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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, 1998 Commission File Number 01-12073
EQUITY INNS, INC.
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(Exact Name of Registrant as Specified in its Charter)
Tennessee 62-1550848
- ------------------------------- ----------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
7700 Wolf River Boulevard, Germantown, Tennessee 38138
---------------------------------------------------------------
(Address of Registrant's Principal Executive Office) (Zip Code)
( 901) 754-7774
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(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 proceeding 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. [ ]
Aggregate market value of voting stock and non-voting stock held by
nonaffiliates of the Registrant as of March 10, 1999: $316,240,785.
Number of shares of Common Stock, $.01 par value, outstanding as of March 10,
1999: 36,663,715
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement for the 1999 Annual Meeting of
Shareholders to be held May 7, 1999 (the "Proxy Statement") are incorporated by
reference into Part III of this Report.
Exhibit Index beginning on Page 60.
Page 1 of 65
EQUITY INNS, INC
ANNUAL REPORT ON FORM 10-K
For the Year Ended December 31, 1998
TABLE OF CONTENTS
PART I
Page
Item 1. Business 3
Item 2. Properties 12
Item 3. Legal Proceedings 18
Item 4. Submission of Matters to a Vote of Security Holders 18
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters 18
Item 6. Selected Financial Data 19
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 21
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 27
Item 8. Financial Statements and Supplementary Data 28
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 51
Part III
Item 10. Directors and Executive Officers of the Registrant 51
Item 11. Executive Compensation 51
Item 12. Security Ownership of Certain Beneficial Owners and
Management 51
Item 13. Certain Relationships and Related Transactions 51
PART IV
Item 14. Exhibits, Financial Statements, Schedules, and Reports
on Form 8-K 52
2
THIS REPORT CONTAINS AND INCORPORATES BY REFERENCE 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,"
"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 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, 1998, owned an approximate 95.0% interest in
the Partnership. The Company conducts its business through the Partnership and
its subsidiaries.
(b) Financial Information About Industry Segment
The Company is in the business of acquiring equity interests in hotel
properties. See the Consolidated Financial Statements and notes thereto included
in Item 8 of this Annual Report on Form 10-K for certain financial information
required in Item 1.
(c) 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,
1998, the Partnership leased 80 of the current hotels to subsidiaries or
affiliates of Patriot American Hospitality, Inc. (collectively, the "Patriot
Lessee"), successor by merger to Interstate Hotels Company ("Patriot"). All
payments due under these Percentage Leases are guaranteed by Patriot and by
Interstate Hotels, LLC ("Interstate"), successor by merger to Interstate Hotels
Corporation and an indirect subsidiary of Patriot. The Partnership leased 19
hotels to a wholly-owned subsidiary of Prime Hospitality Corporation (the "Prime
Lessee").
3
Ninety-nine hotels owned by the Company are leased to the Patriot Lessee and the
Prime Lessee (collectively, the "Lessees" and individually, a "Lessee") pursuant
to percentage leases ("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 revenue of the hotels ("Percentage Rent"). The Percentage Leases
allow the Company to participate in increased revenue from the hotels by
providing for the payment of Percentage Rent. The remaining three hotels are
operated by third parties under management agreements.
At December 31, 1998, the Partnership owned 102 hotel properties with a total of
12,640 rooms in 36 states (the "Hotels"). The diversity of the portfolio is such
that, at December 31, 1998, no individual hotel exceeded 2% of the total rooms
in the portfolio. This geographical distribution and franchise diversity is
further illustrated by the following charts.
Franchise Diversity
# of Hotel # of Rooms/
Franchise Affiliation Properties Suites
--------------------- ---------- -----------
Premium Limited Service Hotels:
Hampton Inn 55 6,856
Hampton Inn & Suites 1 125
Comfort Inn 2 182
--- ------
Sub-total 58 7,163
--- ------
All-Suite Hotels:
AmeriSuites 19 2,403
Premium Extended Stay Hotels:
Residence Inn 12 1,431
Homewood Suites 7 808
--- ------
Sub-total 19 2,239
--- ------
Full Service Hotels:
Holiday Inn 3 397
Comfort Inn 1 177
--- ------
Sub-total 4 574
--- ------
Independent Hotels: 2 261
--- ------
Total 102 12,640
=== ======
4
Geographical Diversity
Number of Number of Percentage of
State Hotels Suites/Rooms Suites/Rooms
- ----- --------- ------------ -------------
Alabama 4 460 3.6%
Arizona 4 495 3.9%
Arkansas 1 123 1.0%
Colorado 3 356 2.8%
Connecticut 3 405 3.2%
Florida 8 931 7.4%
Georgia 4 443 3.5%
Idaho 1 104 0.8%
Illinois 2 264 2.1%
Indiana 2 255 2.0%
Kansas 2 260 2.1%
Kentucky 1 119 0.9%
Louisiana 1 128 1.0%
Maryland 2 244 1.9%
Michigan 4 526 4.2%
Minnesota 2 248 2.0%
Mississippi 1 86 0.7%
Missouri 2 242 1.9%
Nebraska 1 80 0.6%
Nevada 1 202 1.6%
New Jersey 3 424 3.4%
New Mexico 1 128 1.0%
New York 1 154 1.2%
North Carolina 5 614 4.9%
Ohio 6 736 5.8%
Oklahoma 1 135 1.1%
Oregon 1 168 1.3%
Pennsylvania 2 249 2.0%
South Carolina 3 404 3.2%
Tennessee 11 1,286 10.2%
Texas 9 1,230 9.7%
Vermont 2 200 1.6%
Virginia 2 245 1.9%
Washington 1 161 1.3%
West Virginia 4 455 3.6%
Wisconsin 1 80 0.6%
--- ------ -----
102 12,640 100.0%
=== ====== =====
In 1998, the Company agreed to purchase, upon their completion, a 252-room
Homewood Suites hotel in Orlando, Florida for $22.8 million, a 235-room Homewood
Suites hotel in downtown Chicago, Illinois for $30.4 million and a 300-room
Hawthorn Suites hotel in Chicago-Rosemont, Illinois for $33.0 million. Each of
these hotels is currently under construction with completion dates expected in
May 1999, June 1999 and September 1999, respectively. The Company also purchased
land in Salt Lake City, Utah at a cost of $2.4 million, to be held for possible
construction of an Embassy Suites hotel at a later date.
5
BUSINESS STRATEGY
The Company's primary objective is to increase funds from operations and enhance
shareholder value by participating in increased revenues from the Hotels through
leases which provide for rent payments based on the revenues from the Hotels and
by acquiring equity interests in additional hotels that meet the Company's
investment criteria.
ACQUISITION STRATEGY
The Company intends to acquire additional existing hotel properties that meet
its investment criteria, primarily premier upscale limited service,
extended-stay, all-suite and underperforming hotels that can be renovated and/or
converted to premium franchise brands. In particular, the Company has
increasingly emphasized the acquisition of hotel portfolios in order to
capitalize on the Company's efficiency and experience in acquisition analysis
and transaction structuring and to enable the Company to more rapidly expand its
hotel portfolio.
The Company has entered into alliances with two major franchisors of all-suite
hotels, Prime Hospitality Corporation and U.S. Franchise Systems. These
alliances allow the Company the right of first offer through the year 2000 to
purchase up to thirty-two hotels per year. These alliances provide the Company
with a distinct advantage by avoiding the necessity to bid against competition
for new acquisitions.
The Company considers investment in hotel properties which meet some or all of
the following criteria:
Particular emphasis is given to premium extended stay and all-suite
properties in the upscale and mid-price segment, such as AmeriSuites(R),
Homewood Suites(R), Residence Inn(R), Hampton Inn & Suites(R), Embassy
Suites(R) and Hawthorn Suites(R) and premium limited service hotels, such
as Hampton Inn(R) and Marriott Courtyard(R), with major franchisors such as
Promus Hotel Corporation, Marriott Corporation, Prime Hospitality
Corporation and U.S. Franchise Systems;
Properties in attractive locations that the Company believes could benefit
significantly by changing franchise affiliations to a brand the Company
believes will strengthen the acquired hotel's competitive position. In
general, the Company focuses on acquisitions in markets with the following
characteristics:
o high barriers to entry, such as the scarcity or high cost of land for
additional development, restrictive zoning, stringent local
development laws, extended permit-approval processes, and a relatively
low supply of competing hotels;
o historically stable demand generators, such as major corporate office
or retail complexes, airports, major universities and medical centers
with convenient access to major thoroughfares and airports;
Properties with relatively stable operating histories; and
Properties with purchase prices which, coupled with the elimination or
significant reduction of debt, may allow the Company to realize a favorable
return on its investment.
6
The Company continually evaluates its hotel portfolio with respect to the
potential sale of certain of its hotel properties that no longer meet its
investment criteria. Proceeds from the sale of its hotels will be used to repay
indebtedness or re-invested in hotels meeting the Company's investment criteria.
DEVELOPMENT STRATEGY
The Company may consider selective internal development of hotel properties,
principally in the premium extended stay, all-suite and limited service segment
of the market. At December 31, 1998, the Company held land in Salt Lake City,
Utah for possible construction of an Embassy Suites hotel.
The Company may also seek to obtain certain of the benefits of development
without incurring certain of the risks of development, by (a) acquiring
newly-developed hotels or (b) contracting with developers to build hotels that
the Company will buy upon completion. The Company has established and is
pursuing relationships with developers who have established good relationships
with the franchisors of the Company's preferred hotel brands. The Company seeks
established developers who have demonstrated, among other things, the ability to
(a) find attractive sites which, when developed, would meet the Company's
acquisition criteria and (b) manage the franchise brand approval and development
processes.
INTERNAL GROWTH STRATEGY
The Percentage Leases are designed to allow the Company to participate in any
growth in room revenues at the Hotels and to a lesser extent, food and beverage
revenue, if any. The Percentage Leases provide for rent equal to the greater of
(i) a fixed Base Rent or (ii) Percentage Rent. The Percentage Leases provide
that the Base Rent and the thresholds for the payment of Percentage Rent will be
adjusted annually (subject to an annual cap of 7%) based on changes in the
United States Consumer Price Index ("CPI").
EMPLOYEES
At March 1, 1999, the Company employed, through a wholly-owned subsidiary, 16
employees.
COMPETITION
The hotel industry is highly competitive. 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, Average Daily Rate ("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 and
consistency of services provided, and price are the principal competitive
factors affecting the Company's hotels.
The Company may be competing for investment opportunities with entities which
have substantially greater financial resources than the Company. These entities
generally may be able to accept more risk than the Company prudently can manage.
Competition generally may reduce the number of suitable investment opportunities
available to the Company and increase the bargaining power of property owners
seeking to sell. Further, the Company believes that competition from entities
organized for purposes substantially similar to the Company's objectives will
increase significantly.
7
FRANCHISE AGREEMENTS
One hundred of the Hotels operate under franchise licenses. Two of the Hotels
are operated as independent hotels without any franchise affiliation. The
Company anticipates that most of the additional hotel properties in which it
invests will be operated under franchise licenses. The Company believes that the
public's perception of quality associated with a franchisor is an important
feature in the operation of a hotel. Franchisors provide a variety of benefits
for franchisees which include national advertising, publicity and other
marketing programs designed to increase brand awareness, training of personnel,
continuous review of quality standards and centralized reservation systems.
The Lessees hold the franchise licenses for the leased hotels. The franchise
licenses generally specify certain management, operational, recordkeeping,
accounting, reporting and marketing standards and procedures with which the
applicable Lessee must comply. The franchise licenses obligate the Lessee to
comply with the franchisors' standards and requirements with respect to training
of operation personnel, safety, maintaining specified insurance, the types of
services and products ancillary to guest room services that may be provided by
the Lessee, display of signage, and the type, quality and age of furniture,
fixtures and equipment included in guest rooms, lobbies and other common areas.
Each franchise license generally gives the Lessee the right to operate the
particular Hotel under a franchise license for periods ranging up to 20 years.
The franchise agreements provide for termination at the franchisor's option upon
the occurrence of certain events, including the Lessee's failure to pay
royalties and fees or perform its other covenants under the license agreement,
bankruptcy, abandonment of the franchise, commission of a felony, assignment of
the license without the consent of the franchisor, or failure to comply with
applicable law in the operation of the relevant Hotel. The Lessee will be
entitled to terminate the franchise license only by giving at least 12 months'
notice and paying a specific amount of liquidated damages. The Percentage Leases
require the Company's consent to any change or termination in the franchise
brand. The license agreements will not renew automatically upon expiration. The
Partnership made franchise transfer payments to franchisors aggregating
approximately $200,000 in 1998. The Partnership is also committed to franchisors
to fund certain capital improvements to hotel properties, which are funded from
borrowings, working capital, or the room renovation accounts. The Partnership
made capital improvements of approximately $26 million to its hotel properties
in 1998, including approximately $11.4 million in renovations required by
franchisors. In 1999, the Partnership expects to fund approximately $23 million
of capital improvements, approximately $8.6 million of which is renovation
required by franchisors, for the hotel properties owned and contracted to own at
December 31, 1998. The Lessee is responsible for making royalty payments under
the franchise agreements to the franchisors. Under the franchise agreements, the
Lessee pays a franchise fee ranging from 6.5% to 8.05% of room revenue (plus
additional fees). A portion of these fees may be designated for a marketing and
reservation fund for the benefit of franchised hotels systemwide.
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.
8
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 that it distribute
annually at least 95% 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.
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 such substances, may adversely affect the owner's ability to sell such
real estate or to use such real estate as collateral for borrowings. In
connection with the ownership and operation of the Hotels, the Company, the
Partnership or the Lessee, as the case may be, may be potentially liable for any
such costs.
In connection with the Partnership's acquisition of the Hotels, Phase I
environmental site assessments ("ESAs") were obtained on all of the Hotels from
various independent environmental engineers. The Phase I ESAs were intended to
identify potential environmental contamination for which the Hotels may be
responsible and the potential for environmental regulatory compliance
liabilities. The Phase I ESAs included historical review of the Hotels, reviews
of certain public records, preliminary investigations of the sites and
surrounding properties, screening for the presence of hazardous substances,
toxic substances and underground storage tanks, and the preparation and issuance
of a written report. The Phase I ESAs did not include invasive procedures, such
as soil sampling or ground water analysis to detect contaminants from former
operations on the Current 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. Nevertheless, no assurances can be given that (i) future
laws, ordinances or regulations will not impose any material environmental
liability or (ii) the current environmental condition of the Hotels will not be
affected by the condition of the properties in the vicinity of Hotels (such as
the presence of leaking underground storage tanks) or by third parties unrelated
to the Partnership or the Company.
9
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company, 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.
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, Secretary, Treasurer,
Chief Financial Officer 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 60) 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 Board of
Directors of National Commerce Bancorporation. 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 44) 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 served as Executive Vice President of Finance,
Secretary, Treasurer and Chief Financial Officer of the Company until June 1998.
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 54) 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 administration positions with Holiday Inns, Inc. Mr. Dempsey was
10
first appointed to the Board of Directors in December 1998. Mr. Dempsey holds a
B.S. in Accounting from Mississippi State University.
Phillip H. McNeill, Jr. (age 37) 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 50) 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.
