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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
- ---
X Annual Report Pursuant to Section 13 or 15(d) of
- --- The Securities Exchange Act of 1934
For the fiscal year ended December 31, 2000 Commission File Number 01-12073
EQUITY INNS, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Tennessee 62-1550848
- ------------------------------- ---------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
7700 Wolf River Boulevard, Germantown, Tennessee 38138
-----------------------------------------------------------------------
(Address of Registrant's Principal Executive Office) (Zip Code)
(901) 754-7774
----------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act: Not Applicable
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
9 1/2% Series A Cumulative Preferred Stock, $.01 par value
----------------------------------------------------------
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in the definitive proxy statement or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. o
Aggregate market value of voting stock and non-voting stock held by
nonaffiliates of the Registrant as of March 8, 2001: $28,609,862.
Number of shares of Common Stock, $.01 par value, outstanding as of March 8,
2001: 36,825,021
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's proxy statement for its 2001 Annual Meeting of
Shareholders to be held May 10, 2001 (the "Proxy Statement") are incorporated by
reference into Part III of this Report.
Exhibit Index beginning on Page 56.
Page 1 of 60
EQUITY INNS, INC
ANNUAL REPORT ON FORM 10-K
For the Year Ended December 31, 2000
TABLE OF CONTENTS
PART I
Page
Item 1. Business 3
Item 2. Properties 10
Item 3. Legal Proceedings 16
Item 4. Submission of Matters to a Vote of Security Holders 16
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters 16
Item 6. Selected Financial Data 17
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 19
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 25
Item 8. Financial Statements and Supplementary Data 26
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 49
Part III
Item 10. Directors and Executive Officers of the Registrant 49
Item 11. Executive Compensation 49
Item 12. Security Ownership of Certain Beneficial Owners and
Management 49
Item 13. Certain Relationships and Related Transactions 49
PART IV
Item 14. Exhibits, Financial Statements, Schedules, and Reports on
Form 8-K 50
2
THIS REPORT CONTAINS AND INCORPORATES BY REFERENCE CERTAIN FORWARD- LOOKING
STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS
AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED,
INCLUDING, WITHOUT LIMITATION, STATEMENTS CONTAINING THE WORDS "BELIEVES,"
"ANTICIPATES," "ESTIMATES," "PROJECTS," "EXPECTS" AND SIMILAR WORDS. SUCH
FORWARD-LOOKING STATEMENTS RELATE TO FUTURE EVENTS AND THE FUTURE FINANCIAL
PERFORMANCE OF THE COMPANY, AND INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES
AND OTHER FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE OR
ACHIEVEMENTS OF THE COMPANY TO BE MATERIALLY DIFFERENT FROM THE RESULTS OR
ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD- LOOKING STATEMENTS. ATTENTION
SHOULD BE PAID TO THE VARIOUS FACTORS IDENTIFIED OR INCORPORATED BY REFERENCE IN
THIS REPORT (INCLUDING THOSE FACTORS SET FORTH IN THE COMPANY'S CURRENT REPORT
ON FORM 8-K DATED MARCH 23, 2001) WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER,
INCLUDING BUT NOT LIMITED TO THOSE DISCUSSED IN THE SECTIONS ENTITLED "INTERNAL
GROWTH STRATEGY," "ACQUISITION STRATEGY," "COMPETITION," "LEVERAGE,"
"ENVIRONMENTAL MATTERS," "TAX STATUS" AND "MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS." THE COMPANY IS NOT OBLIGATED
TO UPDATE ANY SUCH FACTORS OR TO REFLECT THE IMPACT OF ACTUAL FUTURE EVENTS OR
DEVELOPMENTS ON SUCH FORWARD-LOOKING STATEMENTS.
PART I
ITEM 1. BUSINESS
(a) General Development of Business
Equity Inns, Inc. (the "Company") is in the business of acquiring equity
interests in hotel properties. The Company commenced operations in March 1994
and is a real estate investment trust ("REIT") for federal income tax purposes.
The Company, through its wholly-owned subsidiary, Equity Inns Trust (the
"Trust"), is the sole general partner of Equity Inns Partnership, L.P. (the
"Partnership") and, at December 31, 2000, owned an approximate 96.8% interest in
the Partnership. The Company conducts its business through the Partnership and
its subsidiaries.
(b) Narrative Description of Business
In order to qualify as a REIT, neither the Company nor the Partnership can
operate hotels. The Company has implemented a strategy of utilizing multiple
lessees and hotel management companies for its hotel properties. At December 31,
2000, the Partnership or its affiliates owned 96 hotel properties, with a total
of 12,284 rooms in 34 states (the "Hotels"). During the year ended December 31,
2000 the Partnership or its affiliates, under operating leases providing for the
payment of percentage rent (the "Percentage Leases"), leased 75 of the Company's
hotels to affiliates of Interstate Hotels Corporation ("IHC"), which was
recently divested from Wyndham International, Inc. ("Wyndham"). IHC is referred
to herein as the "Interstate Lessee." All payments due under these Percentage
Leases were guaranteed by Interstate Hotels, L.L.C., a subsidiary of IHC, and
IHC (except for three hotels where Wyndham rather than IHC was the guarantor).
The Partnership leased 19 hotels to wholly-owned subsidiaries of Prime
Hospitality Corporation (collectively, the "Prime Lessee"). All payments due
under these Percentage Leases are guaranteed by Prime Hospitality Corporation.
The Interstate Lessee and the Prime Lessee are referred to herein collectively
as the "Lessees", and individually as a "Lessee." During the year ended December
31, 2000, the Lessees operated and leased hotels owned by the Partnership and
its affiliates pursuant to the Percentage Leases, which provide for rent
payments equal to the greater of (i) a fixed base rent ("Base Rent") or (ii)
percentage rent based on the revenues of the hotels ("Percentage Rent"). The
remaining two hotels were operated pursuant to management agreements, one of
which is operated by a subsidiary of IHC and one of which is operated by a
wholly-owned subsidiary of MeriStar Hotels & Resorts, Inc.
3
Effective January 1, 2001 (the "Effective Date") and pursuant to the federal
REIT Modernization Act (the "RMA") which took effect on the Effective Date, the
Company and its affiliates (1) terminated or assigned the Percentage Leases
between the Company and the Interstate Lessee, (2) terminated the lease
guaranties with Interstate Hotels, L.L.C. and Wyndham and (3) terminated certain
other agreements between the Company and the Interstate Lessee. As of the
Effective Date, the Company entered into new Percentage Leases with wholly-owned
taxable REIT subsidiaries of the Company (the "TRS Lessees") for the lease of 77
of the Hotels. The terms of the Percentage Leases with the TRS Lessees are
substantially identical to the Percentage Leases terminated between the Company
and the Interstate Lessee. The remaining 19 Hotels continue to be leased to the
Prime Lessee. Under the RMA, the TRS Lessees are required to enter into
management agreements with eligible independent contractors to manage the
hotels. On the Effective Date, the TRS Lessees entered into new management
agreements with Promus Hotels, Inc. ("Promus") (as to 20 Hotels), Crestline
Hotels & Resorts, Inc. ("Crestline") (as to two Hotels) and Crossroads
Hospitality Company, L.L.C., an affiliate of IHC ("CHC") (as to 55 Hotels). In
future reporting periods, the rents generated by the Company's Percentage Leases
with the TRS Lessees will be eliminated in consolidation, while the actual
operating results of all the Company's hotels leased by the TRS Lessees will be
included in the Company's financial statements.
The diversity of the Company's portfolio is such that, at December 31, 2000, no
individual hotel exceeded 2.1% of the total rooms in the portfolio. The
Company's geographical distribution and franchise diversity is illustrated by
the following charts.
Franchise Diversity
# of Hotel # of Rooms/
Franchise Affiliation Properties Suites
--------------------- ---------- -----------
Premium Limited Service Hotels:
Hampton Inn 48 6,030
Hampton Inn & Suites 1 125
Holiday Inn Express 1 101
Comfort Inn 2 245
-- ------
Sub-total 52 6,501
-- ------
All-Suite Hotels:
AmeriSuites 19 2,403
Premium Extended Stay Hotels:
Residence Inn 11 1,351
Homewood Suites 9 1,295
-- ------
Sub-total 20 2,646
-- ------
Full Service Hotels:
Holiday Inn 4 557
Comfort Inn 1 177
-- ------
Sub-total 5 734
-- ------
Total 96 12,284
== ======
4
Geographical Diversity
Number of Number of Percentage of
State Hotels Suites/Rooms Suites/Rooms
- ----- --------- ------------ -------------
Alabama 3 382 3.1%
Arizona 4 495 4.0%
Arkansas 1 123 1.0%
Colorado 3 356 2.9%
Connecticut 3 405 3.3%
Florida 8 1,079 8.8%
Georgia 3 314 2.6%
Idaho 1 104 0.8%
Illinois 3 499 4.1%
Indiana 2 255 2.1%
Kansas 2 260 2.1%
Kentucky 1 119 1.0%
Louisiana 1 128 1.0%
Maryland 2 244 2.0%
Michigan 3 399 3.2%
Minnesota 2 248 2.0%
Missouri 2 242 2.0%
Nebraska 1 80 0.7%
Nevada 1 202 1.6%
New Jersey 3 424 3.5%
New Mexico 1 128 1.0%
New York 1 154 1.3%
North Carolina 5 614 5.0%
Ohio 6 736 6.0%
Oklahoma 1 135 1.1%
Oregon 1 168 1.4%
Pennsylvania 2 249 2.0%
South Carolina 3 404 3.3%
Tennessee 10 1,172 9.5%
Texas 8 1,105 9.0%
Vermont 2 200 1.6%
Virginia 2 245 2.0%
Washington 1 161 1.3%
West Virginia 4 455 3.7%
-- ------ -----
96 12,284 100.0%
== ====== =====
GROWTH STRATEGY
The Company's business objectives are to increase funds from operations and
enhance shareholder value primarily through (i) aggressive asset management and
the strategic investment of capital in its diversified hotel portfolio, (ii)
selectively acquiring hotels that have been underperforming due to the lack of
sufficient capital improvements, poor management or franchise affiliation, and
(iii) selectively disposing of hotels that have reached their earnings potential
or may, in management's judgment, suffer adverse changes in their local market,
or require large capital outlays.
5
Currently, the Company's acquisition and growth strategy has been curtailed due
to a variety of factors, including the difficulty in obtaining equity financing
on terms deemed appropriate by management.
EMPLOYEES
At March 1, 2001, the Company employed, through a wholly-owned subsidiary, 14
employees.
COMPETITION
The hotel industry is highly competitive with various participants competing on
the basis of price, level of service and geographic location. Each of the Hotels
is located in a developed area that includes other hotel properties. The number
of competitive hotel properties in a particular area could have a material
adverse effect on occupancy, ADR and Revenue Per Available Room ("REVPAR") of
the Hotels or at hotel properties acquired in the future. The Company believes
that brand recognition, location, the quality of the hotel, consistency of
services provided, and price are the principal competitive factors affecting the
Company's hotels.
FRANCHISE AGREEMENTS
A part of the Company's asset management program is the licensing of all its
Hotels under nationally franchised brands. The Company believes that the
public's perception of quality associated with a franchisor is an important
feature in the operation of a hotel. The Company believes that franchised
properties generally have higher levels of occupancy and ADR than properties
which are unfranchised due to access to national reservation systems and
advertising and marketing programs provided by franchisors.
The Partnership is also committed to franchisors to make certain capital
improvements to hotel properties, which will be funded from borrowings or
working capital. The Partnership made capital improvements of approximately
$13.6 million to its hotel properties in 2000, including approximately $1.3
million in renovations required by franchisors. In 2001, the Partnership expects
to fund approximately $17 million of capital improvements for the Hotels.
SEASONALITY
The Hotels' operations historically have been seasonal in nature, generally
reflecting higher occupancy rates during the second and third quarters. This
seasonality can be expected to cause fluctuations in the Company's quarterly
lease revenue to the extent that it receives Percentage Rent.
TAX STATUS
The Company intends to operate so as to be taxed as a REIT under Sections
856-860 of the Internal Revenue Code of 1986, as amended (the "Code"). As long
as the Company qualifies for taxation as a REIT, with certain exceptions, the
Company will not be taxed at the corporate level on its taxable income that is
distributed to its shareholders. A REIT is subject to a number of organizational
and operational requirements, including a requirement effective January 1, 2001,
that it distribute annually at least 90% of its taxable income. Failure to
qualify as a REIT will render the Company subject to tax (including any
applicable minimum tax) on its taxable income at regular corporate rates and
distributions to the shareholders in any such year will not be deductible by the
Company. Even if the Company qualifies for taxation as a REIT, the Company may
be subject to certain state and local taxes on its income and property. In
connection with the Company's election to be taxed as a REIT, the Company's
Charter imposes certain restrictions on the transfer of shares of Common Stock.
The Company has adopted the calendar year as its taxable year.
6
In December 1999, the RMA was signed into law. The RMA includes several REIT
provisions (the "REIT Provisions"). The REIT Provisions generally will be
effective January 1, 2001 and will overhaul the existing tax rules applicable to
taxable subsidiaries of REITs. Under the REIT Provisions, the Company is allowed
to own all of the stock in TRSs. In addition, a TRS is allowed to perform
"non-customary" services for hotel guests and is allowed to enter into many new
businesses. However, a TRS is not allowed to franchise or manage hotels. Each
TRS is allowed to enter into management contracts for the Company's hotels, with
independent third party management companies. The use of TRSs, however, is
subject to certain restrictions, including the following:
o no more than 20% of the REIT's assets may consist of securities of its
TRSs,
o the tax deductibility of interest paid or accrued by a TRS to its
affiliated REIT is limited, and
o a 100% excise tax is imposed non-arm's length transactions between
a TRS and its on affiliated REIT or the REIT's tenants.
As a result of the opportunities offered by the RMA, effective as of the
Effective Date, the Company terminated or assigned the Percentage Leases between
the Company and the Interstate Lessee and entered into new Percentage Leases
with the TRS Lessees for the lease of 77 of the Hotels. On the Effective Date,
the TRS Lessees also entered into new management agreements with CHC (for 55
Hotels), Promus (for 20 Hotels) and Crestline (for two Hotels).
ENVIRONMENTAL MATTERS
Under various federal, state and local laws and regulations, an owner or
operator of real estate may be liable for the costs of removal or remediation of
certain hazardous or toxic substances on such property. Such laws often impose
such liability without regard to whether the owner knew of, or was responsible
for, the presence of hazardous or toxic substances. Furthermore, a person that
arranges for the disposal or transports for disposal or treatment a hazardous
substance at a property owned by another may be liable for the costs of removal
or remediation of hazardous substances released into the environment at that
property. The costs of remediation or removal of such substances may be
substantial and the presence of such substances, or the failure to promptly
remediate them, may adversely affect the owner's ability to sell such real
estate or to use such real estate as collateral.
In connection with the Partnership's acquisition of the Hotels, Phase I
environmental site assessments ("ESAs") were obtained on all of the Hotels. The
Phase I ESAs included historical review of the Hotels, reviews of certain public
records, preliminary investigations of the sites and surrounding properties,
screenings for hazardous and toxic substances and underground storage tanks, and
the preparation and issuance of a written report. The Phase I ESAs did not
include invasive procedures to detect contaminants from former operations on the
Hotels or migrating from neighbors or caused by third parties. The Phase I ESAs
have not revealed any environmental liability 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 that
there are material environmental liabilities of which the Company is unaware.
EXECUTIVE OFFICERS OF THE COMPANY
The Company's executive officers, listed below, serve in their respective
capacities for approximate one year terms and are subject to re-election
annually by the Board of Directors, normally in May of each year.
7
NAME POSITION
- ---- --------
Phillip H. McNeill, Sr. Chairman of the Board, Chief Executive Officer
and Director
Howard A. Silver President, Chief Operating Officer and Director
Donald H. Dempsey Executive Vice President, Chief Financial Officer,
Secretary, Treasurer and Director
Phillip H. McNeill, Jr. Executive Vice President of Development
J. Ronald Cooper Vice President, Assistant Secretary, Assistant
Treasurer and Controller
Phillip H. McNeill, Sr. (age 62) is Chairman and Chief Executive Officer of the
Company and has been Chairman of McNeill Hospitality Corporation since 1984.
From 1963 to 1977, he served in various capacities, including President and
Chief Executive Officer, with Schumacher Mortgage Company, Inc., a mortgage
banking firm and subsidiary of Time, Inc. Mr. McNeill has served as President
and Director of the Memphis Mortgage Bankers Association and the Tennessee State
Mortgage Bankers Association. He has served as a member of the Board of
Trustees of the University of Memphis Foundation and as a Director of First
Commercial Bank of Memphis. He is currently serving as a member of the Boards of
Directors of National Commerce Bancorporation and Interstate Hotels Corporation.
Mr. McNeill holds both a B.S. and a J.D. degree from the University of Memphis
and is a graduate of the Northwestern School of Mortgage Banking.
Howard A. Silver (age 46) is President and Chief Operating Officer of the
Company and has been a certified public accountant since 1980. Mr. Silver
joined the Company in May 1994 and has previously served as Executive Vice
President of Finance, Secretary, Treasurer and Chief Financial Officer of the
Company. From 1992 until joining the Company, Mr. Silver served as Chief
Financial Officer of Alabaster Originals, L.P., Memphis, Tennessee, a fashion
jewelry wholesaler. From 1978 to 1985, Mr. Silver was a certified public
accountant with the national accounting firm of Coopers & Lybrand L.L.P., and
from 1987 to 1992 Mr. Silver was employed as a certified public accountant with
the national accounting firm of Ernst & Young. Mr. Silver holds a B.S. in
Accounting from the University of Memphis.
Donald H. Dempsey (age 56) is Executive Vice President, Secretary, Treasurer and
Chief Financial Officer of the Company. Prior to joining the Company in July
1998, Mr. Dempsey served as Executive Vice President and Chief Financial Officer
of Choice Hotels International, Inc. from January 1998 to July 1998. From April
1995 to December 1997, Mr. Dempsey served as Senior Vice President and Chief
Financial Officer of Promus Hotel Corporation, from October 1993 to April 1995
as Senior Vice President of Finance and Administration of the Hotel Division of
The Promus Companies Incorporated, and from December 1991 to October 1993 as
Vice President, Finance of the Hampton Inn/Homewood Suites Hotel Division of The
Promus Companies Incorporated. Mr. Dempsey served in various other senior
financial and development officer positions within the Hotel Division of The
Promus Companies Incorporated and its predecessor companies from 1983 to 1991.
From 1969 to 1983, Mr. Dempsey held various corporate and division financial
management and administrative positions with Holiday Inns, Inc. Mr. Dempsey is
currently serving on the Board of Directors of John Q. Hammons Hotels, Inc. Mr.
Dempsey holds a B.S. in Accounting from Mississippi State University.
8
Phillip H. McNeill, Jr. (age 39) is Executive Vice President of Development of
the Company. From 1994 to 1996, he served as President of Trust Leasing, Inc.,
formerly McNeill Hotel Co., Inc., the Company's former lessee (the "Former
Lessee"), and from 1984 to 1996 served as Vice President of Trust Management,
Inc., formerly McNeill Hospitality Corporation, which was an affiliate of the
Former Lessee. Mr. McNeill is the son of Phillip H. McNeill, Sr. and holds a
B.B.A. from the University of Memphis and is a graduate of the Northwestern
School of Mortgage Banking.
J. Ronald Cooper (age 52) is Vice President, Assistant Secretary, Assistant
Treasurer and Controller of the Company. From 1994 to 1996, he was Controller
and Director of Financial Reporting for the Former Lessee and joined the Former
Lessee in October 1994. Mr. Cooper has been a certified public accountant since
1972. From 1978 until joining the Former Lessee, Mr. Cooper was employed as
Secretary, Treasurer and Controller of Wall Street Deli, Inc., a publicly-owned
delicatessen company. Prior to that, Mr. Cooper was a certified public
accountant with the national accounting firm of Coopers & Lybrand L.L.P. from
1970 to 1976. Mr. Cooper holds a B.S. degree in accounting from Murray State
University.
