UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2001
-----------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to
Commission file number 0-24097
CNL HOSPITALITY PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
Maryland 59-3396369
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
450 South Orange Avenue
Orlando, Florida 32801
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (407) 650-1000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: Name of exchange on which registered:
None Not Applicable
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 par value per share
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant
was required to file such reports), 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 definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Aggregate market value of the voting stock held by nonaffiliates of the
registrant: The registrant registered an offering of shares of common stock (the
"Shares") on Form S-11 under the Securities Act of 1933, as amended. As of
February 22, 2002, 81,382,909 shares were beneficially owned by non-affiliates.
Since no established market for such Shares exists, there is no market value for
such Shares. Each Share was originally sold at $10 per Share.
The number of Shares of common stock outstanding as of February 22, 2001,
was 81,402,909.
DOCUMENTS INCORPORATED BY REFERENCE:
Registrant incorporates by reference portions of the CNL Hospitality
Properties, Inc. Definitive Proxy Statement for the 2002 Annual Meeting of
Stockholders (Items 10, 11, 12 and 13 of Part III) to be filed no later than
April 30, 2002.
CONTENTS
Page
Part I
Item 1. Business 2
Item 2. Properties 5
Item 3. Legal Proceedings 7
Item 4. Submission of Matters to a Vote of Security Holders 7
Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters 8
Item 6. Selected Financial Data 9
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 21
Item 8. Financial Statements and Supplementary Data 21
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 47
Part III.
Item 10. Directors and Executive Officers of the Registrant 47
Item 11. Executive Compensation 47
Item 12. Security Ownership of Certain Beneficial Owners and Management 47
Item 13. Certain Relationships and Related Transactions 47
Part IV.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 47
Signatures 54
Schedule III - Real Estate and Accumulated Depreciation 56
Exhibits 59
PART I
Item 1. Business
CNL Hospitality Properties, Inc. was organized pursuant to the laws of the
State of Maryland on June 12, 1996. CNL Hospitality GP Corp. and CNL Hospitality
LP Corp. are wholly owned subsidiaries of CNL Hospitality Properties, Inc., each
of which was organized in Delaware in June 1998. CNL Hospitality Partners, LP is
a Delaware limited partnership ("Hospitality Partners") formed in June 1998. CNL
Hospitality GP Corp. and CNL Hospitality LP Corp. are the general and limited
partner, respectively, of CNL Hospitality Partners, LP. Properties acquired are
generally expected to be held by Hospitality Partners and, as a result, are
owned by CNL Hospitality Properties, Inc. through Hospitality Partners. Various
other wholly owned subsidiaries have been formed for purposes of acquiring or
developing hotel properties. The terms "Company" or "Registrant" include, unless
the context otherwise requires, CNL Hospitality Properties, Inc., CNL
Hospitality Partners, LP, CNL Hospitality GP Corp., CNL Hospitality LP Corp. and
each of their subsidiaries. The Company operates for federal income tax purposes
as a real estate investment trust (a "REIT").
The Company was formed primarily to acquire properties (the "Properties")
located across the United States to be leased for generally five to 20 years,
plus renewal options generally for up to an additional 20 years on a
"triple-net" basis, which means that the tenants generally are responsible for
repairs, maintenance, property taxes, utilities and insurance. Third party
tenants are operators of selected national and regional limited service,
extended stay and full service hotel chains (the "Hotel Chains"). In 2001, the
Company began operating Properties using independent third party managers, as
permitted by the REIT Modernization Act of 1999. It is expected that the Company
will move from triple-net lease activities to owning and operating Properties
using third parties to manage the Properties' day to day operations.
The Company may also provide mortgage financing ("Mortgage Loans") and
furniture, fixture and equipment financing ("Secured Equipment Leases") to
operators of Hotel Chains. Secured Equipment Leases will be funded from the
proceeds of financing to be obtained by the Company. The aggregate outstanding
principal amount of Secured Equipment Leases will not exceed 10 percent of gross
proceeds from the Company's offerings of shares of common stock. The Company has
not provided any Mortgage Loans or Secured Equipment Financing as of December
31, 2001. The Company has retained CNL Hospitality Corp. (the "Advisor") as its
advisor to provide management, acquisition, advisory and administrative
services.
The Company was formed in June 1996, at which time it received initial
capital contributions of $200,000 for 20,000 shares of common stock from the
Advisor. On July 9, 1997, the Company commenced an offering to the public of up
to 16,500,000 shares of common stock ($165,000,000) pursuant to a registration
statement on Form S-11 under the Securities Act of 1933, as amended (the
"Initial Offering"). Of the 16,500,000 shares of common stock offered, 1,500,000
($15,000,000) were available only to stockholders who elected to participate in
the Company's reinvestment plan. Upon completion of the Initial Offering on June
17, 1999, the Company had received aggregate subscription proceeds of
$150,072,637 (15,007,264 shares), including $72,637 (7,264 shares) through the
Company's reinvestment plan. Following the completion of its Initial Offering,
the Company commenced a second offering of up to 27,500,000 shares of common
stock ($275,000,000) (the "1999 Offering"). Upon completion of the 1999 Offering
on September 14, 2000, the Company had received aggregate subscription proceeds
of $274,998,988 (27,499,899 shares) from its 1999 Offering, including $965,194
(96,520 shares) issued pursuant to the reinvestment plan. Following the
completion of the 1999 Offering on September 14, 2000, the Company commenced a
third offering of up to 45,000,000 shares of common stock ($450,000,000) (the
"2000 Offering"). Of the 45,000,000 shares of common stock offered, up to
5,000,000 are available to stockholders purchasing shares through the
reinvestment plan. As of July 1, 2001, the percentage of gross proceeds payable
to the managing dealer and its affiliates as expenses in connection with the
offering increased and is expected to remain at the higher level for the
remainder of the 2000 Offering. As of December 31, 2001, the Company had
received subscription proceeds of $353,639,032 (35,363,903 shares) from its 2000
Offering, including $2,717,677 (271,768 shares) issued pursuant to the
reinvestment plan.
As of December 31, 2001, net proceeds to the Company from its Initial
Offering, 1999 Offering and 2000 Offering, loan proceeds and capital
contributions from the Advisor, after deduction of selling commissions,
marketing support and due diligence expense reimbursement fees and
organizational and offering expenses, totaled approximately $909,276,000. The
Company has used approximately $385,598,000 of net offering proceeds and
$223,766,000 of loan proceeds to invest in 35 hotel Properties, including three
on which hotel Properties are being constructed, approximately $40,694,000 to
invest in two joint ventures on which Properties are being constructed or
renovated, approximately $88,089,000 to invest in a partnership with Hilton
Hotels Corporation (the "Hilton Partnership"), approximately $13,763,000 to
invest in a partnership with a subsidiary of Interstate Property Corporation
(the "Interstate Partnership"), approximately $60,183,000 to acquire an
additional 51 percent ownership in Hotel Investors, approximately $4,944,000 to
redeem 533,534 shares of common stock and approximately $57,983,000 to pay
acquisition fees and expenses, leaving approximately $34,256,000 available for
investment in Properties and mortgage loans.
On August 9, 2001, the Company filed a registration statement on Form S-11
with the Securities and Exchange Commission in connection with the proposed sale
by the Company of up to an additional 45,000,000 shares of common stock
($450,000,000) (the "2002 Offering") in an offering expected to commence
immediately following the completion of the 2000 Offering. Of the 45,000,000
shares of common stock to be offered, up to 5,000,000 will be available to
stockholders purchasing shares through the reinvestment plan. The price per
share and the other terms of the 2002 Offering, including the percentage of
gross proceeds payable (i) to the managing dealer for selling commissions and
expenses in connection with the offering and (ii) to the Advisor for acquisition
fees, are expected to be substantially the same as those for the 2000 Offering
for shares sold subsequent to July 1, 2001. CNL Securities Corp., an affiliate
of the Advisor, is the managing dealer for the Company's equity offerings.
During the period January 1, 2002 through February 22, 2002, the Company
received additional net offering proceeds of approximately $40,654,000 and had
approximately $11,100,000 available for investment in Properties and Mortgage
Loans. The Company expects to use the uninvested net proceeds, plus any
additional net proceeds from the sale of shares from the 2000 Offering and 2002
Offering to purchase additional Properties and, to a lesser extent, invest in
Mortgage Loans. In addition, the Company intends to borrow money to acquire
additional Properties, to invest in Mortgage Loans and Secured Equipment Leases
and to pay certain related fees. The Company intends to encumber assets in
connection with such borrowings. The Company currently has a $96,725,000 line of
credit available, as described below in "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations." Borrowings on the
line of credit may be repaid with offering proceeds, proceeds from the sale of
assets, working capital or permanent financing. The maximum amount the Company
may borrow, absent the Company demonstrating that a higher level of borrowing is
appropriate as approved by a majority of the independent directors, is 300
percent of the Company's net assets. The Company believes that the net proceeds
received from the 2000 Offering and 2002 Offering will enable the Company to
continue to grow and take advantage of acquisition opportunities until such
time, if any, that the Company lists it shares on a national securities exchange
or over-the-counter market, although there is no assurance that such a listing
("Listing") will occur. If Listing does not occur by December 31, 2007, the
Company will commence the orderly sale of its assets and the distribution of the
proceeds. Listing does not assure liquidity.
The Company's primary investment objectives are to preserve, protect, and
enhance the Company's assets while (i) making quarterly distributions; (ii)
obtaining fixed income through the receipt of base rent, and increasing the
Company's income (and distributions) and providing protection against inflation
through automatic increases in base rent and/or receipt of percentage rent, and
obtaining fixed income through the receipt of payments from Mortgage Loans and
Secured Equipment Leases; (iii) continuing to qualify as a REIT for federal
income tax purposes; and (iv) providing stockholders of the Company with
liquidity of their investment within six years, either in whole or in part,
through (a) Listing or (b) the commencement of orderly sales of the Company's
assets and distribution of the proceeds thereof (outside the ordinary course of
business and consistent with its objectives of qualifying as a REIT). There can
be no assurance that these investment objectives will be met.
For the next six years or until Listing occurs, the Company intends, to the
extent consistent with the Company's objective of qualifying as a REIT, to
reinvest in additional Properties or Mortgage Loans any proceeds of the sale of
a Property or Mortgage Loan that are not required to be distributed to
stockholders in order to preserve the Company's REIT status for federal income
tax purposes. Similarly, and to the extent consistent with REIT qualification,
the Company plans to use the proceeds of the sale of Secured Equipment Leases to
fund additional Secured Equipment Leases, or to reduce its outstanding
indebtedness on the line of credit. The Company will not sell any assets if such
sale would not be consistent with the Company's objective of qualifying as a
REIT. The Company intends to provide stockholders of the Company with liquidity
of their investment, either in whole or in part, through Listing of the shares
of the Company (although liquidity cannot be assured thereby) or by commencing
orderly sales of the Company's assets as discussed above. If Listing occurs, the
Company intends to invest in additional Properties, Mortgage Loans and Secured
Equipment Leases.
In deciding the precise timing and terms of Property sales, the Advisor
will consider factors such as national and local market conditions, potential
capital appreciation, cash flows, and federal income tax considerations. The
terms of certain leases and joint venture agreements, however, may require the
Company to sell a Property at an earlier time if the tenant or joint venture
partner exercises its option to purchase a Property after a specified portion of
the lease or joint venture agreement term has elapsed or certain other events
have occurred. The Company will have no obligation to sell all or any portion of
a Property at any particular time, except as may be required under Property
purchase options granted to certain tenants. In connection with sales of
Properties by the Company, purchase money obligations may be taken by the
Company as partial payment of the sales price. The terms of payment will be
affected by custom in the area in which the Property is located and prevailing
economic conditions. When a purchase money obligation is accepted in lieu of
cash upon the sale of a Property, the Company will continue to have a mortgage
on the Property and the proceeds of the sale will be realized over a period of
years rather than at closing of the sale.