11
ITEM 2. PROPERTIES
The following table sets forth certain information for the year ended December
31, 1998 with respect to the Hotels on a pro forma basis:
Year Ended December 31, 1998
Revenue
Number Pro Forma Pro Forma Average Per
Date Of Room Lease Daily Available
Opened Rooms Revenue(3) Payment (1)(3) Occupancy Rate Room (2)
------ ------- ---------- -------------- --------- --------- ---------
Hampton Inn:
Albany, New York 1986 154 $ 3,334 $ 1,612 70.5% $84.13 $59.31
Ann Arbor, Michigan 1986 150 2,854 1,337 70.6% $73.80 $52.12
Atlanta (Northlake),
Georgia 1988 130 1,860 874 62.9% $62.28 $39.19
Austin, Texas 1987 122 2,240 1,080 73.8% $68.76 $50.72
Baltimore (Glen Burnie),
Maryland 1989 116 2,396 1,090 79.6% $71.73 $57.08
Beckley, West Virginia 1992 108 1,987 1,036 76.1% $66.22 $50.40
Birmingham (Mountain
Brook), Alabama 1987 131 2,251 1,181 67.8% $69.40 $47.07
Birmingham (Vestavia),
Alabama 1986 123 1,977 866 67.8% $64.94 $44.04
Chapel Hill, North
Carolina 1986 122 2,474 1,321 76.7% $72.43 $55.56
Charleston, South
Carolina 1985 125 2,168 1,022 71.5% $66.48 $47.52
Chattanooga, Tennessee 1988 168 2,372 1,003 60.5% $63.95 $38.67
Chicago (Gurnee),
Illinois 1988 134 2,238 980 63.2% $72.40 $45.76
Chicago (Naperville),
Illinois 1987 130 2,349 1,065 73.4% $67.46 $49.50
Cleveland, Ohio 1987 123 2,191 1,118 70.8% $68.95 $48.80
College Station, Texas 1986 135 2,226 1,043 70.5% $64.02 $45.17
Colorado Springs,
Colorado 1985 128 2,111 985 68.4% $66.09 $45.19
Columbia, South Carolina 1985 121 1,704 774 60.9% $63.34 $38.59
Columbus, Georgia 1986 119 2,072 1,007 78.3% $60.90 $47.69
Columbus (Dublin), Ohio 1988 123 1.983 921 63.0% $70.17 $44.18
Dallas (Addison), Texas 1985 160 2,793 1,472 67.0% $71.37 $47.83
Dallas (Arlington),
Texas 1985 141 1,540 600 50.4% $59.41 $29.92
Dallas (Garland), Texas 1987 125 1,225 422 51.9% $51.70 $26.85
Dallas (Richardson),
Texas 1987 130 1,846 839 62.3% $62.49 $38.91
Denver (Aurora),
Colorado 1985 132 1,975 860 66.0% $62.13 $40.99
Destin, Florida 1994 104 1,802 957 55.9% $84.87 $47.46
Detroit (Madison
Heieghts), Michigan 1987 124 2,234 1,054 71.6% $68.92 $49.37
Detroit (Northfield),
Michigan 1989 125 2,629 1,336 78.7% $73.21 $57.63
Fayetteville, North
Carolina 1986 122 1,437 547 60.1% $53.73 $32.27
Ft. Worth, Texas 1987 125 1,658 615 59.9% $60.69 $36.34
Gastonia, North Carolina 1989 109 1,812 927 71.3% $63.89 $45.55
Indianapolis, Indiana 1987 129 2,453 1,175 69.1% $75.36 $52.09
Jacksonville, Florida 1986 122 1,842 736 70.0% $59.08 $41.36
Kansas City (Overland
Park), Kansas 1991 134 2,460 1,189 68.1% $73.87 $50.30
Kansas City, Missouri 1987 120 2,261 1,090 69.5% $74.31 $51.62
Knoxville, Tennessee 1991 118 1,924 817 72.5% $61.64 $44.66
Little Rock (North),
Arkansas 1985 123 1,568 653 61.1% $57.16 $34.92
Louisville, Kentucky 1986 119 1,933 886 64.9% $68.57 $44.50
Memphis (Poplar),
Tennessee 1985 126 2,754 1,440 79.2% $75.63 $59.88
Memphis (Sycamore View),
Tennessee 1984 117 1,762 693 68.6% $60.12 $41.26
Meriden, Connecticut 1988 125 2,087 1,004 67.8% $67.51 $45.75
Milford, Connecticut 1986 148 3,102 1,537 79.9% $71.84 $57.42
Morgantown, West
Virginia 1991 108 2,045 1,035 71.5% $72.54 $51.88
Nashville (Brentwood),
Tennessee 1985 114 2,028 887 64.5% $75.56 $48.74
Nashville (Briley
Parkway), Tennessee 1987 120 2,340 1,081 71.4% $74.83 $53.42
Norfolk, Virginia 1990 119 2,079 1,014 70.1% $68.26 $47.87
Pickwick, Tennessee 1994 50 756 252 61.3% $67.59 $41.43
San Antonio (Bowie),
Texas 1995 169 3,657 2,023 70.2% $84.46 $59.29
Sarasota, Florida 1987 97 1,401 504 60.4% $65.56 $39.58
Savannah, Georgia 1986 129 1,992 951 70.5% $60.03 $42.31
12
Year Ended December 31, 1998
Revenue
Number Pro Forma Pro Forma Average Per
Date Of Room Lease Daily Available
Opened Rooms Revenue (3) Payment (1)(3) Occupancy Rate Room (2)
------ ------- ----------- -------------- --------- --------- ---------
Hampton Inn (Continued):
Scottsdale, Arizona 1996 126 2,063 967 50.2% $89.33 $44.86
Scranton, Pennsylvania 1994 129 2,396 1,070 73.2% $69.50 $50.88
Southaven (Memphis),
Mississippi 1995 86 1,588 724 80.0% $63.21 $50.59
St. Louis (Westport),
Missouri 1987 122 1,690 663 55.9% $67.84 $37.95
State College,
Pennsylvania 1987 120 2,279 1,118 71.3% $72.93 $52.05
Traverse City, Michigan 1987 127 2,165 1,023 59.6% $78.36 $46.70
Hampton Inn & Suites:
Memphis (Bartlett),
Tennessee (4) 1998 125 875
Comfort Inn:
Enterprise, Alabama 1987 78 959 393 66.9% $50.38 $33.69
Jacksonville Beach,
Florida 1973 177 3,403 1,471 62.0% $85.04 $52.68
Rutland, Vermont 1985 104 1,713 719 72.3% $62.41 $45.12
Residence Inn:
Boise, Idaho (5) 1986 104 2,527 1,213 83.8% $79.47 $66.56
Burlington, Vermont 1988 96 2,633 1,303 83.1% $90.40 $75.13
Colorado Springs,
Colorado 1984 96 2,345 1,204 76.4% $87.61 $66.92
Madison, Wisconsin 1988 80 1,529 495 70.2% $74.53 $52.35
Minneapolis (Eagan),
Minnesota 1988 120 3,372 1,715 84.3% $91.33 $77.00
Oklahoma City, Oklahoma 1982 135 3,057 1,474 79.9% $77.67 $62.04
Omaha, Nebraska 1981 80 1,986 800 78.5% $86.68 $68.01
Portland, Oregon (5) 1990 168 5,551 2,664 82.9% $108.86 $90.27
Princeton, New Jersey 1988 208 6,172 3,270 74.3% $109.47 $81.30
Somers Point,
New Jersey (5) 1988 120 3,291 1,580 80.0% $94.66 $75.77
Tinton Falls, New Jersey 1988 96 3,010 1,439 82.5% $104.13 $85.91
Tucson, Arizona 1985 128 3,214 1,576 83.0% $82.86 $68.80
Holiday Inn:
Bluefield, West Virginia 1980 120 1,953 893 64.0% $69.75 $44.60
Charleston (Mt. Pleasant),
South Carolina 1988 158 3,134 1,589 70.7% $76.89 $54.35
Oak Hill, West Virginia 1983 119 1,252 599 48.4% $59.55 $28.82
Independents:
Wilkesboro, North
Carolina 1985 101 1,400 728 59.5% $63.87 $37.98
Winston-Salem, North
Carolina 1969 160 1,736 495 50.9% $58.37 $29.72
Homewood Suites:
Augusta, Georgia 1997 65 1,393 659 64.7% $90.72 $58.73
Cincinnati
Sharonville), Ohio 1990 111 2,327 1,086 74.4% $77.19 $57.43
Hartford, Connecticut 1990 132 3,777 1,862 82.5% $95.06 $78.40
Memphis (Germantown),
Tennessee 1996 92 2,104 1,032 69.7% $89.92 $62.67
Phoenix, Arizona 1996 124 3,698 1,742 78.9% $103.68 $81.76
San Antonio, Texas 1996 123 2,865 1,273 77.7% $82.10 $63.78
Seattle, Washington (4) 1998 161 2,216
AmeriSuites:
Albuquerque, New Mexico 1997 128 2,377 1,190 73.6% $69.16 $50.88
Baltimore, Maryland 1996 128 2,740 1,378 73.5% $79.78 $58.64
Baton Rouge, Louisiana 1997 128 2,498 1,306 71.9% $74.40 $53.46
Birmingham, Alabama 1997 128 1,787 764 52.3% $73.18 $38.25
Cincinnati (Blue Ash),
Ohio 1990 127 2,087 971 60.4% $74.53 $45.03
Cincinnati (Forest
Park), Ohio 1992 126 2,413 1,167 70.0% $75.00 $52.48
Columbus, Ohio 1994 126 2,692 1,347 72.3% $80.93 $58.53
Flagstaff, Arizona 1993 117 1,799 774 64.4% $65.40 $42.14
13
Year Ended December 31, 1998
Revenue
Number Pro Forma Pro Forma Average Per
Date Of Room Lease Daily Available
Opened Rooms Revenue(3) Payment (1)(3) Occupancy Rate Room (2)
------ ------- ---------- -------------- --------- --------- ---------
AmeriSuites (Continued):
Indianapolis, Indiana 1992 126 2,555 1,330 68.4% $81.28 $55.56
Jacksonville, Florida 1996 112 1,842 853 65.7% $68.57 $45.06
Las Vegas, Nevada (4) 1998 202 2,230
Kansas City (Overland
Park), Kansas 1994 126 2,628 1,317 70.4% $81.18 $57.14
Memphis (Wolfchase),
Tennessee 1996 128 2,534 1,208 67.6% $80.27 $54.24
Miami, Florida 1996 126 3,146 1,805 83.0% $82.44 $68.41
Miami (Kendall),
Florida 1996 67 2,122 1,293 89.5% $96.93 $86.78
Minneapolis, Minnesota 1997 128 2,666 1,302 73.5% $77.64 $57.07
Nashville, Tennessee 1997 128 2,321 1,166 65.4% $75.98 $49.68
Richmond, Virginia 1992 126 3,036 1,671 73.5% $89.75 $66.01
Tampa, Florida 1994 126 3,093 1,761 75.3% $89.30 $67.25
------ -------- -------- ---- ------ ------
Consolidated Totals/Weighted
Average for all Hotels 12,640 $231,100 $115,674 69.5% $74.18 $52.08
====== ======== ======== ==== ====== ======
- ------------------------
(1) Represents lease payments calculated on a pro forma basis by applying the
rent provisions in the Percentage Leases using historical room revenues of
the hotels as if January 1, 1998 was the beginning of the lease year.
(2) Determined by multiplying occupancy and the average daily rate.
(3) Amounts in thousands.
(4) Hotel was not open for the entire period; therefore, pro forma results are
not available, minimum rent has been assumed.
(5) Hotel operated under a management contract; lease payment amount
represents operating income
THE PERCENTAGE LEASES
All but three of the Hotels owned by the Partnership are separately leased to
the Lessees under a Percentage Lease. 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 a full calendar year 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.
14
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, 1999.
Range of Percentages of Room Revenue
------------------------------------
First Tier Top Tier
---------- --------
Full Service (1) 28% to 38% 65% to 77%
Extended Stay 27% to 38.0% 65% to 75%
All-Suite 35.7% to 59.7% 71.3% 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.
Three of the Hotels are operated pursuant to management agreements between a
subsidiary of the Company and third party management companies, with fees
ranging from 3% to 5% of total hotel revenues.
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.
Indemnification. Under each of the Percentage Leases, the Lessees are obligated
to indemnify, and are obligated to hold harmless, the Partnership from and
against liabilities, costs and expenses (including reasonable attorneys' fees
and expenses) incurred by, imposed upon or asserted against the Partnership on
account of, among other things, (i) any accident or injury to person or property
on or about the Hotels, (ii) any misuse by the Lessees or any of their agents of
the leased property, (iii) any environmental liability resulting from any action
or negligence of the Lessees, (iv) taxes and
15
assessments in respect of the Hotels (other than real estate and personal
property taxes and income taxes of the Partnership on income attributable to the
Hotels), (v) the sale or consumption of alcoholic beverages on or in the real
property or improvements thereon, or (vi) any breach of the Percentage Leases by
Lessees; provided, however, that such indemnification will not be construed to
require the Lessees to indemnify the Partnership against the Partnership's own
grossly negligent acts or omissions or willful misconduct or third-party
contractual liabilities arising from termination of the Percentage Leases due to
an event of default by the Partnership thereunder.
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) offer to acquire the Hotel on the terms set forth
in the applicable Percentage Lease. If a Lessee rebuilds the Hotel, the
Partnership is obligated to disburse to the Lessee, from time to time and upon
satisfaction of certain conditions, any insurance proceeds actually received by
the Partnership as a result of such damage or destruction, and any excess costs
of repair or restoration will be paid by the Lessee. If the Lessee decides not
to rebuild and the Partnership exercises its right to reject the Lessee's
mandatory offer to purchase the Hotel on the terms set forth in the Percentage
Lease, the Percentage Lease will terminate and the insurance proceeds will be
retained by the Partnership. If the Partnership accepts the Lessee's offer to
purchase the Hotel, the Percentage Lease will terminate and the Lessee will be
entitled to the insurance proceeds. 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 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 a credit against rental payments and other charges in an
amount equal to any loss-of-income insurance proceeds actually received by the
Partnership.
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 in accordance with the provisions of 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 that part of the condemnation award
specified for restoration, provided that if the condemnation awards are
inadequate to restore the affected Hotel to a complete architectural unit,
either the Partnership or the Lessee shall have the right to terminate the
applicable Percentage Lease.
Events of Default. Events of Default under the existing Percentage Leases
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 from the Partnership 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 said 30 days and thereafter acts, with
diligence, to correct such failure within such time as is necessary;
16
(iv) if a Lessee or a guarantor of the Percentage Leases shall file a
petition in bankruptcy or reorganization pursuant to any federal or state
bankruptcy law or any similar federal or state law, or shall be adjudicated a
bankrupt or shall make an assignment for the benefit of creditors or shall admit
in writing its inability to pay its debts generally as they become due, or if a
petition or answer proposing the adjudication of the Lessee or a guarantor of
the Percentage Leases as bankrupt or its reorganization pursuant to any federal
or state bankruptcy law or any similar federal or state law shall be filed in
any court and the Lessee or a guarantor of the Percentage Leases shall be
adjudicated a bankrupt and such adjudication shall not be vacated or set aside
or stayed within 60 days after the entry of an order in respect thereof, or if a
receiver of the Lessee or a guarantor of the Percentage Leases or of the whole
or substantially all of the assets of the Lessee shall be appointed in any
proceeding brought by the Lessee or a guarantor of the Percentage Leases or if
any such receiver, trustee or liquidator shall be appointed in any proceeding
brought against the Lessee or any guarantor of the Percentage Leases and shall
not be vacated or set aside or stayed within 60 days after such appointment;
(v) if the Lessee voluntarily discontinues operations of a Hotel for
more than 30 days, except as a result of damage, destruction, or condemnation;
(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 a failure to complete a capital improvement required by the franchisor
resulting from the Partnership's failure to fund such capital improvements); or
(vii) the occurrence of an event of default under the Lease Guaranties
with respect to the hotels leased to the Patriot Lessee.
If an Event of Default occurs and continues beyond any curative period, the
Partnership will have the option of terminating the Percentage Lease or any or
all other Percentage Leases between the Partnership and the Lessee and the
Consolidated Lease Amendment and the Percentage Leases shall terminate and the
Lessee will be required to surrender possession of the affected Hotels.
Right of First Offer. In the event that the Partnership desires to sell its
interest in a Hotel, the Partnership shall first offer to the 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"). In the event that
the 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 Lessee or its nominee at the Offer Price, and upon such sale, the applicable
Percentage Lease shall terminate with respect to the Hotel. Such provisions
shall not apply to any sale, transfer or conveyance by the Partnership of any
interest in the Hotels to any affiliate of the Partnership.
Termination of Percentage Leases on Disposition of the Hotels. In the event the
Partnership enters into an agreement to sell or otherwise transfer a Hotel and
the 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 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 Lessee the net present
value of the 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
lease to the Lessee one or more substitute hotels on terms that would create a
leasehold interest in such hotels with a fair market value equal to or exceeding
the fair market value of the Lessee's remaining leasehold interest under the
Percentage Lease to be terminated.
17
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 Lessees the termination payment described in the
preceding paragraph.
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 1998, 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:
Distributions
Declared
Price Range Per Share Record
High Low and Unit Date
---- --- -------------- -------------------
Year Ended December 31, 1997:
First Quarter $14-1/2 $12-1/2 $0.28 March 31, 1997
Second Quarter $14-1/8 $12-7/8 $0.28 June 30, 1997
Third Quarter $15-13/16 $13-1/4 $0.29 September 30, 1997
Fourth Quarter $16-9/16 $14-1/8 $0.29 December 30, 1997
Year Ended December 31, 1998:
First Quarter $16 $14-1/4 $0.31 March 27, 1998
Second Quarter $16-1/16 $13-3/16 $0.31 June 30, 1998
Third Quarter $14-1/8 $9-7/8 $0.31 September 30, 1998
Fourth Quarter $11-13/16 $8-3/4 $0.31 December 31, 1998
(b) Stockholder Information
On March 10, 1999, there were 1,134 record holders of the Company's Common
Stock, including shares held in "street name" by nominees who are record
holders, and approximately 28,100 beneficial owners.