9
ITEM 2. PROPERTIES
The following table sets forth certain information for the year ended December
31, 2000 with respect to the Hotels owned at December 31, 2000:
Year Ended December 31, 2000
Revenue
Number Average Per
Date Of Room Lease Daily Available
Opened Rooms Revenue(1) Payment (1)(2) Occupancy Rate Room (3)
------ ------- ---------- -------------- --------- --------- ---------
Hampton Inn:
Albany, New York 1986 154 $ 3,594 $ 1,769 71.1% $89.73 $63.77
Ann Arbor, Michigan 1986 150 2,948 1,379 71.5% $75.62 $54.06
Atlanta (Northlake),
Georgia 1988 130 1,754 782 55.7% $66.16 $36.87
Austin, Texas 1987 122 2,373 1,156 70.6% $75.93 $53.58
Baltimore (Glen Burnie),
Maryland 1989 116 2,746 1,319 81.3% $80.28 $65.24
Beckley, West Virginia 1992 108 1,911 974 73.4% $65.85 $48.36
Birmingham (Mountain
Brook), Alabama 1987 131 2,023 996 59.6% $70.77 $42.19
Birmingham (Vestavia),
Alabama 1986 123 1,555 605 54.9% $62.91 $34.54
Chapel Hill, North
Carolina 1986 122 2,009 968 61.5% $73.13 $44.99
Charleston, South
Carolina 1985 125 1,651 643 54.1% $66.77 $36.10
Chattanooga, Tennessee 1988 168 2,541 1,100 67.9% $60.81 $41.31
Chicago (Gurnee),
Illinois 1988 134 1,981 782 57.6% $70.12 $40.38
Chicago (Naperville),
Illinois 1987 130 2,580 1,194 72.3% $76.19 $55.08
Cleveland, Ohio 1987 123 1,712 780 53.8% $70.68 $38.03
College Station, Texas 1986 135 2,114 950 62.1% $69.25 $43.02
Colorado Springs,
Colorado 1985 128 1,859 786 55.5% $71.44 $39.68
Columbia, South Carolina 1985 121 1,587 676 56.7% $63.22 $35.83
Columbus, Georgia 1986 119 2,064 987 73.2% $64.83 $47.47
Columbus (Dublin), Ohio 1988 123 2,207 1,063 65.6% $74.71 $49.03
Dallas (Addison), Texas 1985 160 2,242 1,053 51.9% $74.39 $38.60
Dallas (Richardson),
Texas 1987 130 2,222 1,089 66.2% $70.48 $46.69
Denver (Aurora),
Colorado 1985 132 1,655 616 52.9% $65.25 $34.51
Detroit (Madison
Heights), Michigan 1987 124 2,503 1,224 73.0% $75.51 $55.16
Detroit (Northfield),
Michigan 1989 125 2,661 1,338 72.9% $79.79 $58.17
Fayetteville, North
Carolina 1986 122 1,339 469 51.9% $57.83 $30.00
Ft. Worth, Texas 1987 125 1,477 471 55.7% $57.95 $32.28
Gastonia, North Carolina 1989 109 1,689 836 60.8% $69.67 $42.35
Indianapolis, Indiana 1987 129 2,359 1,089 62.8% $79.63 $49.97
Jacksonville, Florida 1986 122 1,676 641 62.1% $62.34 $38.72
Kansas City (Overland
Park), Kansas 1991 134 2,364 1,107 65.4% $73.66 $48.20
Kansas City, Missouri 1987 120 2,009 892 62.3% $73.44 $45.75
Knoxville, Tennessee 1991 118 1,884 771 72.1% $60.48 $43.62
Little Rock (North),
Arkansas 1985 123 1,309 598 51.0% $56.97 $29.08
Louisville, Kentucky 1986 119 1,886 837 58.1% $74.83 $43.51
Memphis (Poplar),
Tennessee 1985 126 2,432 1,190 68.8% $77.29 $53.17
Memphis (Sycamore View),
Tennessee 1984 117 1,512 526 61.4% $58.03 $35.61
Meriden, Connecticut 1988 125 2,438 1,219 65.6% $81.33 $53.32
Milford, Connecticut 1986 148 3,161 1,557 75.2% $77.58 $58.35
Morgantown, West
Virginia 1991 108 2,033 1,016 66.9% $76.91 $51.43
Nashville (Briley
Parkway), Tennessee 1987 120 2,216 972 66.5% $75.91 $50.45
Norfolk, Virginia 1990 119 2,153 1,050 68.2% $72.53 $49.43
Pickwick, Tennessee 1994 50 781 260 66.0% $64.64 $42.65
San Antonio (Bowie),
Texas 1995 169 3,568 1,943 69.4% $83.14 $57.68
Sarasota, Florida 1987 97 1,290 447 52.4% $69.32 $36.33
Scottsdale, Arizona 1996 126 1,753 829 46.0% $82.67 $38.02
Scranton, Pennsylvania 1994 129 2,524 1,139 72.5% $73.70 $53.45
10
Year Ended December 31, 2000
Revenue
Number Average Per
Date Of Room Lease Daily Available
Opened Rooms Revenue (1) Payment (1)(2) Occupancy Rate Room (3)
------ ------- ----------- -------------- --------- --------- ---------
Hampton Inn (Continued):
State College,
Pennsylvania 1987 120 2,400 1,182 65.2% $83.79 $54.64
St. Louis (Westport),
Missouri 1987 122 1,748 685 56.6% $69.15 $39.15
Hampton Inn & Suites:
Memphis (Bartlett),
Tennessee 1998 125 1,992 858 59.1% $73.65 $43.54
Comfort Inn:
Dallas (Arlington),
Texas 1985 141 1,384 622 50.5% $53.14 $26.82
Jacksonville Beach,
Florida 1973 177 4,061 1,946 67.9% $92.29 $62.68
Rutland, Vermont 1985 104 1,848 798 73.3% $66.24 $48.55
Residence Inn:
Boise, Idaho (4) 1986 104 2,717 1,195 86.3% $83.26 $71.84
Burlington, Vermont 1988 96 2,457 1,150 71.1% $98.36 $69.92
Colorado Springs,
Colorado 1984 96 2,673 1,430 82.3% $92.38 $76.07
Minneapolis (Eagan),
Minnesota 1988 120 3,222 1,600 85.5% $85.75 $73.35
Oklahoma City, Oklahoma 1982 135 3,011 1,410 76.6% $79.61 $60.95
Omaha, Nebraska 1981 80 1,946 750 75.2% $88.39 $66.46
Portland, Oregon 1990 168 4,890 2,548 71.9% $110.56 $79.53
Princeton, New Jersey 1988 208 6,637 3,560 75.0% $116.28 $87.18
Somers Point,
New Jersey (4) 1988 120 3,621 1,685 77.0% $107.10 $82.44
Tinton Falls, New Jersey 1988 96 3,307 1.613 84.9% $110.89 $94.12
Tucson, Arizona 1985 128 3,235 1,563 81.9% $84.28 $69.05
Holiday Inn:
Bluefield, West Virginia 1980 120 2,044 913 65.2% $71.35 $46.53
Charleston (Mt. Pleasant),
South Carolina 1988 158 2,682 1,206 60.7% $76.34 $46.38
Oak Hill, West Virginia 1983 119 1,252 582 42.3% $67.98 $28.74
Wilkesboro, North
Carolina 1985 101 1,174 561 52.3% $60.78 $31.81
Winston-Salem, North
Carolina 1969 160 1,490 528 39.8% $64.27 $25.61
Homewood Suites:
Augusta, Georgia 1997 65 1,496 721 68.9% $91.28 $62.88
Chicago, Illinois 1999 235 8,835 4,555 72.0% $143.97 $103.61
Cincinnati (Sharonville),
Ohio 1990 111 2,460 1,169 72.2% $83.89 $60.56
Hartford, Connecticut 1990 132 4,329 2,241 76.6% $116.94 $89.60
Memphis (Germantown),
Tennessee 1996 92 1,938 892 66.8% $86.13 $57.54
Orlando, Florida 1999 252 6,116 3,058 74.5% $89.02 $66.31
Phoenix, Arizona 1996 124 3,368 1,476 73.0% $101.60 $74.22
San Antonio, Texas 1996 123 2,611 1,065 70.9% $81.85 $58.00
Seattle, Washington 1998 161 5,107 2,425 77.1% $112.35 $86.67
AmeriSuites:
Albuquerque, New Mexico 1997 128 2,609 1,343 82.6% $67.40 $55.70
Baltimore, Maryland 1996 128 3,676 2,014 86.3% $90.96 $78.46
Baton Rouge, Louisiana 1997 128 2,621 1,384 73.7% $75.93 $55.95
Birmingham, Alabama 1997 128 2,202 1,041 67.6% $69.51 $47.00
Cincinnati (Blue Ash),
Ohio 1990 127 1,730 811 51.6% $72.17 $37.23
Cincinnati (Forest
Park), Ohio 1992 126 1,976 832 59.1% $72.49 $42.85
Columbus, Ohio 1994 126 2,620 1,270 75.1% $75.67 $56.81
Flagstaff, Arizona 1993 117 1,835 781 71.7% $59.76 $42.85
Indianapolis, Indiana 1992 126 2,443 1,225 65.8% $80.47 $52.97
11
Year Ended December 31, 2000
Revenue
Number Average Per
Date Of Room Lease Daily Available
Opened Rooms Revenue(1) Payment (1)(2) Occupancy Rate Room (3)
------ ------- ---------- -------------- --------- --------- ---------
AmeriSuites (Continued):
Jacksonville, Florida 1996 112 1,729 707 62.5% $65.44 $40.89
Las Vegas, Nevada 1998 202 4,962 2,637 84.4% $79.48 $67.12
Kansas City (Overland
Park), Kansas 1994 126 2,452 1,164 65.0% $81.79 $53.18
Memphis (Wolfchase),
Tennessee 1996 128 2,093 961 59.7% $74.76 $44.67
Miami, Florida 1996 126 3,114 1,760 85.3% $79.13 $67.53
Miami (Kendall),
Florida 1996 67 2,263 1,392 87.4% $105.58 $92.30
Minneapolis, Minnesota 1997 128 2,944 1,483 78.4% $80.15 $62.84
Nashville, Tennessee 1997 128 2,408 1,218 68.4% $75.18 $51.39
Richmond, Virginia 1992 126 2,444 1,197 68.4% $77.48 $52.99
Tampa, Florida 1994 126 3,134 1,772 71.6% $94.86 $67.96
------ -------- -------- ----- ------ ------
Consolidated Totals/Weighted
Average for all Hotels 12,284 $241,651 $115,067 67.1% $80.26 $53.81
====== ======== ======== ===== ====== ======
- ------------------------
(1) Amounts in thousands.
(2) Represents lease payments calculated by applying the rent provisions in
the Percentage Leases to the room revenues of the hotels.
(3) Determined by multiplying occupancy times the ADR.
(4) Hotel operated under a management contract; lease payment amount
represents operating income after payment of management fees and other
hotel operating expenses.
THE PERCENTAGE LEASES
Until December 31, 2000, all but two of the Hotels owned by the Partnership were
separately leased to the Interstate Lessee and the Prime Lessee (and 77 to the
TRS Lessees following the Effective Date) under Percentage Leases. All
Percentage Leases with the Lessees have a non-cancelable initial term of ten to
fifteen years, subject to earlier termination upon the occurrence of certain
contingencies described in the Percentage Leases. During the term of each
Percentage Lease, the Lessees are obligated to pay (i) the greater of Base Rent
or Percentage Rent and (ii) certain other amounts, including interest accrued on
any late payments or charges. Base Rent accrues and is required to be paid
monthly. Percentage Rent is based on percentages of room revenues and to a
lesser extent, food and beverage revenues, if any, for each of the Hotels. Both
the Base Rent and the threshold room revenue amount in each Percentage Rent
formula will be adjusted annually for changes in the CPI. The adjustment is
calculated at the beginning of each lease year after a holding period of the
first full calendar year of the lease, based upon the average change in the CPI
during the prior 24 months. The adjustment in any lease year may not exceed 7%
of the Base Rent and threshold room revenue amounts for the prior fiscal year.
Percentage Rent is payable quarterly, on or before the 30th day following the
end of each of the calendar quarters in each fiscal year.
At the Effective Date and pursuant to the RMA, the Company and its affiliates
terminated or assigned the Percentage Leases between the Company and the
Interstate Lessee. As of the Effective Date, the Company also entered into new
Percentage Leases with the TRS Lessees for the lease of 77 of the Hotels. The
terms of the Percentage Leases with the TRS Lessees are substantially identical
to the Percentage Leases terminated betwen the Company and the Interstate
Lessee. The remaining 19 Hotels continue to be leased to the Prime Lessee. Under
the RMA, the TRS Lessees are required to enter into management agreements with
eligible independent contractors to manage the hotels. On the Effective Date,
the TRS Lessees entered into new management agreements with
12
Promus (as to 20 Hotels), Crestline (as to two Hotels) and CHC (as to 55
Hotels). In future reporting periods, the rents generated by the Company's
Percentage Leases with the TRS Lessees will be eliminated in consolidation,
while the actual operating results of all the Company's hotels managed by the
TRS Lessees will be included in the Company's financial statements.
The following table summarizes the percentages of room revenues in excess of
certain levels payable as Percentage Rent under the Percentage Leases as of
January 1, 2001.
Range of Percentages of Room Revenue
---------------------------------------
First Tier Top Tier
-------------- ------------
Full Service (1) 28% to 38% 65% to 77%
Extended Stay 27% to 49.4% 65% to 75%
All-Suite 35.7% to 59.7% 69% to 76.1%
Limited Service 22% to 37% 62% to 74%
(1) Percentage Rent formula also includes 15%-30% of beverage revenue and 5%-15%
of food revenue.
Other than real estate and personal property taxes and maintenance of
underground utilities and structural elements, which are obligations of the
Partnership, the Percentage Leases require the Lessees to pay insurance,
utilities and all other costs and expenses incurred in the operation of the
Hotels. The Percentage Leases also provide for rent reductions and abatements in
the event of damage or destruction or a partial taking of any Hotel.
Maintenance and Modifications. Under the Percentage Leases, the Partnership is
required to maintain the underground utilities and the structural elements of
the improvements, including exterior and interior load bearing walls (excluding
plate glass) and the roof of each Hotel. In addition, the Percentage Leases
obligate the Partnership to fund certain capital expenditures at the Hotels
pursuant to the capital budgets approved by the Partnership, when and as deemed
necessary by the Lessees, up to an amount equal to 4% of annual room revenue,
net of amounts actually expended for capital expenditures for each Hotel during
any fiscal year. The Partnership's obligation will be carried forward to the
extent that the Lessees have not expended such amount, and any unexpended
amounts will remain the property of the Partnership upon termination of the
Percentage Leases. Otherwise, the Lessees are required, at their expense, to
maintain the Hotels in good order and repair, except for ordinary wear and tear,
and to make non-structural, foreseen and unforeseen, and ordinary and
extraordinary, repairs which may be necessary and appropriate to keep the Hotels
in good order and repair.
Insurance and Property Taxes. The Partnership is responsible for paying real
estate and personal property taxes on the Hotels (except to the extent that
personal property associated with the Hotels is owned by the Lessee). The
Lessees are required to keep in force and pay or reimburse the Partnership for
all insurance on the Hotels, with extended coverage, including casualty,
comprehensive general public liability, workers' compensation, earthquake, flood
and other insurance appropriate and customary for properties similar to the
Hotels and is required to name the Partnership as an additional named insured.
13
Indemnification. Under the Percentage Leases, the Lessees have agreed to
indemnify the Partnership, for certain losses relating to the Hotels, including
losses related to any accident or injury to person or property, certain
environmental liability, taxes and assessments and the sale or consumption of
alcoholic beverages.
Damage to Hotels. In the event of damage to or destruction of any Hotel covered
by insurance which renders the Hotel unsuitable for the Lessee's use and
occupancy, the Lessee, at its option, will be obligated to (i) repair, rebuild,
or restore the Hotel or (ii) in the case of the Prime Lessee, it may offer to
acquire the Hotel on the terms set forth in the applicable Percentage Lease. In
the event that damage to or destruction of a Hotel which is covered by insurance
does not render the Hotel wholly unsuitable for the Lessee's use and occupancy,
the Lessee generally will be obligated to repair or restore the Hotel. In the
event of damage to or destruction of any Hotel which is not covered by
insurance, the Lessee will be obligated to either repair, rebuild, or restore
the Hotel, or in the case of the Prime Lessee, offer to purchase the Hotel on
the terms and conditions set forth in the Percentage Lease. The Percentage Lease
shall remain in full force and effect during the period required for repair or
restoration of any damaged or destroyed Hotel, with the Lessee to receive
certain credits against rental payments and other charges.
Condemnation of Hotel. In the event of a total condemnation of a Hotel, the
relevant Percentage Lease will terminate with respect to such Hotel as of the
date of taking, and the Partnership and the Lessee will be entitled to their
shares of the condemnation award under the Percentage Lease. In the event of a
partial taking which does not render the Hotel unsuitable for the Lessee's use,
the Lessee shall restore the untaken portion of the Hotel to a complete
architectural unit and the Partnership shall contribute to the cost of such
restoration. If the condemnation award is inadequate to restore the affected
Hotel, either the Partnership or the Lessee shall have the right to terminate
the lease.
Events of Default. "Events of Default" include the following:
(i) the occurrence of an Event of Default under any other lease
between the Partnership and a Lessee or any affiliate of a Lessee;
(ii) the failure by a Lessee to pay Base Rent, Percentage Rent or any
additional charges within 10 days after written notice that such has become due
and payable;
(iii) the failure by a Lessee to observe or perform any other term of a
Percentage Lease and the continuation of such failure for a period of 30 days
after receipt by the Lessee of notice from the Partnership thereof, unless such
failure cannot be cured within such period and the Lessee commences appropriate
action to cure such failure within such period;
(iv) if a Lessee files a petition in bankruptcy or reorganization, is
adjudicated a bankrupt, or makes an assignment for the benefit of creditors or
similar bankruptcy or reorganization action occurs;
(v) if the Lessee voluntarily discontinues operations of a Hotel for
more than 30 days, except as a result of damage, destruction, or condemnation;
or
(vi) if the franchise agreement with respect to a Hotel is terminated
as a result of any action or failure to act by the Lessee or its agents (other
than certain failures to complete a capital improvement required by the
franchisor.
14
Performance Standard in Prime Percentage Leases. Each Percentage Lease with the
Prime Lessee contains the following performance standards:
(i) In the event the Hotel does not produce REVPAR in an amount at
least equal to 90% of the estimated REVPAR under the applicable operating budget
for any year, the Partnership has the option within 90 days after year-end to
terminate the lease on 30 days notice of such termination to the Prime Lessee,
unless during such period Lessee pays to Lessor, as additional rent, an amount
equal to the sum the Partnership would have received as rent during such period
had the Hotel maintained at least the required 90% of budgeted REVPAR minus the
amount of rent previously received by the Partnership for such period.
(ii) In the event the "Competitive Set" REVPAR index, as reported by
Smith Travel Research, is below certain levels for any fiscal year, then the
Partnership has the option within 90 days of year- end to terminate the lease on
30 days notice, unless during such period the Prime Lessee pays as additional
rent an amount equal to the amount of rent the Partnership would have received
for such period had the Hotel's performance met the required criteria minus the
amount of the rent the Partnership actually received for such period. In the
event the Hotel does not meet or exceed the minimum REVPAR index for any fiscal
year, then the threshold dollar amounts of Room Revenues then included in the
revenues computations shall not be adjusted to reflect any changes in the CPI,
but the Base Rent shall be so adjusted.
(iii) The Partnership has the right to terminate the applicable lease
on 30 days notice if during any fiscal year the Prime Lessee actually expends or
incurs less than 95% of the dollar amounts contained in the operating budget for
sales and marketing expenses (excluding certain franchising and marketing
expenses, and employee taxes and benefits), and normal and recurring property
maintenance.
(iv) The Partnership has the right to terminate the lease on 30 days
notice in the event any general manager or sales director of the Hotel is
transferred to another hotel or similar property owned, leased, or managed by
Prime, the Prime Lessee or an affiliate in the same market without the
Partnership's reasonable consent and such person is not transferred back to the
Hotel within 15 days notice from the Partnership.
The Partnership's sole remedy in the event of any failure to meet the above
performance standards shall be the termination of the applicable Prime
Percentage Lease. Neither the failure to meet any performance standard nor the
termination of a lease by the Partnership solely upon the failure to meet a
performance standard shall cause a default or Event of Default under any other
lease. The Partnership shall not incur any termination payment as a result of a
termination of the lease due to a breach of these performance standards.