Leases
As of December 31, 2001, the Company owned interests in 43 Properties (35
directly owned and eight held indirectly through joint ventures), generally
consisting of land, buildings and equipment The Company had entered into
"triple-net" lease agreements for 33 of it Properties operated and managed by
third parties. These leases generally provide for minimum base annual rental
payments ranging from approximately $716,000 to $6,500,000. Certain of the
leases also provide for increases in the annual base rent. In addition to annual
base rent, certain tenants pay contingent rent computed as a percentage of gross
sales of the Property over a minimum gross sales threshold. The eight Properties
owned through joint ventures and two of the Properties owned by the Company are
operated by the joint ventures or the Company using independent third party
managers. In the future the Company plans to obtain additional Properties and
assume certain existing "triple-net" leases and operate these Properties using
independent third party managers.
The Company's third party leases also require the establishment of separate
bank accounts for the replacement of furniture, fixtures, and equipment and
routine capital items ("FF&E Accounts"). Deposits into the FF&E Accounts
established for the Properties are owned by the Company and have been reported
as additional rent. The funds in the FF&E Accounts are maintained in a
restricted cash account, funded by the tenant, that the tenant is expected to
use for purposes specified in the lease. The cash in the FF&E Accounts, any
interest earned thereon, and any property purchases therewith remain, during and
after the term of the lease, the property of the Company.
Certain Management Services
Pursuant to an advisory agreement (the "Advisory Agreement") with the
Company, the Advisor provides management services relating to the Company, the
Properties, the Mortgage Loans and the Secured Equipment Lease program. Under
this agreement, the Advisor is responsible for assisting the Company in
negotiating leases, Mortgage Loans, the line of credit and Secured Equipment
Leases; collecting rental, Mortgage Loan and Secured Equipment Lease payments;
inspecting the Properties and the tenants' books and records; and responding to
tenants' inquiries and notices. The Advisor also provides information to the
Company about the status of the leases, the Properties, the Mortgage Loans, the
line of credit and the Secured Equipment Leases. In exchange for these services,
the Advisor is entitled to receive certain fees from the Company. For
supervision of the Properties and the Mortgage Loans, the Advisor receives the
asset management fee, which is payable monthly in an amount equal to one-twelfth
of 0.60 percent of the total amount invested in the Properties, exclusive of
acquisition fees and acquisition expenses (the "Real Estate Asset Value"), plus
one-twelfth of 0.60 percent of the outstanding principal amount of any Mortgage
Loans, as of the end of the preceding month. For negotiating Secured Equipment
Leases and supervising the Secured Equipment Lease program, the Advisor will
receive, upon entering into each lease, a Secured Equipment Lease servicing fee,
payable out of the proceeds of the line of credit, equal to 2 percent of the
purchase price of the equipment subject to each Secured Equipment Lease. For
identifying the Properties, structuring the terms of the acquisition and leases
of the Properties and structuring the terms of the Mortgage Loans, the Advisor
will receive a fee equal to 4.5 percent of gross proceeds, loan proceeds from
permanent financing and the line of credit that are used to acquire Properties,
but excluding loan proceeds used to finance Secured Equipment Leases.
The Advisory Agreement continues until June 16, 2002, and thereafter may be
extended annually upon mutual consent of the Advisor and the Board of Directors
of the Company unless terminated at an earlier date upon 60 days prior written
notice by each party.
Competition
The hotel industry is generally characterized as being intensely
competitive. The operators of the hotels located on the Properties do, and are
expected to in the future, compete with independently owned hotels, hotels which
are part of local or regional chains, and hotels in other well-known national
chains, including those offering different types of accommodations.
The Company will be in competition with other persons and entities both to
locate suitable Properties to acquire and to locate purchasers for its
Properties. The Company also will compete with other financing sources such as
banks, mortgage lenders, and sale/leaseback companies for suitable Properties,
tenants, Mortgage Loan borrowers and equipment tenants.
Employees
Reference is made to Item 10. Directors and Executive Officers of the
Registrant for a listing of the Company's Executive Officers. The Company has no
other employees.
Item 2. Properties
As of December 31, 2001, the Company owned interests directly or indirectly
in 43 Properties, located in 21 states, consisting of land, buildings and
equipment, including three Properties on which hotel Properties are being
constructed; interests in two joint ventures with Marriott International, Inc.,
through which one resort is being constructed and one resort is being renovated;
an interest in a joint venture with Hilton Hotels Corporation, which owns four
Properties; and an interest in a joint venture with Interstate Property
Corporation, which owns two Properties.
Generally, Properties acquired or to be acquired by the Company consist of
both land, building and equipment; although in some cases, the Company may
acquire the land underlying the building with the building owned by the tenant
or a third party, or may acquire the building only with the land owned by a
third party. The 43 Properties directly or indirectly owned by the Company as of
December 31, 2001, conform generally to the following specifications of size,
cost, and type of land and buildings.
Hotel Properties. The lot sizes generally range up to 10 acres depending on
product, market and design considerations, and are available at a broad range of
pricing. The hotel sites are generally in primary or secondary urban, suburban,
airport, highway or resort markets which have been evaluated for past and future
anticipated lodging demand trends.
The hotel buildings generally are mid-rise construction. The Properties
consist of limited service, extended stay or full service hotel Properties.
Limited service hotels generally minimize non-guest room space and offer limited
food service such as complimentary continental breakfasts and do not have
restaurant or lounge facilities on-site. Extended stay hotels generally contain
guest suites with a kitchen area and living area separate from the bedroom.
Extended stay hotels vary with respect to providing on-site restaurant
facilities. Full service hotels generally have conference or meeting facilities
and on-site food and beverage facilities. The Properties include equipment and
the Properties held conform to the Hotel Chain's approved design concepts.
For leases to independent third parties, the tenants generally are required
by the lease agreements to make such capital expenditures as may be reasonably
necessary to refurbish buildings, premises, signs, and equipment so as to comply
with the tenant's or manager's obligations under the franchise agreement to
reflect the current commercial image of the Hotel Chain. These capital
expenditures generally will be paid by the tenant during the term of the lease.
These expenditures are funded through a reserve fund, which the tenant is
obligated to fund, in additional to its lease payment, up to a pre-determined
amount. Generally, money in that fund is used by the tenant to pay for
replacement of furniture and fixtures. The Company may be responsible for
capital expenditures or repairs in excess of the amounts in the reserve fund,
and the tenant generally would be responsible for replenishing the reserve fund
and to pay a specified return on the amount of capital expenditures paid for by
the Company in excess of amounts in the reserve fund.
As of December 31, 2001, 31 directly owned Properties (including three
under construction) were pledged as collateral under the Company's financing
arrangements. For more detailed information relating to these arrangements, see
"Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations - Borrowings".
The following table lists the number of Properties owned, directly or
indirectly through joint ventures, by the Company as of December 31, 2001, by
state, including Properties under construction. More detailed information
regarding the location of the Properties is contained in the Schedule of Real
Estate and Accumulated Depreciation filed with this report.
State Total Number of Properties
--------------------------------- ------------------------------
Arizona 3*
California 6
Colorado 1
Connecticut 2
Florida 6**
Georgia 3
Hawaii 1*
Kansas 1
Maine 1
Massachusetts 2
Maryland 1
Michigan 1
Nevada 1
New Jersey 2***
North Carolina 2
Oregon 1
Pennsylvania 1
Texas 3
Utah 1
Virginia 3
Washington 1
------------------------------
Total Number of Properties 43
*Includes one Property owned by a partnership currently under
construction/renovation.
**Includes two Properties currently under construction.
***Includes one Property currently under construction.
Leases with Major Tenants. The terms of the leases with the Company's major
tenants as of December 31, 2001 (see Item 1. Business), are substantially the
same as those described in Item 1. Business.
Crestline Capital Corporation ("Crestline Tenant") through two of its
subsidiaries leases eleven Properties owned by the Company. Properties include
three Residence Inns(R) by Marriott(R), three Towneplace Suites(R) by
Marriott(R), three SpringHill Suites(TM) by Marriott(R), and two Courtyards(R)
by Marriott(R). The initial term of each lease is approximately 19 years
(expiring in 2019) and the aggregate minimum base annual rent from these
Properties is approximately $12,945,000.
City Center Annex Tenant Corporation leases the Courtyard(R) by Marriott(R)
Property in Philadelphia, Pennsylvania. The initial term of the lease is 15
years (expiring in 2015) and the aggregate minimum base annual rent is
approximately $6,500,000.
WI Leasing, LLC ("WI Tenant") leases seven Properties owned by Hotel
Investors. Properties include three Residence Inns(R) by Marriott(R), three
Courtyards(R) by Marriott(R) and one Marriott Suites(R). The initial term of
each lease is approximately 19 years (expiring in 2018) and the aggregate
minimum base annual rent from these Properties is approximately $17,669,000. As
noted in "Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations - Subsequent Events", below, the Company took
assignment of these leases on February 22, 2002.
LLB Tenant Corporation leases three Properties owned by the Company.
Properties include one Courtyard(R) by Marriott (R), one Townplace Suites(R) by
Marriott(R) and one Springhill Suites (TM) by Marriott(R). The initial term of
each lease is approximately 15 years (expiring in 2016) and the aggregate
minimum base annual rent from these Properties is approximately $10,884,000.
Item 3. Legal Proceedings
Neither the Company, nor any of its subsidiaries, nor any of their
respective Properties, is a party to, or subject to, any material pending legal
proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
None
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
As of February 22, 2002, there were 26,471 stockholders of record of common
stock. There is no public trading market for the shares, and even though the
Company intends to list the shares on a national securities exchange or
over-the-counter market within six years, there is no assurance that one will
develop and it is not known at this time if a public market for the shares will
develop. Prior to such time, if any, as Listing occurs, any stockholder (other
than the Advisor) may present all or any portion equal to at least 25 percent of
such stockholder's shares to the Company for redemption at any time, in
accordance with the procedures outlined in the Company's prospectus. At such
time, the Company may, at its sole option, redeem such shares presented for
redemption for cash to the extent it has sufficient funds available, subject to
certain conditions and limitations. The price to be paid for any share
transferred other than pursuant to the redemption plan is subject to negotiation
by the purchaser and the selling stockholder, however, shares have historically
been redeemed for $9.20 per share. For the years ended December 31, 2001 and
2000, 251,373 and 269,276 shares, respectively, were redeemed at $9.20 per share
and retired pursuant to the redemption plan.
As of December 31, 2001, the offering price per Share was $10.
The Company is aware of the following trades in its shares other than
purchases made in its public offering and redemptions of shares by the Company:
Effective Date No. of Shares Price Per Share
-------------- ------------- ---------------
June 1, 2001 2,000 $7.45*
October 1, 2001 1,275.85 $9.00
*Value received by seller after broker fees and commissions
The Company expects to make distributions to the stockholders pursuant to
the provisions of the Articles of Incorporation. For the years ended December
31, 2001 and 2000, the Company declared cash distributions of $48,409,660 and
$28,082,275, respectively, to the stockholders. No amounts distributed to
stockholders for the years ended December 31, 2001 and 2000, are required to be
or have been treated by the Company as a return of capital for purposes of
calculating the stockholders' return on their invested capital. The following
table presents total distributions and distributions per share:
2001 Quarter First Second Third Fourth Year
- ------------ --------- ---------- --------- ---------- -----------
Total distributions declared $9,772,721 $11,256,998 $13,036,969 $14,342,972 $48,409,660
Distributions per share 0.191 0.191 0.194 0.194 0.770
2000 Quarter First Second Third Fourth Year
- ------------ --------- ---------- --------- ---------- -----------
Total distributions declared $5,522,124 $6,414,210 $7,533,536 $8,612,405 $28,082,275
Distributions per share 0.181 0.181 0.188 0.188 0.738
On January 1, 2002 and February 1, 2002, the Company declared distributions
totaling $4,998,298 and $5,133,486, respectively, or $0.064583 per share of
common stock, payable in March 2002, to stockholders of record on January 1,
2002 and February 1, 2002, respectively.