18
(c) Distributions
The Company intends to make regular quarterly distributions to its shareholders.
The Company's ability to make distributions is dependent on the receipt of
distributions from the Partnership. In order to qualify as a REIT for federal
income tax purposes, the Company must distribute to shareholders annually at
least 95% of its taxable income. 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. The Partnership's primary source of revenue
consists of rent payments from the Lessees under the Percentage Leases.
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
1998 and 1997 are considered to be approximately 26% and 10% 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.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth (i) selected historical operating and other
financial information for the years ended December 31, 1998, 1997, 1996 and 1995
and the period from March 1, 1994 (inception of operations) through December 31,
1994, and (ii) selected historical balance sheet data as of December 31, 1998,
1997, 1996, 1995 and 1994. 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.
19
EQUITY INNS, INC
SELECTED FINANCIAL DATA
(in thousands, Except Per Share Data)
March 1, 1994
(inception of
operations)
Year Ended December 31, through
1998 1997 1996 1995 December 31, 1994
-------- -------- --------- -------- -----------------
Operating Data:
Revenue $106,731 $71,761 $38,430 $24,145 $9,798
Net income 31,595 23,543 14,473 8,511 4,620
Preferred stock dividends 3,374
Net income applicable to common
shareholders 28,221 23,543 14,473 8,511 4,620
Income before extraordinary
item per common share .78 .88 .69 .70 .60
Net income per common share,
basic and diluted .78 .82 .69 .70 .60
Distributions declared per
common share and Unit 1.24 1.14 1.12 1.00 .70
Funds from operations (1) 64,985 45,748 26,397 15,804 7,611
Funds from operations per
common share and Unit 1.71 1.53 1.22 1.22 .89
Weighted average number of
common shares and Units
outstanding-diluted 38,001 29,963 21,681 12,920 8,551
Balance Sheet Data:
Investments in hotel properties,
net $790,132 $617,072 $309,202 $218,429 $140,970
Total assets 807,023 635,525 317,880 225,067 145,555
Debt 331,394 233,206 77,399 74,939 45,838
Minority interest in Partnership 19,070 19,035 7,728 6,073 6,081
Shareholders' Equity 431,264 360,172 222,951 137,493 89,802
(1) Represents Funds from Operations of the Company on a consolidated basis.
Industry analysts generally consider Funds from Operations 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"), Funds from
Operations represents net income (loss) (computed in accordance with
generally accepted accounting principles), excluding gains (or losses)
from debt restructuring or sales of property, plus depreciation, and
after adjustments for unconsolidated partnerships and joint ventures. For
the periods presented, depreciation, gain (loss) on the sale of hotel
properties, non-recurring merger expenses, minority interest and the 1997
extraordinary charge from write-off of deferred financing fees were the
only adjustments. Funds from Operations 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. Funds from Operations does not reflect working capital
changes, cash expenditures for capital improvements or principal payments
with respect to indebtedness on the hotels.
20
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 real estate investment trust
("REIT") which commenced operations on March 1, 1994. 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,
1998 owned an approximate 95.0% interest in the Partnership.
In order to qualify as a REIT, neither the Company nor the Partnership can
operate hotels. Therefore, the Partnership leases 80 hotels collectively to
subsidiaries or affiliates of Patriot American Hospitality, Inc.(collectively,
the "Patriot Lessee"), successor by merger to Interstate Hotels Company
("Patriot"). Patriot has managed hotel properties since 1961, and as of December
31, 1998, owned, managed, leased or performed related services for 474 hotels
with approximately 101,000 rooms. The Partnership leases 19 hotels to a
wholly-owned subsidiary of Prime Hospitality Corporation (the "Prime Lessee").
Prime has managed hotel properties since 1992, and as of December 31, 1998,
managed 180 hotels with 24,516 rooms in 31 states, including 19 of the Hotels.
The lessees are required to perform all operational and management functions
necessary to operate the Hotels. Ninety-nine hotels owned by the Partnership are
leased to the Patriot Lessee and the Prime Lessee, collectively, as the lessees
(the "Lessees"), and individually as the lessee (a "Lessee") pursuant to the
Percentage Leases (the "Percentage Leases") which provide for the greater of (i)
fixed annual Base Rent ("Base Rent") or (ii) rent based, in part, on the revenue
of the hotels ("Percentage Rent"). The remaining three hotels are operated
pursuant to management agreements, two of which are operated by an affiliate of
Patriot, and one of which is operated by MeriStar Management Company, L.L.C, a
wholly-owned subsidiary of MeriStar Hotels & Resorts, Inc. The Partnership's,
and therefore the Company's, principal sources of revenue are lease payments
made by the Lessees under the Percentage Leases. Percentage Rent is based
primarily upon the hotels' room revenues and, to a lesser extent, food and
beverage revenues.
Recent Highlights
Since its inception, the Company has taken steps to position itself for growth
and stability. Several changes have occurred since December 31, 1997 which add
significantly to these efforts. These events are as follows:
Acquisitions and Disposition of Hotels
Since the IPO, the Company has actively implemented its acquisition
strategy. During 1998 and 1997, the Company acquired the following
types of hotels at advantageous capitalization rates for the
approximate amounts indicated:
1998 1997
---------------------- ----------------------
No. of Purchase No. of Purchase
Hotels Price Hotels Price
------ -------- ------ --------
(in thousands) (in thousands)
Premium Limited Service 2 $ 20,100 34 $198,574
Premium Extended Stay 5 68,350 6 61,650
All-Suite 9 96,996 10 86,966
-- -------- -- --------
16 $185,446 50 $347,190
== ======== == ========
21
During 1998, the Partnership sold three hotels which did not meet its
growth strategy (Hampton Inn, Little Rock, Arkansas; Hampton Inn,
Shelby, North Carolina; Hampton Inn, Cleveland, Tennessee) to third
parties for an aggregate sales price of approximately $8.0 million. The
sales price was paid with cash.
Formation of Strategic Alliance US Franchise Systems, Inc.
On January 20, 1998, the Company entered into a strategic alliance with
US Franchise Systems, Inc., ("USFS"), the exclusive franchisor of
Hawthorn Suites. Under the agreement, the Company will have the right
of first offer to purchase from USFS up to twelve Hawthorn Suites per
year for three years in certain parts of the Eastern United States. No
hotels were purchased during 1998 under this alliance.
Equity Offerings
On February 18, 1998, the Company sold 641,556 shares of common stock,
$.01 par value ("Common Stock") to Prudential Securities Incorporated.
The offering price was $15.81 per share, resulting in gross proceeds of
approximately $10.1 million. On March 30, 1998, the Company sold
645,162 shares of Common Stock to J.C. Bradford & Co. The offering
price was $15.50 per share, resulting in gross proceeds of
approximately $10 million. The Company received approximately $19.1
million after underwriters' discounts and offering expenses from the
combined offerings.
On June 25, 1998, the Company completed its first offering of preferred
stock ("Preferred Stock"), selling 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 from
the offering.
Development
In May 1998, the Company completed its first development property, a
125-room Hampton Inn & Suites located in Bartlett (Memphis), Tennessee,
at a cost of approximately $7.5 million.
In July 1998, the Company purchased land in Salt Lake City, Utah at a
cost of approximately $2.4 million, to be held for possible
construction of a hotel at a later date.
22
Results of Operations
Comparison of the Company's operating results for the year ended December 31,
1998 with the year ended December 31, 1997.
For the year ended December 31, 1998, the Company had total revenues of $106.7
million, consisting substantially of Percentage Lease revenue. This compares
with total revenue of $71.8 million for the year ended December 31, 1997.
Increases in revenue from hotel operations for the year ended December 31, 1998
as compared to 1997 are due to (i) an increased number of hotels being owned and
leased by the Partnership throughout 1998, (ii) increases in ADR and/or
occupancy at many of the hotels leased during both years, and (iii) a full year
of operation in 1998 of hotels acquired in 1997. Assuming all hotels which were
in operation a full year in both 1998 and 1997 had been owned and leased as of
January 1, 1997, revenue per available room ("REVPAR") on a pro forma basis
would have increased .7% over 1997.
Real estate and personal property taxes and general and administration expenses
in the aggregate remained fairly constant in 1998 as compared to 1997 as a
percentage of total revenue. Interest expense increased to $21.6 million from
$12.6 in 1997 due primarily to borrowings incurred to finance the Company's
acquisitions. The Company's weighted average interest rates on outstanding
borrowings during the years ended December 31, 1998 and 1997, were 7.46% and
7.53%, respectively. Net income applicable to common shareholders for 1998 was
$28.2 million or $0.78 per share, compared to $23.5 million or $0.82 per share
for 1997. Funds from Operations ("FFO"), as defined below, for 1998 was $65.0
million or $1.71 per share and Unit, compared to $45.7 million or $1.53 per
share and Unit for 1997, an increase of 12%.
Comparison of the Company's operating results for the year ended December 31,
1997 with the year ended December 31, 1996.
For the year ended December 31, 1997, the Company had total revenues of $71.8
million, consisting substantially of Percentage Lease revenue. This compares
with total revenues of $38.4 million for the year ended December 31, 1996.
Increases in revenue from hotel operations for the year ended December 31, 1997
as compared to 1996 are due to (i) an increased number of hotels being owned and
leased by the Partnership throughout 1997, (ii) increases in ADR and/or
occupancy at many of the hotels leased during both years, and (iii) a full year
of operation in 1997 of hotels acquired in 1996. Assuming all hotels which were
in operation a full year in both 1997 and 1996 had been owned and leased as of
January 1, 1996, REVPAR on a pro forma basis would have increased 5.7% over
1996.
Real estate and personal property taxes and general and administrative expenses
in the aggregate remained fairly constant in 1997 as compared to 1996 as a
percentage of total revenue. Interest expense increased to $12.6 million from
$4.4 million in 1996 due primarily to borrowings incurred to finance the
Company's acquisitions. The Company's weighted average interest rate on
outstanding borrowings during the years ended December 31, 1997 and 1996, was
7.53% for both years. Net income applicable to common shareholders for 1997 was
$23.5 million or $0.82 per share, compared to $14.5 million or $0.69 per share
for 1996. FFO, as defined below, for 1997 was $45.7 million or $1.53 per share
and Unit, compared to $26.4 million or $1.22 per share and Unit for 1996, an
increase of 25%. The increase in FFO/share is attributable to (i) an increase in
REVPAR and (ii) acquisition of fifty hotels in 1997, acquired at accretive
capitalization rates.
23
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 debt restructuring or sales of property, plus depreciation, and
after adjustments for unconsolidated partnerships and joint ventures. For the
periods presented, depreciation, gain (loss) on the sale of hotel properties,
non-recurring merger expenses, minority interest and the 1997 extraordinary
charge from write-off of deferred financing fees were the only adjustments. 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 income before minority interest to FFO
illustrates the difference in the two measures of operating performance:
For the Years Ended December 31,
1998 1997
------- -------
(in thousands, except per share and Unit data)
Income before extraordinary item
and minority interest $33,087 $26,445
Less:
Gain on sale of hotel properties (666)
Preferred stock dividends (3,374)
Add:
Depreciation of buildings,
furniture and fixtures 32,370 19,969
Loss on sale of hotel properties 705
Non-recurring merger expenses 2,197
------- -------
Funds from Operations $64,985 $45,748
======= =======
Weighted average number of
common shares and Units
outstanding 38,001 29,963
======= =======
Funds from Operations per common share
and Unit $ 1.71 $ 1.53
======= =======
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. All of the Patriot Lessee's lease
obligations are guaranteed by Patriot and by Interstate. The Prime Lessee is
required, under the terms of its master lease agreement, to maintain 20% of its
expected annual percentage rents generated from the Percentage Leases in cash or
marketable securities.
24
Cash and cash equivalents were $400,000 at December 31, 1998, compared to
$190,000 at December 31, 1997. Excess cash balances are used to reduce the
Company's outstanding debt. For the year ended December 31, 1998, cash flow
provided by operating activities, consisting primarily of Percentage Lease
revenue, was $67.1 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. Prior to its latest annual meeting, the
Company's Charter limited 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 limitation was deleted by
shareholder vote on May 14, 1998. The Company's Board of Directors subsequently
adopted a debt limitation policy currently imposing the same limitations
previously imposed by the Charter.
At December 31, 1998, the Company had outstanding debt of approximately $331.4
million, including $235.4 million under the $250 million Unsecured Line of
Credit, $84.1 million under the Commercial Mortgage Bonds (the "Bonds"), and
$1.2 million under an additional line of credit (the "NBC Credit Line"), leaving
approximately $4.0 million available under the Unsecured Line of Credit after
consideration of outstanding letters of credit and $8.8 million available under
the NBC Credit Line. Additionally, the Company had $10.6 million of mortgage
notes payable assumed in connection with the purchase of two hotels in 1998. The
Company's consolidated indebtedness was 38.6% of its investments in hotels, at
cost, at December 31, 1998.
In December 1997, the Company arranged an interest rate swap on a notional
amount of $75 million with The First National Bank of Chicago as a hedge against
the floating rate. At December 31, 1998, the swap resulted in a fixed interest
rate of 7.65% on the notional amount. The swap agreement will expire in October
2000.
During the first quarter of 1999, the Company is planning to refinance $100
million of borrowings outstanding under the Unsecured Line of Credit with a new
10-year term loan (the "Term Loan"). In addition, the Company plans to complete
a $25 million unsecured line of credit, expiring in October 2000.
During 1998, the Company invested $26 million, including $11.4 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 has committed to fund
approximately $19 million in 1999 for capital improvements, $5.7 million of
which is renovations required by franchisors.
The Company intends to fund such improvements out of future cash from
operations, present cash balances and borrowings under its Unsecured Line of
Credit and the NBC Credit Line. Under the Unsecured Line of Credit, and the
Bonds, 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.
During 1998 and 1997, non-recurring enhancements for capital expenditures
exceeded this threshold, which based upon 4% of room revenue, were $8.6 million
and $6.1 million, respectively.
25
The Company has entered into agreements to purchase three hotels at a total cost
of approximately $86 million. The hotels are currently in various stages of
development, with projected openings between May 1999 and September 1999.
Additionally, the Company is currently holding land for possible use in the
development of an Embassy Suites hotel in Salt Lake City, Utah. Funds needed to
complete these projects will be obtained from borrowings under the Unsecured
Line of Credit and other sources of debt or equity financing.
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 95% of its taxable income to its
shareholders. The Company intends to pay these distributions from operating cash
flows. During 1998, the Partnership distributed an aggregate of $47.2 million to
its partners, or $1.24 per Unit (including $44.9 million of distributions to the
Company to fund distributions to shareholders of $1.24 per share in 1998).
During 1997, the Partnership distributed an aggregate of $36.4 million to its
partners, or $1.14 per Unit (including $34.9 million of distributions to the
Company to fund distributions to shareholders of $1.14 per share in 1997). For
federal income tax purposes, 26% of 1998 distributions represented a return of
capital, compared with 10% for 1997.
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 Unsecured Line of Credit and the NBC
Credit Line. 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 Agreement for the Partnership,
subject to certain holding period requirements, holders of Units have the right
to require the Partnership to redeem their Units. During the year ended December
31, 1998, 49,074 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.
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.
26
Forward Looking Statements
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," "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. The Company
is not obligated to update any such factors.
Year 2000 Compliance
Many existing computer programs have been designed to use only two digits to
identify a year in the date field, without considering the impact of the
upcoming change in the century. If not corrected, many computer applications
could fail or create erroneous results by or at the Year 2000. The Company's
assessment of its Year 2000 compliance is not complete. The Company has used its
hardware and software contractors to implement a compliance program to address
the challenges the Year 2000 may present to the Company's systems and
applications. This program includes an analysis of computer systems and
applications operated by the Company and computer systems of third parties upon
whose data or services the Company relies (including the Lessees).
The Company's management, as a result of discussions with its hardware and
software contractors, has modified its systems, and is scheduled to complete
remaining software conversions by mid- 1999. As part of its compliance program,
the Company has also surveyed its customers, franchisors, vendors, and the
Lessees, whose failure to timely convert their systems could have an impact on
the Company's operations. Although the Company does not believe the Year 2000
issue will materially affect its business, financial conditions and results of
operations, there can be no assurance that its Year 2000 remediation efforts
will be fully effective to prevent problems that could affect the Company's
business. In addition, although the Company has no reason to believe that the
Lessees will not be in compliance by the Year 2000, the Company is unable to
determine the extent to which the Year 2000 issue will affect the operations of
the hotels. The Company continues to discuss with the Lessees the need for
implementing adequate procedures, including contingency plans, to address this
issue and has been assured that each Lessee is on schedule to complete these
compliance issues by mid-1999.