Right of First Offer. If the Partnership desires to sell its interest in a Prime
Hotel, the Partnership shall first offer to the Prime Lessee by written notice
the opportunity to acquire the Hotel at the price at which the Partnership
intends to offer the Hotel (the "Offer Price"), and if the Prime Lessee elects
within 15 days after receipt of such notice to acquire the Hotel at the Offer
Price, the Partnership will be obligated to sell the Hotel to the Prime Lessee
or its nominee at the Offer Price. On such sale, the applicable Percentage Lease
shall terminate.
Termination of Percentage Leases on Disposition of the Hotels. If the
Partnership enters into an agreement to sell or otherwise transfer a Hotel and
the Prime Lessee does not elect to acquire the Hotel in accordance with the
right of first offer described above, the Partnership shall be permitted to sell
the Hotel to a third party at a price equal to or greater than 95% of the offer
price. As compensation for the early termination of the Prime Lessee's leasehold
estate, the Partnership will have the right to terminate the Percentage Lease
with respect to such Hotel upon either (i) paying the Prime Lessee the net
present value of the Prime Lessee's leasehold interest in the remaining term of
the Percentage Lease to be terminated as set forth in the lease agreement or
(ii) offering to
15
lease to the Prime Lessee one or more substitute hotels on leasehold terms with
a fair market value at least equal to the fair market value of the Prime
Lessee's remaining leasehold interest under the terminating Percentage Lease.
Termination of Percentage Leases on Company's Termination of REIT Status. In the
event that the Company terminates its REIT status or the Code provisions are
amended so that REITs are permitted to operate hotels, the Partnership may elect
to terminate the Percentage Leases. In such event, the Partnership shall be
obligated to pay to the Prime Lessee and the TRS Lessees certain termination
payments described in the Percentage Leases with the Prime Lessee and the TRS
Lessees.
ITEM 3. LEGAL PROCEEDINGS
Neither the Company nor the Partnership currently is involved in any material
litigation nor, to the Company's knowledge, is any material litigation currently
threatened against the Company or the Partnership.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's shareholders during the
fourth quarter of 2000, through the solicitation of proxies or otherwise.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
(a) Market Information
The Company's common stock, $.01 par value (the "Common Stock") is traded on the
New York Stock Exchange (the "NYSE") under the symbol "ENN." The following table
sets forth for the indicated periods the high and low closing prices for the
Common Stock as traded through the facilities of the NYSE and the cash
distributions declared per share:
Price Range Distributions
----------- Declared Record
High Low Per Share Date
------- ------- ------------- ------------------
Year Ended December 31, 1999:
First Quarter $10-1/8 $8-1/2 $0.31 March 31, 1999
Second Quarter $10-1/8 $9-1/4 $0.31 June 30, 1999
Third Quarter $9-5/16 $8-1/2 $0.31 September 30, 1999
Fourth Quarter $8-9/16 $6-1/4 $0.31 December 31, 1999
Year Ended December 31, 2000:
First Quarter $7-1/16 $6-5/16 $0.31 March 31, 2000
Second Quarter $7 $6-1/8 $0.25 June 30, 2000
Third Quarter $6-15/16 $6-1/8 $0.25 September 30, 2000
Fourth Quarter $6-13/16 $5-1/2 $0.25 December 29, 2000
16
(b) Stockholder Information
On March 8, 2001, there were 1,007 record holders of the Company's Common Stock,
including shares held in "street name" by nominees who are record holders, and
approximately 23,500 beneficial owners.
(c) Distributions
In order to qualify as a REIT for federal income tax purposes, the Company must
distribute to shareholders annually at least 90% of its taxable income. The
Company's ability to make distributions is dependent on the receipt of
distributions from the Partnership. The Partnership's primary source of revenue
consists of rent payments from the Lessees under the Percentage Leases. The
Company, as general partner of the Partnership through the Trust, intends to
cause the Partnership to distribute to its partners sufficient amounts to permit
the Company to make regular quarterly distributions to its shareholders in an
annual amount necessary to maintain the Company's REIT status.
A portion of the distribution to shareholders is expected to represent a return
of capital for federal income tax purposes which generally will not be subject
to federal income tax under current law. The Company's distributions made in
2000 and 1999 are considered to be approximately 54% and 33% return of capital,
respectively, for federal income tax purposes.
Future distributions paid by the Company will be at the discretion of the Board
of Directors of the Company and will depend on the actual cash flow of the
Company, its financial condition, capital requirements, the annual distribution
requirements under the REIT provisions of the Code and such other factors as the
directors of the Company deem relevant.
(d) Recent Sales of Unregistered Securities
In the year ended December 31, 2000, the Company issued no securities which were
not registered pursuant to the Securities Act of 1933, as amended, under either
a registration statement on Form S-3 or Form S-8.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth (i) selected historical operating and other
financial information for the years ended December 31, 2000, 1999, 1998, 1997,
and 1996 and (ii) selected historical balance sheet data as of December 31,
2000, 1999, 1998, 1997, and 1996. The selected historical financial information
has been derived from the historical financial statements of the Company audited
by PricewaterhouseCoopers LLP, independent accountants.
The following selected financial information should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and all of the financial statements and notes thereto included
elsewhere in this report.
17
EQUITY INNS, INC
SELECTED FINANCIAL DATA
(in thousands, except per share data)
Year Ended December 31,
2000 1999 1998 1997 1996
-------- -------- -------- ------- -------
Operating Data:
Revenue $116,810 $117,294 $107,436 $71,095 $38,430
Net income 16,340 29,316 31,595 23,543 14,473
Preferred stock dividends 6,531 6,531 3,374
Net income applicable to common
shareholders 9,809 22,785 28,221 23,543 14,473
Income before extraordinary
item per common share .27 .61 .78 .88 .69
Net income per common share,
basic and diluted .27 .61 .78 .82 .69
Distributions declared per
common share and Unit 1.06 1.24 1.24 1.14 1.12
Weighted average number of
common shares and Units
outstanding-diluted 37,960 38,570 38,001 29,963 21,681
Balance Sheet Data:
Investments in hotel properties,
net $772,411 $814,537 $790,132 $617,072 $309,202
Total assets 801,743 832,119 807,023 635,525 317,880
Debt 383,403 381,175 331,394 233,206 77,399
Minority interest in Partnership 10,370 12,008 19,070 19,035 7,728
Shareholders' Equity 383,786 412,252 431,264 360,172 222,951
Cash Flow Data:
Cash flows from operating activities 58,010 71,515 69,386 50,402 26,200
Cash used from investing activities (2,201) (61,899) (193,539) (314,089) (101,175)
Cash flows (used) from financing
activities (55,377) (9,655) 124,363 263,748 74,971
Other Data:
Funds from operations (1) $53,729 $61,180 $64,985 $45,748 $26,397
(1) Represents Funds from Operations ("FFO") of the Company on a consolidated
basis. Industry analysts generally consider FFO to be an appropriate
measure of the performance of an equity REIT. In accordance with the
resolution adopted by the Board of Governors of the National Association
of Real Estate Investment Trusts ("NAREIT"), FFO represents net income
(loss) (computed in accordance with generally accepted accounting
principles), excluding gains (or losses) from sales of property, plus
depreciation, and after adjustment for unconsolidated partnerships and
joint ventures. For the periods presented, depreciation, minority
interest, and the charge from write-off of deferred organizational costs
were the Company's only adjustments to net income for the determination
of FFO. The Company's computation of FFO may not be comparable to FFO
reported by other REITs that do not define the term in accordance with
the current NAREIT definition or that interpret the current NAREIT
definition differently than the Company. FFO should not be considered an
alternative to net income or other measurements under generally accepted
accounting principles as an indicator of operating performance or to cash
flows from operating, investing or financing activities as a measure of
liquidity. FFO does not reflect working capital changes, cash
expenditures for capital improvements or principal payments with respect
to indebtedness on the hotels.
18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company
Equity Inns, Inc. (the "Company") is a self-advised hotel real estate investment
trust ("REIT") for federal income tax purposes. The Company, through its
wholly-owned subsidiary, Equity Inns Trust (the "Trust"), is the sole general
partner of Equity Inns Partnership, L.P. (the "Partnership") and at December 31,
2000 owned an approximate 96.8% interest in the Partnership.
At December 31, 2000, the Partnership or its affiliates owned 96 hotel
properties, with a total of 12,284 rooms in 34 states. During the year ended
December 31, 2000, the Partnership or its affiliates, under operating leases
providing for the payment of percentage rent (the "Percentage Leases"), leased
75 of the Company's hotels to affiliates of Interstate Hotels Corporation
("IHC"), which was recently divested from Wyndham International, Inc.
("Wyndham"). IHC is referred to herein as the "Interstate Lessee." All payments
due under these Percentage Leases were guaranteed by IHC and Interstate Hotels,
L.L.C., a subsidiary of IHC (except for three hotels where Wyndham rather than
IHC was the guarantor). Also, during the year ended December 31, 2000, the
Partnership leased 19 hotels to wholly-owned subsidiaries of Prime Hospitality
Corporation (collectively, the "Prime Lessee"). All payments due under these
Percentage Leases were guaranteed by Prime Hospitality Corporation. The
remaining two hotels were operated in 2000 pursuant to management agreements,
one of which was operated by a subsidiary of IHC and one of which was operated
by a wholly-owned subsidiary of MeriStar Hotels & Resorts, Inc.
In December 1999, the REIT Modernization Act (the "RMA") was signed into law,
allowing the Company to own all of the stock in taxable REIT subsidiaries (the
"TRS"). As a result of the opportunities offered by the RMA, effective on
January 1, 2001, the Company terminated or assigned the Percentage Leases
between the Company and the Interstate Lessee and terminated the guarantee with
Interstate Hotels, L.L.C. and Wyndham and entered into new Percentage Leases
with the taxable REIT subsidiaries of the Company (the "TRS Lessees") for the
lease of 77 of the Company's hotels. The terms of the Percentage Leases with the
TRS Lessees are substantially identical to the Percentage Leases terminated
between the Company and the Interstate Lessee. The Interstate Lessee and the
Prime Lessee are referred to herein collectively as the "Lessees", and
individually as a "Lessee." The Lessees operate and lease hotels owned by the
Partnership and its affiliates pursuant to the Percentage Leases, which provide
for rent payments to the Partnership equal to the greater of (i) a fixed base
rent ("Base Rent") or (ii) percentage rent based on the revenues of the hotels
("Percentage Rent"). In future reporting periods, the rents generated by the
Percentage Leases with the TRS Lessees will be eliminated in consolidation,
while the actual operating results of all the Company's hotels leased by the TRS
Lessees will be included in the Company's financial statements.
Recent Highlights
Since its inception, the Company has taken steps to position itself for growth
and stability. Several changes have occurred since December 31, 1999 which add
significantly to these efforts. These events are as follows:
19
Acquisitions and Disposition of Hotels
Since the IPO, the Company has actively implemented its acquisition and
disposition strategy. During 2000, 1999, and 1998, the Company acquired and
disposed of the following types of hotels:
December 31, 2000 December 31, 1999 December 31, 1998
------------------------------- ------------------------------- ---------------------------------------
Properties Properties Properties
Owned at Owned at Owned at
End of End of End of
Acquisitions Sales Year Acquisitions Sales Year Acquisitions Sales Year
------------ ----- ---------- ------------ ----- ---------- ------------- ----- ----------
Premium Limited Service 2 52 5 54 2 3 58
Premium Extended Stay 1 20 2 21 5 19
All Suite 19 19 9 19
Full Service 5 5 4
Independent 2
- - -- - - -- -- - ---
0 3 96 2 5 99 16 3 102
= = == = = == == = ===
With the above-mentioned acquisitions and sales, the Company has reduced its
exposure in the premium limited service segment from approximately 61% of
revenues in 1997 to approximately 44% of revenues in 2000. The premium extended
stay and all-suite segments now represent approximately 52% of the Company's
revenues.
Debt Refinancing
During the fourth quarter of 2000, the Company financed $108.8 million with
several financial institutions, at fixed rates ranging from 8.25% - 8.50%. The
principal amounts of the various loans are amortized over periods ranging from
20 - 25 years, with the unpaid balances payable from November 2005 - November
2010. Proceeds from the completion of these loans were used to repay existing
debt under its prior unsecured line of credit with Bank One, NA. In connection
with these transactions, twenty-five of the Company's hotel properties with a
carrying value of approximately $181.3 million collateralize the loans.
On November 9, 2000, the Company repaid the then outstanding balance under its
prior unsecured line of credit with Bank One, NA with borrowings under a new
$125 million secured line of credit with Bank One, NA (the "Line of Credit").
The Line of Credit bears interest at a variable rate of LIBOR plus 1.5%, 1.75%,
2.0%, 2.25%, 2.5% or 2.75% as determined by the Company's percentage of total
debt to earnings before interest, taxes, depreciation and amortization
("EBITDA"), as defined in the loan agreement (the "Percentage"). The Percentage
is reviewed quarterly and the interest rate is adjusted as necessary. Currently,
the interest rate on the Line of Credit is LIBOR (6.65% at December 31, 2000)
plus 2.50%. In connection with these transactions, twenty-eight of the Company's
hotel properties with a carrying value of approximately $267.3 million
collateralize the loans. The Line of Credit has a three-year term, expiring on
November 9, 2003.
On January 16, 2001, the Company entered into an interest rate swap agreement
with a financial institution on a notional principal amount of $50 million. The
agreement effectively fixes the interest rate on floating rate debt at a rate of
6.4275%, plus the Percentage. The swap agreement will expire in November 2003.
20
Action Taken as a Result of Recent Legislation
The Company terminated all 75 of its Percentage Leases with the Interstate
Lessee effective January 1, 2001. No remuneration was exchanged for the
termination of the leases. This action was precipitated by the recent enactment
of the RMA, which enables REITs such as the Company to gain greater control of
their properties by establishing taxable subsidiaries to function as lessees,
with hotel management provided by independent companies. On January 1, 2001, 55
of the leases acquired from the Interstate Lessee were terminated and the TRS
Lessees entered into management contracts with an affiliate of IHC, which later
will expire on a staggered basis, beginning January 1, 2002 through 2005. Twenty
of the leases were converted to management contracts with Promus Hotels, Inc., a
subsidiary of Hilton Hotels Corporation, and two leases were converted to
management contracts with Crestline Hotels and Resorts, Inc.
Results of Operations
Comparison of the Company's operating results for the year ended December 31,
2000 with the year ended December 31, 1999
For the year ended December 31, 2000, the Company had total revenue of $116.8
million, consisting substantially of Percentage Lease revenue. This compares
with total revenue of $117.3 million for the year ended December 31, 1999.
Decreases in revenue from hotel operations for the year ended December 31, 2000
as compared to 1999 are due to the recognition in 1999 of $2 million in
percentage revenue applicable to the amendment of the Company's leases with the
Interstate Lessee, partially offset by (i) a .9% increase in revenue per
available room ("REVPAR") for comparable hotels and (ii) a full year of
operations in 2000 of two hotels acquired in 1999.
Real estate and personal property taxes increased over the comparable period in
1999 due primarily to taxes on two large extended stay hotels purchased in mid
1999 that were not assessed at full value until 2000.
Depreciation and amortization increased over the comparable period in 1999 due
primarily to capitalized renovation costs at certain hotels.
Interest expense increased to $32.3 million from $27.9 million in 1999 due to
(i) an increase in the Company's weighted average outstanding debt to $379.9
million from $362.4 million in 1999 and (ii) an increase in weighted average
interest rates to 8.44% from 7.74% in 1999. The increase in borrowings is due
primarily to costs incurred as a result of refinancing a major portion of the
Company's debt during the year.
Amortization of loan costs increased to $1.7 million from $1.2 million in 1999
as a result of refinancing a significant amount of the Company's variable rate
debt with fixed rate debt.
General and administration expenses increased to $5.7 million, an increase of
$571,000 over 1999. This increase is primarily attributable to legal and
professional fees incurred in the conversion of the Company's leases to
management contracts and to the establishment of a taxable REIT subsidiary to
serve as a lessee.
Net income applicable to common shareholders for 2000 was $9.8 million or $0.27
per share, compared to $22.8 million or $0.61 per share for 1999.
21
Comparison of the Company's operating results for the year ended December 31,
1999 with the year ended December 31, 1998
For the year ended December 31, 1999, the Company had total revenues of $117.3
million, consisting substantially of Percentage Lease revenue. This compares
with total revenue of $107.4 million for the year ended December 31, 1998.
Increases in revenue from hotel operations for the year ended December 31, 1999
as compared to 1998 are due to (i) an increased number of hotels being owned and
leased by the Partnership throughout 1999, (ii) a full year of operation in 1999
of hotels acquired in 1998 and (iii) the recognition of the $2 million in
percentage lease revenue applicable to the amendment of the Company's leases
with the Interstate Lessee. Assuming all hotels which were in operation a full
year in both 1999 and 1998 had been owned and leased as of January 1, 1998,
REVPAR on a pro forma basis would have decreased 2.0% compared to 1998.
Real estate and personal property taxes and general and administration expenses
in the aggregate remained fairly constant in 1999 as compared to 1998 as a
percentage of total revenue. Interest expense increased to $27.9 million from
$21.6 million in 1998 due primarily to borrowings incurred to finance the
Company's acquisitions and slightly higher interest rates on the Company's
variable rate borrowings. The Company's weighted average interest rates on
outstanding borrowings during the years ended December 31, 1999 and 1998 were
7.74% and 7.46%, respectively. Net income applicable to common shareholders for
1999 was $22.8 million, or $0.61 per share, compared to $28.2 million, or $0.78
per share for 1998.
Liquidity and Capital Resources
The Company's principal source of cash to meet its cash requirements, including
distributions to its shareholders, is its cash distributions from the
Partnership. The Partnership receives cash payments from the Lessees pursuant to
the Percentage Leases. The Company's liquidity, including its ability to make
distributions to shareholders, is dependent upon the Lessees' ability to make
payments under the Percentage Leases.
Cash and cash equivalents were $793,000 at December 31, 2000, compared to
$361,000 at December 31, 1999. Excess cash balances are used to reduce the
Company's outstanding debt. For the year ended December 31, 2000, cash flow
provided by operating activities, consisting primarily of Percentage Lease
revenue, was $58 million.
The Company intends to make additional investments in hotel properties and may
incur, or cause the Partnership to incur, indebtedness to make such investments
or to meet distribution requirements imposed on a REIT under the Code to the
extent that working capital and cash flow from the Company's investments are
insufficient to make such distributions. The Company's Board of Directors has
adopted a policy limiting aggregate indebtedness to 45% of the Company's
investment in hotel properties, at cost, after giving effect to the Company's
use of proceeds from any indebtedness. This policy may be amended at any time by
the Board of Directors without shareholder vote. The Company's consolidated
indebtedness was 42.3% of its investments in hotels, at cost, at December 31,
2000.
On January 16, 2001, the Company entered into an interest rate swap agreement
with a financial institution on a notional principal amount of $50 million. The
agreement effectively fixes the interest rate on floating rate debt at a rate of
6.4275% plus 1.50%, 1.75%, 2.00%, 2.25%, 2.50% or 2.75% as determined by the
Percentage. The swap agreement will expire in November 2003.
During 2000, the Company invested $13.6 million, including $1.3 million for
renovations required by franchisors, to fund capital improvements to its hotels,
including replacement of carpets, drapes, renovation of common areas and
improvements of hotel exteriors. In addition, the Company expects to fund
approximately $17 million in 2001 for capital improvements.
22
The Company intends to fund such improvements out of future cash from
operations, present cash balances and borrowings under its Line of Credit. Under
certain of its loan covenants, the Partnership is obligated to fund 4% of room
revenues per quarter on a cumulative basis, to a separate room renovation
account for the ongoing replacement or refurbishment of furniture, fixtures and
equipment at the Hotels. For the years ended December 31, 2000 and 1999, the
amounts expended exceeded the amounts required under the loan covenants.
The Company elected to be taxed as a REIT commencing with its taxable year ended
December 31, 1994, and expects to continue to be taxed as a REIT under Sections
856 through 860 of the Internal Revenue Code of 1986. Accordingly, no provision
for federal income taxes has been reflected in the financial statements.
REITs are subject to a number of organizational and operational requirements.
For example, for federal income tax purposes, a REIT, and therefore the Company,
is required to pay distributions of at least 90% of its taxable income to its
shareholders. The Company intends to pay these distributions from operating cash
flows. During 2000, the Partnership distributed an aggregate of $40.2 million to
its partners, or $1.06 per Unit (including $38.9 million of distributions to the
Company to fund distributions to shareholders of $1.06 per share in 2000).