The Company intends to continue to declare distributions of cash to
stockholders on a monthly basis during the offering period, and quarterly
thereafter.
Item 6. Selected Financial Data
2001 2000 1999 1998 1997 (1)(3)
---------------- ---------------- ---------------- -------------- -------------
Year Ended December 31:
Revenues $71,462,544 $36,099,219 $10,677,505 $1,955,461 $ 46,071
Net earnings 19,328,376 20,670,462 7,515,988 958,939 22,852
Cash flows from operating activities 52,937,964 43,650,561 12,890,161 2,776,965 22,469
Cash flows used in investing (295,990,882) (334,236,686) (130,231,475) (34,510,982) (463,470)
activities
Cash flows from financing activities 237,680,116 238,811,538 206,084,832 36,093,102 9,308,755
Cash distributions declared 48,409,660 28,082,275 10,765,881 1,168,145 29,776
Funds from operations (2) 40,838,412 30,053,368 10,478,103 1,343,105 22,852
Earnings per share:
Basic 0.30 0.53 0.47 0.40 0.03
Diluted 0.30 0.53 0.45 0.40 0.03
Cash distributions declared per share 0.77 0.74 0.72 0.47 0.05
Weighted average number of shares
outstanding:
Basic 64,457,643 38,698,066 15,890,212 2,402,344 686,063
Diluted 66,282,330 45,885,742 21,437,859 2,402,344 686,063
At December 31:
Total assets $901,406,487 $653,962,058 $266,968,274 $48,856,690 $9,443,476
Mortgages payable 168,883,882 170,055,326 -- -- --
Other notes payable and line of
credit 65,071,680 19,581,950 -- -- --
Total stockholders' equity 637,876,684 419,288,998 253,054,839 37,116,491 9,233,917
(1) No operations commenced until the Company received minimum offering
proceeds and funds were released from escrow on October 15, 1997.
(2) Funds from operations ("FFO"), based on the revised definition adopted
by the Board of Governors of the National Association of Real Estate
Investment Trusts ("NAREIT") in October 1999 and as used herein, means
net earnings determined in accordance with generally accepted
accounting principles ("GAAP"), excluding gains or losses from sales
of property, plus depreciation and amortization of real estate assets
and after adjustments for unconsolidated partnerships and joint
ventures. (Net earnings determined in accordance with GAAP includes
the noncash effect of straight-lining rent increases throughout the
lease terms. This straight-lining is a GAAP convention requiring real
estate companies to report rental revenue based on the average rent
per year over the life of the leases. During the years ended December
31, 2001, 2000, 1999, and 1998 net earnings included $118,038,
$117,282, $35,238 and $44,160, respectively, of these amounts. No such
amounts were earned during 1997.) FFO was developed by NAREIT as a
relative measure of performance and liquidity of an equity REIT in
order to recognize that income-producing real estate historically has
not depreciated on the basis determined under GAAP. However, FFO (i)
does not represent cash generated from operating activities determined
in accordance with GAAP (which, unlike FFO, generally reflects all
cash effects of transactions and other events that enter into the
determination of net earnings), (ii) is not necessarily indicative of
cash flow available to fund cash needs and (iii) should not be
considered as an alternative to net earnings determined in accordance
with GAAP as an indication of the Company's operating performance, or
to cash flow from operating activities determined in accordance with
GAAP as a measure of either liquidity or the Company's ability to make
distributions. FFO, as presented, may not be comparable to similarly
titled measures reported by other companies. Accordingly, the Company
believes that in order to facilitate a clear understanding of the
consolidated historical operating results of the Company, FFO should
be considered in conjunction with the Company's net earnings and cash
flows as reported in the accompanying consolidated financial
statements and notes thereto.
(3) The weighted average number of shares outstanding is based upon the
period the Company was operational.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following information that are not historical facts, may be
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These
statements generally are characterized by the use of terms such as "believe,"
"expect" and "may." Although the Company believes that the expectations
reflected in such forward-looking statements are based upon reasonable
assumptions, the Company's actual results could differ materially from those set
forth in the forward-looking statements. Certain factors that might cause such a
difference include the following: changes in general economic conditions,
changes in local and national real estate conditions, availability of capital
from borrowings under the Company's line of credit and security agreement,
continued availability of proceeds from the Company's offering, the ability of
the Company to obtain permanent financing on satisfactory terms, the ability of
the Company to continue to identify suitable investments, the ability of the
Company to continue to locate suitable tenants for its properties and borrowers
for its Mortgage Loans and Secured Equipment Leases, and the ability of such
tenants and borrowers to make payments under their respective leases, Mortgage
Loans and Secured Equipment Leases. Given these uncertainties, readers are
cautioned not to place undue reliance on such statements.
Introduction
------------
The Company
CNL Hospitality Properties, Inc. was organized pursuant to the laws of the
State of Maryland on June 12, 1996. CNL Hospitality GP Corp. and CNL Hospitality
LP Corp. are wholly owned subsidiaries of CNL Hospitality Properties, Inc., each
of which was organized in Delaware in June 1998. CNL Hospitality Partners, LP is
a Delaware limited partnership ("Hospitality Partners") formed in June 1998. CNL
Hospitality GP Corp. and CNL Hospitality LP Corp. are the general and limited
partner, respectively, of CNL Hospitality Partners, LP. Properties acquired are
generally expected to be held by Hospitality Partners and, as a result, are
owned by CNL Hospitality Properties, Inc. through Hospitality Partners. Various
other wholly owned subsidiaries have been formed for purposes of acquiring or
developing hotel properties. The terms "Company" include, unless the context
otherwise requires, CNL Hospitality Properties, Inc., CNL Hospitality Partners,
LP, CNL Hospitality GP Corp., CNL Hospitality LP Corp. and each of their
subsidiaries. The Company operates for federal income tax purposes as a real
estate investment trust (a "REIT"). The Company has retained CNL Hospitality
Corp. (the "Advisor") as its advisor to provide management, acquisition,
advisory and administrative services.
The Company was formed primarily to acquire properties (the "Properties")
located across the United States to be leased for generally, five to 20 years,
plus renewal options generally for up to an additional 20 years, on a
"triple-net" basis, which means that the tenants generally are responsible for
repairs, maintenance, property taxes, utilities and insurance. Third party
tenants are operators of selected national and regional limited service,
extended stay and full service hotel chains (the "Hotel Chains"). In 2001, the
Company began operating other Properties using independent third party managers,
as permitted by the REIT Modernization Act of 1999. It is expected that the
Company will move from triple-net lease activities to owning and operating
Properties using third parties to manage the Properties' day to day operations.
The Company may also provide mortgage financing ("Mortgage Loans") and
furniture, fixture and equipment financing ("Secured Equipment Leases") to
operators of Hotel Chains. Secured Equipment Leases will be funded from the
proceeds of financing to be obtained by the Company. The aggregate outstanding
principal amount of Secured Equipment Leases will not exceed 10 percent of gross
proceeds from the Company's offerings of shares of common stock. The Company has
not provided any Mortgage Loans or Secured Equipment Financing as of December
31, 2001.
Liquidity and Capital Resources
-------------------------------
Common Stock Offerings
On September 14, 2000, the Company commenced its third offering of up to
45,000,000 shares of common stock ($450,000,000) (the "2000 Offering"). Of the
45,000,000 shares of common stock offered, up to 5,000,000 are available to
stockholders purchasing shares through the reinvestment plan. As of July 1,
2001, the percentage of gross proceeds payable to the managing dealer and its
affiliates as expenses in connection with the offering increased and is expected
to remain at the higher level for the remainder of the 2000 Offering. Since its
formation, the Company has received an initial $200,000 contribution from its
Advisor and subscription proceeds of $778,710,657 (77,871,066 shares), including
$3,755,508 (375,552 shares) issued pursuant to Company's reinvestment plan.
On August 9, 2001, the Company filed a registration statement on Form S-11
with the Securities and Exchange Commission in connection with the proposed sale
by the Company of up to an additional 45,000,000 shares of common stock
($450,000,000) (the "2002 Offering") in an offering expected to commence
immediately following the completion of the 2000 Offering. Of the 45,000,000
shares of common stock to be offered, up to 5,000,000 will be available to
stockholders purchasing shares through the reinvestment plan. The price per
share and the other terms of the 2002 Offering, including the percentage of
gross proceeds payable (i) to the managing dealer for selling commissions and
expenses in connection with the offering and (ii) to the Advisor for acquisition
fees, are substantially the same as those for the 2000 Offering for shares sold
subsequent to July 1, 2001. CNL Securities Corp., an affiliate of the Advisor,
is the managing dealer for the Company's equity offerings.
As of December 31, 2001, net proceeds to the Company from its stock
offerings, loan proceeds and capital contributions from the Advisor, after
deduction of selling commissions, marketing support and due diligence expense
reimbursement fees and organizational and offering expenses, totaled
approximately $909,276,000. The Company has used approximately $385,598,000 of
net offering proceeds and $223,766,000 of loan proceeds to invest in 35 hotel
Properties, including three on which hotel Properties are being constructed,
approximately $40,694,000 to invest in two joint ventures on which Properties
are being constructed or renovated, approximately $88,089,000 to invest in a
joint venture with Hilton Hotels Corporation, approximately $13,763,000 to
invest in a joint venture with Interstate Property Corporation, approximately
$60,183,000 to acquire an additional 51 percent ownership in Hotel Investors,
approximately $4,944,000 to redeem 533,534 shares of common stock and
approximately $57,983,000 to pay acquisition fees and expenses, leaving
approximately $34,256,000 available for investment in Properties and mortgage
loans.
During the period January 1, 2002 through February 22, 2002, the Company
received additional net offering proceeds of approximately $40,654,000 and had
approximately $11,100,000 available for investment in Properties and Mortgage
Loans. The Company expects to use the uninvested net proceeds, plus any
additional net proceeds from the sale of shares from the 2000 Offering to
purchase additional Properties and, to a lesser extent, invest in Mortgage
Loans. In addition, the Company intends to borrow money to acquire additional
Properties, to invest in Mortgage Loans and Secured Equipment Leases and to pay
certain related fees. The Company intends to encumber assets in connection with
such borrowings. The Company currently has a $96,725,000 line of credit
available, as described below (See "Borrowings"). Borrowings on the line of
credit may be repaid with offering proceeds, working capital or permanent
financing. The maximum amount the Company may borrow, absent a satisfactory
showing that a higher level of borrowing is appropriate as approved by a
majority of the independent directors, is 300 percent of the Company's net
assets. The Company believes that the net proceeds received from the 2000
Offering will enable the Company to continue to grow and take advantage of
acquisition opportunities until such time, if any, that the Company lists it
shares on a national securities exchange or over-the-counter market, although
there is no assurance that such a listing ("Listing") will occur. If Listing
does not occur by December 31, 2007, the Company will commence the orderly sale
of its assets and the distribution of the proceeds. Listing does not assure
liquidity.
Redemptions
In October 1998, the Board of Directors elected to implement the Company's
redemption plan. Under the redemption plan, the Company may elect, at its
discretion, to redeem shares, subject to certain conditions and limitations.
During the years ended December 30, 2001 and 2000, 251,373 shares and 269,276
shares, respectively, were redeemed at $2,312,634 and $2,503,484, respectively,
and retired from shares outstanding of common stock. Shares were redeemed for
$9.20 per share.