Management does not consider the incurred or estimated costs of the Company's
compliance program to be material.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Pursuant to the general instructions to Rule 305 of SEC Regulation S-K, the
quantitative and qualitative disclosures called for by this Item 7a and by Rule
305 of SEC Regulation S-K are inapplicable to the Company at this time.
27
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 29
Consolidated Balance Sheets as of December 31, 1998
and 1997 30
Consolidated Statements of Operations for the years ended
December 31, 1998, 1997 and 1996 31
Consolidated Statements of Shareholders' Equity for the
years ended December 31, 1998, 1997 and 1996 32
Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996 34
Notes to Consolidated Financial Statements 35
(b) Supplementary Data:
Quarterly Financial Information
Unaudited quarterly results for 1998 and 1997 are summarized as follows:
First Second Third Fourth
Quarter (1) Quarter (1) Quarter (1) Quarter (1)
----------- ----------- ------------- -----------
1998 (in thousands, except per share data)
----
Revenue $21,577 $28,237 $32,481 $24,436
Net income applicable to
common shareholders 6,004 10,491 8,590 3,136
Net income per common
share, basic and diluted .17 .29 .24 .09
1997
----
Revenue $11,795 $16,039 $24,745 $19,182
Net income applicable to
common shareholders 3,167 5,746 11,235 3,395
Income before extraordinary
item per common share .13 .22 .35 .16
Net income per common share,
basic and diluted .13 .22 .35 .10
- ------------------------
(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.
28
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 index
appearing under Item 14(a) present fairly, in all material respects, the
financial position of Equity Inns, Inc. at December 31, 1998 and 1997, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1998, in conformity with generally accepted accounting
principles. In addition, in our opinion, the financial statement schedule listed
in the index appearing under Item 14(a) presents 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 schedule are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits. We conducted our audits of
these statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
Memphis, Tennessee
January 22, 1999
29
EQUITY INNS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
December 31, December 31,
1998 1997
------------ ------------
Assets:
Investment in hotel properties, net $790,132 $617,072
Cash and cash equivalents 400 190
Due from Lessees 6,288 5,925
Note receivable 2,884 3,884
Deferred expenses, net 6,313 7,276
Deposits and other assets 1,006 1,178
-------- --------
Total Assets $807,023 $635,525
======== ========
Liabilities and Shareholders' Equity:
Debt $331,394 $233,206
Accounts payable and accrued expenses 12,316 12,467
Distributions payable 12,979 10,645
Minority interest in Partnership 19,070 19,035
-------- --------
Total Liabilities 375,759 275,353
-------- --------
Commitments and contingencies (Note 5)
Shareholders' Equity:
Preferred stock, $.01 par value,
10,000,000 shares authorized,
2,750,000 and -0- shares issued
and outstanding at December 31,
1998 and 1997, respectively 68,750
Common stock, $.01 par value,
50,000,000 shares authorized,
36,438,535 and 34,865,578 shares
issued and outstanding at December
31, 1998 and 1997, respectively 364 349
Additional paid-in capital 407,833 387,134
Unearned directors' and officers'
compensation (2,006) (274)
Predecessor basis assumed (1,264) (1,264)
Distributions in excess of net earnings (42,413) (25,773)
-------- --------
Total Shareholders' Equity 431,264 360,172
-------- --------
Total Liabilities and Shareholders' Equity $807,023 $635,525
======== ========
The accompanying notes are an integral part
of these consolidated financial statements.
30
EQUITY INNS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
For the Years Ended December 31,
1998 1997 1996
-------- ------- -------
Revenue:
Percentage lease revenues $106,661 $70,478 $38,314
Gain (loss) on sale of hotel properties (705) 666
Other income 775 617 116
-------- ------- -------
Total Revenue 106,731 71,761 38,430
-------- -------- -------
Expenses:
Real estate and personal property taxes 10,411 6,688 3,693
Depreciation and amortization 32,665 20,214 11,631
Interest 21,587 12,601 4,382
Amortization of loan costs 834 1,013 1,565
General and administrative 4,650 4,142 1,975
Amortization of unearned directors' and
officers' compensation 331 92 33
Rental expense 969 566 218
Merger expense 2,197
-------- ------- -------
Total Expenses 73,644 45,316 23,497
-------- ------- -------
Income before extraordinary item
and minority interest 33,087 26,445 14,933
Extraordinary charge from write-off of
deferred financing fees 1,984
-------- ------- -------
Income before minority interest 33,087 24,461 14,933
Minority interest 1,492 918 460
-------- ------- -------
Net income 31,595 23,543 14,473
Preferred stock dividends 3,374
-------- ------- -------
Net income applicable to common
shareholders $ 28,221 $23,543 $14,473
======== ======= =======
Net income per common share, basic and diluted:
Income before extraordinary item $ .78 $ .88 $ .69
Extraordinary charge .06
-------- ------- -------
Net income $ .78 $ .82 $ .69
======== ======= =======
Weighted average number of common
shares and units outstanding - diluted 38,001 29,963 21,681
======== ======= =======
The accompanying notes are an integral part
of these consolidated financial statements.
31
EQUITY INNS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in thousands, except share and per share data)
Unearned
Additional Directors' Predecessor Distributions
Preferred Stock Common Stock Paid-In and Officers' Basis In Excess of
Shares Dollars Shares Dollars Capital Compensation Assumed Net Earnings Total
------ ------- ------ ------- ------- ------------ ------- ------------ --------
Balance at
December 31, 1995 14,907,231 $149 $143,576 $ (93) $(1,264) $(4,875) $137,493
Issuance of common
shares, net of
offering expenses
and allocation to
minority interest 7,947,000 80 85,787 85,867
Issuance of common
shares to officers
in lieu of cash
bonus 25,000 294 294
Issuance of restricted
common shares
to officers 25,000 306 (306)
Issuance of common
shares in private
placements 606,232 6 7,082 7,088
Issuance of common
shares upon
redemption of Units 182,815 2 1,703 1,705
Amortization of
unearned officers'
and directors'
compensation 33 33
Net income
applicable to
common shareholders 14,473 14,473
Distributions ($1.12
per share) (24,002) (24,002)
----- ------- ---------- --- ------- ----- ------- ------- -------
Balance at
December 31, 1996 23,693,278 237 238,748 (366) (1,264) (14,404) 222,951
------ ------- ---------- --- ------- ----- ------- ------- -------
Issuance of common
shares, net of
offering expenses 11,082,300 111 144,428 144,539
Issuance of common
shares to officers
and directors
through exercise
of stock options 90,000 1 1,124 1,125
Amortization of
unearned officers'
and directors'
compensation 92 92
Net income
applicable to
common shareholders 23,543 23,543
Distributions ($1.14
per share) (34,912) (34,912)
Adjustments to
minority interest
from issuance of
common shares and
partnership units 2,834 2,834
------ ------- ---------- --- ------- ----- ------- ------- -------
Balance at
December 31, 1997 34,865,578 349 387,134 (274) (1,264) (25,773) 360,172
32
EQUITY INNS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY, CONTINUED
(in thousands, except share and per share data)
Unearned
Additional Directors' Predecessor Distributions
Preferred Stock Common Stock Paid-In and Officers' Basis In Excess of
Shares Dollars Shares Dollars Capital Compensation Assumed Net Earnings Total
------ ------- ------ ------- ---------- ------------ ----------- ------------ --------
Issuance of common
shares, net of
offering expenses 1,286,718 13 18,795 18,808
Issuance of preferred
shares, net of
offering expenses 2,750,000 $68,750 (2,408) 66,342
Issuance of common
shares to officers
in lieu of cash
bonus 69,123 1 1,062 1,063
Issuance of common
shares to directors
in lieu of cash
compensation 4,042 55 55
Issuance of
restricted common
shares to officers
and directors 161,000 1 2,135 (2,136) 0
Issuance of common
shares to officers
through exercise
of stock options 9,000 112 112
Forfeitures of
unvested shares
by an officer,
upon resignation (6,000) (73) 73 0
Amortization of
unearned officers'
and directors'
compensation 331 331
Issuance of common
shares upon
redemption of Units 49,074 525 525
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 496 496
--------- ------- ---------- ---- ------- ------- ------- -------- -------
Balance at
December 31, 1998 2,750,000 $68,750 36,438,535 $364 $407,833 $(2,006) $(1,264) $(42,413) $431,264
========= ======= ========== ==== ======== ======= ======= ======== ========
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,
1998 1997 1996
--------- --------- ---------
Cash flows from operating activities:
Net income applicable to common shareholders $28,221 $23,543 $14,473
Adjustment to reconcile net income to net cash
provided by operating activities:
(Gain) loss on sale of hotel properties 705 (666)
Depreciation and amortization 32,665 20,214 11,631
Amortization of loan costs 834 1,013 1,565
Write-off of debt costs 1,984
Amortization of unearned directors' and
officers' compensation 331 92 33
Directors' compensation 55
Minority interest 1,492 918 460
Changes in assets and liabilities:
Due from Lessees (363) (2,548) (1,078)
Note receivable 1,000 (3,884)
Deferred expenses (11) (8) (225)
Deposits and other assets 172 215 (1,376)
Accounts payable and accrued expenses 911 9,529 717
Preferred dividends payable 1,088
--------- --------- ---------
Net cash flow provided by operating
activities 67,100 50,402 26,200
--------- --------- ---------
Cash flows from investing activities:
Acquisitions of hotel properties (175,576) (337,069) (81,395)
Improvements and additions to hotel properties (25,998) (18,083) (19,440)
Cash paid for franchise applications (215) (2,144) (340)
Proceeds from sale of hotel properties 8,250 43,207
--------- --------- ---------
Net cash flow used in investing activities (193,539) (314,089) (101,175)
--------- --------- ---------
Cash flows from financing activities:
Gross proceeds from public offering of common stock 20,145 153,388 91,390
Gross proceeds from public offering of preferred stock 68,750
Payment of offering expenses (3,745) (8,849) (5,653)
Proceeds from exercise of stock options 112 1,125
Distributions paid (45,976) (32,656) (21,962)
Borrowings under revolving credit facility 179,475 326,411 102,890
Payments on revolving credit facility (89,725) (256,885) (100,724)
Borrowings under CMBS credit facility 88,000
Payments under CMBS credit facility (2,195) (1,717)
Payments on debt assumed (160)
Proceeds from issuance of common stock 7,087
Proceeds from sale of Units 2,875
Cash paid for loan costs (28) (5,067) (926)
Payments on capital lease obligations (4) (2) (6)
--------- --------- ---------
Net cash flow provided by financing
activities 126,649 263,748 74,971
--------- --------- ---------
Net increase (decrease) in cash and cash
equivalents 210 61 (4)
Cash and cash equivalents at beginning of year 190 129 133
--------- --------- ---------
Cash and cash equivalents at end of year $ 400 $ 190 $ 129
========= ========= =========
Supplemental disclosure of cash flow information --
Interest paid $ 20,947 $ 12,226 $ 4,399
========= ========= =========
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 in the business of acquiring equity
interests in hotel properties. The Company 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, 1998 owned
an approximate 95.0% interest in the Partnership.
As of December 31, 1998, the Partnership owned 102 hotel properties, with a
total of 12,640 rooms in 36 states. The Partnership, under operating leases
providing for the payment of percentage rent (the "Percentage Leases"), leased
80 of the current hotels to affiliates of Patriot American Hospitality, Inc.
(collectively, the "Patriot Lessee"), successor by merger to Interstate Hotels
Company ("Patriot"). All payments due under these Percentage Leases are
guaranteed by Patriot and by Interstate Hotels, LLC ("Interstate"), successor by
merger to Interstate Hotels Corporation and an indirect subsidiary of Patriot.
The Partnership leased 19 hotels to a wholly-owned subsidiary of Prime
Hospitality Corporation (the "Prime Lessee"). The Prime Lessee is required,
under the terms of its master lease agreement, to maintain capitalization of 20%
of the expected annual percentage rents. The Patriot 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 pursuant
to separate 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 three hotels are
operated pursuant to management agreements, two of which are operated by a
subsidiary of Interstate, and one of which is operated by MeriStar Hotel Company
L.L.C., a wholly owned subsidiary of MeriStar Hotels & Resorts, Inc.
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
31 to 40 years for buildings and 5 to 7 years for furniture and equipment.
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
35
EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Summary of Significant Accounting Policies, Continued
property is adjusted based on the discounted future cash flows. 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 the following at December
31, 1998 and 1997:
1998 1997
------ ------
(in thousands)
Initial franchise fees $3,712 $3,615
Loan costs 4,413 4,380
Other 260 254
------ ------
8,385 8,249
Accumulated amortization (2,072) (973)
------ ------
$6,313 $7,276
====== ======
Amortization of franchise fees is computed using the straight-line method over
the remaining lives of the franchise agreements which range up to 20 years and
is included in depreciation and amortization expense. Amortization of loan costs
is computed using the straight-line method over the term of the related debt. In
1997, the Company expensed approximately $2.0 million of unamortized loan costs
relating to debt that was replaced in 1997.
Deposits and Other Assets
Deposits include escrow deposits and other prepayments relating to the potential
acquisitions of hotel properties.
Interest Rate Swap Agreements
The Company enters into interest rate swap agreements to reduce the impact of
changes in interest rates on its floating rate debt. The agreements are
contracts to exchange floating rate interest payments for fixed rate interest
payments periodically over the life of the agreements without the exchange of
the underlying notional amounts. The notional amounts of interest rate
agreements are used to measure the interest to be received or paid and do not
represent the amount of exposure to credit loss. The differential paid or
received on interest rate agreements is recognized as an adjustment to interest
expense.
36
EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Summary of Significant Accounting Policies, Continued
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 (Note 5).
Net Income Per Common Share
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share" (SFAS 128), which
changed the computation and presentation of earnings per share. SFAS 128
requires the presentation of basic and diluted earnings per share, replacing
primary and fully diluted earnings per share previously required. Earnings per
share for all prior years presented have been presented in accordance with SFAS
128.
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, 1998,
1997 and 1996, respectively.
For the Years Ended December 31,
-----------------------------------------------------------------------------------------------------------
1998 1997 1996
----------------------------------- ----------------------------------- -----------------------------------
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 $28,221 36,073 $.78 $23,543 28,773 $.82 $14,473 20,957 $.69
Diliutive effect of
potential conversion
of partnership units
and elimination of
minority interest 1,492 1,907 918 1,129 460 700
Dilutive effect of stock
options outstanding
using the treasury
stock method 21 61 24
------- ------ ---- ------- ------ ---- ------- ------ ----
Net income applicable to
common shareholders-
diluted $29,713 38,001 $.78 $24,461 29,963 $.82 $14,933 21,681 $.69
======= ======= ==== === ======= ====== ==== ======= ====== ====
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.
37
EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Summary of Significant Accounting Policies, Continued
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 tax purposes in the
estimated useful lives and methods used to compute depreciation. Distributions
made to shareholders in 1998 and 1997 are considered to be approximately 26% and
10% return of capital, respectively, for federal income tax purposes.
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.
3. Investment in Hotel Properties
Hotel properties consist of the following at December 31:
1998 1997
-------- --------
(in thousands)
Land $102,897 $ 76,730
Buildings and improvements 655,300 505,715
Furniture and equipment 97,556 72,878
Construction in progress 2,854 5,568
-------- --------
858,607 660,891
Less accumulated depreciation (68,475) (43,819)
-------- --------
$790,132 $617,072
======== ========
38
EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. Investment in Hotel Properties, Continued
Fifty-nine of the hotel properties are premium limited service hotels, five are
full service hotels, nineteen are premium extended stay hotels, and nineteen are
all-suite hotels.
During 1998 and 1997, the Company acquired the following types of hotels for the
approximate amounts indicated:
1998 1997
----------------------------- -----------------------------
No. of Hotels Purchase Price No. of Hotels Purchase Price
------------- -------------- ------------- --------------
(in thousands) (in thousands)
Mid-scale Limited Service 2 $ 20,100 34 $198,574
Upscale Extended Stay 5 68,350 6 61,650
Upscale All-Suite 9 96,996 10 86,966
-- -------- -- --------
16 $185,446 50 $347,190
== ======== == ========
The above acquisitions were accounted for as purchases, and the results of such
acquisitions are included in the Company's consolidated statements of operations
from the dates of acquisition.
During 1998, the Partnership sold three hotels (Hampton Inn, Little Rock,
Arkansas; Hampton Inn, Shelby, North Carolina; Hampton Inn, Cleveland,
Tennessee) to third parties for an aggregate sales price of approximately $8.0
million. The Company realized a loss of approximately $705,000 as a result of
these sales. The sales price was paid in cash.