During 1999, the Partnership distributed an aggregate of $47.7 million to its
partners, or $1.24 per Unit (including $46.1 million of distributions to the
Company to fund distributions to shareholders of $1.24 per share in 1999). For
federal income tax purposes, approximately 54% of 2000 distributions represented
a return of capital, compared with approximately 33% for 1999.
The Company expects to meet its short-term liquidity requirements generally
through net cash provided by operations, existing cash balances and, if
necessary, short-term borrowings under the Line of Credit. The Company believes
that its net cash provided by operations will be adequate to fund both operating
requirements and payment of distributions by the Company in accordance with REIT
requirements.
The Company expects to meet its long-term liquidity requirements, such as
scheduled debt maturities and property acquisitions, through long-term secured
and unsecured borrowings, the issuance of additional equity securities of the
Company or, in connection with acquisitions of hotel properties, the issuance of
Partnership Units. Pursuant to the Partnership's limited partnership agreement
(the "Partnership Agreement"), subject to certain holding period requirements,
holders of Units in the Partnership have the right to require the Partnership to
redeem their Units. During the year ended December 31, 2000, 74,703 Units were
tendered for redemption. Pursuant to the Partnership Agreement, the Company has
the option to redeem Units tendered for redemption on a one-for-one basis for
shares of Common Stock or for an equivalent amount of cash. The Company
anticipates that it will acquire any Units tendered for redemption in the
foreseeable future in exchange for shares of Common Stock and has agreed to
register such shares so as to be freely tradeable by the recipient.
Funds from Operations
Industry analysts generally consider Funds from Operations ("FFO") to be an
appropriate measure of the performance of an equity REIT. In accordance with the
resolution adopted by the Board of Governors of the National Association of Real
Estate Investment Trusts ("NAREIT"), FFO represents net income (loss) (computed
in accordance with generally accepted accounting principles), excluding gains
(or losses) from sales of property, plus depreciation, and after adjustments for
unconsolidated partnerships and joint ventures. For the periods presented,
depreciation, minority interest, the write- off of non-recurring merger expenses
and the charge from write-off of deferred organization costs were the Company's
only adjustments to net income for the definition of FFO. The Company's
computation of FFO may not be comparable to FFO reported by other REITs that do
not define the term in accordance with the current NAREIT definition or that
interpret the current NAREIT definition
23
differently than the Company. FFO should not be considered an alternative to net
income or other measurements under generally accepted accounting principles as
an indicator of operating performance or to cash flows from operating, investing
or financing activities as a measure of liquidity. FFO does not reflect working
capital changes, cash expenditures for capital improvements or principal
payments with respect to indebtedness on the hotels.
The following reconciliation of net income to FFO illustrates the difference in
the two measures of operating performance:
For the Years Ended December 31,
2000 1999
------- -------
(in thousands, except per share and Unit data)
Net income $16,340 $29,316
Less:
Gain on sale of hotel properties (1,130)
Preferred stock dividends (6,531) (6,531)
Add:
Minority interest 337 819
Depreciation of buildings,
furniture and fixtures 40,267 38,573
Loss on sale of hotel properties 3,316
Change in accounting for corporate
organization costs 133
------- -------
Funds from Operations $53,729 $61,180
======= =======
Weighted average number of
common shares and Units
outstanding 37,960 38,570
====== ======
Inflation
Operators of hotels in general have the ability to adjust room rates quickly.
However, competitive pressures may limit the Lessees' ability to raise room
rates in the face of inflation.
Seasonality
Hotel operations historically are seasonal in nature, generally reflecting
higher occupancy rates during the second and third quarters. This seasonality
can be expected to cause fluctuations in the Company's quarterly lease revenues
to the extent that it receives Percentage Rent.
Impact of Recently Issued Accounting Standards to be Adopted in 2001
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101 ("SAB 101") which provides guidance on revenue recognition. SAB
101 requires that a lessor not recognize contingent rental income until annual
specified revenue levels have been achieved by the Lessees. During 1999 and
prior years, the Company has recognized contingent rentals throughout the year
since it was considered probable that the Lessees would exceed the annual
specified hurdles. The Company has reviewed the terms of its Percentage Leases
and has determined that the provisions of SAB 101 materially impact the
Company's revenue recognition on an interim basis, effectively deferring the
recognition of revenue from its Percentage Leases from
24
the first and second quarters of the calendar year to the third and fourth
quarters. SAB 101 will not impact the Company's revenue recognition on an annual
basis nor will it impact the Company's interim or annual cash flow or its FFO
from its Lessees, and therefore will not effect its ability to pay dividends.
The Company adopted SAB 101 as a change in accounting principle effective
January 1, 2000.
In June 1998, the FASB issued SFAS No. 133 ("SFAS 133"), "Accounting for
Derivative Instruments and Hedging Activities", as amended, which is required to
be adopted in years beginning after June 15, 2000. SFAS 133 requires the Company
to recognize all derivatives on the balance sheet at fair value. If the
derivative is a hedge, depending on the nature of the hedge, changes in the fair
value of the derivative will either be offset against the change in fair value
of the hedged assets, liabilities, or firm commitments through earnings, or
recognized in other comprehensive income, until the hedged item is recognized in
earnings. Any ineffective portion of a derivatives's change in fair value will
be immediately recognized in earnings, and any derivatives that are not hedges
must be adjusted to fair value through income. The Company adopted SFAS 133 in
January 2001. The impact of adoption was immaterial and the Company expects the
impact to continue to be immaterial in future periods.
Forward-Looking Statements
This Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Securities Act
of 1934, as amended, including, without limitation, statements containing the
words "believes," "estimates," "projects," "anticipates," "expects" and words of
similar import. Such forward-looking statements relate to future events and the
future financial performance of the Company, and involve known and unknown
risks, uncertainties and other factors which may cause the actual results,
performance or achievements of the Company to be materially different from the
results or achievement expressed or implied by such forward-looking statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
The Company is exposed to certain financial market risks, the most predominant
of which is the fluctuation in interest rates. At December 31, 2000, the
Company's exposure to market risk for a change in interest rates is related
solely to its debt outstanding under its $125 million Line of Credit. Total debt
outstanding under the Line of Credit totaled $96.5 million at December 31, 2000
for which the Company was exposed to fluctuations in the market rate of
interest.
The Company's operating results are affected by changes in interest rates,
primarily as a result of borrowing under the Line of Credit. If interest rates
increased by 25 basis points, the Company's annual interest expense would have
increased by approximately $241,250, based on balances outstanding during the
year ended December 31, 2000.
25
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
(a) Financial Statements:
The following financial statements are located in this report on the pages
indicated.
Equity Inns, Inc. Page
Report of Independent Accountants 28
Consolidated Balance Sheets as of December 31, 2000 and
1999 29
Consolidated Statements of Operations for the years ended
December 31, 2000, 1999 and 1998 30
Consolidated Statements of Shareholders' Equity for the
years ended December 31, 2000, 1999 and 1998 31
Consolidated Statements of Cash Flows for the years ended
December 31, 2000, 1999 and 1998 34
Notes to Consolidated Financial Statements 35
Schedule III -- Real Estate and Accumulated Depreciation
as of December 31, 2000 47
26
(b) Supplementary Data:
Quarterly Financial Information
Unaudited quarterly results for 2000 and 1999 are summarized as follows:
First Second Third Fourth
Quarter (1) Quarter (1) Quarter (1) Quarter (1)
----------- ----------- ------------- -----------
2000 (in thousands, except per share data)
----
Revenue $20,332 $20,759 $29,430 $46,289
Net income applicable to
common shareholders (6,180) (6,499) 3,520 18,968
Net income per common
share, basic and diluted (.17) (.18) .10 .52
1999 Pro Forma (2)
--------------
Revenue $18,723 $20,096 $30,458 $48,017
Net income applicable to
common shareholders (3,831) (2,197) 6,187 22,624
Net income per common share,
basic and diluted (.10) (.06) .17 .61
1999
----
Revenue $26,076 $31,675 $34,185 $25,358
Net income applicable to
common shareholders 3,259 8,976 9,788 762
Net income per common share,
basic and diluted .09 .24 .26 .02
- ------------------------
(1) Acquisitions of hotel properties throughout both years, coupled with the
seasonality of the hotels, have impacted the trend of quarterly results for the
periods shown.
(2) For comparative purposes, pro forma information is presented to illustrate
1999 quarterly earnings in accordance with SAB 101, which was adopted January 1,
2000. SAB 101 provides that a lessor shall defer recognition of contingent
rental income in interim periods until specified targets that trigger the
contingent income are met. SAB 101 has significantly impacted the Company's
current revenue recognition on a quarterly basis, but has no impact on the
Company's annual Percentage Lease revenue, FFO or quarterly cash flow from its
Lessees.
27
Report of Independent Accountants
To the Board of Directors and
Shareholders of Equity Inns, Inc.
In our opinion, the consolidated financial statements listed in the accompanying
index present fairly, in all material respects, the financial position of Equity
Inns, Inc. at December 31, 2000 and 1999, and the results of its operations and
its cash flows for each of the three years in the period ended December 31,
2000, in conformity with accounting principles generally accepted in the United
States of America. In addition, in our opinion, the financial statement
schedules listed in the accompanying index present fairly, in all material
respects, the information set forth therein when read in conjunction with the
related consolidated financial statements. These financial statements and
financial statement schedules are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements and financial statement schedules based on our audits. We conducted
our audits of these statements in accordance with auditing standards generally
accepted in the United States of America, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
Memphis, Tennessee
January 22, 2001, except as to Note 11, for which
the date is January 25, 2001
28
EQUITY INNS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
December 31, December 31,
2000 1999
------------ ------------
Assets:
Investment in hotel properties, net $772,411 $814,537
Cash and cash equivalents 793 361
Due from Lessees 5,595 5,124
Notes receivable 3,408 3,314
Deferred expenses, net 12,843 7,019
Deposits and other assets 6,693 1,764
-------- --------
Total Assets $801,743 $832,119
======== ========
Liabilities and Shareholders' Equity:
Debt $383,403 $381,175
Accounts payable and accrued expenses 13,605 13,755
Distributions payable 10,579 12,929
Minority interest in Partnership 10,370 12,008
-------- --------
Total Liabilities 417,957 419,867
-------- --------
Commitments and contingencies (Note 6)
Shareholders' Equity:
Preferred stock, $.01 par value,
10,000,000 shares authorized,
2,750,000 issued and outstanding
at December 31, 2000 and 1999 68,750 68,750
Common stock, $.01 par value,
50,000,000 shares authorized,
37,498,659 and 37,308,523 shares
issued and outstanding at December 31,
2000 and 1999, respectively 375 373
Additional paid-in capital 417,755 416,354
Treasury stock, at cost, 747,600 shares
and 557,300 shares issued and
outstanding at December 31, 2000 and
1999, respectively (5,173) (3,883)
Unearned directors' and officers'
compensation (1,854) (2,375)
Predecessor basis assumed (1,264) (1,264)
Distributions in excess of net earnings (94,803) (65,703)
-------- --------
Total Shareholders' Equity 383,786 412,252
-------- --------
Total Liabilities and Shareholders' Equity $801,743 $832,119
======== ========
The accompanying notes are an integral part of these
consolidated financial statements.
29
EQUITY INNS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
For the Years Ended December 31,
2000 1999 1998
-------- -------- ---------
Revenue:
Percentage lease revenues $115,875 $116,459 $106,661
Other income 935 835 775
-------- -------- --------
Total Revenue 116,810 117,294 107,436
-------- -------- --------
Expenses:
Real estate and personal property taxes 14,085 12,756 10,411
Depreciation and amortization 40,494 38,856 32,665
Interest 32,323 27,947 21,587
Amortization of loan costs 1,749 1,210 834
General and administrative 5,721 5,150 4,650
Amortization of unearned directors' and
officers' compensation 927 891 331
Rental expense 1,518 1,346 969
Merger expense 2,197
-------- -------- -------
Total Expenses 96,817 88,156 73,644
-------- -------- --------
Income before minority interest
and other items 19,993 29,138 33,792
Minority interest (337) (819) (1,492)
Gain (loss) on sale of hotel properties (3,316) 1,130 (705)
Change in accounting for corporate
organizational costs (133)
-------- -------- --------
Net income 16,340 29,316 31,595
Preferred stock dividends 6,531 6,531 3,374
-------- -------- --------
Net income applicable to common
shareholders $ 9,809 $ 22,785 $ 28,221
======== ======== ========
Net income per common share, basic
and diluted $ .27 $ .61 $ .78
======== ======== ========
Weighted average number of common
shares and units outstanding - diluted 37,960 38,570 38,001
======== ======== ========
The accompanying notes are an integral part of these
consolidated financial statements.
30
EQUITY INNS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in thousands, except share and per share data)
Preferred Stock Common Stock Additional Treasury Stock
------------------- ------------------ Paid-In -----------------
Shares Dollars Shares Dollars Capital Shares Dollars
--------- ------- ---------- ------- ---------- ------ -------
Balance at December 31, 1997 34,865,578 $349 $387,134
Issuance of common shares, net of
offering expenses 1,286,718 13 18,795
Issuance of preferred shares, net of
offering expenses 2,750,000 $68,750 (2,408)
Issuance of common shares to officers
in lieu of cash bonus 69,123 1 1,062
Issuance of common shares to
directors in lieu of cash
compensation 4,042 55
Issuance of restricted common
shares to officers and directors 161,000 1 2,135
Issuance of common shares to
officers through exercise of stock
options 9,000 112
Forfeitures of unvested shares by an
officer, upon resignation (6,000) (73)
Amortization of unearned officers' and
directors' compensation
Issuance of common shares upon
redemption of Units 49,074 525
Net income applicable to common
shareholders
Distributions ($1.24 per share)
Adjustments to minority interest from
issuance of common shares and
partnership units 496
--------- ------- ---------- ---- --------- ------ --------
Balance at December 31, 1998 2,750,000 68,750 36,438,535 364 407,833
Issuance of common shares to
officers in lieu of cash bonus 98,824 1 987
Issuance of common shares to
directors in lieu of cash
compensation 9,235 80
Unearned
Directors' Predecessor Distributions
and Officers' Basis In Excess of
Compensation Assumed Net Earnings Total
------------- ----------- ------------- --------
Balance at December 31, 1997 $ (274) $(1,264) $(25,773) $360,172
Issuance of common shares, net of
offering expenses 18,808
Issuance of preferred shares, net of
offering expenses 66,342
Issuance of common shares to officers
in lieu of cash bonus 1,063
Issuance of common shares to
directors in lieu of cash
compensation 55
Issuance of restricted common
shares to officers and directors (2,136) 0
Issuance of common shares to
officers through exercise of stock
options 112
Forfeitures of unvested shares by an
officer, upon resignation 73 0
Amortization of unearned officers' and
directors' compensation 331 331
Issuance of common shares upon
redemption of Units 525
Net income applicable to common
shareholders 28,221 28,221
Distributions ($1.24 per share) (44,861) (44,861)
Adjustments to minority interest from
issuance of common shares and
partnership units 496
------- ------- -------- --------
Balance at December 31, 1998 (2,006) (1,264) (42,413) 431,264
Issuance of common shares to
officers in lieu of cash bonus 988
Issuance of common shares to
directors in lieu of cash
compensation 80
31
EQUITY INNS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (CONTINUED)
(in thousands, except share and per share data)
Preferred Stock Common Stock Additional Treasury Stock
------------------- ------------------ Paid-In -----------------
Shares Dollars Shares Dollars Capital Shares Dollars
--------- ------- ---------- ------- ---------- ------ -------
Issuance of restricted common
stock to officers and directors 129,800 1 1,259
Repurchase of Treasury Stock 557,300 $(3,883)
Offering expenses (30)
Amortization of unearned officers'
and directors' compensation
Issuance of common shares upon
redemption of Units 632,129 7 6,266
Net income applicable to common
shareholders
Distributions ($1.24 per share)
Adjustments to minority interest from
purchase of treasury stock,
issuance of common shares and
partnership units (41)
--------- ------- ---------- ---- --------- ------- --------
Balance at December 31, 1999 2,750,000 68,750 37,308,523 373 416,354 557,300 (3,883)
Issuance of common shares to
officers in lieu of cash bonus 38,669 265
Issuance of common shares to
directors in lieu of cash
compensation 12,324 80
Issuance of restricted common
stock to officers and directors 71,450 1 481
Forfeiting of unvested shares by
an officer, upon resignation (7,010) (76)
Repurchase of Treasury Stock 190,300 (1,290)
Amortization of unearned officers'
and directors' compensation
Issuance of common shares upon
redemption of Units 74,703 1 675
Net income applicable to common
shareholders
Distributions ($1.06 per share)
Unearned
Directors' Predecessor Distributions
and Officers' Basis In Excess of
Compensation Assumed Net Earnings Total
------------- ----------- ------------- --------
Issuance of restricted common
stock to officers and directors (1,260) 0
Repurchase of Treasury Stock (3,883)
Offering expenses (30)
Amortization of unearned officers'
and directors' compensation 891 891
Issuance of common shares upon
redemption of Units 6,273
Net income applicable to common
shareholders 22,785 22,785
Distributions ($1.24 per share) (46,075) (46,075)
Adjustments to minority interest from
purchase of treasury stock,
issuance of common shares and
partnership units (41)
------- ------- -------- --------
Balance at December 31, 1999 (2,375) (1,264) (65,703) 412,252
Issuance of common shares to
officers in lieu of cash bonus 265
Issuance of common shares to
directors in lieu of cash
compensation 80
Issuance of restricted common
stock to officers and directors (482) 0
Forfeiting of unvested shares by
an officer, upon resignation 76 0
Repurchase of Treasury Stock (1,290)
Amortization of unearned officers'
and directors' compensation 927 927
Issuance of common shares upon
redemption of Units 676
Net income applicable to common
shareholders 9,809 9,809
Distributions ($1.06 per share) (38,909) (38,909)
32
EQUITY INNS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (CONTINUED)
(in thousands, except share and per share data)
Preferred Stock Common Stock Additional Treasury Stock
------------------- ------------------ Paid-In -----------------
Shares Dollars Shares Dollars Capital Shares Dollars
--------- ------- ---------- ------- ---------- ------ -------
Adjustments to minority interest from
purchase of treasury stock,
issuance of common shares and
partnership units (24)
--------- ------- ---------- ---- -------- ------- -------
Balance at December 31, 2000 2,750,000 $68,750 37,498,659 $375 $417,755 747,600 $(5,173)
========= ======= ========== ==== ======== ======= =======
Unearned
Directors' Predecessor Distributions
and Officers' Basis In Excess of
Compensation Assumed Net Earnings Total
------------- ----------- ------------- --------
Adjustments to minority interest from
purchase of treasury stock,
issuance of common shares and
partnership units (24)
------- ------- -------- --------
Balance at December 31, 2000 $(1,854) $(1,264) $(94,803) $383,786
======= ======= ======== ========
The accompanying notes are an integral part of these
consolidated financial statements.
33
EQUITY INNS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the Years Ended December 31,
2000 1999 1998
------- ------- -------
Cash flows from operating activities:
Net income $16,340 $29,316 $31,595
Adjustment to reconcile net income to net cash
provided by operating activities:
(Gain) loss on sale of hotel properties 3,316 (1,130) 705
Depreciation and amortization 40,494 38,856 32,665
Amortization of loan costs 1,749 1,210 834
Change in accounting for corporate
organizational costs 133
Amortization of unearned directors' and
officers' compensation 927 891 331
Directors' compensation 80 80 55
Minority interest 337 819 1,492
Changes in assets and liabilities:
Due from Lessees (471) 1,164 (363)
Note receivable (94) (99) 669
Deferred expenses 5 (11)
Deposits and other assets (4,929) (1,089) 503
Accounts payable and accrued expenses 261 1,359 911
------- ------- -------
Net cash flow provided by operating
activities 58,010 71,515 69,386
------- ------- -------
Cash flows from investing activities:
Acquisitions of hotel properties (57,188) (175,576)
Improvements and additions to hotel properties (13,602) (32,800) (25,998)
Cash paid for franchise applications (833) (234) (215)
Proceeds from sale of hotel properties 12,234 28,323 8,250
------- ------- -------
Net cash flow used in investing activities (2,201) (61,899) (193,539)
------- ------- -------
Cash flows from financing activities:
Gross proceeds from public offering of common stock 20,145
Gross proceeds from public offering of preferred stock 68,750
Purchase of Treasury stock (1,290) (2,815)
Payment of offering expenses (30) (3,745)
Proceeds from exercise of stock options 112
Distributions paid to common and preferred shareholders
and unit holders (49,114) (54,305) (48,262)
Proceeds from borrowings 182,467 263,170 179,475
Payments on debt (180,239) (213,320) (92,080)
Cash paid for loan costs (7,201) (2,286) (28)
Payments on capital lease obligations (69) (4)
------- ------- -------
Net cash flow provided by (used in)
financing activities (55,377) (9,655) 124,363
------- ------- -------
Net increase (decrease) in cash and cash
equivalents 432 (39) 210
Cash and cash equivalents at beginning of year 361 400 190
------- ------- -------
Cash and cash equivalents at end of year $ 793 $ 361 $ 400
======= ======= =======
The accompanying notes are an integral part of these
consolidated financial statements.