Borrowings
On September 14, 2001, the Company obtained a revolving line of credit (the
"Revolving LOC") to fund acquisition and development of Properties and
investments in Mortgage Loans and Secured Equipment Leases. The Company is able
to receive cash advances of up to approximately $96.7 million for a period of
five years. Interest payments are due monthly with principal payments of $1,000
due at the end of each loan year. Advances under the Revolving LOC bear interest
at an annual rate of 225 basis points above 30-day LIBOR (4.10 percent as of
December 31, 2001) and are collateralized by certain hotel Properties.
As of December 31, 2001, the Company's fixed and variable rate debt
instruments, excluding debt of unconsolidated joint ventures, were as follows:
Principal and Accrued Fixed Rate Interest
Interest Balance Maturity Per Year Variable Rate Payments Due
-------------------------- ---------------------- ----------------- ----------------------- ----------------
$ 50,000,000 December 2007 8.335% -- Monthly
86,151,860 July 2009 7.67%* -- Monthly
32,732,022 December 2007 8.29% -- Monthly
9,684,609 September 2017 12.85%** -- Monthly
42,118,898 November 2003 -- LIBOR + 275 bps Monthly
5,768,173 September 2003 -- LIBOR + 300 bps Monthly
7,500,000 September 2006 -- LIBOR + 225 bps Monthly
*Average interest rate as the loans bear interest ranging from 7.50 percent to 7.75 percent.
**Implicit interest on the TIF Note is 12.85 percent.
The Company's objectives and strategies with respect to long-term debt are
to minimize the amount of interest incurred on permanent financing while
limiting the risk related to interest rate fluctuations through hedging
activities and the ability to refinance existing debt. Because some of the
Company's mortgage notes bear interest at fixed rates, changes in market
interest rates during the term of such debt will not affect the Company's
operating results. The majority of the Company's fixed rate debt arrangements
allow for repayments earlier than the stated maturity date. These prepayment
rights may afford the Company the opportunity to mitigate the risk of
refinancing at maturity at higher rates by refinancing prior to maturity. The
weighted average effective interest rates on mortgages and other notes payable
was approximately 6.69 percent as of December 31, 2001.
The Company's construction loan facility, expiring in November 2003, bears
interest at a floating rate. Approximately $42,119,000 was outstanding and
approximately $12,881,000 was available under the construction loan facility as
of December 31, 2001. Currently, the construction loan facility is being used to
finance the construction of two hotel Properties. The estimated remaining cost
to complete these Properties was $8,036,000 as of December 31, 2001.
The Company's construction loan, expiring in September 2003, bears interest
at a floating rate. Approximately $5,768,000 was outstanding and approximately
$11,232,000 was available under the construction loan as of December 31, 2001.
Currently, the construction loan is being used to finance the construction of
one hotel Property. The estimated remaining cost to complete this Property was
$9,975,000 as of December 31, 2001.
The Company plans to use net proceeds it receives from the 2000 Offering
and the 2002 Offering to purchase additional Properties and, to a lesser extent,
to invest in Mortgage Loans. In addition, the Company intends to borrow under
the Revolving LOC and obtain permanent financing in order to acquire additional
Properties, to invest in Mortgage Loans and Secured Equipment Leases, and to pay
certain related fees. The Company intends to encumber assets in connection with
such borrowing. The Revolving LOC may be repaid with offering proceeds, proceeds
from the sale of assets, working capital or permanent financing. The maximum
amount the Company may borrow, absent a satisfactory showing that a higher level
of borrowing is appropriate as approved by a majority of the independent
directors, is 300 percent of the Company's net assets.
Market Risk
The Company may be subject to interest rate risk through any outstanding
balances on its variable rate debt. The Company may mitigate this risk by paying
down any outstanding balances on the Revolving LOC from offering proceeds,
refinancing with fixed rate permanent debt or obtaining cash flow hedges should
interest rates rise substantially, as discussed above. At December 31, 2001,
there was approximately $55,387,000 in variable rate debt was outstanding.
In addition, the Company has issued fixed interest rate mortgages payable
and notes payable to lenders under permanent financing arrangements. The Company
believes that the estimated fair value of the amounts outstanding on its fixed
rate mortgages payable and notes payable under permanent financing arrangements
at December 31, 2001, approximated the outstanding principal amount. The
following table presents the expected cash flows of principal that are sensitive
to these changes:
Notes Payable
------------------
2002 $ 3,136,602
2003 2,393,876
2004 2,561,298
2005 2,742,225
2006 2,869,490
Thereafter 164,865,000
------------------
$ 178,568,491
==================
Property Acquisitions and Investments
Hotel Investors. In 1999, the Company and Five Arrows Realty Securities II
LLC ("Five Arrows") invested a total of approximately $86 million in Hotel
Investors, resulting in the Company owning approximately 49 percent. In 2000,
the Company acquired a 22 percent interest in Hotel Investors from Five Arrows
for approximately $26.3 million, resulting in the Company owning approximately
71 percent of Hotel Investors. The results of Hotel Investors have been
consolidated with those of the Company since October 1, 2000. In June 2001, the
Company acquired the remaining 29 percent of Hotel Investors for approximately
$32.9 million. Hotel Investors owns seven hotel Properties. This transaction was
accounted for under the purchase method of accounting. The purchase price
approximated the fair value of the net assets acquired.
Desert Ridge Joint Venture. In December 2000, the Company acquired a 44
percent interest in Desert Ridge Resort Partners, LLC (the "Desert Ridge Joint
Venture"), a joint venture with an affiliate of Marriott International, Inc. and
a partnership in which an affiliate of the Advisor is the general partner. The
Desert Ridge Joint Venture owns the Desert Ridge Marriott Resort & Spa in
Phoenix, Arizona (the "Desert Ridge Property"), which is currently under
construction. As of December 31, 2001, the Company had made an initial capital
contribution of approximately $8.8 million of its anticipated $25 million
investment in the Desert Ridge Joint Venture. The total cost of the Desert Ridge
Property is estimated to be $298 million. The Desert Ridge Property is secured
by a mortgage of $179 million (the "Desert Ridge Mortgage"), which is scheduled
to mature on December 15, 2007. Although this resort property is currently under
construction, limited operations for the year ended December 31, 2001 resulted
from a golf course located on the premises. Development of a second golf course
was completed and the course began operations in January 2002.
A portion of the Desert Ridge Mortgage bears interest at an annual rate of
185 basis points above three-month London Interbank Offered Rate (the "LIBOR").
The Desert Ridge Joint Venture has entered into an interest rate swap agreement
(the "DRR Swap") to effectively convert the variable rate portion of this
mortgage to a fixed rate of 6.025 percent per annum. The DRR Swap is being
accounted for as a cash flow hedge. All terms of the DRR Swap are identical to
the terms of the underlying mortgage. The blended interest rate on the aggregate
principal amount of the $179 million mortgage notes, including interest rate,
swap costs, premiums for a debt service insurance policy, and amortization of
loan costs is approximately 10.13 percent per annum.
Waikiki Partnership. In July 2001, the Company acquired a 49 percent
interest in WB Resort Partners, L.P. (the "Waikiki Partnership"), a joint
venture with an affiliate of Marriott International, Inc. and a partnership in
which an affiliate of the Advisor is the general partner. The Waikiki
Partnership owns the Waikiki Beach Marriott in Honolulu, Hawaii (the "Waikiki
Property"), which is currently undergoing significant renovations. As of
December 31, 2001, the Company had made total capital contributions of
approximately $27.7 million of its anticipated $42 million investment in the
Waikiki Partnership. The total cost of the Waikiki Property is estimated to be
$215 million. The Waikiki Property is secured by a mortgage in the amount of
$130,000,000, which matures on August 15, 2006 and bears annual interest at a
rate of 8.53 percent. Although this resort property is currently undergoing
significant renovations, it has remained partially open. Operations for the year
ended December 31, 2001 resulted from the operations of the open portion of the
resort.
Hilton Partnership. The Company and Hilton Hotels Corporation ("Hilton")
formed a partnership (the "Hilton Partnership") of which the Company owns a 70
percent interest and Hilton owns a 30 percent interest. The Hilton Partnership
owns four Properties in Miami, Florida and Costa Mesa, California, which were
contributed by the Company, and Auburn Hills, Michigan and Portland, Oregon,
which were contributed by Hilton. The total value of the four Properties
contributed was valued at approximately $215,929,000. The Hilton Partnership
intends to spend approximately $21,000,000 for renovations to the Miami, Florida
and Costa Mesa, California Properties.
The Hilton Partnership's Properties are encumbered by a $100,000,000
mortgage, which has a term of five years and bears annual interest at a variable
rate equal to 230 basis points above 30-day LIBOR subject to a three-year cap of
8.30 percent and a floor of 4.96 percent. The Company intends to purchase an
additional interest rate cap for the last two years of the Hilton Mortgage term,
prior to the maturity of the Hilton Cap.
Interstate Partnership. On November 19, 2001, the Company and a subsidiary
of Interstate Property Corporation ("Interstate") formed a partnership (the
"Interstate Partnership") of which the Company owns an 85 percent interest and
Interstate owns a 15 percent interest. The Interstate Partnership owns two
Properties in Manchester, Connecticut. The total value of the Properties
obtained was approximately $20,372,000. One of the Properties is secured by a
mortgage of approximately $6,736,000, which was assumed by the Interstate
Partnership. The mortgage matures on January 1, 2011 and bears annual interest
of 8.32 percent.
Property Acquisitions. During 2001, the Company made the following additional acquisitions:
Brand Affiliation Property Location Purchase Date
----------------------------------------- ----------------------- ----------------------
SpringHill Suites(TM)by Marriott(R) Raleigh, NC February 2, 2001
Courtyard(R)by Marriott(R) Overland Park, KS February 2, 2001
SpringHill Suites(TM)by Marriott(R) Charlotte, NC March 23, 2001
SpringHill Suites(TM)by Marriott(R) Centreville, VA March 23, 2001
Courtyard(R)by Marriott(R) Edison, NJ April 6, 2001*
Courtyard(R)by Marriott(R) Oakland, CA December 28, 2001
SpringHill Suites (TM) by Marriott(R) Richmond, VA December 28, 2001
* Land purchased for development on which a hotel Property is being built.
The Company is operating the Oakland, CA and the Richmond, VA Properties
using independent third party managers and is leasing the other five Properties
on a triple-net basis to third party tenants.
Commitments
The Company has commitments (i) to acquire three hotel Properties for an
anticipated aggregate purchase price of approximately $90 million, (ii) to
invest approximately $15 million in two new joint ventures, (iii) to fund the
remaining total of $31 million in the Desert Ridge Joint Venture and the Waikiki
Partnership, (iv) to acquire a 10 percent interest in a limited partnership that
owns an office building located in Orlando, Florida, for approximately $300,000,
in which the Advisor and its affiliates lease office space, and (v) to fund the
development of a new hotel Property for approximately $88 million. The Company
also has committed to fund its prorata share of working capital shortfalls, debt
service and construction commitments for the Hilton Partnership and Interstate
Partnership if shortfalls arise. The acquisition of each of these additional
Properties is subject to the fulfillment of certain conditions. In order to
acquire these Properties, the Company must obtain additional funds through the
receipt of additional offering proceeds and/or advances on the Revolving LOC.
There can be no assurance that any or all of the conditions will be satisfied
or, if satisfied, that one or more of these Properties will be acquired by the
Company. The Company currently is seeking additional Properties.
Subsequent Events
During the period January 1, 2002 through February 22, 2002, the Company
received subscription proceeds for an additional 4,065,377 shares ($40,653,770)
of common stock.