4. Debt
Debt is comprised of the following at December 31:
1998 1997
-------- --------
(in thousands)
Revolving credit facilities $236,600 $146,850
Commercial Mortgage Bonds 84,088 86,283
Mortgage notes payable 10,637
Other 69 73
-------- --------
$331,394 $233,206
======== ========
39
EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. Debt, Continued
In February 1997, the Company, through a subsidiary, issued $88 million of rated
Commercial Mortgage Bonds (the "Bonds") in a private placement transaction as
follows:
Initial
Principal Interest Stated
Class Amount Rate Maturity Rating
----- ------------- -------- -----------------
A $27.4 million 6.825% November 20, 2006 AA
B $50.6 million 7.370% December 20, 2015 A
C $10.0 million 7.580% February 20, 2017 BBB
The initial combined interest rate for all three issues of Bonds was fixed at
7.22%. The combined interest rate on the outstanding balances on all three
issues of Bonds at December 31, 1998 is 7.24%. 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. Twenty-three hotel properties with a carrying value of
approximately $129.9 million at December 31, 1998 and their respective leases
collateralize the Bonds.
Aggregate annual principal payments for the next five years at December 31, 1998
for the Bonds are as follows (in thousands):
Year Amount
---- ------
1999 2,351
2000 2,518
2001 2,698
2002 2,890
2003 3,096
The Company's $250 million unsecured line of credit (the "Unsecured Line of
Credit") bears interest at a variable rate of LIBOR plus 1.4%, 1.5%, 1.625%, or
1.75% as determined by the Company's percentage of total debt to the total value
of the Company's investment in hotel properties, as defined in the loan
agreement (the "Percentage"). The Percentage is reviewed quarterly, and the
interest rate is adjusted as necessary. At December 31, 1998, the interest rate
on the Unsecured Line of Credit was LIBOR (5.28% at December 31, 1998) plus
1.75%. The Unsecured Line of Credit has a three-year term, expiring in October
2000, plus a one-year renewal option.
In December 1997, the Company entered into an interest rate swap agreement with
a financial institution. The agreement effectively fixes the interest rate on
floating rate debt at a rate of 5.90% plus the Percentage for a notional
principal amount of $75 million. The swap agreement will expire in October 2000.
The Company's $10,000,000 line of credit with the National Bank of Commerce (the
"NBC Credit Line") bears interest at the bank's prime rate (7.75% at December
31, 1998) and is unsecured. The NBC Credit Line has a three-year term, expiring
in September 2000.
40
EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. Debt, Continued
In connection with the purchase of a Hampton Inn hotel in San Antonio, Texas in
April 1998, the Partnership assumed a mortgage note payable with a principal
balance of approximately $6.5 million. The note bears interest at 10% and is due
in monthly principal and interest installments of approximately $66,000. The
note is due September 1, 2015. The hotel securing this note has a carrying value
of $12.5 million at December 31, 1998.
In connection with the purchase of a Residence Inn hotel in Boise, Idaho in
April 1998, the Partnership assumed a mortgage note payable with a principal
balance of approximately $4.3 million. The note bears interest at a variable
rate which, as of December 31, 1998, was approximately 8.6% and is due in
monthly principal and interest installments of approximately $39,000. The note
is due December 1, 2016 and contains a prepayment penalty. The hotel securing
this note has a carrying value of approximately $7.6 million at December 31,
1998.
Aggregate principal payments at December 31, 1998 for the next five years for
the mortgage notes payable described above are as follows (in thousands):
Year Amount
---- ------
1999 $260
2000 286
2001 314
2002 345
2003 379
The weighted average interest rate on the Company's outstanding borrowings
during 1998 and 1997 was 7.46% and 7.53%, respectively. Fees of .30% and .20%
are paid quarterly on the unused portion of the Unsecured Line of Credit and the
NBC Credit Line, respectively. The carrying amount of the Company's borrowings
on its revolving credit facilities approximates fair value due to the Company's
ability to obtain such borrowings at comparable interest rates.
Prior to its 1998 annual shareholders meeting, the Company's Charter limited
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 limitation was deleted by shareholder vote on May 14, 1998.
The Company's Board of Directors has subsequently adopted a policy currently
imposing the same limitations previously imposed by the Charter.
The Unsecured Line of Credit agreement requires the Company to maintain certain
debt coverage ratios and certain levels of cash flow, with which the Company was
in compliance at December 31, 1998. Additionally, the agreement requires a
quarterly deposit into a separate room renovation account for the amount by
which 4% of room revenues at the Company's hotels exceeds the amount expended by
the Company during the quarter for replacement of furniture, fixtures and
equipment and capital improvements for the hotels. For the years ended December
31, 1998 and 1997, actual expenditures exceeded the amounts required.
41
EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. Commitments and Related Party Transactions
One hundred of the hotels are operated under franchise agreements and are
licensed as Hampton Inn hotels (55), AmeriSuites hotels (19), Residence Inn
hotels (12), Homewood Suites hotels (7), Holiday Inn hotels (3), Comfort Inn
hotels (3), and Hampton Inn & Suites hotels (1). Two of the hotels are operated
as independent hotels. The franchisors approve the transfer of the franchise
licenses to the 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 Lessees have future lease commitments to the Company under the Percentage
Leases for various terms extending through 2013. Minimum future rental income
(Base Rents) under these non-cancelable operating leases is as follows:
Year Amount
---- ------
(in thousands)
1999 $ 70,282
2000 69,741
2001 69,741
2002 69,741
2003 69,741
2004 and thereafter 502,020
--------
$851,266
========
The Company earned Base Rents of $65.9 million, $38.3 million and $20.1 million
and Percentage Rents in excess of Base Rents of $40.8 million, $32.2 million and
$18.2 million, respectively, for the years ended December 31, 1998, 1997 and
1996. The Percentage Lease revenue is based on a percentage of gross room
revenue, and food and beverage revenue, if applicable, of the hotels. 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, 1999, eighty-six of the Percentage Leases were
adjusted, resulting in a 1.63% increase in both Base Rent and threshold room
revenue.
At December 31, 1998, the Lessees owed the Company $6,288,000 representing
fourth quarter Percentage Rent. All of the amounts due were collected prior to
January 31, 1999.
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.
42
EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. Commitments and Related Party Transactions, Continued
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 4). Capital improvements of $26.0
million, $18.1 million, and $19.4 million in 1998, 1997, and 1996, respectively,
were made to the hotel properties, including those required by the franchisors
at the acquisition of the property. In 1999, the Company expects to fund
approximately $19 million of capital improvements for the hotel properties owned
at December 31, 1998, of which $5.7 million is required by the franchisors.
The Company has commitments under operating land leases through December 31,
2062, at nine hotel properties for payments as follows: 1999 -- $736,429; 2000
- -- $766,138; 2001 -- $777,861; 2002 -- $804,288; 2003 -- $806,788; thereafter --
$11.9 million.
The Company has commitments under a lease to an affiliate of Phillip H. McNeill,
Sr., the Company's Chairman of the Board, for its office space through December
2008 at monthly payments of $13,238.
In February 1998, the Company advanced loans to its officers in the amount of
$330,508 for taxes withheld from 1997 bonuses taken in Company stock in lieu of
cash. In February 1999, $100,764 of these loans were repaid. The remaining loans
were extended for one year. In February 1999, the Company also advanced
additional loans to its officers in the amount of $308,803 for taxes withheld
from 1998 bonuses taken in Company stock in lieu of cash. All loans are due in
January 2000 and bear no interest.
In 1998, the Company agreed to purchase, upon completion, a 252-room Homewood
Suites hotel in Orlando, Florida for $22.8 million, a 235-room Homewood Suites
hotel in Downtown Chicago for $30.4 million and a 300-room Hawthorn Suites hotel
in Chicago-Rosemont for $33.0 million. These hotels are currently under
construction with completion dates expected in May 1999, June 1999 and September
1999, respectively. In connection with these acquisitions, the Company has
issued letters of credit in the amount of $10.6 million under the Unsecured Line
of Credit. The Company also purchased land in Salt Lake City, Utah at a cost of
$2.4 million, to be held for possible construction of an Embassy Suites hotel at
a later date. Total costs incurred relating to these developments at December
31, 1998 were approximately $2.9 million, of which $78,000 represents related
interest costs.
6. Supplemental Disclosure of Noncash Investing and Financing Activities
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 shares of restricted common stock
valued from $13.50 to $13.56 per share were issued to the Company's officers;
20,000 shares of restricted 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.
43
EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. Supplemental Disclosure of Noncash Investing and Financing Activities,
Continued
In 1997, the Company issued 90,000 shares of common stock to an officer upon
exercise of options; 1,021,062 Units valued at $14.7 million were issued as part
of the total acquisition cost of six hotel properties; and $10.6 million in
distributions to common shareholders and limited partners had been declared but
not paid at December 31, 1997.
In 1996, the Company issued 25,000 shares of common stock valued at $11.75 per
share to its officers in lieu of cash to satisfy bonus compensation accrued at
December 31, 1995; 182,815 Units were exchanged for shares of common stock by
certain limited partners; 96,303 Units valued at $1.1 million and an assumption
of a $300,000 note payable were issued as part of the total acquisition cost of
a hotel property; 25,000 shares of restricted common stock valued at $12.25 per
share were issued to the Company's officers; $297,000 of the net proceeds of the
Company's public offering was allocated to minority interest with the remainder
of the net proceeds increasing common stock and additional paid-in capital; and
$6.9 million in distributions to common shareholders and limited partners had
been declared but not paid at December 31, 1996.
7. 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 in the Partnership 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,
1998 and 1997 were 1,916,903 and 1,842,520, respectively. The total market value
of these Units at December 31, 1998, based on the last reported sales price of
the common stock on the NYSE of $9.63, was approximately $18.5 million.
8. Stock Based Compensation Plans
The Company is authorized, under the 1994 Stock Incentive Plan (the "1994 Plan")
and the Company's Non-Employee Directors Stock Option Plan (the "Directors
Plan"), collectively ("the Plans"), to issue a total of 2,350,000 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 2,300,000, of which not more than
350,000 shares may be grants of restricted stock or performance stock. Under the
Directors Plan, the total shares available for grant is 50,000, which may only
be awarded in the form of stock options. An amendment to the Directors Plan to
authorize grants of restricted stock will be submitted to the Company's
shareholders at the annual shareholders meeting in May 1999.
44
EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. Stock Based Compensation Plans, Continued
Stock Options
All options have 8 to 10 year contractual terms and vest ratably over 5 years,
with the exception of 100,000 stock options granted in 1998, of which 20,000
vested immediately with the remainder to vest ratably over 4 years. A summary of
the Company's stock options as of December 31, 1998, 1997 and 1996 and the
changes during the years are presented below:
1998 1997 1996
----------------------- ----------------------- -----------------------
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 519,000 $12.49 606,000 $12.49 603,000 $12.49
Granted 118,000 $13.40 3,000 $13.50 3,000 $11.75
Exercised (9,000) $12.50 (90,000) $12.50
Forfeited (60,000) $12.50
------- ------ ------- ------ ------- ------
Outstanding at end of year 568,000 $12.68 519,000 $12.49 606,000 $12.49
Exercisable at end of year 383,000 $12.56 279,000 $12.49 246,000 $12.49
Options Outstanding Options Exercisable
---------------------------------- ----------------------------------
Weighted Weighted Weighted Weighted
Average Average Average Average
# Outstanding Remaining Exercise # Exercisable Remaining Exercise
Range of Exercise Prices at 12/31/98 Life Price at 12/31/98 Life Price
- ------------------------ ------------- --------- -------- ------------- --------- --------
$11.25 -- $13.69 568,000 4.46 $12.68 383,000 3.84 $12.56
Restricted Stock
In 1998, the Company issued 20,000 shares of restricted stock to the independent
directors of the Company subject to the approval of an amendment to the
Directors' Plan by the Company's shareholders at the annual shareholder's
meeting in May 1999. Unvested shares are subject to forfeiture if the grantee
does not remain an officer or director of the Company for the specified vesting
period. A summary of the status of the Company's restricted stock grants to
officers and directors as of December 31, 1998, 1997 and 1996 and the changes
during the years are presented below:
45
EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. Stock Based Compensation Plans, Continued
1998 1997 1996
------------------------ ------------------------ ------------------------
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 40,000 $11.41 40,000 $11.41 15,000 $10.00
Granted:
With 5 year pro rata vesting 99,000 $13.12 25,000 $12.25
With 4 year pro rata vesting 16,000 $13.56
With 3 year pro rata vesting 42,000 $13.50
Vest 100% at grant date 4,000 $13.56
------- ------ ------ ------ ------
Total granted 161,000 $13.27 25,000 $12.25
Forfeited (6,000) $12.25
------- ------ ----- ------ ------ ------
Outstanding at end of year 195,000 $12.92 40,000 $11.41 40,000 $11.41
Vested at end of year 29,000 $11.27 17,000 $10.67 9,000 $10.00
In January 1999, 124,800 shares of restricted stock were issued to officers of
the Company at a price of $9.75 per share, to vest ratably over 3 to 5 years.
9. Pro Forma Financial Information (Unaudited)
The following unaudited pro forma consolidated statements of operations for the
year ended December 31, 1998 and 1997 are presented as if the acquisition of all
102 hotels owned at December 31, 1998, and the consummation of the offerings and
the application of the net proceeds therefrom had occurred on January 1, 1997,
and all of the hotels had been leased to the Lessees pursuant to the Percentage
Leases. Additionally, the pro forma consolidated statement of operations for the
year ended December 31, 1998 includes approximately $2.2 million of merger
expenses relating to the terminated merger agreement between the Company and RFS
Hotel Investors and approximately $705,000 in losses from the sale of hotel
properties, both of which collectively reduced pro forma net income applicable
to common shareholders by $.07. The pro forma consolidated statement of
operations for the year ended December 31, 1997 includes approximately $666,000
in gains from the sale of hotel properties and does not include approximately
$2.0 million for the extraordinary charge from the write-off of deferred
financing fees, both of which collectively increased pro forma net income
applicable to common shareholders by $.07.
46
EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. Pro Forma Financial Information (Unaudited), Continued
The pro forma consolidated statements of operations do not purport to present
what actual results of operations would have been if the acquisitions and the
consummation of the offerings had occurred on such date or to project results
for any future period.
For the Years Ended
December 31,
1998 1997
-------- --------
(in thousands, except per share data)
Revenue:
Percentage lease revenues $116,471 $118,276
Gain (loss) on sale of hotel properties (705) 666
Other income 774 617
-------- --------
Total Revenue 116,540 119,559
Expenses:
Real estate and personal property taxes 11,359 11,381
Depreciation and amortization 35,691 33,671
Compensation 2,564 2,099
Interest 24,960 26,310
Amortization of loan costs 834 1,040
General and administration 2,086 2,086
Amortization of unearned directors' and
officers' compensation 331 92
Rental expense 969 814
Merger expense 2,197
-------- --------
Total Expenses 80,991 77,493
-------- --------
Income before minority interest 35,549 42,066
Minority interest 1,457 1,784
-------- --------
Net income 34,092 40,282
Preferred stock dividends 6,531 6,531
-------- --------
Net income applicable to common shareholders $ 27,561 $ 33,751
======== ========
Net income per common share, basic and diluted $ .76 $ .93
======== ========
Weighted average number of common shares
outstanding - basic 36,439 36,439
======== ========
Weighted average number of common shares
and units outstanding - diluted 38,377 38,415
======== ========
47
EQUITY INNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. Significant Lessee Information
As discussed in Note 1, the Percentage Leases relating to hotels accounting for
more than 20% of the Company's assets are guaranteed by Patriot and its
wholly-owned subsidiary, Interstate. At December 31, 1998, Patriot owned,
managed, leased or performed related services for a portfolio of 474 hotels
totaling approximately 101,000 rooms.
Summarized unaudited financial information for Patriot is as follows (in
thousands):
Balance Sheet Data - As of September 30, 1998
(December 31, 1998 data not available)
Investment in hotel real estate $5,661,769
Cash and short-term investments 147,397
Total assets 7,499,989
Total debt 3,803,808
Shareholders' equity 2,680,458
Income Statement Data - For the year ended December 31, 1998
Total revenue $2,056,341
Net loss (158,223)
48
EQUITY INNS, INC.