34
EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization
Equity Inns, Inc. (the "Company") is a hotel real estate investment trust
("REIT") for federal income tax purposes. The Company, through its wholly owned
subsidiary, Equity Inns Trust (the "Trust"), is the sole general partner of
Equity Inns Partnership, L.P. (the "Partnership") and at December 31, 2000 owned
an approximate 96.8% interest in the Partnership.
At December 31, 2000, the Partnership or its affiliates owned 96 hotel
properties, with a total of 12,284 rooms in 34 states. During the year ended
December 31, 2000, the Partnership or its affiliates, under operating leases
providing for the payment of percentage rent (the "Percentage Leases"), leased
75 of the Company's hotels to affiliates of Interstate Hotels Corporation
("IHC"), which was recently divested from Wyndham International, Inc.
("Wyndham"). IHC is referred to herein as the "Interstate Lessee." All payments
due under these Percentage Leases were guaranteed by IHC and Interstate Hotels,
L.L.C., a subsidiary of IHC (except for three hotels where Wyndham rather than
IHC was the guarantor). Also, during the year ended December 31, 2000, the
Partnership leased 19 hotels to wholly-owned subsidiaries of Prime Hospitality
Corporation (collectively, the "Prime Lessee"). All payments due under these
Percentage Leases were guaranteed by Prime Hospitality Corporation. The
remaining two hotels were operated in 2000 pursuant to management agreements,
one of which was operated by a subsidiary of IHC and one of which was operated
by a wholly-owned subsidiary of MeriStar Hotels & Resorts, Inc.
In December 1999, the REIT Modernization Act (the "RMA") was signed into law,
allowing the Company to own all of the stock in taxable REIT subsidiaries (the
"TRS"). As a result of the opportunities offered by the RMA, effective on
January 1, 2001, the Company terminated or assigned the Percentage Leases
between the Company and the Interstate Lessee and terminated the guarantee with
Interstate Hotels, L.L.C. and Wyndham and entered into new Percentage Leases
with the Taxable REIT subsidiaries of the Company (the "TRS Lessees") for the
lease of 77 of the Company's hotels. The terms of the Percentage Leases with the
TRS Lessees are substantially identical to the Percentage Leases terminated
between the Company and the Interstate Lessee. The Interstate Lessee and the
Prime Lessee are referred to herein collectively as the "Lessees", and
individually as a "Lessee." The Lessees operate and lease hotels owned by the
Partnership and its affiliates pursuant to the Percentage Leases, which provide
for rent payments to the Partnership equal to the greater of (i) a fixed base
rent ("Base Rent") or (ii) percentage rent based on the revenues of the hotels
("Percentage Rent"). In future reporting periods, the rents generated by the
Percentage Leases with the TRS Lessees will be eliminated in consolidation,
while the actual operating results of all the Company's hotels leased by the TRS
Lessees will be included in the Company's financial statements.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company, the
Trust and the Partnership. All significant intercompany balances and
transactions have been eliminated.
Investment in Hotel Properties
The hotel properties are recorded at cost. Depreciation is computed using the
straight-line method over estimated useful lives of the assets which range from
5 to 40 years for buildings and components and 5 to 7 years for furniture and
equipment.
35
EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Summary of Significant Accounting Policies, Continued
Maintenance and repairs are the responsibility of the Lessees; major renewals
and improvements are capitalized. Upon disposition, both the asset and
accumulated depreciation accounts are relieved, and the related gain or loss is
credited or charged to the income statement.
The Company reviews the carrying value of each hotel property to determine if
circumstances exist indicating an impairment in the carrying value of the
investment in the hotel property or that depreciation periods should be
modified. If impairment is indicated, the carrying value of the hotel property
will be adjusted to its fair market value. The Company does not believe that
there are any current facts or circumstances indicating impairment of any of its
investment in hotel properties.
Cash and Cash Equivalents
All highly liquid investments with maturities of three months or less when
purchased are considered to be cash equivalents.
Deferred Expenses
Deferred expenses are recorded at cost and consist of initial fees paid to
franchisors and loan fees and other costs incurred in issuing debt. Amortization
of franchise fees is computed using the straight-line method over the lives of
the franchise agreements which range up to 20 years. Amortization of loan fees
and other costs incurred in issuing debt is computed using the straight-line
method, which approximates the interest method, over the term of the related
debt. Accumulated amortization of deferred expenses totaled $2.9 million and
$3.4 million at December 31, 2000 and 1999, respectively.
Deposits and Other Assets
Deposits include escrow deposits and other deposits relating to the Company's
mortgage debt.
Revenue Recognition
Percentage Lease revenue is recognized when earned from the Lessees under the
Percentage Leases from the date of acquisition of each hotel property.
Net Income Per Common Share
Statement of Financial Accounting Standards No. 128, "Earnings per Share"
requires the presentation of basic and diluted earnings per share, replacing
primary and fully diluted earnings per share previously required. A
reconciliation of the numerator and denominator used in the basic earnings per
share computation to the numerator and denominator used in the diluted earnings
per share computation is presented below for the years ended December 31, 2000,
1999 and 1998, respectively.
36
EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Summary of Significant Accounting Policies, Continued
For the Years Ended December 31,
-----------------------------------------------------------------------------------------------------------
2000 1999 1998
----------------------------------- ----------------------------------- -----------------------------------
Income Shares Per Share Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- --------- ----------- ------------- --------- ----------- ------------- ---------
(in thousands except per share data)
Net income applicable to
common shareholders-
basic $ 9,809 36,698 $.27 $22,785 37,225 $.61 $28,221 36,073 $.78
Dilutive effect of
potential conversion
of partnership units
and elimination of
minority interest 337 1,262 819 1,345 1,492 1,907
Dilutive effect of
stock options
outstanding
using the treasury
stock method 21
------- ------ ---- ------- ------ ---- ------- ------ ----
Net income applicable to
common shareholders-
diluted $10,146 37,960 $.27 $23,604 38,570 $.61 $29,713 38,001 $.78
======= ====== ==== ======= ====== ==== ======= ====== ====
Distributions
The Company pays regular quarterly cash distributions to shareholders which are
dependent upon receipt of distributions from the Partnership.
Minority Interest
Minority interest in the Partnership represents the limited partners'
proportionate share of the equity of the Partnership. Income is allocated to
minority interest based on weighted average percentage ownership throughout the
year.
Stock-Based Compensation Plans
The Company applies APB Opinion No. 25 and related interpretations in its
accounting for Stock Based Compensation Plans. Accordingly, the Company has
adopted the disclosure-only provisions of SFAS No. 123, "Accounting for Stock-
Based Compensation."
Income Taxes
The Company has qualified as a REIT under Sections 856 through 860 of the
Internal Revenue Code, as amended. Accordingly, no provision for federal income
taxes has been reflected in the financial statements.
Earnings and profits, which will determine the taxability of distributions to
shareholders, will differ from net income reported for financial reporting
purposes primarily due to the differences for federal income tax purposes in the
estimated useful lives and methods used to compute depreciation. Distributions
made to shareholders in 2000 and 1999 are considered to be approximately 54% and
33% return of capital, respectively, for federal income tax purposes.
37
EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Summary of Significant Accounting Policies, Continued
Concentration of Credit Risk
The Company maintains cash balances with financial institutions with high
ratings. The Company has not experienced any losses with respect to bank
balances in excess of government-provided insurance.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Reclassifications
Certain reclassifications of the prior year amounts have been made to conform
with the current year presentation.
3. Investment in Hotel Properties
Hotel properties consist of the following at December 31:
2000 1999
-------- --------
(in thousands)
Land $101,532 $103,315
Buildings and improvements 691,516 695,923
Furniture and equipment 110,458 112,817
Construction in progress 3,490 3,366
-------- --------
906,996 915,421
Less accumulated depreciation (134,585) (100,884)
-------- --------
$772,411 $814,537
======== ========
Fifty-two of the hotel properties are premium limited service hotels, five are
full service hotels, twenty are premium extended stay hotels, and nineteen are
all-suite hotels.
During 2000, the Company sold three hotels to third parties for an aggregate
sales price of approximately $13 million. The Company realized a loss of
approximately $3,300,000 as a result of these sales. The sales price was paid in
cash.
During 1999, the Company acquired two hotels for approximately $56.7 million and
sold five hotels to third parties for an aggregate sales price of approximately
$29 million. The Company realized a gain of approximately $1,130,000 as a result
of these sales.
38
EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. Notes Receivable
Notes receivable consist of the following at December 31:
2000 1999
------ ------
(in thousands)
Hudson Hotels Properties Corporation, a
subsidiary of Hudson Hotels Corporation $2,634 $2,634
Officers of the Company 633 539
Rosemont Hospitality Group, L.L.C. 141 141
------ -------
$3,408 $3,314
====== ======
On August 13, 1997, the Company sold nine Hampton Inn hotels to a subsidiary of
Hudson Hotels Corporation ("Hudson") for a purchase price of approximately
$46.25 million, $3.9 million of which was in the form of a two-year note bearing
interest at an annual rate of 10%, and is secured by 666,667 shares of Hudson
Hotels Corporation common stock. In 1998, the Company modified the repayment
terms of the note and extended the term of the note by one year. On April 14,
2000, the Company, in connection with Hudson's overall financial restructuring,
modified the repayment terms of the note and extended the term to mature on
April 1, 2006. The modified terms require monthly payments of principal and
interest, beginning in April 2001. The note continues to bear interest at an
annual rate of 10%.
In December 1999, the Company assigned its obligation to purchase a Hawthorn
Suites hotel in Chicago to Rosemont Hospitality Group, L.L.C. As a result, the
Company received a one-year note receivable in the amount of $140,878 as
reimbursement for expenses incurred in regard to the proposed acquisition of the
hotel. In December 2000, the Company extended the term of the note by one year.
The note bears interest at 12.25% and is due on December 31, 2001.
Since January 1998, the Company has advanced loans annually to its executive
officers for taxes relating to annual bonuses taken in shares of the Company's
common stock. At December 31, 2000, the aggregate amount of notes receivable
from officers of the Company is $632,960. In January 2001, the Company advanced
loans to its officers in the amount of $105,951 for taxes relating to 2000
bonuses taken in common stock. All loans are collateralized by all shares of
common stock received as bonus compensation held by each officer, are
non-interest bearing and have an original term of one year. However, these notes
have historically been extended an additional year for each year in which they
are not repaid. All loans are due in full upon termination of employment or upon
retirement.
39
EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. Debt
The following details the Company's debt outstanding at December 31, 2000 and
1999 (in thousands):
Principal Balance Collateral Net Book
------------------- Interest # of Value at
12/31/00 12/31/99 Rate Maturity Hotels 12/31/00
-------- -------- ------------- -------- ----------- --------
Commercial Mortgage Bonds
Class A $ 12,084 $ 21,138 6.83% Fixed 11/20/06
Class B 50,600 50,600 7.37% Fixed 12/20/15
Class C 10,000 10,000 7.58% Fixed 02/20/17
-------- --------
72,684 81,738 21 $120,818
Line of Credit 96,525 192,500 LIBOR plus Variable Nov 2003 28 267,335
Percentage
Mortgage 95,360 96,561 8.37% Fixed July 2009 19 174,033
Mortgage 69,653 8.25% Fixed Nov 2010 16 111,538
Mortgage 35,964 8.25% Fixed Nov 2010 8 62,406
Mortgage 3,126 8.50% Fixed Nov 2005 1 7,366
Mortgage 6,062 6,234 10.00% Fixed Sept 2005 1 12,152
Mortgage 4,029 4,142 8.57% Fixed Nov 2016 1 7,220
-------- -------- --------
$383,403 $381,175 $762,868
======== ======== ========
In February 1997, the Company, through a subsidiary, issued $88 million of rated
Commercial Mortgage Bonds (the "Bonds") in a private placement transaction. The
combined interest rate on the outstanding balances on all three issues of Bonds
at December 31, 2000 is 7.25%. Principal payments are to be applied to each
class of Bonds in order of their respective maturities with no principal payment
on any Bond until all Bonds in a bond class with an earlier stated maturity have
been paid in full. The Company expects to repay these Bonds in full within 10
years with no prepayment penalty.
During the fourth quarter of 2000, the Company converted approximately $109
million of its debt outstanding under its unsecured lines of credit to fixed
rate debt with several financial institutions, at interest rates ranging from
8.25% - 8.50%. The principal amounts of the various loans are amortized over
periods ranging from 20 - 25 years, with the unpaid balances payable from
November 2005 - November 2010.
On November 9, 2000, the Company repaid the remaining outstanding balance under
its prior unsecured line of credit with Bank One, NA with borrowings under a new
$125 million secured line of credit with Bank One, NA (the "Line of Credit").
The Line of Credit bears interest at a variable rate of LIBOR plus 1.5%, 1.75%,
2.0%, 2.25%, 2.5% or 2.75% as determined by the Company's percentage of total
debt to earnings before interest, taxes, depreciation and amortization
("EBITDA"), as defined in the loan agreement (the "Percentage"). The Percentage
is reviewed quarterly and the interest rate is adjusted as necessary. At
December 31, 2000, the interest rate on the Line of Credit was LIBOR (6.65% at
December 31, 2000) plus 2.50%. Fees ranging from .25% to .55%, as determined by
the Company's ratio of total indebtedness to EBITDA, are paid quarterly on the
unused portion of the Line of Credit. The Line of Credit contains various
covenants including the maintenance of a minimum net worth, minimum debt
coverage and interest coverage ratios, and total indebtedness limitations. At
December 31, 2000, the Company was in compliance with all covenants contained in
the Line of Credit.
40
EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. Debt, Continued
Certain of the Company's loan agreements require a quarterly deposit into
separate room renovation accounts for the amount by which 4% of revenues at the
Company's hotels exceeds the amount expended by the Company during the year for
replacement of furniture, fixtures and equipment and capital improvements for
the hotels. For the year ended December 31, 2000, actual expenditures exceeded
the amounts required.
Future scheduled principal payments of debt obligations at December 31, 2000 are
as follows (in thousands):
Year Amount
---- --------
2001 $ 4,712
2002 5,100
2003 102,045
2004 5,770
2005 14,138
Thereafter 251,638
--------
$383,403
========
6. Commitments and Related Party Transactions
All of the Company's hotels are operated under franchise agreements and are
licensed as Hampton Inn hotels (48), AmeriSuites hotels (19), Residence Inn
hotels (11), Homewood Suites hotels (9), Holiday Inn hotels (5), Comfort Inn
hotels (3), and Hampton Inn & Suites hotels (1). The franchisors approve the
transfer of the franchise licenses to the applicable Lessee when the Partnership
acquires each hotel property. The franchise agreements require the payment of
fees based on a percentage of hotel room revenue which are paid by the Lessee.
The Company earned Base Rents of $77.2 million, $77.0 million, and $65.9 million
and Percentage Rents in excess of Base Rents of $38.7 million, $39.5 million,
and $40.8 million, respectively, for the years ended December 31, 2000, 1999 and
1998. The Percentage Lease revenue is based on a percentage of gross room
revenue, and, if applicable, food and beverage revenue of the hotels.
The Prime Lessee has future lease commitments to the Company under the
Percentage Leases for various terms extending through 2010. Minimum future
rental income (Base Rents) under these non-cancelable operating leases is as
follows (in thousands):
Year Amount
---- --------
2001 $ 20,140
2002 20,140
2003 20,140
2004 20,140
2005 20,140
Thereafter 85,836
--------
$186,536
========
41
EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. Commitments and Related Party Transactions, Continued
The Percentage Leases range in terms from ten to fifteen years. Rental rates on
all fifteen-year leases are required to be re-negotiated after ten years. Both
the Base Rent and the threshold room revenue amount in each Percentage Rent
formula are adjusted annually for changes in the U.S. Consumer Price Index
("CPI"). The adjustment is calculated on January 1 of each year, provided the
lease has been in effect for a complete calendar year and is based upon the
average change in the CPI during the prior 24 months. The adjustment in any
lease year may not exceed 7%. Effective January 1, 2001, the Percentage Leases
for the Prime Lessee were adjusted, resulting in a 3.13% increase in both Base
Rent and threshold room revenue. As discussed in Note 1, the Company terminated
or assigned the Percentage Leases with the Interstate Lessee, effective December
31, 2000.
At December 31, 2000, the Lessees owed the Company $5,595,000 representing
fourth quarter Percentage Rent. All of the amounts due were collected prior to
January 31, 2001.
Under the Percentage Leases, the Partnership is obligated to pay the costs of
real estate and personal property taxes and to maintain underground utilities
and structural elements of the Hotels. In addition, the Percentage Leases
obligate the Partnership to fund the cost of periodic repair, replacement and
refurbishment of furniture, fixtures and equipment in the Hotels. The Company
also may be required by franchisors to fund certain capital improvements to
hotel properties, which are funded from borrowings, working capital, or the room
renovation account (Note 5). Capital improvements of $13.6 million, $32.8
million, and $26.0 million in 2000, 1999, and 1998, respectively, were made to
the hotel properties, including those required by the franchisors at the
acquisition of the property.
The Company has commitments under operating land leases through December 31,
2062, at eight hotel properties for payments as follows: 2001 -- $769,461; 2002
- -- $795,888; 2003 -- $798,388; 2004 -- $801,138; 2005 -- $743,863; thereafter --
$10.4 million.
The Company has commitments under a lease with an affiliate of Phillip H.
McNeill, Sr., the Company's Chairman of the Board, for the Company's office
space through December 2008 at monthly payments of $13,238.
As discussed in Note 4, the Company has $632,960 of non-interest bearing notes
receivable from its officers for taxes relating to annual bonuses taken in
common stock.
7. Supplemental Disclosure of Noncash Operating, Investing and Financing
Activities
In 2000, $145,000 of deferred franchise fees and corresponding payables were
determined not to be owed; the Company issued 38,669 shares of Common Stock
valued at $6.88 per share to its officers in lieu of cash to satisfy bonus
compensation accrued at December 31, 1999; 7,010 unvested, restricted shares of
common stock were forfeited by an officer of the Company; 74,703 units of
limited partnership interest in the partnership ("Units") were exchanged for
shares of Common Stock by certain limited partners; 71,450 restricted shares of
Common Stock valued at $6.75 per share were issued to the Company's officers;
12,324 shares of Common Stock at prices ranging from $5.50 to $6.88 were issued
to independent directors of the Company in lieu of cash as directors'
compensation; and $9.5 million in distributions to common shareholders and
limited partners had been declared but not paid at December 31, 2000.
42
EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. Supplemental Disclosure of Noncash Ooperating, Investing and Financing
Activities, Continued
In 1999, the Company issued 98,824 shares of Common Stock valued at $10.00 per
share to its officers in lieu of cash to satisfy bonus compensation accrued at
December 31, 1998; 632,129 Units were exchanged for shares of Common Stock by
certain limited partners; 124,800 restricted shares of Common Stock valued at
$9.75 per share were issued to the Company's officers; 5,000 restricted shares
of Common Stock valued at $8.69 per share were issued to the Company's
independent directors; 9,235 shares of Common Stock at prices ranging from $6.31
to $9.63 were issued to independent directors of the Company in lieu of cash as
directors' compensation; 157,300 treasury shares valued at $6.79 per share were
traded in December 1999, but not settled at December 31, 1999; and $11.8 million
in distributions to common shareholders and limited partners had been declared
but not paid at December 31, 1999.