On January 18, 2002, the Company acquired a SpringHill Suites(TM) by
Marriott(R) and a Townplace Suites(TM) by Marriott(R), both located in Manhattan
Beach, California and a SpringHill Suites(TM) by Marriott(R) located in Plymouth
Meeting, Pennsylvania for approximately $62 million. The Company plans to
operate these Properties using affilates of Marriott, an independent third party
manager.
On January 18, 2002, the Company acquired an interest in a joint venture
with Publications International, Ltd. ("PIL"), Hilton, and Marriott that owns a
77.5 percent interest in a joint venture with Exxon Mobil Corporation and PIL
("EMTG"). EMTG owns the licensing rights to the Mobil Travel Guide. The joint
venture has licensed its rights to a wholly owned subsidiary, which will
assemble, edit, publish and sell the Mobil Travel Guide. The Company's total
capital contribution will be $3.4 million, with $1,787,500 being funded on
January 18, 2002 and the remainder to be contributed by June 30, 2002.
On February 22, 2002, the Company took assignment of its leases with
Western International, Inc. for seven Hotel Investors' Properties. Effective
January 1, 2002, these Properties will be operated by the Company using
affiliates of Marriott as an independent third party manager and the operations
of these Properties will be reflected in the results of the Company. The Company
paid consideration of approximately $54,000 for this assignment.
Cash and Cash Equivalents
Until Properties are acquired, or Mortgage Loans are entered into, net
offering proceeds are held in short-term (defined as investments with a maturity
of three months or less), highly liquid investments, such as demand deposit
accounts at commercial banks, certificates of deposit and money market accounts.
This investment strategy provides high liquidity in order to facilitate the
Company's use of these funds to acquire Properties at such time as Properties
suitable for acquisition are located or to fund Mortgage Loans. At December 31,
2001, the Company had $44,825,052 invested in such short-term investments as
compared to $50,197,854 at December 31, 2000. The decrease in the amount
invested in short-term investments was primarily attributable to the acquisition
of Properties during 2001 offset by proceeds received from the sale of common
stock of the 2000 Offering. These funds will be used to purchase additional
Properties, to make Mortgage Loans, to pay offering and acquisition expenses, to
pay distributions to stockholders and other Company expenses and, at
management's discretion, to create cash reserves.
Liquidity Requirements
The Company expects to meet its short-term liquidity requirements, other
than for offering expenses, for the acquisition and development of Properties
and investment in Mortgage Loans and Secured Equipment Leases, through cash flow
provided by operating activities. The Company believes that cash flow provided
by operating activities will be sufficient to fund normal recurring operating
expenses, regular debt service requirements and distributions to stockholders.
To the extent that the Company's cash flow provided by operating activities is
not sufficient to meet such short-term liquidity requirements as a result, for
example, of unforeseen expenses due to tenants defaulting under the terms of
their lease agreements, the Company will use borrowings under its Revolving LOC.
The Company expects to meet its other short-term liquidity requirements,
including payment of offering expenses, Property acquisitions and development
and investment in Mortgage Loans and Secured Equipment Leases, with additional
advances under its Revolving LOC and proceeds from its offerings. The Company
expects to meet its long-term liquidity requirements through short or long-term,
unsecured or secured debt financing or equity financing.
Management believes that the Properties are adequately covered by
insurance. In addition, the Advisor has obtained contingent liability and
property coverage for the Company. This insurance policy is intended to reduce
the Company's exposure in the unlikely event a tenant's insurance policy lapses
or is insufficient to cover a claim relating to a Property.
Distributions
During the years ended December 31, 2001, 2000 and 1999, the Company
generated cash from operations of $52,937,964, $43,650,561, and $12,890,161,
respectively. The Company declared and paid distributions to its stockholders of
$48,409,660, $28,082,275, and $10,765,881 during the years ended December 31,
2001, 2000 and 1999, respectively. In addition, on January 1, 2002 and February
1, 2002, the Company declared distributions to stockholders of record on January
1, 2002 and February 1, 2002, totaling $4,998,298 and $5,133,486, respectively,
or $0.064583 per share, payable in March 2002.
For the years ended December 31, 2001, 2000 and 1999, approximately 52
percent, 63 percent and 75 percent, respectively, of the distributions received
by stockholders were considered to be ordinary income and approximately 48
percent, 37 percent and 25 percent, respectively, were considered a return of
capital for federal income tax purposes. No amounts distributed to the
stockholders for the years ended December 31, 2001, 2000 and 1999 were required
to be or have been treated by the Company as a return of capital for purposes of
calculating the stockholders' return on their invested capital.
Related Party Transactions
During the years ended December 31, 2001, 2000 and 1999, affiliates of the
Company incurred on behalf of the Company $4,988,427, $4,363,326, and
$3,257,822, respectively, for certain offering expenses, $261,373, $717,273, and
$653,231, respectively, for certain acquisition expenses, and $742,876,
$605,517, and $325,622, respectively, for certain operating expenses. As of
December 31, 2001 and 2000, the Company owed the Advisor and other related
parties $1,026,225 and $1,359,417, respectively, for expenditures incurred on
behalf of the Company and for acquisition fees.
The Company maintains bank accounts in a bank in which certain officers and
directors of the Company serve as directors, and in which an affiliate of the
Advisor is a stockholder. The amount deposited with this bank was $6,928,363 and
$17,568,909 at December 31, 2001 and 2000, respectively.
The Board of Directors of the Company has authorized the Company to pursue
the opportunity to acquire a 10 percent interest in a limited partnership that
owns a building in which the Advisor leases office space. If consummated, the
Company's investment in the partnership is expected to be approximately
$300,000. The remaining interest in the limited partnership is expected to be
owned by several affiliates of the Advisor.
See "Item 13. Certain Relationships and Related Transactions" for
information regarding other related party transactions of a non-operating
nature.
Other
As of December 31, 2001, 2000 and 1999, the tenants of the Properties have
established reserve funds which will be used for the replacement and renewal of
furniture, fixtures and equipment relating to the hotel Properties ("the FF&E
Reserve"). Funds in the FF&E Reserve from unrelated third party tenants have
been paid, granted and assigned to the Company. For the years ended December 31,
2001, 2000 and 1999, revenues from unrelated third party lessees relating to the
FF&E Reserve of the Properties owned by the Company totaled $5,786,879,
$2,508,949, and $320,356, respectively.
Management does not believe that other working capital reserves are
necessary at this time. Management has the right to cause the Company to
maintain additional reserves if, in their discretion, they determine such
reserves are required to meet the Company's working capital needs.
Critical Accounting Policies
The Company's leases are accounted for under the provisions of Statement of
Accounting Standard No. 13, "Accounting for Leases" ("FAS 13"), and have been
accounted for as operating leases. FAS 13 requires management to estimate the
economic life of the leased property, the residual value of the leased property
and the present value of minimum lease payments to be received from the tenant.
In addition, management assumes that all payments to be received under its
leases are collectible. Changes in management's estimates or assumption
regarding collectibility of lease payments could result in a change in
accounting for the lease at the inception of the lease.
Acquisition fees and miscellaneous acquisition costs that are directly
identifiable with Properties that are probable of being acquired are capitalized
and included in other assets. Upon purchase of a Property or the entrance into a
joint venture, the fees and costs that are directly identifiable with that
Property or investment are reclassified to land, building and equipment or
allocated to the Company's investment in the joint venture, respectively. In the
event a Property is not acquired or is no longer probable of being acquired, any
costs directly related to the Property or joint venture will be charged to
expense.
The Company accounts for its unconsolidated joint ventures using the equity
method of accounting. Under generally accepted accounting principles, the equity
method of accounting is appropriate for subsidiaries that that partially owned
by the Company, but for which operations of the investee are controlled by, or
shared with, an unrelated third party. Currently, the Hilton Partnership and the
Interstate Partnership are more than 50 percent owned by the Company but are not
consolidated because control is shared with Hilton and Interstate, respectively.
Changes in accounting regulations, if such changes occur, could require the
consolidated of these joint ventures. If consolidation was required, the amounts
reported for net income and total stockholder's equity would be the same as what
would be reported under the equity method of accounting.
In accordance with Staff Accounting Bulletin No. 101, the Company records
FF&E reserve revenue for cash transferred by third party tenants into restricted
FF&E Accounts during the years ended December 31, 2001, 2000 and 1999. The funds
in the FF&E Accounts are maintained in a restricted cash account that the tenant
is expected to use for purposes specified in the lease. Cash is restricted
because the funds may only be expended with regard to the specific property to
which the funds related during the period of the lease. The cash in the FF&E
Accounts, any interest earned thereon, and any property purchases therewith
remain, during and after the term of the lease, the property of the Company. To
the extent that funds in the FF&E Accounts are insufficient to maintain the
Properties in good working conditions and repair, the Company may make
expenditures, in which case annual minimum rent is increased. FF&E reserve
revenue is not generated from hotels operated by the Company using independent
third party managers, however, cash is restricted by the Company for the
purposes stated above. As the Company's business shifts from leasing Properties
to third parties to operating Properties, using independent third party
managers, the amount of FF&E reserve revenue is expected to decline.
Management reviews its Properties and investments in unconsolidated
subsidiaries periodically (no less than once per year) for impairment whenever
events or changes in circumstances indicate that the carrying amount of the
assets may not be recoverable through operations. Management determines whether
impairment in value has occured by comparing the estimated future undiscounted
cash flows, including the residual value of the Property, with carrying cost of
the individual Property. If an impairment is indicated, the assets are adjusted
to their fair value.
Results of Operations
---------------------
Comparison of year ended December 31, 2001 to year ended December 31, 2000
As of December 31, 2001, the Company owned interests 43 Properties (35
directly owned and eight held indirectly through joint ventures), consisting of
land, buildings and equipment, including three Properties on which hotel
Properties are being constructed, an interest the Desert Ridge Joint Venture, an
interest in the Waikiki Partnership, an interest in the Hilton Partnership, and
an interest in the Interstate Partnership, and had entered into "triple-net"
lease agreements or operates these Properties using independent third party
managers.
During the years ended December 31, 2001 and 2000, the Company earned
rental income from operating leases, contingent rental income and FF&E reserve
revenue of $66,817,430 and $26,681,838, respectively. The increase in rental
income, contingent rental income and FF&E reserve income is due to the Company
directly owning 35 Properties during the year ended December 31, 2001, as
compared to 29 Properties during the year ended December 31, 2000. In addition,
several of the Properties, which were owned for only a portion of 2000, were
owned for a full year in 2001. Because additional Property acquisitions are
expected to occur, revenues for the year ended December 31, 2001, represent only
a portion of revenues which the Company is expected to earn in future periods.
However, due to the fact that management expects that a majority of the new
acquisitions will be operated by the Company using independent third party
managers and the Company plans to take assignment of certain existing leases
from unrelated tenants, rental income from operating leases, contingent rental
income, and FF&E reserve revenues are not expected to continue to increase at
the same rate in the future, but instead will be replaced by hotel operating
revenues.
During the years ended December 31, 2001 and 2000, the Company earned
$3,494,238 and $6,637,318, respectively, in interest income from investments in
money market accounts and other short-term highly liquid investments and other
income. The decrease in interest income was primarily attributable to a decrease
in the average dollar amount invested in short-term, liquid investments during
the year 2001 as compared with 2000. As net offering proceeds from the Company's
offering are invested in Properties and used to make Mortgage Loans, the
percentage of the Company's total revenues from interest income from investments
in money market accounts or other short term, highly liquid, investments is
expected to remain constant or decrease.