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1998
(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 $ 262 $ 432 $ 953 $ 10,159 $ 1,234
Hampton Inn-Cleveland, Ohio 820 4,428 217 338 446 820 4,766 663
Hampton Inn-College Station,
Texas 656 4,655 671 221 524 656 4,876 1,195
Hampton Inn-Columbus, Georgia 603 2,591 1,073 486 (98) 603 3,077 975
Hampton Inn-Ft. Worth, Texas 385 1,754 896 353 385 385 2,107 1,281
Hampton Inn-Louisville, Kentucky 395 2,406 919 237 177 395 2,643 1,096
Hampton Inn-Sarasota, Florida 553 3,389 753 350 209 553 3,739 962
Hampton Inn-Ann Arbor, Michigan 565 4,499 506 428 603 565 4,927 1,109
Comfort Inn-Enterprise, Alabama 544 2,398 112 139 394 544 2,537 506
Hampton Inn-Gurnee, Illinois 630 3,397 277 527 981 630 3,924 1,258
Hampton Inn-Traverse City,
Michigan 526 6,153 335 188 613 526 6,341 948
Hampton Inn-Arlington, Texas 425 6,387 582 337 482 425 6,724 1,064
Residence Inn-Eagan, Minnesota 540 8,130 652 652 844 540 8,782 1,496
Residence Inn-Tinton Falls,
New Jersey 7,711 419 484 297 8,195 716 8,911 1,324
Hampton Inn-Milford, Connecticut 759 5,689 467 267 656 759 5,956 1,123
Hampton Inn-Meriden, Connecticut 648 3,226 435 191 423 648 3,417 858
Hampton Inn-Beckley, West
Virginia 1,876 5,557 402 227 237 1,876 5,784 639
Holiday Inn-Bluefield, West
Virginia 1,661 6,141 342 725 825 1,661 6,866 1,167
Hampton Inn-Gastonia, North
Carolina 1,835 4,741 358 172 444 1,835 4,913 802
Hampton Inn-Morgantown, West
Virginia 1,573 4,311 324 4 139 410 1,577 4,450 734
Holiday Inn-Oak Hill, West
Virginia 269 3,727 85 1,271 830 269 4,998 915
Holiday Inn Express-Wilkesboro,
North Carolina 269 2,778 177 344 412 269 3,122 589
Hampton Inn-Naperville, Illinois 678 6,455 396 366 794 678 6,821 1,190
Hampton Inn-State College,
Pennsylvania 718 7,310 525 223 309 718 7,533 834
Comfort Inn-Rutland, Vermont 359 3,683 354 311 289 359 3,994 643
Hampton Inn-Scranton,
Pennsylvania 403 7,017 720 99 169 403 7,116 889
Residence Inn-Omaha, Nebraska 953 2,650 162 6 869 394 959 3,519 556
Hampton Inn-Fayetteville, North
Carolina 403 5,043 148 18 531 756 421 5,574 904
Hampton Inn-Indianapolis,
Indiana 1,207 6,513 126 418 1,036 1,207 6,931 1,162
Hampton Inn-Jacksonville
Florida 403 4,793 126 332 1,176 403 5,125 1,302
Holiday Inn-Mt. Pleasant,
South Carolina 1,205 7,874 247 484 697 1,205 8,358 944
Comfort Inn-Jacksonville Beach,
Florida 849 7,307 371 2 1,739 1,096 851 9,046 1,467
Hampton Inn-Austin, Texa 500 6,659 375 6 310 609 506 6,969 984
Hampton Inn-Garland, Texas 375 4,959 450 3 195 519 378 5,154 969
Hampton Inn-Knoxville, Tennessee 617 3,871 232 264 507 617 4,135 739
Hampton Inn-Glen Burnie,
Maryland 5,075 322 341 477 5,416 799
Hampton Inn-Detroit, Michigan 1,207 5,785 526 265 299 1,207 6,050 825
Homewood Suites-Hartford,
Connecticut 2,866 7,660 915 295 373 2,866 7,955 1,288
Residence Inn-Madison,
Wisconsin 700 2,879 356 206 363 700 3,085 719
Holiday Inn-Winston-Salem,
North Carolina 1,350 3,124 639 598 420 1,350 3,722 1,059
Hampton Inn-Scottsdale, Arizona 2,227 6,566 723 206 17 2,227 6,772 740
Hampton Inn-Chattanooga,
Tennessee 1,475 6,824 752 331 317 1,475 7,155 1,069
Homewood Suites-San Antonio,
Texas 907 6,661 1,029 54 24 907 6,715 1,053
Residence Inn-Burlington, Vermont 679 6,677 342 607 438 679 7,284 780
Homewood Suites-Phoenix, Arizona 7,086 902 1,633 8,719 902
Residence Inn-Colorado Springs,
Colorado 1,350 7,638 740 312 385 1,350 7,950 1,125
Residence Inn-Oklahoma City,
Oklahoma 1,450 8,921 850 354 388 1,450 9,275 1,238
Residence Inn-Tucson, Arizona 832 7,078 705 72 65 832 7,150 770
Hampton Inn-Savannah, Georgia 705 4,186 334 197 619 705 4,383 953
Hampton Inn-Norfolk, Virginia 5,092 520 221 492 5,313 1,012
Hampton Inn-Pickwick, Tennessee 370 1,484 263 82 89 370 1,566 352
Hampton Inn-Southaven,
Mississippi 698 3,138 522 90 79 698 3,228 601
Hampton Inn-Overland Park,
Kansas 906 5,931 330 395 453 906 6,326 783
Hampton Inn-Addison, Texas 2,981 6,336 810 354 295 2,981 6,690 1,105
Hampton Inn-Atlanta-Northlake,
Georgia 6,905 600 209 570 7,114 1,170
Hampton Inn-Birmingham (Mountain
Brook), Alabama 7,988 687 655 566 8,643 1,253
Hampton Inn-Birmingham
(Vestavia), Alabama 1,057 5,162 541 315 605 1,057 5,477 1,146
Hampton Inn-Chapel Hill, North
Carolina 1,834 6,504 725 398 664 1,834 6,902 1,389
Hampton Inn-Charleston, South
Carolina 712 5,219 516 272 227 712 5,491 743
Accumulated Net Book
Depreciation Value Life Upon
Buildings and Buildings and Which
Improvements; Improvements; Depreciation
Furniture & Furniture & Date of In Statement
Description of Property Total Fixtures Fixtures Construction Is Computed
- ----------------------- ------- ------------- ------------- ------------ ------------
Hampton Inn- Albany, New York $12,346 $ 2,252 $10,094 1986 5-40 Yrs.
Hampton Inn-Cleveland, Ohio 6,249 1,098 5,151 1987 5-40 Yrs.
Hampton Inn-College Station,
Texas 6,727 1,295 5,432 1986 5-40 Yrs.
Hampton Inn-Columbus, Georgia 4,655 1,310 3,345 1986 5-40 Yrs.
Hampton Inn-Ft. Worth, Texas 3,773 865 2,908 1987 5-40 Yrs.
Hampton Inn-Louisville, Kentucky 4,134 1,593 2,541 1986 5-40 Yrs.
Hampton Inn-Sarasota, Florida 5,254 1,141 4,113 1987 5-40 Yrs.
Hampton Inn-Ann Arbor, Michigan 6,601 1,251 5,350 1986 5-31 Yrs.
Comfort Inn-Enterprise, Alabama 3,587 568 3,019 1987 5-31 Yrs.
Hampton Inn-Gurnee, Illinois 5,812 1,043 4,769 1988 5-31 Yrs.
Hampton Inn-Traverse City,
Michigan 7,815 1,513 6,302 1987 5-31 Yrs.
Hampton Inn-Arlington, Texas 8,213 1,490 6,723 1985 7-31 Yrs.
Residence Inn-Eagan, Minnesota 10,818 1,742 9,076 1988 7-31 Yrs.
Residence Inn-Tinton Falls,
New Jersey 8,911 1,324 7,587 1988 7-31 Yrs.
Hampton Inn-Milford, Connecticut 7,838 1,329 6,509 1986 7-31 Yrs.
Hampton Inn-Meriden, Connecticut 4,923 839 4,084 1988 7-31 Yrs.
Hampton Inn-Beckley, West
Virginia 8,298 1,035 7,263 1992 7-31 Yrs.
Holiday Inn-Bluefield, West
Virginia 9,694 1,271 8,423 1980 7-31 Yrs.
Hampton Inn-Gastonia, North
Carolina 7,550 975 6,575 1989 7-31 Yrs.
Hampton Inn-Morgantown, West
Virginia 6,761 859 5,902 1991 7-31 Yrs.
Holiday Inn-Oak Hill, West
Virginia 6,182 902 5,280 1983 7-31 Yrs.
Holiday Inn Express-Wilkesboro,
North Carolina 3,980 639 3,341 1985 7-31 Yrs.
Hampton Inn-Naperville, Illinois 8,689 1,298 7,391 1987 7-31 Yrs.
Hampton Inn-State College,
Pennsylvania 9,085 1,280 7,805 1987 7-31 Yrs.
Comfort Inn-Rutland, Vermont 4,996 720 4,276 1985 7-31 Yrs.
Hampton Inn-Scranton,
Pennsylvania 8,408 1,118 7,290 1994 7-31 Yrs.
Residence Inn-Omaha, Nebraska 5,034 466 4,568 1985 7-31 Yrs.
Hampton Inn-Fayetteville, North
Carolina 6,899 921 5,978 1986 7-31 Yrs.
Hampton Inn-Indianapolis,
Indiana 9,300 1,150 8,150 1987 7-31 Yrs.
Hampton Inn-Jacksonville
Florida 6,830 919 5,911 1986 7-31 Yrs.
Holiday Inn-Mt. Pleasant,
South Carolina 10,507 1,213 9,294 1988 7-31 Yrs.
Comfort Inn-Jacksonville Beach,
Florida 11,364 1,155 10,209 1990 7-31 Yrs.
Hampton Inn-Austin, Texas 8,459 1,009 7,450 1987 7-31 Yrs.
Hampton Inn-Garland, Texas 6,501 850 5,651 1986 7-31 Yrs.
Hampton Inn-Knoxville, Tennessee 5,492 621 4,871 1988 7-31 Yrs.
Hampton Inn-Glen Burnie,
Maryland 6,215 707 5,508 1989 7-31 Yrs.
Hampton Inn-Detroit, Michigan 8,082 718 7,364 1989 7-31 Yrs.
Homewood Suites-Hartford,
Connecticut 12,109 1,023 11,087 1990 7-31 Yrs.
Residence Inn-Madison,
Wisconsin 4,504 420 4,084 1988 7-31 Yrs.
Holiday Inn-Winston-Salem,
North Carolina 6,131 520 5,611 1969 7-31 Yrs.
Hampton Inn-Scottsdale, Arizona 9,739 785 8,954 1996 7-31 Yrs.
Hampton Inn-Chattanooga,
Tennessee 9,699 896 8,803 1988 7-31 Yrs.
Homewood Suites-San Antonio,
Texas 8,675 823 7,852 1996 7-31 Yrs.
Residence Inn-Burlington, Vermont 8,743 679 8,064 1988 7-31 Yrs.
Homewood Suites-Phoenix, Arizona 9,621 886 8,735 1996 7-31 Yrs.
Residence Inn-Colorado Springs,
Colorado 10,425 750 9,675 1984 7-31 Yrs.
Residence Inn-Oklahoma City,
Oklahoma 11,963 858 11,105 1982 7-31 Yrs.
Residence Inn-Tucson, Arizona 8,752 667 8,085 1985 7-31 Yrs.
Hampton Inn-Savannah, Georgia 6,041 454 5,587 1968 7-31 Yrs.
Hampton Inn-Norfolk, Virginia 6,325 527 5,798 1990 7-31 Yrs.
Hampton Inn-Pickwick, Tennessee 2,288 167 2,121 1994 7-31 Yrs.
Hampton Inn-Southaven,
Mississippi 4,527 334 4,193 1995 7-31 Yrs.
Hampton Inn-Overland Park,
Kansas 8,015 467 7,548 1991 7-31 Yrs.
Hampton Inn-Addison, Texas 10,776 542 10,233 1985 7-31 yrs.
Hampton Inn-Atlanta-Northlake,
Georgia 8,284 517 7,767 1988 7-31 Yrs.
Hampton Inn-Birmingham (Mountain
Brook), Alabama 9,896 569 9,327 1987 7-31 Yrs.
Hampton Inn-Birmingham
(Vestavia), Alabama 7,680 428 7,252 1986 7-31 Yrs.
Hampton Inn-Chapel Hill, North
Carolina 10,125 562 9,563 1986 7-31 Yrs.
Hampton Inn-Charleston, South
Carolina 6,946 405 6,541 1985 7-31 Yrs.
49
EQUITY INNS, INC.
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
AS OF DECEMBER 31, 1998
(In Thousands)
Cost Capitalized Subsequent Gross Amount at Which
Initial Cost to Acquisition Carried at Close of Period
------------------------------- ----------------------------- --------------------------------
Furniture Buildings Furniture Building Furniture
and and and and and
Description of Property Land Improvements Fixtures Land Improvements Fixtures Land Improvements Fixtures
- ----------------------- ------- ------------ --------- ------ ------------ --------- -------- ------------ ----------
Hampton Inn-Colorado Springs,
Colorado 803 3,925 411 207 143 803 4,132 554
Hampton Inn-Columbia, South
Carolina 650 6,572 628 365 262 650 6,937 890
Hampton Inn-Aurora, Colorado 784 3,344 359 345 176 784 3,689 535
Hampton Inn-Detroit (Madison
Heights), Michigan 881 4,304 451 446 167 881 4,750 618
Hampton Inn-Dublin, Ohio 944 3,612 483 573 514 944 4,185 997
Hampton Inn-Kansas City, Kansas 585 4,294 425 304 226 585 4,598 651
Hampton Inn-Little Rock, Arkansas 898 5,520 558 273 473 898 5,793 1,031
Hampton Inn-Memphis (Poplar),
Tennessee 1,955 6,547 739 451 576 1,955 6,998 1,315
Hampton Inn-Memphis (Sycamore),
Tennessee 2,751 239 307 365 3,058 604 3,662 239
Hampton Inn-Nashville
(Brentwood), Tennessee 928 5,705 577 305 246 928 6,010 823
Hampton Inn-Nashville (Briley),
Tennessee 6,550 569 270 302 6,820 871 7,691 472
Hampton Inn-Richardson, Texas 1,750 5,252 609 343 325 1,750 5,595 934
Hampton Inn-St. Louis, Missouri 665 3,775 386 647 554 665 4,422 940
Hampton Inn-Destin, Florida 952 5,166 680 140 104 952 5,306 784
Homewood Suites-Germantown,
Tennessee 1,011 5,760 1,011 56 73 1,011 5,816 1,084
Homewood Suites-Augusta, Georgia 330 4,164 516 101 24 330 4,265 540
Residence Inn-Princeton,
New Jersey 1,920 15,875 1,500 585 538 1,920 16,460 2,038
AmeriSuites-Cincinnati (Blue
Ash), Ohio 900 6,241 466 233 137 900 6,474 603
AmeriSuites-Cincinnati (Forest
Park), Ohio 800 5,616 569 144 143 800 5,760 712
AmeriSuites-Columbus, Ohio 903 6,774 856 136 60 903 6,910 916
AmeriSuites-Flagstaff, Arizona 600 3,832 737 81 53 600 3,913 790
AmeriSuites-Jacksonville,
Florida 1,168 5,734 436 211 229 1,168 5,945 665
AmeriSuites-Indianapolis,
Indiana 700 4,775 800 117 51 700 4,892 851
AmeriSuites-Miami, Florida 1,500 9,387 900 137 12 1,500 9,524 912
AmeriSuites-Overland Park,
Kansas 1,300 7,030 900 254 96 1,300 7,284 996
AmeriSuites-Richmond, Virginia 1,772 9,640 921 119 52 1,772 9,759 973
AmeriSuites-Tampa, Florida 1,400 9,786 523 119 29 1,400 9,905 552
Hampton Inn-San Antonio, Texas 3,749 7,539 1,317 132 109 3,749 7,671 1,426
Homewood Suites-Sharonville,
Ohio 863 6,194 746 505 199 863 6,699 945
Residence Inn-Boise, Idaho 950 5,758 350 294 367 950 6,052 717
Residence Inn-Portland, Oregon 2,400 20,735 500 244 413 2,400 20,979 913
Hampton Inn & Suites-Memphis
(Bartlett), Tennessee 860 5,721 1,052 7 22 860 5,728 1,074
Residence Inn-Somers Point,
New Jersey 1,094 6,372 729 333 344 1,094 6,705 1,073
AmeriSuites-Albuquerque, New
Mexico 1,776 6,871 918 32 1,776 6,903 918
AmeriSuites-Baltimore, Maryland 659 8,514 898 35 659 8,549 898
AmeriSuites-Baton Rouge,
Louisiana 649 9,085 1,157 37 649 9,122 1,157
AmeriSuites-Birmingham, Alabama 1,066 5,871 758 31 1,066 5,902 758
AmeriSuites-Las Vegas, Nevada 4,126 13,056 1,965 30 4,126 13,086 1,965
AmeriSuites-Memphis (Wolfchase),
Tennessee 1,108 6,433 900 43 1,108 6,476 900
AmeriSuites-Miami (Kendall),
Florida 2,426 7,394 802 35 2,426 7,429 802
AmeriSuites-Minneapolis,
Minnesota 1,312 7,421 873 22 1,312 7,443 873
AmeriSuites-Nashville,
Tennessee 1,622 8,452 1,198 25 1,622 8,476 1,198
Homewood Suites-Seattle,
Washington 2,639 17,769 1,760 149 84 2,639 17,919 1,844
Construction in Progress 2,854 2,854
Corporate Office--Memphis, TN 0 130 130
-------- -------- ------- ------ ------- ------- -------- -------- -------
$102,859 $623,134 $62,857 $2,893 $32,164 $34,700 $105,752 $655,298 $97,557
======== ======== ======= ====== ======= ======= ======== ======== =======
Accumulated Net Book
Depreciation Value Life Upon
Buildings and Buildings and Which
Improvements; Improvements; Depreciation
Furniture & Furniture & Date of In Statement
Description of Property Total Fixtures Fixtures Construction Is Computed
- ----------------------- ------- ------------- ------------- ------------ ------------
Hampton Inn-Colorado Springs,
Colorado 5,489 304 5,185 1985 7-31 Yrs.