In 1998, the Company issued 69,123 shares of Common Stock valued at $15.38 per
share to its officers in lieu of cash to satisfy bonus compensation accrued at
December 31, 1997; 49,074 Units were exchanged for shares of Common Stock by
certain limited partners; 123,457 Units valued at $1.9 million and an assumption
of a $6.5 million note payable were issued as part of the total acquisition cost
of a hotel property; a $4.3 million note payable was assumed as part of the
acquisition cost of a hotel property; 141,000 restricted shares of Common Stock
valued from $13.50 to $13.56 per share were issued to the Company's officers;
20,000 restricted shares of Common Stock valued from $9.63 to $12.31 per share
were issued to the Company's independent directors; 4,042 shares of Common Stock
at prices ranging from $9.63 to $15.50 were issued to independent directors of
the Company in lieu of cash as directors' compensation; 9,000 shares of Common
Stock were issued to an officer upon exercise of options; and $11.9 million in
distributions to common shareholders and limited partners had been declared but
not paid at December 31, 1998.
8. Capital Stock
The Board of Directors is authorized to provide for the issuance of ten million
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 restriction
thereof. On June 25, 1998, the Company issued 2,750,000 shares of its 9 1/2%
Series A Cumulative Preferred Stock, $.01 par value ("Series A Preferred
Stock"). The offering price was $25 per share, resulting in gross proceeds of
$68.8 million. The Company received approximately $66.3 million after
underwriters' discounts and offering expenses.
The outstanding Units are redeemable at the option of the holder for a like
number of shares of Common Stock, or at the option of the Company, the cash
equivalent thereof. Total Units outstanding at December 31, 2000 and 1999 were
1,210,071 and 1,284,774, respectively.
In October 1999, the Board of Directors approved a stock repurchase program
authorizing the Company to buy back up to $25 million of Common Stock on the
open market over the next eighteen months, subject to certain market conditions
and other factors. The Company expects to fund any stock repurchases primarily
with proceeds from the sale of hotels which do not currently meet the Company's
investment criteria. The Company believes that these repurchases, at current
market prices, will enhance shareholder value. At December 31, 2000, 747,600
shares had been repurchased at a cost of approximately $5.2 million.
43
EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. Stock Based Compensation Plans
The Company is authorized, under the 1994 Stock Incentive Plan (the "1994 Plan")
and the Directors' Compensation Plan (the "Directors Plan"), (referred to
collectively as the "Plans"), to issue a total of 4,050,000 shares of common
stock to directors, officers and key employees of the Company in the form of
stock options, restricted stock, or performance stock. Under the 1994 Plan, the
total shares available for grant is 4,000,000, of which not more than 1,100,000
shares may be grants of restricted stock or performance stock. Under the
Directors Plan, the total shares available for grants of options is 50,000.
Awards of common stock may also be made, and directors may elect to receive
their meeting and retainer fees in the form of common stock.
Stock Options
All options to officers and key employees have 8 to 10 year contractual terms
and generally vest ratably over 5 years. A summary of the Company's stock
options as of December 31, 2000, 1999 and 1998 and the changes during the years
are presented below:
2000 1999 1998
-------------------------- ------------------------ -----------------------
Weighted Weighted Weighted
# of Shares Average # of Shares Average # of Shares Average
of Underlying Exercise of Underlying Exercise of Underlying Exercise
Options Price Options Price Options Price
------------- ----------- ------------- -------- ------------- --------
Outstanding at beginning
of year 582,000 $12.60 568,000 $12.68 519,000 $12.49
Granted 4,000 $ 6.88 14,000 $ 9.24 118,000 $13.40
Exercised (9,000) $12.50
Forfeited (60,000) $12.50
------- ------ ------- ------ ------- ------
Outstanding at end of year 586,000 $12.56 582,000 $12.60 568,000 $12.68
Exercisable at end of year 529,000 $12.58 505,000 $12.55 383,000 $12.56
Options Outstanding Options Exercisable
--------------------------------------- -------------------------------------
Weighted Weighted Weighted Weighted
Average Average Average Average
# Outstanding Remaining Exercise # Exercisable Remaining Exercise
Range of Exercise Prices at 12/31/00 Life Price at 12/31/00 Life Price
- ------------------------ -------------- --------- -------- ------------ --------- ---------
$8.69 -- $13.69 586,000 2.39 $12.56 529,000 2.02 $12.58
The Company applies APB Opinion No. 25 and related interpretations in accounting
for the Plans. FASB Statement No. 123, "Accounting for Stock-Based Compensation"
("SFAS 123"), was issued by the FASB in 1995 and, if fully adopted, changes the
method for recognition of compensation cost on stock plans. Adoption of the
expense recognition provisions of SFAS 123 is optional; however, pro forma
disclosures as if the Company adopted the cost recognition requirements under
SFAS 123 in 1995 are presented below.
The fair value of each option granted during 2000, 1999 and 1998 is estimated on
the date of grant using the Black-Scholes option-pricing model with the
following assumptions: (1) dividend of $1.06 for 2000 and $1.24 for 1999 and
1998; (2) expected volatility of .21 for 2000 and .19 for 1999 and
44
EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. Stock Based Compensation Plans, Continued
1998; (3) a risk-free interest rate of 6.3% for 2000, 6.0% for 1999, and 5.2%
for 1998; and (4) expected life of six years for 2000, ten years for 1999, and
eight years for 1998.
Had compensation cost for the Company's 2000, 1999 and 1998 grants for
stock-based compensation plans been determined consistent with SFAS 123, the
Company's pro forma net income, and net income per common share for 2000, 1999
and 1998 would have decreased less than 1%.
The effects of applying SFAS 123 in this pro forma disclosure are not indicative
of the future effect, since additional SFAS 123 awards in future years are
anticipated.
Restricted Stock
A summary of the status of the Company's restricted stock grants to officers and
directors as of December 31, 2000, 1999 and 1998 and the changes during the
years are presented below:
2000 1999 1998
------------------------ ------------------------ ------------------------
Weighted Weighted Weighted
Average Average Average
Fair Market Fair Market Fair Market
Value at Value at Value at
# of Shares Grant # of Shares Grant # of Shares Grant
----------- ----------- ----------- ----------- ----------- -----------
Outstanding at beginning of year 323,300 $11.64 193,500 $12.92 40,000 $11.41
Granted:
With 5 year pro rata vesting 51,450 $ 6.75 91,400 $ 9.69 99,000 $13.12
With 4 year pro rata vesting 16,000 $13.56
With 3 year pro rata vesting 20,000 $ 6.75 38,400 $ 9.75 42,000 $13.50
Vest 100% at grant date 4,000 $13.56
------- ------ ------- ------ ------- ------
Total granted 71,450 $ 6.75 129,800 $ 9.71 161,000 $13.27
Vested to former employee (1,440) $11.83 (1,500) $12.25
Forfeited (7,010) $10.93 (6,000) $12.25
------- ------ ------- ------ ------- ------
Outstanding at end of year 386,300 $11.23 323,300 $11.64 193,500 $12.92
Vested at end of year 141,240 $12.06 71,300 $12.42 29,000 $11.27
In January 2001, 31,820 shares of restricted stock were issued to officers of
the Company at a price of $6.19 per share, to vest ratably over 3 to 5 years.
45
EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. Significant Lessee Information
As discussed in Note 1, the Company's Prime Lessee guarantees Percentage Rent
Leases relating to hotels accounting for more than 20% of the Company's assets.
The following financial information as of December 31, 2000 is presented for the
Prime Lessee:
Prime
-----------
Miscellaneous Data:
Number of hotels owned, managed or leased 214
Number of rooms owned, managed or leased 27,871
Balance Sheet Data (in thousands):
Investment in hotel real estate $1,015,997
Cash and short-term investments 5,060
Total assets 1,174,265
Total debt 345,689
Shareholders' equity 668,100
Income Statement Data (in thousands):
Total revenue $559,944
Net income 62,500
11. Subsequent Events
Effective January 1, 2001, the Company terminated or assigned all 75 of its
Percentage Leases with the Interstate Lessee. No remuneration was exchanged for
the termination of the leases. This action was precipitated by the recent
enactment of the federal REIT Modernization Act, which enables REITs such as the
Company to gain greater control of their properties by establishing taxable
subsidiaries to function as lessees, with hotel management provided by
independent companies. On January 1, 2001, the Company entered into management
contracts on 55 of its hotels with an affiliate of IHC, which later will expire
on a staggered basis, beginning January 1, 2002 through 2005. Also, the Company
entered into management contracts on 20 of its hotels with Promus Hotels, Inc.,
a subsidiary of Hilton Hotels Corporation, and two of its hotels with Crestline
Hotels and Resorts, Inc.
Effective January 16, 2001, the Company entered into an interest rate swap
agreement with a financial institution on a notional principal amount of $50
million. The agreement effectively fixes the interest rate on floating rate debt
at a rate of 6.4275%, plus the Percentage. The swap agreement will expire in
November 2003.
On January 25, 2001, the Company issued 39,722 shares of common stock valued at
$6.19 per share to its officers in lieu of cash to satisfy bonus compensation
accrued at December 31, 2000 and also issued 31,820 restricted shares of common
stock valued at $6.19 per share to its officers.
46
EQUITY INNS, INC.
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 2000
(In Thousands)
Cost Capitalized Subsequent Gross Amount at Which
Initial Cost to Acquisition Carried at Close of Period
------------------------------- ---------------------------- -------------------------------
Furniture Buildings Furniture Buildings Furniture
and and and and and
Description of Property Land Improvements Fixtures Land Improvements Fixtures Land Improvements Fixtures
- ----------------------- -------- ------------ --------- ---- ------------ --------- -------- ------------ ---------
Hampton Inn- Albany, New York $ 953 $ 9,897 $ 802 $ 548 $ 532 $ 953 $10,445 $ 1,334
Hampton Inn-Cleveland, Ohio 820 4,428 217 544 531 820 4,972 748
Hampton Inn-College Station,
Texas 656 4,655 671 865 686 656 5,520 1,357
Hampton Inn-Columbus, Georgia 603 2,591 787 665 267 603 3,256 1,054
Hampton Inn-Ft. Worth, Texas 385 1,754 896 539 237 385 2,293 1,133
Hampton Inn-Louisville, Kentucky 395 2,406 919 712 208 395 3,118 1,127
Hampton Inn-Sarasota, Florida 553 3,389 753 511 60 553 3,900 813
Hampton Inn-Ann Arbor, Michigan 565 4,499 506 685 748 565 5,184 1,254
Hampton Inn-Gurnee, Illinois 630 3,397 277 1,029 1,082 630 4,426 1,359
Comfort Inn-Arlington, Texas 425 6,387 582 625 851 425 7,012 1,433
Residence Inn-Eagan, Minnesota 540 8,130 652 1,152 870 540 9,282 1,522
Residence Inn-Tinton Falls,
New Jersey 7,711 419 942 639 8,653 1,058
Hampton Inn-Milford, Connecticut 759 5,689 467 819 1,200 759 6,508 1,667
Hampton Inn-Meriden, Connecticut 648 3,226 435 724 782 648 3,950 1,217
Hampton Inn-Beckley, West
Virginia 1,876 5,557 402 324 502 1,876 5,881 904
Holiday Inn-Bluefield, West
Virginia 1,661 6,141 342 1,406 1,215 1,661 7,547 1,557
Hampton Inn-Gastonia, North
Carolina 1,651 4,741 358 271 771 1,651 5,012 1,129
Hampton Inn-Morgantown, West
Virginia 1,573 4,311 324 $ 4 176 501 1,577 4,487 825
Holiday Inn-Oak Hill, West
Virginia 269 3,727 85 1,628 1,167 269 5,355 1,252
Holiday Inn Express-Wilkesboro,
North Carolina 269 2,778 177 1,065 854 269 3,843 1,031
Hampton Inn-Naperville, Illinois 678 6,455 396 846 963 678 7,301 1,359
Hampton Inn-State College,
Pennsylvania 718 7,310 525 399 726 718 7,709 1,251
Comfort Inn-Rutland, Vermont 359 3,683 354 355 308 359 4,038 662
Hampton Inn-Scranton,
Pennsylvania 403 7,017 720 218 280 403 7,235 1,000
Residence Inn-Omaha, Nebraska 953 2,650 162 6 1,502 770 959 4,152 932
Hampton Inn-Fayetteville, North
Carolina 403 5,043 148 17 652 820 420 5,695 968
Hampton Inn-Indianapolis,
Indiana 1,207 6,513 126 597 1,161 1,207 7,110 1,287
Hampton Inn-Jacksonville
Florida 403 4,793 126 447 1,279 403 5,240 1,405
Holiday Inn-Mt. Pleasant,
South Carolina 1,205 7,874 247 580 926 1,205 8,454 1,173
Comfort Inn-Jacksonville
Beach, Florida 849 7,307 371 2 1,883 1,266 851 9,190 1,637
Hampton Inn-Austin, Texas 500 6,659 375 6 592 805 506 7,251 1,180
Hampton Inn-Knoxville,
Tennessee 617 3,871 232 624 951 617 4,495 1,183
Hampton Inn-Glen Burnie,
Maryland 5,075 322 526 879 5,601 1,201
Hampton Inn-Detroit, Michigan 1,207 5,785 526 484 424 1,207 6,269 950
Homewood Suites-Hartford,
Connecticut 2,866 7,660 915 1,112 474 2,866 8,772 1,389
Holiday Inn-Winston-Salem,
North Carolina 1,350 3,124 639 3,629 949 1,350 6,753 1,588
Hampton Inn-Scottsdale,
Arizona 2,227 6,566 723 206 140 2,227 6,772 863
Hampton Inn-Chattanooga,
Tennessee 1,475 6,824 752 506 467 1,475 7,330 1,219
Homewood Suites-San Antonio,
Texas 907 6,661 1,029 44 109 907 6,705 1,138
Residence Inn-Burlington,
Vermont 678 6,677 342 902 722 678 7,579 1,064
Homewood Suites-Phoenix,
Arizona 7,086 902 1,693 52 8,779 954
Residence Inn-Colorado
Springs, Colorado 1,350 7,638 740 977 632 1,350 8,615 1,372
Residence Inn-Oklahoma
City, Oklahoma 1,450 8,921 850 1,073 214 1,450 9,994 1,064
Residence Inn-Tucson,
Arizona 832 7,078 705 679 721 832 7,757 1,426
Hampton Inn-Norfolk, Virginia 5,092 520 236 537 5,328 1,057
Hampton Inn-Pickwick, Tennessee 370 1,484 263 257 131 370 1,741 394
Hampton Inn-Overland Park,
Kansas 906 5,931 330 808 793 906 6,739 1,123
Hampton Inn-Addison, Texas 2,981 6,336 810 693 741 2,981 7,029 1,551
Hampton Inn-Atlanta-Northlake,
Georgia 6,905 600 571 726 7,476 1,326
Hampton Inn-Birmingham
(Mountain Brook), Alabama 7,988 687 661 700 8,649 1,387
Hampton Inn-Birmingham
(Vestavia), Alabama 1,057 5,162 541 327 694 1,057 5,489 1,235
Hampton Inn-Chapel Hill,
North Carolina 1,834 6,504 725 436 371 1,834 6,940 1,096
Hampton Inn-Charleston,
South Carolina 712 5,219 516 281 494 712 5,500 1,010
Hampton Inn-Colorado
Springs, Colorado 803 3,925 411 499 319 803 4,424 730
Hampton Inn-Columbia,
South Carolina 650 6,572 628 525 333 650 7,097 961
Accumulated Net Book
Depreciation Value Life Upon
Buildings and Buildings and Which
Improvements; Improvements; Depreciation
Furniture & Furniture & Date of In Statement
Total Fixtures Fixtures Construction Is Computed
-------- ------------- ------------- ------------ ------------
Hampton Inn- Albany, New York $ 12,732 $ 3,177 $ 9,555 1986 5-40 Yrs.
Hampton Inn-Cleveland, Ohio 6,540 1,581 4,959 1987 5-40 Yrs.
Hampton Inn-College Station,
Texas 7,533 1,935 5,598 1986 5-40 Yrs.
Hampton Inn-Columbus, Georgia 4,913 1,464 3,449 1986 5-40 Yrs.
Hampton Inn-Ft. Worth, Texas 3,811 1,081 2,730 1987 5-40 Yrs.
Hampton Inn-Louisville, Kentucky 4,640 1,868 2,772 1986 5-40 Yrs.
Hampton Inn-Sarasota, Florida 5,266 1,193 4,073 1987 5-40 Yrs.
Hampton Inn-Ann Arbor, Michigan 7,003 1,867 5,136 1986 5-31 Yrs.
Hampton Inn-Gurnee, Illinois 6,415 1,727 4,688 1988 5-31 Yrs.
Comfort Inn-Arlington, Texas 8,870 2,306 6,564 1985 5-31 Yrs.
Residence Inn-Eagan, Minnesota 11,344 2,806 8,538 1988 5-31 Yrs.
Residence Inn-Tinton Falls,
New Jersey 9,711 2,100 7,611 1988 5-31 Yrs.
Hampton Inn-Milford, Connecticut 8,934 2,166 6,768 1986 5-31 Yrs.
Hampton Inn-Meriden, Connecticut 5,815 1,467 4,348 1988 5-31 Yrs.
Hampton Inn-Beckley, West
Virginia 8,661 1,624 7,037 1992 5-31 Yrs.
Holiday Inn-Bluefield, West
Virginia 10,765 2,111 8,654 1980 5-31 Yrs.
Hampton Inn-Gastonia, North
Carolina 7,792 1,597 6,195 1989 5-31 Yrs.
Hampton Inn-Morgantown, West
Virginia 6,889 1,371 5,518 1991 5-31 Yrs.
Holiday Inn-Oak Hill, West
Virginia 6,876 1,531 5,345 1983 5-31 Yrs.
Holiday Inn Express-Wilkesboro,
North Carolina 5,143 1,060 4,083 1985 5-31 Yrs.
Hampton Inn-Naperville, Illinois 9,338 2,140 7,198 1987 5-31 Yrs.
Hampton Inn-State College,
Pennsylvania 9,678 2,099 7,579 1987 5-31 Yrs.
Comfort Inn-Rutland, Vermont 5,059 1,166 3,893 1985 5-31 Yrs.
Hampton Inn-Scranton,
Pennsylvania 8,638 1,867 6,771 1994 5-31 Yrs.
Residence Inn-Omaha, Nebraska 6,043 972 5,071 1985 5-31 Yrs.
Hampton Inn-Fayetteville, North
Carolina 7,083 1,560 5,523 1986 5-31 Yrs.
Hampton Inn-Indianapolis,
Indiana 9,604 1,972 7,632 1987 5-31 Yrs.
Hampton Inn-Jacksonville
Florida 7,048 1,580 5,468 1986 5-31 Yrs.
Holiday Inn-Mt. Pleasant,
South Carolina 10,832 2,048 8,784 1988 5-31 Yrs.
Comfort Inn-Jacksonville
Beach, Florida 11,678 2,197 9,481 1990 5-31 Yrs.
Hampton Inn-Austin, Texas 8,937 1,700 7,237 1987 5-31 Yrs.
Hampton Inn-Knoxville,
Tennessee 6,295 1,190 5,105 1988 5-31 Yrs.
Hampton Inn-Glen Burnie,
Maryland 6,802 1,379 5,423 1989 5-31 Yrs.
Hampton Inn-Detroit, Michigan 8,426 1,387 7,039 1989 5-31 Yrs.
Homewood Suites-Hartford,
Connecticut 13,027 1,763 11,264 1990 5-31 Yrs.
Holiday Inn-Winston-Salem,
North Carolina 9,691 1,089 8,602 1969 5-31 Yrs.
Hampton Inn-Scottsdale,
Arizona 9,862 1,438 8,424 1996 5-31 Yrs.
Hampton Inn-Chattanooga,
Tennessee 10,024 1,687 8,337 1988 5-31 Yrs.
Homewood Suites-San Antonio,
Texas 8,750 1,560 7,190 1996 5-31 Yrs.
Residence Inn-Burlington,
Vermont 9,321 1,493 7,828 1988 5-31 Yrs.
Homewood Suites-Phoenix,
Arizona 9,733 1,708 8,025 1996 5-31 Yrs.
Residence Inn-Colorado
Springs, Colorado 11,337 1,577 9,760 1984 5-31 Yrs.
Residence Inn-Oklahoma
City, Oklahoma 12,508 1,606 10,902 1982 5-31 Yrs.
Residence Inn-Tucson,
Arizona 10,015 1,511 8,504 1985 5-31 Yrs.
Hampton Inn-Norfolk, Virginia 6,385 1,167 5,218 1990 5-31 Yrs.
Hampton Inn-Pickwick, Tennessee 2,505 382 2,123 1994 5-31 Yrs.