Four of the Company's tenants contributed approximately 70 percent and 75
percent of total rental income for the years ended December 31, 2001 and 2000,
respectively. In addition, a significant portion of the Company's rental income
was earned from properties operating as Marriott(R) brand chains for the years
ended December 31, 2001 and 2000. Although the Company acquires Properties in
various states and regions, carefully screens its tenants in order to reduce
risks of default and has acquired four Hilton Properties through the Hilton
Partnership, failure of these lessees or the Marriott(R) brand chains could
significantly impact the results of operations of the Company. However,
management believes that the risk of such a default is reduced due to the
initial and continuing due diligence procedures performed by the Company. It is
expected that the percentage of total rental income contribution by these
lessees will decrease as additional Properties are acquired and 2002 and
subsequent years.
Operating expenses, including interest expense and depreciation and
amortization expense, were $43,892,956 and $13,525,893 for the years ended
December 31, 2001 and 2000, respectively (61.4 percent and 37.5 percent,
respectively, of total revenues). The increase in operating expenses during the
year ended December 31, 2001, as compared to 2000, was as a result of the
Company directly owning 29 Properties during 2000 compared to 35 Properties in
2001. Additionally, interest expense increased from $2,383,449 for the year
ended December 31, 2000 to $14,653,011 for the year ended December 31, 2001, as
a result of the Company securing additional permanent financing and draws on the
Revolving LOC in 2001.
Equity in loss of unconsolidated subsidiaries was $7,092,674 and $386,627
for the years ended December 31, 2001 and 2000, respectively. The increase in
the loss from unconsolidated subsidiaries during the year ended December 31,
2001 was due primarily to pre-opening and marketing expenses incurred by the
Desert Ridge Joint Venture during the year ended December 31, 2001 and operating
losses at the Waikiki Property which occurred as a result of a significant
portion of the Waikiki Property being closed for renovations. Additional
pre-opening and marketing expenses are expected to be incurred during 2002 by
the Desert Ridge Joint Venture in preparation for the expected opening of the
Desert Ridge Property in January 2003. Operating losses at the Waikiki Property
will likely continue until expected renovations are completed and international
tourism rebounds from the events of September 11, 2001.
Pursuant to the Advisory Agreement, the Advisor is required to reimburse
the Company the amount by which the total operating expenses paid or incurred by
the Company exceed in any four consecutive fiscal quarters, the greater of two
percent of average invested assets or 25 percent of net income (the "Expense
Cap"). For the years ended December 31, 2001 and 2000, the Company's operating
expenses did not exceed the Expense Cap.
The dollar amount of operating expenses is expected to increase as the
Company acquires additional Properties and invests in Mortgage Loans. However,
general operating and administrative expenses as a percentage of total revenues
is expected to decrease as the Company acquires additional Properties and
invests in Mortgage Loans.
Comparison of year ended December 31, 2000 to year ended December 31, 1999
As of December 31, 2000, the Company directly owned 29 Properties,
consisting of land, buildings and equipment, including two Properties on which
hotel Properties are being constructed, and had entered into "triple-net" lease
agreements relating to these Properties.
During the years ended December 31, 2000 and 1999, the Company earned
rental income from operating leases, contingent rental income and FF&E Reserve
revenue of $26,681,838 and $4,230,995, respectively. The increase in rental
income, contingent rental income and FF&E Reserve income was due to the Company
owning 29 Properties during the year ended December 31, 2000, as compared to 11
Properties during the year ended December 31, 1999. In addition, several of the
Properties, which were owned for only a portion of 1999, were owned for a full
year in 2000.
In October 2000, the Company acquired a majority interest in Hotel
Investors, as described above in "Property Acquisitions and Investments." In
connection with its investment, the Company recognized $2,780,063 in dividend
income and $386,627 in equity in loss after deduction of preferred stock
dividends, resulting in net earnings of $2,393,436 prior to consolidating Hotel
Investors, for the year ended December 31, 2000. During the year ended December
31, 1999, the Company recognized $2,753,506 in dividend income and $778,466 in
equity in loss after deduction of preferred stock dividends, resulting in net
earnings attributable to this investment of $1,975,040.
During the years ended December 31, 2000 and 1999, the Company earned
$6,637,318 and $3,693,004, respectively, in interest income from investments in
money market accounts and other short-term, highly liquid investments and other
income. The increase in interest income was primarily attributable to an
increase in the dollar amount invested in short-term liquid investments and the
period of time the funds were invested as compared to 1999.
Operating expenses, including interest expense and depreciation and
amortization expense, were $13,525,893 and $2,318,717 for the years ended
December 31, 2000 and 1999, respectively (37.5 percent and 21.7 percent,
respectively, of total revenues). The increase in operating expenses during the
year ended December 31, 2000, as compared to 1999, was as a result of the
Company owning 29 Properties during 2000 compared to 11 Properties in 1999.
Additionally, interest expense increased from $248,094 for the year ended
December 31, 1999 to $2,383,449 for the year ended December 31, 2000, as a
result of the Company securing permanent financing in 2000.
For the years ended December 31, 2000 and 1999, the Company's operating
expenses did not exceed the Expense Cap.
Other
Management considers funds from operations ("FFO") to be an indicative
measure of operating performance due to the significant effect of depreciation
on real estate assets on net earnings. The following information is presented to
help stockholders better understand the Company's financial performance and to
compare the Company to other REITs. However, FFO as presented may not be
comparable to similarly titled measures reported by other companies. This
information should not be considered an alternative to net earnings, cash flow
generated from operations, or any other operating or liquidity performance
measure prescribed by accounting principles generally accepted in the United
States.
The following is a reconciliation of net earnings to FFO for the years
ended December 31, 2001 and 2000:
Year Ended
December 31,
2001 2000
--------------- --------------
Net earnings $19,328,376 $20,670,462
Adjustments:
Effect of unconsolidated subsidiaries 2,701,993 1,824,124
Effect of minority interest (940,654) (271,674)
Amortization of real estate assets 534,851 131,490
Depreciation of real estate assets 19,213,846 7,698,966
----------------- ---------------
FFO $40,838,412 $30,053,368
================= ===============
Weighted average shares:
Basic 64,457,643 38,698,066
================= ===============
Diluted 66,282,330 45,885,742
================= ===============
The Company has made an election under Section 856(c) of the Internal
Revenue Code of 1986, as amended (the "Code"), to be taxed as a REIT under the
Code beginning with its taxable year ended December 31, 1997. As a REIT, for
federal income tax purposes, the Company generally will not be subject to
federal income tax on income that it distributes to its stockholders, with the
exception of TRS entities which are subject to federal and state income taxes.
As of the year ended December 31, 2001, no significant income had been realized
by the Company's TRS entities. Accordingly, no provision for federal or state
income taxes has been made in the accompanying consolidated financial
statements. Notwithstanding the Company's qualification for taxation as a REIT,
the Company is subject to certain state taxes on its income and Properties. If
the Company fails to qualify as a REIT in any taxable year, it will be subject
to federal income tax on all of its taxable income at regular corporate rates
and will not be permitted to qualify for treatment as a REIT for federal income
tax purposes for four years following the year during which qualification is
lost. Such an event could materially affect the Company's net earnings. However,
the Company believes that it is organized and operates in such a manner as to
qualify for treatment as a REIT for the years ended December 31, 2001, 2000 and
1999. In addition, the Company intends to continue to operate the Company so as
to remain qualified as a REIT for federal income tax purposes.
The attacks on the World Trade Center and the Pentagon on September 11,
2001 adversely impacted economic activity during the weeks following the
attacks, particularly affecting the travel and lodging industries. Although it
appears that a recovery is occurring in the business and leisure travel sector,
the business of the Company's tenants and managers may still be affected and
hotel occupancy and revenues and, as a result, the Company's revenues may still
remain at reduced levels to the extent that rents and other revenues received by
the Company are calculated as a percentage of hotel revenues. Further,
Properties that the Company operates using independent third party managers, may
continue to be impacted by a reduction in hotel operating revenues. In addition,
if the reduction in travel is protracted, the ability of the Company's tenants
to make rental payments may be affected.
From time to time the Company may be exposed to litigation arising from the
operation of its business. Management does not believe that resolutions of these
matters will have a material adverse effect on the Company's financial condition
or results of operations.
Management of the Company currently knows of no trends that will have a
material adverse effect on liquidity, capital resources or results of
operations.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
See Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations - Market Risk for information related to quantitative and
qualitative disclosure about market risk.
Item 8. Financial Statements and Supplementary Data
The following table presents selected unaudited quarterly financial data
for each full quarter during the years ended December 31, 2001 and 2000:
2001 Quarter First Second Third Fourth Year
- ------------ -------------- -------------- -------------- --------------- ---------------
Revenue $16,713,199 $18,202,364 $19,029,243 $17,517,738 $71,462,544
Net income 5,529,222 7,058,222 3,890,425 2,850,507 19,328,376
Earning per share:
Basic 0.11 0.12 0.06 0.01 0.30
Diluted 0.11 0.12 0.06 0.01 0.30
2000 Quarter First Second Third Fourth Year
- ------------ -------------- -------------- -------------- --------------- ---------------
Revenue $5,581,157 $6,690,682 $8,540,296 $ 15,287,084 $ 36,099,219
Net income 3,945,084 4,642,940 5,251,624 6,830,814 20,670,462
Earning per share:
Basic 0.13 0.13 0.13 0.14 0.53
Diluted 0.12 0.13 0.13 0.15 0.53
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
CONTENTS
--------
Page
----
Report of Independent Certified Public Accountants 23
Financial Statements:
Consolidated Balance Sheets 24
Consolidated Statements of Earnings 25
Consolidated Statements of Stockholders' Equity 26
Consolidated Statements of Cash Flows 29
Notes to Consolidated Financial Statements 32
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders
CNL Hospitality Properties, Inc.
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1)on page 47 present fairly, in all material
respects, the financial position of CNL Hospitality Properties, Inc. (a Maryland
corporation) and its subsidiaries at December 31, 2001 and 2000, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 2001, in conformity with accounting principles
generally accepted in the United States of America. In addition, in our opinion,
the financial statement schedule listed in the index appearing under Item
14(a)(2)on page 48 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 the financial statement
schedule are the responsibility of the Company's management; our responsibility
is to express an opinion on these financial statements and the financial
statement schedule based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
As discussed in Note 1 to the consolidated financial statements, on January 1,
2001, the Company changed its method of accounting for derivative financial
instruments.
/s/ PRICEWATERHOUSECOOPERS LLP
Orlando, Florida
January 25, 2002, except as to Note 13 for which the date is February 22, 2002
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
2001 2000
--------------- --------------
ASSETS
Land, buildings and equipment, less accumulated depreciation of
$29,182,487 and $9,433,790, respectively $ 699,239,959 $ 581,528,928
Investment in unconsolidated subsidiaries 135,271,048 10,174,209
Cash and cash equivalents 44,825,052 50,197,854
Restricted cash 8,493,446 3,263,712
Receivables 1,266,862 1,009,421
Due from related parties 1,410,900 --
Prepaid expenses and other assets 6,796,398 5,811,304
Loan costs, less accumulated amortization of $980,303 and
$152,621, respectively 4,102,822 1,976,630
--------------- ---------------
$ 901,406,487 $ 653,962,058
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgages payable and accrued interest $ 168,883,882 $ 170,055,326
Other notes payable 57,571,680 19,581,950
Line of credit 7,500,000 --
Accounts payable and accrued expenses 8,269,796 2,126,365
Distributions payable 87,685 1,089,394
Due to related parties 1,026,225 1,359,417
Security deposits 19,454,611 15,418,626
Rents paid in advance 735,924 2,271,836
--------------- ---------------
Total liabilities 263,529,803 211,902,914
--------------- ---------------
Commitments and contingencies
Minority interest -- 22,770,146
--------------- ---------------
Stockholders' equity:
Preferred stock, without par value.
Authorized and unissued 3,000,000 shares -- --
Excess shares, $.01 par value per share.