Hampton Inn-Columbia, South
Carolina 8,477 496 7,981 1985 7-31 Yrs.
Hampton Inn-Aurora, Colorado 5,008 287 4,721 1985 7-31 Yrs.
Hampton Inn-Detroit (Madison
Heights), Michigan 6,249 334 5,915 1987 7-31 Yrs.
Hampton Inn-Dublin, Ohio 6,126 360 5,766 1988 7-31 Yrs.
Hampton Inn-Kansas City, Kansas 5,834 345 5,489 1987 7-31 Yrs.
Hampton Inn-Little Rock, Arkansas 7,722 469 7,253 1985 7-31 yrs.
Hampton Inn-Memphis (Poplar),
Tennessee 10,268 548 9,720 1985 7-31 Yrs.
Hampton Inn-Memphis (Sycamore),
Tennessee 3,662 239 3,423 1984 7-31 Yrs.
Hampton Inn-Nashville
(Brentwood), Tennessee 7,761 446 7,315 1985 7-31 Yrs.
Hampton Inn-Nashville (Briley),
Tennessee 7,691 472 7,219 1987 7-31 Yrs.
Hampton Inn-Richardson, Tex 8,279 445 7,834 1987 7-31 Yrs.
Hampton Inn-St. Louis, Missouri 6,027 338 5,689 1987 7-31 Yrs.
Hampton Inn-Destin, Florida 7,042 418 6,624 1994 7-31 Yrs.
Homewood Suites-Germantown,
Tennessee 7,911 506 7,405 1986 7-31 Yrs.
Homewood Suites-Augusta, Georgia 5,135 309 4,825 1997 7-31 Yrs.
Residence Inn-Princeton,
New Jersey 20,418 966 19,452 1988 7-31 Yrs.
AmeriSuites-Cincinnati (Blue
Ash), Ohio 7,977 299 7,678 1990 7-31 Yrs.
AmeriSuites-Cincinnati (Forest
Park), Ohio 7,272 294 6,978 1992 7-31 Yrs.
AmeriSuites-Columbus, Ohio 8,729 371 8,358 1994 7-31 Yrs.
AmeriSuites-Flagstaff, Arizona 5,303 251 5,052 1993 7-31 Yrs.
AmeriSuites-Jacksonville,
Florida 7,778 283 7,495 1996 7-31 yrs.
AmeriSuites-Indianapolis,
Indiana 6,443 294 6,149 1992 7-31 Yrs.
AmeriSuites-Miami, Florida 11,936 465 11,471 1996 7-31 Yrs.
AmeriSuites-Overland Park,
Kansas 9,580 390 9,190 1994 7-31 Yrs.
AmeriSuites-Richmond, Virginia 12,504 485 12,019 1992 7-31 Yrs.
AmeriSuites-Tampa, Florida 11,857 427 11,430 1994 7-31 Yrs.
Hampton Inn-San Antonio, Texas 12,846 316 12,530 1995 7-31 Yrs.
Homewood Suites-Sharonville,
Ohio 8,507 226 8,281 1990 7-31 Yrs.
Residence Inn-Boise, Idaho 7,719 166 7,553 1986 7-31 Yrs.
Residence Inn-Portland, Oregon 24,292 503 23,789 1990 7-31 Yrs.
Hampton Inn & Suites-Memphis
(Bartlett), Tennessee 7,662 224 7,438 1998 7-31 Yrs.
Residence Inn-Somers Point,
New Jersey 8,872 215 8,657 1998 7-31 Yrs.
AmeriSuites-Albuquerque, New
Mexico 9,957 177 9,421 1997 7-31 Yrs.
AmeriSuites-Baltimore, Maryland 10,106 202 9,904 1996 7-31 Yrs.
AmeriSuites-Baton Rouge,
Louisiana 10,928 229 10,699 1997 7-31 Yrs.
AmeriSuites-Birmingham, Alabama 7,726 149 7,577 1997 7-31 Yrs.
AmeriSuites-Las Vegas, Nevada 19,177 351 18,826 1998 7-31 Yrs.
AmeriSuites-Memphis (Wolfchase),
Tennessee 8,484 168 8,316 1996 7-31 Yrs.
AmeriSuites-Miami (Kendall),
Florida 10,657 177 10,480 1996 7-31 Yrs.
AmeriSuites-Minneapolis,
Minnesota 9,628 182 9,446 1997 7-31 Yrs.
AmeriSuites-Nashville,
Tennessee 11,296 222 11,074 1997 7-31 Yrs.
Homewood Suites-Seattle,
Washington 22,402 346 22,056 1998 7-31 Yrs.
Construction in Progress 2,854 2,854 7-31 Yrs.
Corporate Office--Memphis, TN 130 23 107 7 Yrs
-------- ------- ---------
$858,607 $68,475 $ 790,132
======== ======= =========
(a) Reconciliation of Real Estate:
Balance at December 31, 1996 $333,561
Additions during the period 368,840
Sales during the period (39,510)
Balance at December 31, 1997 660,891
Additions during the period 208,374
Sales during the period (10,658)
Balance at December 31, 1998 $858,607
========
(b) Reconciliation of Accumulated Depreciation:
Balance At December 31, 1996 $24,359
Depreciation expense during the period 19,969
Depreciation on sales during the period (509)
Balance at December 31, 1997 43,819
Depreciation expense during the period 26,447
Depreciation on sales during the period (1,791)
Balance at December 31, 1998 $68,475
=======
50
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
During the fiscal year ended December 31, 1998 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 "Proposal One - 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 the Company's Common Stock" and "Proposal One - 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.
51
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 29
Consolidated Balance Sheets at December 31, 1998 and 1997 30
Consolidated Statements of Operations for the years ended
December 31, 1998, 1997 and 1996 31
Consolidated Statements of Shareholders' Equity for the
years ended December 31, 1998, 1997 and 1996 32
Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996 34
Notes to Consolidated Financial Statements 35
Schedule III - Real Estate and Accumulated Depreciation
as of December 31, 1998 49
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)
52
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. 01-12-73) 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, 10.1 -- Indenture dated as of February 6, 1997 among EQI
Financing 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)
10.2(a) -- Form of Percentage Lease Agreement (incorporated by reference
to Exhibit 10.3 to the Company's Registration Statement on
Form S-11 (Registration No. 33-73304))
10.2(b) -- Consolidated Lease Amendment dated as of November 15, 1996
between Equity Inns Partnership, L.P. and Crossroads/Memphis
Partnership, L.P. (incorporated by reference to Exhibit
10.1(a) to the Company's Current Report on Form 8-K
(Registration No. 01-12073) filed with the Securities and
Exchange Commission on December 13, 1996)
53
10.2(c) -- Form of Percentage Lease Amendment between Equity Inns
Partnership, L.P. and Crossroads/Future Company, L.L.C.
(incorporated by reference to Exhibit 10.1(b) to the Company's
Amended Current Report on Form 8-K (Registration No. 01-12073)
filed with the Securities and Exchange Commission on July 22,
1997)
10.2(d) -- Form of Percentage Lease Amendment between Equity Inns
Partnership, L.P. and Caldwell Holding Corp. (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 December 24, 1997)
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 -- Credit Agreement between Equity Inns, Inc., Equity Inns Trust,
Equity Inns Partnership, L.P., Smith Barney Mortgage Capital
Group, Inc., National Bank of Commerce, First National Bank of
Chicago, Leader Federal Bank for Savings, AmSouth Bank, First
National Bank of Commerce, Bank of Mississippi, Mercantile
Bank of St. Louis, First National Bank of Chicago and Smith
Barney Mortgage Capital Group, Inc. as collateral agent
(incorporated by reference to Exhibit 10.7 to the Company's
Annual Report on Form 10-K/A for the year ended December 31,
1995 (Registration No. 0-23290) filed with the Securities and
Exchange Commission on March 20, 1996)
10.6(a)* -- 1st Amendment to Revolving Credit Agreement, dated August 10,
1998, between Equity Inns Partnership, L.P., Equity Inns/West
Virginia Partnership, L.P., Equity Inns, Inc., Equity Inns
Trust and National Bank of Commerce
10.6(b)* -- 2nd Amendment to Revolving Credit Agreement, dated December
18, 1998, between Equity Inns Partnership, L.P., Equity Inns/
West Virginia Partnership, L.P., Equity Inns, Inc., Equity
Inns Trust and National Bank of Commerce
10.7 -- Unsecured Revolving Credit Agreement dated as of October 10,
1997, by and among Equity Inns Partnership, L.P. and Equity
Inns/West Virginia Partnership, L.P. as Borrower and The First
National Bank of Chicago, Credit Lyonnais New York Branch, and
AmSouth Bank as Lenders, Credit Lyonnais New York Branch, as
Syndication Agent and The First National Bank of Chicago as
Administrative Agent (incorporated by reference to Exhibit
10.3 to the Company's Current Report on Form 8-K (Registration
No. 0-23290) filed with the Securities and Exchange Commission
on November 24, 1997)
54
10.7(a)* -- First Amendment to Unsecured Revolving Credit Agreement dated
as of November 24, 1997, by and among Equity Inns Partnership,
L.P., Equity Inns/West Virginia Partnership, L.P., The First
National Bank of Chicago and Credit Lyonnais New York Branch.
10.7(b)* -- Second Amendment to Unsecured Revolving Credit Agreement dated
as of September 28, 1998, by and among Equity Inns
Partnership, L.P., Equity Inns/West Virginia Partnership,
L.P., The First National Bank of Chicago and Credit Lyonnais
New York Branch.
10.8 -- Memorandum of Understanding between Promus Hotels, Inc.,
Equity Inns, Inc. and McNeill Hotel Co., Inc. (incorporated by
reference to Exhibit 10.1 to the Company's Current Report on
Form 8-K (Registration No. 0-23290) filed with the Securities
and Exchange Commission on March 20, 1996)
10.9 -- Agreement of Phillip H. McNeill, Sr. concerning investments of
the income of McNeill Hotel Co., Inc. (incorporated by
reference to Exhibit 10.2 to the Company's Current Report on
Form 8-K (Registration No. 0-23290) filed with the Securities
and Exchange Commission on March 20, 1996)
10.10 -- Agreement of Phillip H. McNeill, Sr. concerning purchase of
250,000 units of limited partnership interest in Equity Inns
Partnership, L.P. (incorporated by reference to Exhibit 10.3
to the Company's Current Report on Form 8-K (Registration No.
0-23290) filed with the Securities and Exchange Commission on
March 20, 1996)
10.11 -- Agreement of Phillip H. McNeill, Sr. concerning development
activities (incorporated by reference to Exhibit 10.4 to the
Company's Current Report on Form 8-K (Registration No.
0-23290) filed with the Securities and Exchange Commission on
March 20, 1996)
10.12 -- Amendment to Agreement of Phillip H. McNeill, Sr. concerning
the purchase of 250,000 units of limited partnership interest
in Equity Inns Partnership, L.P. (incorporated by reference to
Exhibit 10.2 to the Company's Current Report on Form 8-K
(Registration No. 0-23290) filed with the Securities and
Exchange Commission on March 22, 1996)
10.13 -- Stock Purchase Agreement dated as of May 31, 1996 by and among
Equity Inns, Inc., Equity Inns Partnership, L.P. and Promus
Hotels, Inc. (incorporated by reference to Exhibit 10.1 to the
Company's Current Report on Form 8-K (Registration No.
0-23290) filed with the Securities and Exchange Commission on
June 13, 1996)
10.14 -- Development Agreement dated as of May 31, 1996 between Equity
Inns Partnership, L.P., Trust Leasing, Inc. and Promus Hotels,
Inc. (incorporated by reference to Exhibit 10.2 to the
Company's Current Report on Form 8-K (Registration No. 0-
23290) filed with the Securities and Exchange Commission on
June 13, 1996)
10.15 -- Form of Management Agreement between Equity Inns Partnership,
L.P., Trust Leasing, Inc. and Promus Hotels, Inc.
(incorporated by reference to Exhibit 10.3 to the Company's
Current Report on Form 8-K (Registration No. 0-23290) filed
with the Securities and Exchange Commission on June 13, 1996)
55
10.16 -- Guaranty of Leases dated November 15, 1996 by Interstate
Hotels Company (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
December 13, 1996)
10.17 -- Guaranty of Leases dated November 15, 1996 by Interstate
Hotels Corporation (incorporated by reference to Exhibit 10.3
to the Company's Current Report on Form 8-K (Registration No.
01-12073) filed with the Securities and Exchange Commission on
December 13, 1996)
10.18 -- Master Agreement dated as of November 4, 1996 among Equity
Inns, Inc., Equity Inns Partnership, L.P., Interstate Hotels
Corporation, Crossroads/Memphis Partnership, L.P. and
Crossroads Future Company, L.L.C. (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 December 13, 1996)
10.19 -- First Amendment to Master Agreement dated as of November 15,
1996 among Equity Inns, Inc., Equity Inns Partnership, L.P.,
Interstate Hotels Corporation, Crossroads/Memphis Partnership,
L.P. and Crossroads Future Company, L.L.C. (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 December 13, 1996)
10.20 -- Second Amendment to Master Agreement dated as of February 6,
1997 by Equity Inns, Inc., Equity Inns Partnership, L.P., EQI
Financing Partnership 1, L.P., Interstate Hotels Corporation,
Crossroads/Memphis Partnership, L.P., Crossroads/Memphis
Financing Company, L.L.C., and Crossroads Future Company,
L.L.C. (incorporated by reference to Exhibit 10.3 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)
10.21 -- Form of Deed of Trust dated as of February 6, 1997 by EQI
Financing Partnership 1, 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)
10.22 -- Credit Agreement dated June 25, 1997, by and among Equity Inns
Partnership, L.P. and Equity Inns Trust, The First National
Bank of Chicago, Credit Lyonnais, New York Branch and AmSouth
Bank of Alabama, as Lenders, Credit Lyonnais, New York Branch,
as Documentation Agent and The First National Bank of Chicago,
as Administrative Agent and Syndication Agent (incorporated by
reference to Exhibit 10.1 to the Company's Current Report on
Form 8-K (Registration No. 01-12073) filed with the Securities
and Exchange Commission on July 10, 1997)
10.23 -- Hotel Asset Purchase Agreement by and between Hudson Hotels
Corporation, Hudson Hotels Properties Corp. and Equity Inns
Partnership, L.P. (incorporated by reference to Exhibit 10.1
to the Company's Current Report on Form 8-K (Registration No.
01-12073) filed with the Securities and Exchange Commission on
November 24, 1997)
56
10.24 -- Amendment No. 1 to Hotel Asset Purchase Agreement by and
between Hudson Hotels Corporation, Hudson Hotels Properties
Corp. and Equity Inns Partnership, L.P. (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 November 24, 1997)
10.25 -- Amended and Restated Purchase and Sale Agreement between Prime
Hospitality Corp. and Equity Inns Partnership, L.P. dated
December 2, 1997 (incorporated by reference to Exhibit 10.1 to
the Company's Current Report on Form 8-K (Registration No.
01-12073) filed with the Securities and Exchange Commission on
December 24, 1997)
10.26 -- Second Purchase and Sale Agreement between Prime Hospitality
Corp. and Equity Inns Partnership, L.P. dated December 2, 1997
(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 December 24,
1997)
10.27 -- Third Purchase and Sale Agreement between Prime Hospitality
Corp. and Equity Inns Partnership, L.P. dated December 2, 1997
(incorporated by reference to Exhibit 10.3 to the Company's
Current Report on Form 8-K (Registration No. 01-12073) filed
with the Securities and Exchange Commission on December 24,
1997)
10.28 -- Fourth Purchase and Sale Agreement between Prime Hospitality
Corp. and Equity Inns Partnership, L.P. dated December 2, 1997
(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 December 24,
1997)
10.29 -- Revolving Credit Loan Agreement dated as of November 14, 1997
by and among Equity Inns Partnership, L.P., Equity Inns/West
Virginia Partnership, L.P., Equity Inns, Inc., Equity Inns
Trust and National Bank of Commerce
10.30 -- Alliance Agreement dated as of January 20, 1998 between U. S.