Hampton Inn-Overland Park,
Kansas 8,768 1,180 7,588 1991 5-31 Yrs.
Hampton Inn-Addison, Texas 11,561 1,395 10,166 1985 5-31 Yrs.
Hampton Inn-Atlanta-Northlake,
Georgia 8,802 1,365 7,437 1988 5-31 Yrs.
Hampton Inn-Birmingham
(Mountain Brook), Alabama 10,036 1,500 8,536 1987 5-31 Yrs.
Hampton Inn-Birmingham
(Vestavia), Alabama 7,781 1,124 6,657 1986 5-31 Yrs.
Hampton Inn-Chapel Hill,
North Carolina 9,870 1,227 8,643 1986 5-31 Yrs.
Hampton Inn-Charleston,
South Carolina 7,222 1,026 6,196 1985 5-31 Yrs.
Hampton Inn-Colorado
Springs, Colorado 5,957 787 5,170 1985 5-31 Yrs.
Hampton Inn-Columbia,
South Carolina 8,708 1,216 7,492 1985 5-31 Yrs.
47
EQUITY INNS, INC.
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
AS OF DECEMBER 31, 2000
(In Thousands)
Cost Capitalized Subsequent Gross Amount at Which
Initial Cost to Acquisition Carried at Close of Period
------------------------------- ---------------------------- -------------------------------
Furniture Buildings Furniture Buildings Furniture
and and and and and
Description of Property Land Improvements Fixtures Land Improvements Fixtures Land Improvements Fixtures
- ----------------------- -------- ------------ --------- ---- ------------ --------- -------- ------------ ---------
Hampton Inn-Aurora, Colorado 784 3,344 359 475 292 784 3,819 651
Hampton Inn-Detroit (Madison
Heights), Michigan 881 4,304 451 521 272 881 4,825 723
Hampton Inn-Dublin, Ohio 944 3,612 483 573 660 944 4,185 1,143
Hampton Inn-Kansas City, Kansas 585 4,294 425 343 351 585 4,637 776
Hampton Inn-Little Rock,
Arkansas 898 5,520 558 273 497 898 5,793 1,055
Hampton Inn-Memphis (Poplar),
Tennessee 1,955 6,547 739 686 280 1,955 7,233 1,019
Hampton Inn-Memphis (Sycamore),
Tennessee 2,751 239 531 624 3,282 863
Hampton Inn-Nashville
(Briley), Tennessee 6,550 569 880 456 7,430 1,025
Hampton Inn-Richardson, Texas 1,750 5,252 609 468 691 1,750 5,720 1,300
Hampton Inn-St. Louis, Missouri 665 3,775 386 722 751 665 4,497 1,137
Homewood Suites-Germantown,
Tennessee 1,011 5,760 1,011 143 113 1,011 5,903 1,124
Homewood Suites-Augusta,
Georgia 330 4,164 516 102 31 330 4,266 547
Residence Inn-Princeton,
New Jersey 1,920 15,875 1,500 1,326 1,157 1,920 17,201 2,657
AmeriSuites-Cincinnati
(Blue Ash), Ohio 900 6,241 466 296 255 900 6,537 721
AmeriSuites-Cincinnati
(Forest Park), Ohio 800 5,616 569 368 328 800 5,984 897
AmeriSuites-Columbus, Ohio 903 6,774 856 214 394 903 6,988 1,250
AmeriSuites-Flagstaff, Arizona 600 3,832 737 184 72 600 4,016 809
AmeriSuites-Jacksonville,
Florida 1,168 5,734 436 544 332 1,168 6,278 768
AmeriSuites-Indianapolis,
Indiana 700 4,775 800 157 217 700 4,932 1,017
AmeriSuites-Miami, Florida 1,500 9,387 900 143 49 1,500 9,530 949
AmeriSuites-Overland Park,
Kansas 1,300 7,030 900 336 298 1,300 7,366 1,198
AmeriSuites-Richmond, Virginia 1,772 9,640 921 173 159 1,772 9,813 1,080
AmeriSuites-Tampa, Florida 1,400 9,786 523 150 97 1,400 9,936 620
Hampton Inn-San Antonio, Texas 3,749 7,539 1,317 647 163 3,749 8,186 1,480
Homewood Suites-Sharonville,
Ohio 863 6,194 746 746 516 863 6,940 1,262
Residence Inn-Boise, Idaho 950 5,758 350 403 566 950 6,161 916
Residence Inn-Portland, Oregon 2,400 20,735 500 269 575 2,400 21,004 1,075
Hampton Inn & Suites-Memphis
(Bartlett), Tennessee 860 5,721 1,052 55 28 860 5,776 1,080
Residence Inn-Somers Point,
New Jersey 1,094 6,372 729 749 564 1,094 7,121 1,293
AmeriSuites-Albuquerque, New
Mexico 1,776 6,871 918 36 25 1,776 6,907 943
AmeriSuites-Baltimore,
Maryland 659 8,514 898 43 28 659 8,557 926
AmeriSuites-Baton Rouge,
Louisiana 649 9,085 1,157 46 20 649 9,131 1,177
AmeriSuites-Birmingham,
Alabama 1,066 5,871 758 45 16 1,066 5,916 774
AmeriSuites-Las Vegas, Nevada 4,126 13,056 1,965 41 34 4,126 13,097 1,999
AmeriSuites-Memphis
(Wolfchase), Tennessee 1,108 6,433 900 41 26 1,108 6,474 926
AmeriSuites-Miami (Kendall),
Florida 2,426 7,394 802 38 68 2,426 7,432 870
AmeriSuites-Minneapolis,
Minnesota 1,312 7,421 873 38 27 1,312 7,459 900
AmeriSuites-Nashville,
Tennessee 1,622 8,452 1,198 40 10 1,622 8,492 1,208
Homewood Suites-Seattle,
Washington 2,640 17,769 1,760 240 258 2,640 18,009 2,018
Homewood Suites-Chicago,
Illinois 29,052 179 3,559 29,231 3,559
Homewood Suites-Orlando,
Florida 4,250 17,015 163 2,834 4,250 17,178 2,834
Construction in Progress 3,490 3,490
Corporate Office--Memphis, TN 402 402
-------- -------- ------- --- ------- ------- -------- -------- --------
$104,987 $634,617 $59,205 $35 $54,477 $53,675 $105,022 $689,094 $112,880
======== ======== ======= === ======= ======= ======== ======== ========
Accumulated Net Book
Depreciation Value Life Upon
Buildings and Buildings and Which
Improvements; Improvements; Depreciation
Furniture & Furniture & Date of In Statement
Total Fixtures Fixtures Construction Is Computed
-------- ------------- ------------- ------------ ------------
Hampton Inn-Aurora, Colorado 5,254 720 4,534 1985 5-31 Yrs.
Hampton Inn-Detroit (Madison
Heights), Michigan 6,429 838 5,591 1987 5-31 Yrs.
Hampton Inn-Dublin, Ohio 6,272 917 5,355 1988 5-31 Yrs.
Hampton Inn-Kansas City, Kansas 5,998 843 5,155 1987 5-31 Yrs.
Hampton Inn-Little Rock,
Arkansas 7,746 1,141 6,605 1985 5-31 Yrs.
Hampton Inn-Memphis (Poplar),
Tennessee 10,207 1,231 8,976 1985 5-31 Yrs.
Hampton Inn-Memphis (Sycamore),
Tennessee 4,145 651 3,494 1984 5-31 Yrs.
Hampton Inn-Nashville
(Briley), Tennessee 8,455 1,089 7,366 1987 5-31 Yrs.
Hampton Inn-Richardson, Texas 8,770 1,178 7,592 1987 5-31 Yrs.
Hampton Inn-St. Louis, Missouri 6,299 953 5,346 1987 5-31 Yrs.
Homewood Suites-Germantown,
Tennessee 8,038 1,206 6,832 1986 5-31 Yrs.
Homewood Suites-Augusta,
Georgia 5,143 739 4,404 1997 5-31 Yrs.
Residence Inn-Princeton,
New Jersey 21,778 2,779 18,999 1988 5-31 Yrs.
AmeriSuites-Cincinnati
(Blue Ash), Ohio 8,158 910 7,248 1990 5-31 Yrs.
AmeriSuites-Cincinnati
(Forest Park), Ohio 7,681 926 6,755 1992 5-31 Yrs.
AmeriSuites-Columbus, Ohio 9,141 1,146 7,995 1994 5-31 Yrs.
AmeriSuites-Flagstaff, Arizona 5,425 701 4,724 1993 5-31 Yrs.
AmeriSuites-Jacksonville,
Florida 8,214 893 7,321 1996 5-31 Yrs.
AmeriSuites-Indianapolis,
Indiana 6,649 878 5,771 1992 5-31 Yrs.
AmeriSuites-Miami, Florida 11,979 1,345 10,634 1996 5-31 Yrs.
AmeriSuites-Overland Park,
Kansas 9,864 1,188 8,676 1994 5-31 Yrs.
AmeriSuites-Richmond, Virginia 12,665 1,415 11,250 1992 5-31 Yrs.
AmeriSuites-Tampa, Florida 11,956 1,236 10,720 1994 5-31 Yrs.
Hampton Inn-San Antonio, Texas 13,415 1,263 12,152 1995 5-31 Yrs.
Homewood Suites-Sharonville,
Ohio 9,065 1,014 8,051 1990 5-31 Yrs.
Residence Inn-Boise, Idaho 8,027 807 7,220 1986 5-31 Yrs.
Residence Inn-Portland, Oregon 24,479 2,136 22,343 1990 5-31 Yrs.
Hampton Inn & Suites-Memphis
(Bartlett), Tennessee 7,716 908 6,808 1998 5-31 Yrs.
Residence Inn-Somers Point,
New Jersey 9,508 1,005 8,503 1998 5-31 Yrs.
AmeriSuites-Albuquerque, New
Mexico 9,626 887 8,739 1997 5-31 Yrs.
AmeriSuites-Baltimore,
Maryland 10,142 1,015 9,127 1996 5-31 Yrs.
AmeriSuites-Baton Rouge,
Louisiana 10,957 1,152 9,805 1997 5-31 Yrs.
AmeriSuites-Birmingham,
Alabama 7,756 750 7,006 1997 5-31 Yrs.
AmeriSuites-Las Vegas, Nevada 19,222 1,763 17,459 1998 5-31 Yrs.
AmeriSuites-Memphis
(Wolfchase), Tennessee 8,508 846 7,662 1996 5-31 Yrs.
AmeriSuites-Miami (Kendall),
Florida 10,728 899 9,829 1996 5-31 Yrs.
AmeriSuites-Minneapolis,
Minnesota 9,671 916 8,755 1997 5-31 Yrs.
AmeriSuites-Nashville,
Tennessee 11,322 1,114 10,208 1997 5-31 Yrs.
Homewood Suites-Seattle,
Washington 22,667 2,065 20,602 1998 5-31 Yrs.
Homewood Suites-Chicago,
Illinois 32,790 2,411 30,379 1999 5-31 Yrs.
Homewood Suites-Orlando,
Florida 24,262 1,500 22,762 1999 5-31 Yrs.
Construction in Progress 3,490 3,490 5-31 Yrs.
Corporate Office--Memphis, TN 402 121 281 7 Yrs.
-------- -------- --------
$906,996 $134,585 $772,411
======== ======== ========
(a) Reconciliation of Real Estate:
Balance at December 31, 1998 $858,607
Additions during the period 87,769
Sales during the period (30,955)
--------
Balance at December 31, 1999 915,421
Additions during the period 9,791
Sales during the period (18,216)
--------
Balance at December 31, 2000 $906,996
========
(b) Reconciliation of Accumulated Depreciation:
Balance At December 31, 1998 $ 68,475
Depreciation expense during the period 36,290
Depreciation on sales during the period (3,881)
--------
Balance at December 31, 1999 100,884
Depreciation expense during the period 36,455
Depreciation on sales during the period (2,754)
--------
Balance at December 31, 2000 $134,585
========
48
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
During the fiscal year ended December 31, 2000 and through the date of this
report, there has been no change in the Company's independent accountants, nor
have any disagreements with such accountants or reportable events occurred.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required by this item is incorporated by reference from the section
entitled "The Election of Directors" in the Proxy Statement as to the Company's
directors. See also Item 1 -- "Business- Executive Officers of the Company."
ITEM 11. EXECUTIVE COMPENSATION
Information required by this item is incorporated by reference from the section
entitled "Executive Compensation" in the Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by this item is incorporated by reference from the sections
entitled "Ownership of Our Common Stock" and "The Election of Directors" in the
Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this item is incorporated by reference from the section
entitled "Certain Relationships and Related Transactions" in the Proxy
Statement.
49
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
The following documents are filed as part of this report:
(a) Financial Statements:
--------------------
The following financial statements and financial statement schedules are located
in this report on the pages indicated:
Equity Inns, Inc. Page
----
Report of Independent Accountants 28
Consolidated Balance Sheets at December 31, 2000 and 1999 29
Consolidated Statements of Operations for the years ended
December 31, 2000, 1999 and 1998 30
Consolidated Statements of Shareholders' Equity for the
years ended December 31, 2000, 1999 and 1998 31
Consolidated Statements of Cash Flows for the years ended
December 31, 2000, 1999 and 1998 34
Notes to Consolidated Financial Statements 35
Schedule III - Real Estate and Accumulated Depreciation
as of December 31, 2000 47
All other schedules to the consolidated financial statements required by Article
7 of Regulation S-X are not required under the related instructions or are
inapplicable and therefore have been omitted.
(b) Reports on Form 8-K:
No Current Reports on Form 8-K were filed during the last quarter of the period
covered by this Annual Report on Form 10-K.
(c) Exhibits:
Exhibit
Number Description
- ------ -----------
3.1(a) -- Charter of the Registrant (incorporated by reference to Exhibit
3.1 to the Company's Registration Statement on Form S-11
(Registration No. 33-73304)
3.1(b) -- Articles of Amendment to the Charter of the Registrant
(incorporated by reference to Exhibit 3.1 to the Company's Current
Report on Form 8-K (Registration No. 0-23290) filed with the
Securities and Exchange Commission on April 27, 1995)
3.1(c) -- Articles of Amendment to the Charter of the Registrant
(incorporated by reference to Exhibit 3.1 to the Company's Current
Report on Form 8-K (Registration No. 0-23290) filed with the
Securities and Exchange Commission on May 31, 1996)
3.1(d) -- Second Amended and Restated Charter of the Registrant
(incorporated by reference to Exhibit 3.1 to the Company's Current
Report on Form 8-K (Registration No. 01-12073) filed with the
Securities and Exchange Commission on October 23, 1997)
50
3.1(e) -- Articles of Amendment to the Second Amended and Restated Charter
of the Registrant (incorporated by reference to Exhibit 3.1 to the
Company's Current Report on Form 8-K (Registration No. 01-12073)
filed with the Securities and Exchange Commission on May 28, 1998)
3.1(f) -- Articles of Amendment to the Second Amended and Restated Charter
of the Registrant (incorporated by reference to Exhibit 4.2 to the
Company's Current Report on Form 8-K (Registration No. 01-12073)
filed with the Securities and Exchange Commission on June 24,
1998)
3.2 -- By-Laws of the Registrant (incorporated by reference to Exhibit
3.2 to the Company's Registration Statement on Form S-11
(Registration No. 33-73304)
4.1(a) -- Form of Share Certificate for the Company's Common Stock, $.01
par value (incorporated by reference to Exhibit 4.1 to the
Company's Registration Statement on Form S-11 (Registration No.
33-73304))
4.1(b) -- Form of Share Certificate for the Company's 9 1/2% Series A
Cumulative Preferred Stock, $.01 par value (incorporated by
reference to Exhibit 4.1 to the Company's Registration Statement
on Form S-11 (Registration No. 33-73304))
4.2(a) -- Second Amended and Restated Agreement of Limited Partnership of
Equity Inns Partnership, L.P. (incorporated by reference to
Exhibit 4.1 to the Company's Registration Statement on Form S-3
(Registration No. 33-90364)
4.2(b) -- Third Amended and Restated Agreement of Limited Partnership of
Equity Inns Partnership, L.P. (incorporated by reference to
Exhibit 4.1 to the Company's Current Report on Form 8-K dated June
24, 1997 (Registration No. 01-12073) filed with the Securities and
Exchange Commission on July 10, 1997
4.2(c) -- Amendment No. 1 to Third Amended and Restated Agreement of Limited
Partnership of Equity Inns Partnership, L.P. (incorporated by
reference to Exhibit 99.1 to the Company's Current Report on Form
8-K (Registration No. 01-12073) filed with the Securities and
Exchange Commission on June 24, 1998)
4.3(a), -- Indenture dated as of February 6, 1997 among EQI Financing
10.1(a) Partnership I., L.P., as Issuer, LaSalle National Bank, as
Trustee, and ABN AMBRO Bank N.V., as Fiscal Agent (incorporated by
reference to Exhibit 10.1 to the Company's Quarterly Report on
Form 10-Q (Registration No. 01-12073) for the quarter ended March
31, 1997 and filed with the Securities and Exchange Commission on
April 30, 1997)
4.3(b), -- Agreement regarding indenture and mortgages dated as of January
10.2(b) 1, 2001 by and between LaSalle Bank National Association and EQI
Financing Partnership I, L.P. (incorporated by reference to
Exhibits 4.2 and 10.2 to the Company's Current Report on Form 8-K
(Registration No. 01-12073) filed with the Securities and Exchange
Commission on February 26, 2001)
10.2 -- Form of Lease Agreement, effective as of January 1,
2001(incorporated by reference to Exhibit 10.5 to the Company's
Current Report on Form 8-K (Registration No. 01-12073) filed with
the Securities and Exchange Commission on February 26, 2001
51
10.3(a) -- Equity Inns, Inc. 1994 Stock Incentive Plan (incorporated by
reference to Exhibit 10.29(a) to the Company's Registration
Statement on Form S-11 (Registration No. 33-80318))
10.3(b) -- Equity Inns, Inc. Non-Employee Directors' Stock Option Plan
(incorporated by reference to Exhibit 10.29(b) to the Company's
Registration Statement on Form S-11 (Registration No. 33-80318))
10.4 -- Right of First Refusal Agreement between Wolf River Hotel, L.P.
and Equity Inns Partnership, L.P. (incorporated by reference to
Exhibit 10.5 to the Company's Registration Statement on Form S-3
(Registration No. 33-93158))
10.5 -- Right of First Refusal Agreement between SAHI I L.P. and Equity
Inns Partnership, L.P. (incorporated by reference to Exhibit 10.6
to the Company's Registration Statement on Form S-3 (Registration
No. 33-93158))
10.6(a) -- Loan Agreement, dated as of June 16, 1999, among EQI Financing
Partnership II, L.P. and EQI/WV Financing Partnership, L.P., as
Borrower Parties, and GMAC Commercial Mortgage Corporation, as
Lender (incorporated by reference to Exhibit 10.2 to the Company's
Current Report on Form 8-K (Registration No. 01-12073) filed with
the Securities and Exchange Commission on February 26, 2001)
10.6(b) -- Loan Affirmation and Modification Agreement dated as of December
31, 2000 by and among EQI Financing Partnership II, L.P., EQI/WV
Financing Partnership, L.P., ENN Leasing Company II, L.L.C.,
Equity Inns Partnership, L.P., Equity Inns, Inc., Norwest Bank
Minnesota, National Association, as trustee, and LaSalle Bank
National Association, as trustee (incorporated by reference to
Exhibit 10.4 to the Company's Current Report on Form 8-K
(Registration No. 01-12073) filed with the Securities and Exchange
Commission on February 26, 2001)
10.7* -- Loan Agreement, dated as of October 20, 2000, between EQI
Financing Partnership V, L.P., as Borrower, and GMAC Commercial
Mortgage Corporation, as Lender
10.8* -- Loan Agreement, dated as of November 7, 2000, between EQI
Financing Partnership III, L.P., as Borrower, and General Electric
Capital Corporation, as Lender
10.9* -- Loan Agreement, dated as of November 7, 2000, between EQI
Financing Partnership IV, L.P. and EQI/WV Financing Partnership
II, L.P., as Borrowers, and General Electric Corporation, as
Lender
10.10 -- Secured Revolving Credit Agreement dated as of October 26, 2000,
by and among Equity Inns Partnership, L.P., Equity Inns/West
Virginia Partnership, L.P. and Equity Inns Partnership II, L.P. as
Borrower, Bank One, NA, Credit Lyonnais New York Branch, Bank of
America, N.A., National Bank of Commerce, AmSouth Bank and Union
Planters Bank, National Association, as Lenders, Bone One, NA, as
Administrative Agent, Banc One Capital Markets, Inc. as Co-Lead
Arranger/Book Manager, Credit Lyonnais New York Branch as
Syndication Agent and Co-Lead Arranger/Book Manager, and Bank of
America N.A. as Documentation Agent (incorporated by reference to
Exhibit 10.8 to the Company's Current Report on Form 8-K
(Registration No. 01-12073) filed with the Securities and Exchange
Commission on January 11, 2001)
52
10.11 -- Master Lease Termination Agreement dated as of September 7, 2000,
by and among Equity Inns, Inc., Equity Inns Partnership, L.P.,
Equity Inns/West Virginia Partnership, L.P., EQI Financing
Partnership I, L.P., EQI Financing Partnership II, L.P., EQI/WV
Financing Partnership, L.P., Equity Inns Partnership II, L.P.,
E.I.P. Orlando, L.P., Crossroads/Memphis Partnership, L.P.,
Crossroads/Memphis Financing Company, L.L.C., Crossroads/Memphis
Financing Company II, L.L.C., Crossroads Future Company, L.L.C.,
Crossroads Future Financing Company, L.L.C., Interstate Hotels,
LLC and Crossroads Hospitality Company, L.L.C. (incorporated by
reference to Exhibit 10.7 to the Company's Current Report on Form
8-K (Registration No. 01-12073) filed with the Securities and
Exchange Commission on January 11, 2001)
10.12 -- Form of Management Agreement between certain subsidiaries of
Equity Inns TRS Holdings, Inc., as lessees, and Promus Hotels,
Inc., effective as of January 1, 2001 incorporated by reference to
Exhibit 10.6 to the Company's Current Report on Form 8-K
(Registration No. 01-12073) filed with the Securities and Exchange
Commission on February 26, 2001)
10.13 -- Form of Management Agreement between certain subsidiaries of
Equity Inns TRS Holdings, Inc. as lessees, and Crestline Hotels
and Resorts, Inc., effective as of January 1, 2001 incorporated by
reference to Exhibit 10.7 to the Company's Current Report on Form
8-K (Registration No. 01-12073) filed with the Securities and
Exchange Commission on February 26, 2001)
10.14 -- Form of Management Agreement between certain subsidiaries of
Equity Inns TRS Holdings, Inc as lessees, and Crossroads
Hospitality Company, L.L.C., effective as of January 1, 2001
incorporated by reference to Exhibit 10.8 to the Company's Current
Report on Form 8-K (Registration No. 01-12073) filed with the
Securities and Exchange Commission on February 26, 2001)
10.15 -- Form of Deed of Trust dated as of February 6, 1997 by EQI
Financing Partnership I, L.P. in favor of LaSalle National Bank,
as Trustee (incorporated by reference to Exhibit 10.2 to the
Company's Quarterly Report on Form 10-Q (Registration No.