Authorized and unissued 63,000,000 shares -- --
Common stock, $.01 par value per share. Authorized
150,000,000 and 60,000,000 shares, respectively; issued
77,891,066 and 49,284,203 shares, respectively;
outstanding 77,357,532 and 49,002,042 shares,
respectively 773,575 490,020
Capital in excess of par value 681,152,253 432,403,246
Accumulated distributions in excess of net earnings (39,959,120) (10,877,836)
Accumulated other comprehensive loss (1,189,396) --
Minority interest distributions in excess of contributions and
accumulated earnings (2,900,628) (2,726,432)
--------------- ---------------
Total stockholders' equity 637,876,684 419,288,998
--------------- ---------------
$ 901,406,487 $ 653,962,058
=============== ===============
See accompanying notes to consolidated financial statements.
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
Year Ended December 31,
2001 2000 1999
-------------- ------------- --------------
Revenues:
Rental income from
operating leases $ 61,030,551 $ 24,172,889 $ 3,910,639
FF&E reserve income 5,786,879 2,508,949 320,356
Dividend income -- 2,780,063 2,753,506
Hotel revenue 1,150,876 -- --
Interest and other income 3,494,238 6,637,318 3,693,004
-------------- ------------- --------------
71,462,544 36,099,219 10,677,505
-------------- ------------- --------------
Expenses:
Interest and loan cost amortization 14,653,011 2,383,449 248,094
General operating and administrative 3,465,568 1,565,664 569,583
Asset management fees to
related parties 3,326,688 1,335,488 106,788
Hotel expense 1,515,808 -- --
Taxes 1,183,184 410,836 126,384
Depreciation and amortization 19,748,697 7,830,456 1,267,868
-------------- ------------- --------------
43,892,956 13,525,893 2,318,717
-------------- ------------- --------------
Earnings Before Equity in Loss of
Unconsolidated Subsidiaries and
Minority Interest 27,569,588 22,573,326 8,358,788
Equity in Loss of Unconsolidated
Subsidiaries (7,092,674) (386,627) (778,466)
Minority Interest (1,148,538) (1,516,237) (64,334)
-------------- ------------- --------------
Net Earnings $ 19,328,376 $ 20,670,462 $ 7,515,988
============== ============= ==============
Earnings Per Share of Common Stock:
Basic $ 0.30 $ 0.53 $ 0.47
============== ============= ==============
Diluted $ 0.30 $ 0.53 $ 0.45
============== ============= ==============
Weighted Average Number of Shares of
Common Stock Outstanding:
Basic 64,457,643 38,698,066 15,890,212
============== ============= ==============
Diluted 66,282,330 45,885,742 21,437,859
============== ============= ==============
See accompanying notes to consolidated financial statements.
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31, 2001, 2000 and 1999
Common Stock Accumulated Minority interest
----------------------- Capital in distributions distributions in
Number of Par excess of in excess excess of contr.and
shares value par value of net earnings accum. earnings Total
----------- ----------- ------------- ------------- ---------------- --------------
Balance at December 31, 1998 4,321,908 $ 43,219 $ 37,289,402 $ (216,130) $ -- $ 37,116,491
Subscriptions received for common
stock through public offerings
and distribution reinvestment
plan 24,593,891 245,939 245,692,968 -- -- 245,938,907
Retirement of common stock (12,885) (129) (118,413) -- -- (118,542)
Stock issuance costs -- -- (26,632,124) -- -- (26,632,124)
Net earnings -- -- -- 7,515,988 -- 7,515,988
Distributions declared and paid
($.72 per share) -- -- -- (10,765,881) -- (10,765,881)
----------- ----------- ------------ ------------- -------------- --------------
Balance at December 31, 1999 28,902,914 $ 289,029 $ 256,231,833 $ (3,466,023) $ -- $ 253,054,839
=========== =========== ============= ============= ============== ==============
See accompanying notes to consolidated financial statements.
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - CONTINUED
Years Ended December 31, 2001,
2000 and 1999
Common Stock Accumulated Minority interest
----------------------- Capital in distributions distributions in
Number of Par excess of in excess excess of contr.and
shares value par value of net earnings accum. earnings Total
----------- ----------- ------------- ------------- ---------------- --------------
Balance at December 31, 1999 28,902,914 $ 289,029 $256,231,833 $ (3,466,023) $ -- $ 253,054,839
Subscriptions received for
common stock through public
offering and distribution
reinvestment plan 20,368,404 203,684 203,480,360 -- -- 203,684,044
Retirement of common stock (269,276) (2,693) (2,500,791) -- -- (2,503,484)
Stock issuance costs -- -- (24,808,156) -- -- (24,808,156)
Net earnings -- -- -- 20,670,462 -- 20,670,462
Minority interest distributions
in excess of contributions
and accumulated earnings -- -- -- -- (2,726,432) (2,726,432)
Distributions declared and paid
($.74 per share) -- -- -- (28,082,275) -- (28,082,275)
------------ ---------- ------------- ------------- ---------------- --------------
Balance at December 31, 2000 49,002,042 $ 490,020 $432,403,246 $(10,877,836) $ (2,726,432) $ 419,288,998
=========== =========== ============= ============= ================ =============
See accompanying notes to consolidated financial statements.
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - CONTINUED
Years Ended December 31, 2001,
2000 and 1999
Minority
interest
distributions
Common Stock Accumulated Accumulated in excess of
----------------------- Capital in distributions other contr. and
Number of Par excess of in excess comprehensive accum. Comprehensive
shares value par value of net earnings loss earnings Total Income
----------- ----------- ------------- ------------- ------------- ------------ ------------- ---------------
Balance at
December 31, 2000 49,002,042 $ 490,020 $432,403,246 $(10,877,836) $ -- $(2,726,432) $419,288,998 $ --
Subscriptions
received for
common stock
through public
offerings and
distribution
reinvestment
plan 28,606,863 286,069 285,782,557 -- -- -- 286,068,626 --
Retirement of
common stock (251,373) (2,514) (2,310,120) -- -- -- (2,312,634) --
Stock issuance
costs -- -- (34,723,430) -- -- -- (34,723,430) --
Net earnings -- -- -- 19,328,376 -- -- 19,328,376 19,328,376
Minority interest
distributions
in excess of
contributions
and accumulated
earnings -- -- -- -- -- (174,196) (174,196) --
Current period
adjustments to
recognize value
of cash flow
hedges of
equity
investees -- -- -- -- (1,189,396) -- (1,189,396) (1,189,396)
---------------
Total comprehen-
sive income -- -- -- -- -- -- -- $ 18,138,980
===============
Distributions
declared and
paid ($.77 per
share) -- -- -- (48,409,660) -- -- (48,409,660)
----------- ----------- ------------- ------------- ------------ ------------ -------------
Balance at
December 31,
2001 77,357,532 $ 773,575 $681,152,253 $(39,959,120) $ (1,189,396) $(2,900,628) $637,876,684
=========== =========== ============= ============= ============= ============ =============
See accompanying notes to consolidated financial statements.
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31,
2001 2000 1999
------------- ------------- -------------
Cash flows from operating activities:
Net earnings $ 19,328,376 $ 20,670,462 $ 7,515,988
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation 19,748,697 7,830,456 1,230,499
Amortization 1,181,580 65,994 130,769
Distribution from investment in
unconsolidated subsidiaries net of
equity in earnings/losses 9,277,923 1,123,687 1,478,111
Minority interest 1,148,538 1,516,237 64,334
Changes in operating assets and
liabilities:
Dividends receivable -- 1,215,993 (1,215,993)
Receivables (257,441) (812,688) (67,352)
Interest payable -- -- (66,547)
Prepaid expenses (23,521) 19,975 (31,774)
Accrued rental income (7,803) (124,329) (35,239)
Accounts payable and accrued
expenses 374,734 860,676 (2,191)
Due to related parties -
operating expenses (333,192) 360,696 12,923
Security deposits 4,035,985 10,376,573 3,624,554
Rents paid in advance (1,535,912) 546,829 252,079
------------- ------------- -------------
Net cash provided by
operating activities 52,937,964 43,650,561 12,890,161
------------ ------------- -------------
Cash flows from investing activities:
Additions to land, buildings and
equipment on operating leases (117,233,515) (310,711,912) (85,089,887)
Investment in unconsolidated
subsidiaries (129,032,824) (10,174,209) (39,879,638)
Acquisition of additional interest in
Hotel Investors, net of Hotel
Investors' cash (32,884,119) (17,872,573) --
Increase (decrease) in certificate of
deposit -- 5,000,000 --
Increase in restricted cash (5,229,734) (2,988,082) (193,223)
Increase (decrease) in other assets (11,610,690) 2,510,090 (5,068,727)
------------- -------------- -------------
Net cash used in investing
activities (295,990,882) (334,236,686) (130,231,475)
------------- -------------- -------------
See accompanying notes to consolidated financial statements.
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
Years Ended December 31,
2001 2000 1999
------------- -------------- -------------
Cash flows from financing activities:
Proceeds from borrowings on line of
credit 7,500,000 -- --
Repayment of borrowings on line of
credit -- -- (9,600,000)
Payment of loan costs (2,953,874) (1,342,713) (47,334)
Proceeds from mortgage loans and
other notes payable 37,989,731 102,081,950 --
Principal payments on mortgage loans (1,171,444) -- --
Contributions from minority interest
of consolidated subsidiaries -- -- 7,150,000
Subscriptions received from
stockholders 286,068,626 203,684,044 245,938,907
Distributions to stockholders (48,409,660) (28,082,275) (10,765,881)
Due from related parties - offering
expenses (1,410,900) -- --
Distributions to minority interest (2,896,299) (10,217,828) --
Retirement of common stock (2,312,634) (2,503,484) (118,542)
Payment of stock issuance costs (34,723,430) (24,808,156) (26,472,318)
------------- -------------- -------------
Net cash provided by financing
activities 237,680,116 238,811,538 206,084,832
------------- -------------- -------------
Net increase (decrease) in cash and cash
equivalents (5,372,802) (51,774,587) 88,743,518
Cash and cash equivalents at beginning of
year 50,197,854 101,972,441 13,228,923
------------- -------------- -------------
Cash and cash equivalents at end of year $ 44,825,052 $ 50,197,854 $101,972,441
============= ============== =============
See accompanying notes to consolidated financial statements.
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
Years Ended December 31,
2001 2000 1999
------------- -------------- -------------
Supplemental disclosures of cash flow
information:
Cash paid during the year for $ 15,248,479 $ 1,802,451 $ 240,994
interest ============= ============== =============
Supplemental schedule of non-cash
investing activities:
Amounts incurred but not paid for
construction in progress $ 6,601,248 $ 832,551 $ --
============= ============== =============
Allocation of acquisition fees
included in other assets to
investment in unconsolidated
subsidiaries and land, building,
and equipment on operating leases $ 10,656,920 $ 16,182,043 $ 4,470,836
============= ============== =============
Supplemental schedule of non-cash
financing activities:
Non-cash reduction in TIF Note $ -- $ 315,391 --
============= ============== =============
Distributions declared not paid to
minority interest at year end $ 87,685 $ 1,089,394 --
============= ============== =============
See accompanying notes to consolidated financial statements.
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2001, 2000 and 1999
1. Significant Accounting Policies:
-------------------------------
Organization and Nature of Business - CNL Hospitality Properties, Inc. was
organized pursuant to the laws of the State of Maryland on June 12, 1996.
CNL Hospitality GP Corp. and CNL Hospitality LP Corp. are wholly owned
subsidiaries of CNL Hospitality Properties, Inc., each of which was
organized in Delaware in June 1998. CNL Hospitality Partners, LP is a
Delaware limited partnership ("Hospitality Partners") formed in June 1998.