Franchise Systems, Inc. and Equity Inns Partnership, L.P.
(incorporated by reference to Exhibit 10.0 to the Company's
Current Report on Form 8-K (Registration No. 01-12073) filed
with the Securities and Exchange Commission on February 6,
1998)
10.31(a) -- Asset Sale Agreement and Plans of Mergers among RFS Hotel
Investors, Inc., RHI Acquisition, Inc., Equity Inns, Inc., RFS
Partnership, L.P. and Equity Inns Partnership, L.P. dated
April 21, 1998 (incorporated by reference to Exhibit 10.1 to
the Company's Current Report on Form 8-K (Registration No.
01-12073) filed with the Securities and Exchange Commission on
May 21, 1998)
10.31(b) -- Termination Agreement, dated as of September 8, 1998, as to
Asset Sale Agreement and Plans of Mergers, by and among RFS
Hotel Investors, Inc., Equity Inns, Inc., RHI Acquisition,
Inc., Equity Inns Partnership, L.P. and RFS Partnership, L.P.
(incorporated by reference to Exhibit 99.2 to the Company's
Current Report on Form 8-K (Registration No. 01-12073) filed
with the Securities and Exchange Commission on September 14,
1998)
10.32* -- Commercial Lease dated as of December 17, 1998 between 64 LTD,
LLC and Equity Inns Services, Inc.
57
10.33* -- Change in Control and Termination Agreement between Equity
Inns, Inc. and Phillip H. McNeill, Sr.
10.34* -- Change in Control and Termination Agreement between Equity
Inns Services, Inc., Equity Inns, Inc. and Howard A. Silver
10.35* -- Change in Control and Termination Agreement between Equity
Inns Services, Inc., Equity Inns, Inc. and Donald H. Dempsey
10.36* -- Change in Control and Termination Agreement between Equity
Inns Services, Inc., Equity Inns, Inc. and Phillip H. McNeill,
Jr.
10.37* -- Change in Control and Termination Agreement between Equity
Inns Services, Inc., Equity Inns, Inc. and J. Ronald Cooper
10.38* -- Change in Control and Termination Agreement between Equity
Inns Services, Inc., Equity Inns, Inc. and Richard F. Mitchell
10.39* -- Employment Agreement between Equity Inns Services, Inc.,
Equity Inns, Inc. and Donald H. Dempsey
21.1* -- List of subsidiaries of Equity Inns, Inc.
23.1* -- Consent of PricewaterhouseCoopers LLP
27.1* -- Financial Data Schedule (filed electronically with the
Securities and Exchange Commission)
- --------------
* 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).
58
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 23rd day of March,
1999.
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 23rd day of March, 1999.
Signature Title Date
--------- ----- ----
/s/ Phillip H. McNeill, Sr. Chairman of the Board and March 23, 1999
- ---------------------------
Phillip H. McNeill, Sr. Chief Executive Officer
(Principal Executive Officer)
and Director
/s/ Howard A. Silver President, Chief Operating March 23, 1999
- --------------------
Howard A. Silver Officer and Director
/s/ Donald H. Dempsey Executive Vice President, March 23, 1999
- ---------------------
Donald H. Dempsey Secretary, Treasurer,
Financial Officer (Principal
Financial and Accounting
Officer) and Director
/s/ William A. Deupree, Jr. Director March 23, 1999
- ---------------------------
William A. Deupree, Jr.
/s/ James A. Thomas III Director March 23, 1999
- ----------------------
James A. Thomas III
/s/ Joseph W. McLeary Director March 23, 1999
- ---------------------
Joseph W. McLeary
/s/ Raymond E. Schultz Director March 23, 1999
- ----------------------
Raymond E. Schultz
59
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. 01-12-73) 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)
60
4.3, 10.1 -- Indenture dated as of February 6, 1997 among EQI
Financing 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)
10.2(a) -- Form of Percentage Lease Agreement (incorporated by reference
to Exhibit 10.3 to the Company's Registration Statement on
Form S-11 (Registration No. 33-73304))
10.2(b) -- Consolidated Lease Amendment dated as of November 15, 1996
between Equity Inns Partnership, L.P. and Crossroads/Memphis
Partnership, L.P. (incorporated by reference to Exhibit
10.1(a) to the Company's Current Report on Form 8-K
(Registration No. 01-12073) filed with the Securities and
Exchange Commission on December 13, 1996)
10.2(c) -- Form of Percentage Lease Amendment between Equity Inns
Partnership, L.P. and Crossroads/Future Company, L.L.C.
(incorporated by reference to Exhibit 10.1(b) to the Company's
Amended Current Report on Form 8-K (Registration No. 01-12073)
filed with the Securities and Exchange Commission on July 22,
1997)
10.2(d) -- Form of Percentage Lease Amendment between Equity Inns
Partnership, L.P. and Caldwell Holding Corp. (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 December 24, 1997)
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 -- Credit Agreement between Equity Inns, Inc., Equity Inns Trust,
Equity Inns Partnership, L.P., Smith Barney Mortgage Capital
Group, Inc., National Bank of Commerce, First National Bank of
Chicago, Leader Federal Bank for Savings, AmSouth Bank, First
National Bank of Commerce, Bank of Mississippi, Mercantile
Bank of St. Louis, First National Bank of Chicago and Smith
Barney Mortgage Capital Group, Inc. as collateral agent
(incorporated by reference to Exhibit 10.7 to the Company's
Annual Report on Form 10-K/A for the year ended December 31,
1995 (Registration No. 0-23290) filed with the Securities and
Exchange Commission on March 20, 1996)
61
10.6(a)* -- 1st Amendment to Revolving Credit Agreement, dated August 10,
1998, between Equity Inns Partnership, L.P., Equity Inns/West
Virginia Partnership, L.P., Equity Inns, Inc., Equity Inns
Trust and National Bank of Commerce
10.6(b)* -- 2nd Amendment to Revolving Credit Agreement, dated December
18, 1998, between Equity Inns Partnership, L.P., Equity Inns/
West Virginia Partnership, L.P., Equity Inns, Inc., Equity
Inns Trust and National Bank of Commerce
10.7 -- Unsecured Revolving Credit Agreement dated as of October 10,
1997, by and among Equity Inns Partnership, L.P. and Equity
Inns/West Virginia Partnership, L.P. as Borrower and The First
National Bank of Chicago, Credit Lyonnais New York Branch, and
AmSouth Bank as Lenders, Credit Lyonnais New York Branch, as
Syndication Agent and The First National Bank of Chicago as
Administrative Agent (incorporated by reference to Exhibit
10.3 to the Company's Current Report on Form 8-K (Registration
No. 0-23290) filed with the Securities and Exchange Commission
on November 24, 1997)
10.7(a)* -- First Amendment to Unsecured Revolving Credit Agreement dated
as of November 24, 1997, by and among Equity Inns Partnership,
L.P., Equity Inns/West Virginia Partnership, L.P., The First
National Bank of Chicago and Credit Lyonnais New York Branch.
10.7(b)* -- Second Amendment to Unsecured Revolving Credit Agreement dated
as of September 28, 1998, by and among Equity Inns
Partnership, L.P., Equity Inns/West Virginia Partnership,
L.P., The First National Bank of Chicago and Credit Lyonnais
New York Branch.
10.8 -- Memorandum of Understanding between Promus Hotels, Inc.,
Equity Inns, Inc. and McNeill Hotel Co., Inc. (incorporated
by reference to Exhibit 10.1 to the Company's Current Report
on Form 8-K (Registration No. 0-23290) filed with the
Securities and Exchange Commission on March 20, 1996)
10.9 -- Agreement of Phillip H. McNeill, Sr. concerning investments of
the income of McNeill Hotel Co., Inc. (incorporated by
reference to Exhibit 10.2 to the Company's Current Report on
Form 8-K (Registration No. 0-23290) filed with the Securities
and Exchange Commission on March 20, 1996)
10.10 -- Agreement of Phillip H. McNeill, Sr. concerning purchase of
250,000 units of limited partnership interest in Equity Inns
Partnership, L.P. (incorporated by reference to Exhibit 10.3
to the Company's Current Report on Form 8-K (Registration No.
0-23290) filed with the Securities and Exchange Commission on
March 20, 1996)
10.11 -- Agreement of Phillip H. McNeill, Sr. concerning development
activities (incorporated by reference to Exhibit 10.4 to the
Company's Current Report on Form 8-K (Registration No.
0-23290) filed with the Securities and Exchange Commission on
March 20, 1996)
10.12 -- Amendment to Agreement of Phillip H. McNeill, Sr. concerning
the purchase of 250,000 units of limited partnership interest
in Equity Inns Partnership, L.P. (incorporated by reference to
Exhibit 10.2 to the Company's Current Report on Form 8-K
(Registration No. 0-23290) filed with the Securities and
Exchange Commission on March 22, 1996)
62
10.13 -- Stock Purchase Agreement dated as of May 31, 1996 by and among
Equity Inns, Inc., Equity Inns Partnership, L.P. and Promus
Hotels, Inc. (incorporated by reference to Exhibit 10.1 to the
Company's Current Report on Form 8-K (Registration No.
0-23290) filed with the Securities and Exchange Commission on
June 13, 1996)
10.14 -- Development Agreement dated as of May 31, 1996 between Equity
Inns Partnership, L.P., Trust Leasing, Inc. and Promus Hotels,
Inc. (incorporated by reference to Exhibit 10.2 to the
Company's Current Report on Form 8-K (Registration No.
0-23290) filed with the Securities and Exchange Commission on
June 13, 1996)
10.15 -- Form of Management Agreement between Equity Inns Partnership,
L.P., Trust Leasing, Inc. and Promus Hotels, Inc.
(incorporated by reference to Exhibit 10.3 to the Company's
Current Report on Form 8-K (Registration No. 0-23290) filed
with the Securities and Exchange Commission on June 13, 1996)
10.16 -- Guaranty of Leases dated November 15, 1996 by Interstate
Hotels Company (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 December 13, 1996)
10.17 -- Guaranty of Leases dated November 15, 1996 by Interstate
Hotels Corporation (incorporated by reference to Exhibit 10.3
to the Company's Current Report on Form 8-K (Registration No.
01-12073) filed with the Securities and Exchange Commission
on December 13, 1996)
10.18 -- Master Agreement dated as of November 4, 1996 among Equity
Inns, Inc., Equity Inns Partnership, L.P., Interstate Hotels
Corporation, Crossroads/Memphis Partnership, L.P. and
Crossroads Future Company, L.L.C. (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 December 13, 1996)
10.19 -- First Amendment to Master Agreement dated as of November 15,
1996 among Equity Inns, Inc., Equity Inns Partnership, L.P.,
Interstate Hotels Corporation, Crossroads/Memphis Partnership,
L.P. and Crossroads Future Company, L.L.C. (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 December 13, 1996)
10.20 -- Second Amendment to Master Agreement dated as of February 6,
1997 by Equity Inns, Inc., Equity Inns Partnership, L.P., EQI
Financing Partnership 1, L.P., Interstate Hotels Corporation,
Crossroads/Memphis Partnership, L.P., Crossroads/Memphis
Financing Company, L.L.C., and Crossroads Future Company,
L.L.C. (incorporated by reference to Exhibit 10.3 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)
10.21 -- Form of Deed of Trust dated as of February 6, 1997 by EQI
Financing Partnership 1, 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)
63
10.22 -- Credit Agreement dated June 25, 1997, by and among Equity Inns
Partnership, L.P. and Equity Inns Trust, The First National
Bank of Chicago, Credit Lyonnais, New York Branch and AmSouth
Bank of Alabama, as Lenders, Credit Lyonnais, New York Branch,
as Documentation Agent and The First National Bank of Chicago,
as Administrative Agent and Syndication Agent (incorporated by
reference to Exhibit 10.1 to the Company's Current Report on
Form 8-K (Registration No. 01-12073) filed with the Securities
and Exchange Commission on July 10, 1997)
10.23 -- Hotel Asset Purchase Agreement by and between Hudson Hotels
Corporation, Hudson Hotels Properties Corp. and Equity Inns
Partnership, L.P. (incorporated by reference to Exhibit 10.1
to the Company's Current Report on Form 8-K (Registration No.
01-12073) filed with the Securities and Exchange Commission on
November 24, 1997)
10.24 -- Amendment No. 1 to Hotel Asset Purchase Agreement by and
between Hudson Hotels Corporation, Hudson Hotels Properties
Corp. and Equity Inns Partnership, L.P. (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 November 24, 1997)
10.25 -- Amended and Restated Purchase and Sale Agreement between Prime
Hospitality Corp. and Equity Inns Partnership, L.P. dated
December 2, 1997 (incorporated by reference to Exhibit 10.1 to
the Company's Current Report on Form 8-K (Registration No.
01-12073) filed with the Securities and Exchange Commission on
December 24, 1997)
10.26 -- Second Purchase and Sale Agreement between Prime Hospitality
Corp. and Equity Inns Partnership, L.P. dated December 2, 1997
(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 December 24,
1997)
10.27 -- Third Purchase and Sale Agreement between Prime Hospitality
Corp. and Equity Inns Partnership, L.P. dated December 2, 1997
(incorporated by reference to Exhibit 10.3 to the Company's
Current Report on Form 8-K (Registration No. 01-12073) filed
with the Securities and Exchange Commission on December 24,
1997)
10.28 -- Fourth Purchase and Sale Agreement between Prime Hospitality
Corp. and Equity Inns Partnership, L.P. dated December 2, 1997
(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 December 24,
1997)
10.29 -- Revolving Credit Loan Agreement dated as of November 14, 1997
by and among Equity Inns Partnership, L.P., Equity Inns/West
Virginia Partnership, L.P., Equity Inns, Inc., Equity Inns
Trust and National Bank of Commerce
10.30 -- Alliance Agreement dated as of January 20, 1998 between U. S.
Franchise Systems, Inc. and Equity Inns Partnership, L.P.
(incorporated by reference to Exhibit 10.0 to the Company's
Current Report on Form 8-K (Registration No. 01-12073) filed
with the Securities and Exchange Commission on February 6,
1998)
64
10.31(a) -- Asset Sale Agreement and Plans of Mergers among RFS Hotel
Investors, Inc., RHI Acquisition, Inc., Equity Inns, Inc., RFS
Partnership, L.P. and Equity Inns Partnership, L.P. dated
April 21, 1998 (incorporated by reference to Exhibit 10.1 to
the Company's Current Report on Form 8-K (Registration No.
01-12073) filed with the Securities and Exchange Commission on
May 21, 1998)
10.31(b) -- Termination Agreement, dated as of September 8, 1998, as to
Asset Sale Agreement and Plans of Mergers, by and among RFS
Hotel Investors, Inc., Equity Inns, Inc., RHI Acquisition,
Inc., Equity Inns Partnership, L.P. and RFS Partnership, L.P.
(incorporated by reference to Exhibit 99.2 to the Company's
Current Report on Form 8-K (Registration No. 01-12073) filed
with the Securities and Exchange Commission on September 14,
1998)
10.32* -- Commercial Lease dated as of December 17, 1998 between 64 LTD,
LLC and Equity Inns Services, Inc.
10.33* -- Change in Control and Termination Agreement between Equity
Inns Services, Inc., Equity Inns, Inc. and Phillip H. McNeill,
Sr.
10.34* -- Change in Control and Termination Agreement between Equity
Inns Services, Inc., Equity Inns, Inc. and Howard A. Silver
10.35* -- Change in Control and Termination Agreement between Equity
Inns Services, Inc., Equity Inns, Inc. and Donald H. Dempsey
10.36* -- Change in Control and Termination Agreement between Equity
Inns Services, Inc., Equity Inns, Inc. and Phillip H. McNeill,
Jr.
10.37* -- Change in Control and Termination Agreement between Equity
Inns Services, Inc., Equity Inns, Inc. and J. Ronald Cooper
10.38* -- Change in Control and Termination Agreement between Equity
Inns Services, Inc., Equity Inns, Inc. and Richard F. Mitchell
10.39* -- Employment Agreement between Equity Inns Services, Inc.,
Equity Inns, Inc. and Donald H. Dempsey
21.1* -- List of subsidiaries of Equity Inns, Inc.
23.1* -- Consent of PricewaterhouseCoopers LLP
27.1* -- Financial Data Schedule (filed electronically with the
Securities and Exchange Commission)
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* Filed herewith.
65