01-12073) for the quarter ended March 31, 1997 and filed with the
Securities and Exchange Commission on April 30, 1997)
10.16 -- Commercial Lease dated as of December 17, 1998 between 64 LTD, LLC
and Equity Inns Services, Inc. (incorporated by reference to
Exhibit 10.32 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1998 (Registration No. 01-12073) filed
with the Securities and Exchange Commission on March 23, 1999
10.17 -- Change in Control and Termination Agreement between Equity Inns
Services, Inc., Equity Inns, Inc. and Phillip H. McNeill, Sr.
(incorporated by reference to Exhibit 10.33 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1998
(Registration No. 01-12073) filed with the Securities and Exchange
Commission on March 23, 1999)
10.18 -- Change in Control and Termination Agreement between Equity Inn
Services, Inc., Equity Inns, Inc. and Howard A. Silver
(incorporated by reference to Exhibit 10.34 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1998
(Registration No. 01-12073) filed with the Securities and Exchange
Commission on March 23, 1999)
53
10.19 -- Change in Control and Termination Agreement between Equity Inns
Services, Inc., Equity Inns, Inc. and Donald H. Dempsey
(incorporated by reference to Exhibit 10.35 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1998
(Registration No. 01-12073) filed with the Securities and Exchange
Commission on March 23, 1999)
10.20 -- Change in Control and Termination Agreement between Equity Inns
Services, Inc., Equity Inns, Inc. and Phillip H. McNeill, Jr.
(incorporated by reference to Exhibit 10.36 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1998
(Registration No. 01-12073) filed with the Securities and Exchange
Commission on March 23, 1999)
10.21 -- Change in Control and Termination Agreement between Equity Inns
Services, Inc., Equity Inns, Inc. and J. Ronald Cooper
(incorporated by reference to Exhibit 10.37 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1998
(Registration No. 01-12073) filed with the Securities and Exchange
Commission on March 23, 1999)
10.22 -- Change in Control and Termination Agreement between Equity Inns
Services, Inc., Equity Inns, Inc. and Richard F. Mitchell
(incorporated by reference to Exhibit 10.38 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1998
(Registration No. 01-12073) filed with the Securities and Exchange
Commission on March 23, 1999)
10.23 -- Change in Control and Termination Agreement between Equity Inns
Services, Inc., Equity Inns, Inc. and Michael K. Goforth
(incorporated by reference to Exhibit 10.26 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1999
(Registration No. 01-12073) filed with the Securities and Exchange
Commission on March 17, 2000)
10.24 -- Employment Agreement between Equity Inns Services, Inc., Equity
Inns, Inc. and Donald H. Dempsey (incorporated by reference to
Exhibit 10.39 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1998 (Registration No. 01-12073) filed
with the Securities and Exchange Commission on March 23, 1999)
10.25 -- Equity Inns, Inc. Executive Deferred Compensation Plan
(incorporated by reference to Exhibit 10.27 to the Company Annual
Report on From 10-K for the year ended December 31, 1999
(Registration No. 01-12073) filed with the Securities and Exchange
Commission on March 17, 2000)
21.1* -- List of subsidiaries of Equity Inns, Inc.
23.1* -- Consent of PricewaterhouseCoopers L.L.P.
- --------------
* Filed herewith.
(d) Financial Statement Schedules
The response to this portion of Item 14 is submitted as a separate
section of this Annual Report on Form 10-K. See Item 14 (a).
54
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized on the 19th day of March,
2001.
EQUITY INNS, INC.
By: /s/Phillip H. McNeill, Sr.
--------------------------
Phillip H. McNeill, Sr.
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated on the 19th day of March, 2001.
Signature Title Date
--------- ----- ----
/s/ Phillip H. McNeill, Sr. Chairman of the Board and March 19, 2001
- --------------------------- Chief Executive Officer
Phillip H. McNeill, Sr. (Principal Executive Officer)
and Director
/s/ Howard A. Silver President, Chief Operating March 19, 2001
- -------------------- Officer and Director
Howard A. Silver
/s/ Donald H. Dempsey Executive Vice President, March 19, 2001
- --------------------- Secretary, Treasurer,
Donald H. Dempsey Chief Financial Officer
(Principal Financial and
Accounting Officer) and
Director
/s/ William A. Deupree, Jr. Director March 19, 2001
- ---------------------------
William A. Deupree, Jr.
/s/ Harry S. Hays Director March 19, 2001
- -----------------
Harry S. Hays
/s/ Joseph W. McLeary Director March 19, 2001
- ---------------------
Joseph W. McLeary
/s/ Raymond E. Schultz Director March 19, 2001
- ----------------------
Raymond E. Schultz
55
INDEX OF EXHIBITS
Exhibit
Number Description
- ------ -----------
3.1(a) -- Charter of the Registrant (incorporated by reference to Exhibit
3.1 to the Company's Registration Statement on Form S-11
(Registration No. 33-73304)
3.1(b) -- Articles of Amendment to the Charter of the Registrant
(incorporated by reference to Exhibit 3.1 to the Company's Current
Report on Form 8-K (Registration No. 0-23290) filed with the
Securities and Exchange Commission on April 27, 1995)
3.1(c) -- Articles of Amendment to the Charter of the Registrant
(incorporated by reference to Exhibit 3.1 to the Company's Current
Report on Form 8-K (Registration No. 0-23290) filed with the
Securities and Exchange Commission on May 31, 1996)
3.1(d) -- Second Amended and Restated Charter of the Registrant
(incorporated by reference to Exhibit 3.1 to the Company's Current
Report on Form 8-K (Registration No. 01-12073) filed with the
Securities and Exchange Commission on October 23, 1997)
3.1(e) -- Articles of Amendment to the Second Amended and Restated Charter
of the Registrant (incorporated by reference to Exhibit 3.1 to the
Company's Current Report on Form 8-K (Registration No. 01-12073)
filed with the Securities and Exchange Commission on May 28, 1998)
3.1(f) -- Articles of Amendment to the Second Amended and Restated Charter
of the Registrant (incorporated by reference to Exhibit 4.2 to the
Company's Current Report on Form 8-K (Registration No. 01-12073)
filed with the Securities and Exchange Commission on June 24,
1998)
3.2 -- By-Laws of the Registrant (incorporated by reference to Exhibit
3.2 to the Company's Registration Statement on Form S-11
(Registration No. 33-73304)
4.1(a) -- Form of Share Certificate for the Company's Common Stock, $.01
par value (incorporated by reference to Exhibit 4.1 to the
Company's Registration Statement on Form S-11 (Registration No.
33-73304))
4.1(b) -- Form of Share Certificate for the Company's 9 1/2% Series A
Cumulative Preferred Stock, $.01 par value (incorporated by
reference to Exhibit 4.1 to the Company's Registration Statement
on Form S-11 (Registration No. 33-73304))
4.2(a) -- Second Amended and Restated Agreement of Limited Partnership of
Equity Inns Partnership, L.P. (incorporated by reference to
Exhibit 4.1 to the Company's Registration Statement on Form S-3
(Registration No. 33-90364)
4.2(b) -- Third Amended and Restated Agreement of Limited Partnership of
Equity Inns Partnership, L.P. (incorporated by reference to
Exhibit 4.1 to the Company's Current Report on Form 8-K dated
June 24, 1997 (Registration No. 01-12073) filed with the
Securities and Exchange Commission on July 10, 1997
56
4.2(c) -- Amendment No. 1 to Third Amended and Restated Agreement of Limited
Partnership of Equity Inns Partnership, L.P. (incorporated by
reference to Exhibit 99.1 to the Company's Current Report on Form
8-K (Registration No. 01-12073) filed with the Securities and
Exchange Commission on June 24, 1998)
4.3(a), -- Indenture dated as of February 6, 1997 among EQI Financing
10.1(a) Partnership I, L.P., as Issuer, LaSalle National Bank, as Trustee,
and ABN AMBRO Bank N.V., as Fiscal Agent (incorporated by
reference to Exhibit 10.1 to the Company's Quarterly Report on
Form 10-Q (Registration No. 01-12073) for the quarter ended March
31, 1997 and filed with the Securities and Exchange Commission on
April 30, 1997)
4.3(b), -- Agreement regarding indenture and mortgages dated as of January
10.2(b) 1, 2001 by and between LaSalle Bank National Association and EQI
Financing Partnership I, L.P. (incorporated by reference to
Exhibits 4.2 and 10.2 to the Company's Current Report on Form 8-K
(Registration No. 01-12073) filed with the Securities and Exchange
Commission on February 26, 2001)
10.2 -- Form of Lease Agreement, effective as of January 1,
2001(incorporated by reference to Exhibit 10.5 to the Company's
Current Report on Form 8-K (Registration No. 01-12073) filed with
the Securities and Exchange Commission on February 26, 2001
10.3(a) -- Equity Inns, Inc. 1994 Stock Incentive Plan (incorporated by
reference to Exhibit 10.29(a) to the Company's Registration
Statement on Form S-11 (Registration No. 33-80318))
10.3(b) -- Equity Inns, Inc. Non-Employee Directors' Stock Option Plan
(incorporated by reference to Exhibit 10.29(b) to the Company's
Registration Statement on Form S-11 (Registration No. 33-80318))
10.4 -- Right of First Refusal Agreement between Wolf River Hotel, L.P.
and Equity Inns Partnership, L.P. (incorporated by reference to
Exhibit 10.5 to the Company's Registration Statement on Form S-3
(Registration No. 33-93158))
10.5 -- Right of First Refusal Agreement between SAHI I L.P. and Equity
Inns Partnership, L.P. (incorporated by reference to Exhibit 10.6
to the Company's Registration Statement on Form S-3 (Registration
No. 33-93158))
10.6(a) -- Loan Agreement, dated as of June 16, 1999, among EQI Financing
Partnership II, L.P. and EQI/WV Financing Partnership, L.P., as
Borrower Parties, and GMAC Commercial Mortgage Corporation, as
Lender (incorporated by reference to Exhibit 10.2 to the Company's
Current Report on Form 8-K (Registration No. 01-12073) filed with
the Securities and Exchange Commission on February 26, 2001)
10.6(b) -- Loan Affirmation and Modification Agreement dated as of December
31, 2000 by and among EQI Financing Partnership II, L.P., EQI/WV
Financing Partnership, L.P., ENN Leasing Company II, L.L.C.,
Equity Inns Partnership, L.P., Equity Inns, Inc., Norwest Bank
Minnesota, National Association, as trustee, and LaSalle Bank
National Association, as trustee (incorporated by reference to
Exhibit 10.4 to the Company's Current Report on Form 8-K
(Registration No. 01-12073) filed with the Securities and
Exchange Commission on February 26, 2001)
57
10.7* -- Loan Agreement, dated as of October 20, 2000, between EQI
Financing Partnership V, L.P., as Borrower, and GMAC Commercial
Mortgage Corporation, as Lender
10.8* -- Loan Agreement, dated as of November 7, 2000, between EQI
Financing Partnership III, L.P., as Borrower, and General Electric
Capital Corporation, as Lender
10.9* -- Loan Agreement, dated as of November 7, 2000, between EQI
Financing Partnership IV, L.P. and EQI/WV Financing Partnership
II, L.P., as Borrowers, and General Electric Corporation, as
Lender
10.10 -- Secured Revolving Credit Agreement dated as of October 26, 2000,
by and among Equity Inns Partnership, L.P., Equity Inns/West
Virginia Partnership, L.P. and Equity Inns Partnership II, L.P. as
Borrower, Bank One, NA, Credit Lyonnais New York Branch, Bank of
America, N.A., National Bank of Commerce, AmSouth Bank and Union
Planters Bank, National Association, as Lenders, Bone One, NA, as
Administrative Agent, Banc One Capital Markets, Inc. as Co-Lead
Arranger/Book Manager, Credit Lyonnais New York Branch as
Syndication Agent and Co-Lead Arranger/Book Manager, and Bank of
America N.A. as Documentation Agent (incorporated by reference to
Exhibit 10.8 to the Company's Current Report on Form 8-K
(Registration No. 01-12073) filed with the Securities and Exchange
Commission on January 11, 2001)
10.11 -- Master Lease Termination Agreement dated as of September 7, 2000,
by and among Equity Inns, Inc., Equity Inns Partnership, L.P.,
Equity Inns/West Virginia Partnership, L.P., EQI Financing
Partnership I, L.P., EQI Financing Partnership II, L.P., EQI/WV
Financing Partnership, L.P., Equity Inns Partnership II, L.P.,
E.I.P. Orlando, L.P., Crossroads/Memphis Partnership, L.P.,
Crossroads/Memphis Financing Company, L.L.C., Crossroads/Memphis
Financing Company II, L.L.C., Crossroads Future Company, L.L.C.,
Crossroads Future Financing Company, L.L.C., Interstate Hotels,
LLC and Crossroads Hospitality Company, L.L.C. (incorporated by
reference to Exhibit 10.7 to the Company's Current Report on Form
8-K (Registration No. 01-12073) filed with the Securities and
Exchange Commission on January 11, 2001)
10.12 -- Form of Management Agreement between certain subsidiaries of
Equity Inns TRS Holdings, Inc., as lessees, and Promus Hotels,
Inc., effective as of January 1, 2001 incorporated by reference to
Exhibit 10.6 to the Company's Current Report on Form 8-K
(Registration No. 01-12073) filed with the Securities and Exchange
Commission on February 26, 2001)
10.13 -- Form of Management Agreement between certain subsidiaries of
Equity Inns TRS Holdings, Inc. as lessees, and Crestline Hotels
and Resorts, Inc., effective as of January 1, 2001 incorporated by
reference to Exhibit 10.7 to the Company's Current Report on Form
8-K (Registration No. 01-12073) filed with the Securities and
Exchange Commission on February 26, 2001)
10.14 -- Form of Management Agreement between certain subsidiaries of
Equity Inns TRS Holdings, Inc as lessees, and Crossroads
Hospitality Company, L.L.C., effective as of January 1, 2001
incorporated by reference to Exhibit 10.8 to the Company's Current
Report on Form 8-K (Registration No. 01-12073) filed with the
Securities and Exchange Commission on February 26, 2001)
10.15 -- Form of Deed of Trust dated as of February 6, 1997 by EQI
Financing Partnership I, L.P. in favor of LaSalle National Bank,
as Trustee (incorporated by reference to Exhibit 10.2 to the
Company's Quarterly Report on Form 10-Q (Registration No.
58
01-12073) for the quarter ended March 31, 1997 and filed with the
Securities and Exchange Commission on April 30, 1997)
10.16 -- Commercial Lease dated as of December 17, 1998 between 64 LTD, LLC
and Equity Inns Services, Inc. (incorporated by reference to
Exhibit 10.32 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1998 (Registration No. 01-12073) filed
with the Securities and Exchange Commission on March 23, 1999
10.17 -- Change in Control and Termination Agreement between Equity Inns
Services, Inc., Equity Inns, Inc. and Phillip H. McNeill, Sr.
(incorporated by reference to Exhibit 10.33 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1998
(Registration No. 01-12073) filed with the Securities and Exchange
Commission on March 23, 1999)
10.18 -- Change in Control and Termination Agreement between Equity Inns
Services, Inc., Equity Inns, Inc. and Howard A. Silver
(incorporated by reference to Exhibit 10.34 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1998
(Registration No. 01-12073) filed with the Securities and Exchange
Commission on March 23, 1999)
10.19 -- Change in Control and Termination Agreement between Equity Inns
Services, Inc., Equity Inns, Inc. and Donald H. Dempsey
(incorporated by reference to Exhibit 10.35 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1998
(Registration No. 01-12073) filed with the Securities and Exchange
Commission on March 23, 1999)
10.20 -- Change in Control and Termination Agreement between Equity Inns
Services, Inc., Equity Inns, Inc. and Phillip H. McNeill, Jr.
(incorporated by reference to Exhibit 10.36 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1998
(Registration No. 01-12073) filed with the Securities and Exchange
Commission on March 23, 1999)
10.21 -- Change in Control and Termination Agreement between Equity Inns
Services, Inc., Equity Inns, Inc. and J. Ronald Cooper
(incorporated by reference to Exhibit 10.37 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1998
(Registration No. 01-12073) filed with the Securities and Exchange
Commission on March 23, 1999)
10.22 -- Change in Control and Termination Agreement between Equity Inns
Services, Inc., Equity Inns, Inc. and Richard F. Mitchell
(incorporated by reference to Exhibit 10.38 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1998
(Registration No. 01-12073) filed with the Securities and Exchange
Commission on March 23, 1999)
10.23 -- Change in Control and Termination Agreement between Equity Inn
Services, Inc., Equity Inns, Inc. and Michael K. Goforth
(incorporated by reference to Exhibit 10.26 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1999
(Registration No. 01-12073) filed with the Securities and Exchange
Commission on March 17, 2000)
10.24 -- Employment Agreement between Equity Inns Services, Inc., Equity
Inns, Inc. and Donald H. Dempsey (incorporated by reference to
Exhibit 10.39 to the Company's Annual Report on Form 10-K for the
59
year ended December 31, 1998 (Registration No. 01-12073) filed
with the Securities and Exchange Commission on March 23, 1999)
10.25 -- Equity Inns, Inc. Executive Deferred Compensation Plan
(incorporated by reference to Exhibit 10.27 to the Company Annual
Report on From 10-K for the year ended December 31, 1999
(Registration No. 01-12073) filed with the Securities and Exchange
Commission on March 17, 2000)
21.1* -- List of subsidiaries of Equity Inns, Inc.
23.1* -- Consent of PricewaterhouseCoopers L.L.P.
- --------------
* Filed herewith.
60