CNL Hospitality GP Corp. and CNL Hospitality LP Corp. are the general and
limited partner, respectively, of CNL Hospitality Partners, LP. Properties
acquired are generally expected to be held by Hospitality Partners and, as
a result, are owned by CNL Hospitality Properties, Inc. through Hospitality
Partners. Various other wholly owned subsidiaries have been formed for
purposes of acquiring or developing hotel properties. The terms "Company"
include, unless the context otherwise requires, CNL Hospitality Properties,
Inc., CNL Hospitality Partners, LP, CNL Hospitality GP Corp., CNL
Hospitality LP Corp. and each of their subsidiaries. The Company operates
for federal income tax purposes as a real estate investment trust (a
"REIT").
The Company was formed primarily to acquire properties (the "Properties")
located across the United States to be leased generally, five to 20 years,
plus renewal options generally for up to an additional 20 years on a
"triple-net" basis, which means that the tenants generally are responsible
for repairs, maintenance, property taxes, utilities and insurance. Third
party tenants are operators of selected national and regional limited
service, extended stay and full service hotel chains (the "Hotel Chains").
In 2001, the Company began operating other Properties using independent
third party managers, as permitted by the REIT Modernization Act of 1999
("RMA"). In November 1999, Congress passed RMA, which allows a REIT to own
up to 100 percent of the stock of a Taxable REIT Subsidiary ("TRS"). A TRS
can provide services to REIT tenants and others without disqualifying the
rents that a REIT receives from its tenants from being "rents from real
property" under federal income tax law. A TRS may not operate or manage
lodging facilities, but it may lease lodging facilities from its affiliated
REIT, at market rates, as long as an independent contractor operates and
manages the lodging facilities. The provisions of the RMA were effective
January 1, 2001. The Company, consistent with the requirements of the RMA,
formed nine subsidiaries (one consolidated and eight owned through
unconsolidated joint ventures), which made elections to be treated as a
TRS.
The Company has retained CNL Hospitality Corp. (the "Advisor") as its
advisor to provide management, acquisition, advisory and administrative
services.
Principles of Consolidation - The accompanying consolidated financial
statements include the accounts of CNL Hospitality Properties, Inc., and
its wholly owned and majority controlled subsidiaries. All significant
intercompany balances and transactions have been eliminated in
consolidation. Interests of unaffiliated third parties are reflected as
minority interest for less than 100 percent owned and majority controlled
entities.
Lease Accounting - Land, buildings and equipment for certain Properties are
leased to unrelated third parties on a "triple-net" basis, whereby the
tenant is generally responsible for all operating expenses relating to the
Property, including property taxes, insurance, maintenance and repairs.
The Property leases are accounted for using the operating method. Under the
operating method, revenue is recognized as rental payments are due. When
scheduled rentals vary during the lease term, income is recognized on a
straight-line basis so as to produce a constant periodic rent over the
lease term commencing on the date the Property is placed in service.
Accrued rental income, included in other assets, represents the aggregate
amount of income recognized on a straight-line basis in excess of scheduled
rental payments to date.
The Company's leases also require the establishment of separate bank
accounts for the replacement of furniture, fixtures, and equipment and
routine capital items ("FF&E Accounts"). Deposits into the FF&E Accounts
established for the Properties leased to third party tenants are owned by
the Company and have been reported as additional rent ("FF&E Reserve
Revenue") for the years ended December 31, 2001, 2000 and 1999. For the
years ended December 31, 2001, 2000 and 1999, revenues from the FF&E
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2001, 2000 and 1999
1. Significant Accounting Policies - Continued:
-------------------------------------------
Reserve Revenue totaled $5,786,879, $2,508,949, and $320,356, respectively.
For these Properties, the funds in the FF&E Accounts are maintained in a
restricted cash account, funded by the tenant, that the tenant is expected
to use for purposes specified in the lease. Cash is restricted because the
funds may only be expended with regard to the specific property to which
the funds related during the period of the lease. The cash in the FF&E
Accounts , any interest earned thereon, and any property purchases
therewith remain, during and after the term of the lease, the property of
the Company. To the extent that funds in the FF&E Accounts are insufficient
to maintain the Properties in good working conditions and repair, the
Company may make expenditures, in which case annual minimum rent is
increased.
Land, Buildings and Equipment - Land, building, and equipment is recorded
at historical cost. The Company's policy is to capitalize the cost of
improvements and betterments and any interest incurred during the
construction or renovation periods for hotel construction projects. Costs
of repairs and maintenance are expensed as incurred. During the years ended
December 31, 2001 and 2000, $1,552,422 and $52,780 of interest expense was
capitalized, respectively.
Buildings and equipment are depreciated on the straight-line method over
their estimated useful lives of 40 and seven years, respectively. When the
Properties or equipment are sold, the related cost and accumulated
depreciation, plus any accrued rental income, will be removed from the
accounts and any gain or loss from sale will be reflected as income.
Impairment of Long-Lived Assets - Management reviews its Properties and
investments in unconsolidated subsidiaries periodically (no less than once
per year) for impairment whenever events or changes in circumstances
indicate that the carrying amounts of these may not be recoverable through
operations. Management determines whether impairment in value has occured
by comparing the estimated future undiscounted cash flows, including the
residual value of the Property, with the carrying cost of the Individual
Property. If an impairment is indicated, the assets are adjusted to their
fair value.
Investment in Unconsolidated Subsidiaries - Investments in unconsolidated
subsidiaries are accounted for under the equity method of accounting since
the decision making authority and control is shared. All major decisions
are subject to approval of both parties concerning all aspects of the
entities' operations. In the event of a disagreement among the parties,
binding arbitration is used to settle disagreements. At December 31, 2001
the difference between the Company's carrying amount of its investments in
unconsolidated subsidiaries and the underlying equity in the net assets of
the subsidiaries was $15,340,381 due to acquisition fees and expenses which
have been allocated to the Company's investment. These amounts are being
amortized over the estimated lives of the buildings and equipment
commencing when the hotel begins operations.
Cash and Cash Equivalents - The Company considers all highly liquid
investments with an original maturity of three months or less to be cash
equivalents. Cash and cash equivalents consist of demand deposits at
commercial banks and money market funds (some of which are backed by
government securities). Cash equivalents are stated at cost plus accrued
interest, which approximates market value. Cash accounts maintained on
behalf of the Company in demand deposits at commercial banks and money
market funds may exceed federally insured levels; however, the Company has
not experienced any losses in such accounts. Management believes the
Company is not exposed to any significant credit risk on cash and cash
equivalents.
Certain amounts of cash are restricted for maintenance and replacement of
furniture, fixtures, and equipment at the Company's various hotel
Properties. These amounts have been separately classified as restricted
cash in the accompanying consolidated balance sheets.
Loan Costs - Loan costs incurred in connection with securing financing of
the Company's various acquisitions and developments have been capitalized
and are being amortized over the terms of the loans using the straight-line
method, which approximates the effective interest method.
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2001, 2000 and 1999
1. Significant Accounting Policies - Continued:
-------------------------------------------
Income Taxes - The Company has made an election to be taxed as a real
estate investment trust (REIT) under Sections 856 through 860 of the
Internal Revenue Code of 1986, as amended, and related regulations. The
Company generally will not be subject to corporate income taxes on amounts
distributed to stockholders, providing it distributes at least 90 percent
of its REIT taxable income and meets certain other requirements for
qualifying as a REIT, with the exception of TRS entities which are subject
to federal and state income taxes. As of the year ended December 31, 2001,
no significant income had been realized by the Company's wholly owned TRS
entities. Accordingly, no provision for federal or state income taxes has
been made in the accompanying consolidated financial statements.
Notwithstanding the Company's qualification for taxation as a REIT, the
Company is subject to certain state taxes on its income and Properties.
Earnings Per Share - Basic earnings per share ("EPS") is calculated based
upon the weighted average number of shares of common stock outstanding
during each year and diluted earnings per share is calculated based upon
weighted average number of common shares outstanding plus potentially
dilutive common shares.
Reclassification - Certain items in the prior years' consolidated financial
statements have been reclassified to conform with the 2001 presentation.
These reclassifications had no effect on stockholders' equity or net
earnings.
Recent Accounting Pronouncements - In July 2001, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards
No. 141. FAS 141 requires business combinations initiated after June 30,
2001 to be accounted for using the purchase method of accounting and
broadens the criteria for recording intangible assets separate from
goodwill. In October 2001, the FASB issued Statement of Financial
Accounting Standards 144, "Accounting for the Impairment or Disposal of
Long Lived Assets" ("FAS 144"), which requires long-lived assets to be
disposed of to be valued at the lower of the carrying amount or fair value
less the cost to sell the asset. The Company adopted FAS 141 beginning June
30, 2001 and will adopt FAS 144 beginning January 1, 2002. Implementation
of FAS 141 did not have a material impact on the Company's results of
operations. Implementation of FAS 144 is not expected to have a material
impact on the Company's results of operations.
Use of Estimates - Management of the Company has made a number of estimates
and assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities to prepare these
consolidated financial statements in conformity with generally accepted
accounting principles. Actual results could differ from those estimates.
Fair Value of Financial Instruments The estimated fair value of cash and
cash equivalents and accounts payable and accrued expenses approximates
carrying value because of short maturities. The estimated fair value of
long-term borrowings approximates carrying value as interest rates on the
borrowings approximate current market rates.
Implementation of Statement of Financial Accounting Standards 133 ("FAS
133") Effective January 1, 2001, the Company adopted FAS 133, Accounting
for Derivative Instruments and Hedging Activities, as amended. FAS 133
establishes accounting and reporting standards for derivative instruments
and for hedging activities by requiring all derivatives to be measured at
fair value and recognized in the balance sheet. Gains or losses resulting
from changes in the fair value of derivatives are recognized in earnings or
recorded in other comprehensive income, and recognized in the statement of
earnings when the hedged item affects earnings, depending on the purpose of
the derivatives and whether they quality for hedging accounting treatment.
The Company does not enter into or hold derivatives for trading or
speculative purposes. The Company invests in two joint ventures, accounted
for under the equity method, that have entered into interest rate hedges on
variable rate debt. The Company's joint ventures have treated these hedges
as cash flow hedges in accordance with FAS 133. Upon adoption of this
standard on January 1, 2001, the fair value of the interest rate hedges was
zero. Subsequent to the adoption of FAS 133 the Company's portion of the
increased obligation under cash flow hedges reduced the carrying amount of
the Company's investment in unconsolidated subsidiaries by $1,189,396 and
has been reflected in accumulated other comprehensive loss.
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2001, 2000 and 1999
2. Five Arrows Acquisition:
-----------------------
In 1999, the Company and Five Arrows Realty Securities II LLC ("Five
Arrows") invested a total of approximately $86 million in Hotel Investors,
resulting in the Company owning approximately 49 percent. In 2000, the
Company acquired a 22 percent interest in Hotel Investors from Five Arrows
for approximately $26.3 million, resulting in the Company owning
approximately 71 percent of Hotel Investors. The results of Hotel
Investors, which owns seven hotel Properties, have been consolidated with
those of the Company since October 1, 2000. The net assets of Hotel
Investors at September 30, 2000 were as follows:
Cash $ 8,445,237
Other assets 162,787,701
Liabilities (91,079,932)
-----------------
Net assets $ 80,153,006
=================
In June 2001, the Company acquired the remaining 29 percent of Hotel
Investors for approximately $32.9 million. This transaction was accounted
for under the purchase method of accounting. The purchase price
approximated the fair value of the net assets acquired.
The following presents unaudited pro forma information on the results of
operations for the years ended December 31, 2001 and 2000 for the Company
as if the acquisition had taken place on January 1, 1999:
2001 2000
-------------- --------------
Revenues 71,462,544 $47,676,054
Expenses 43,892,956 22,945,999
Net earnings 20,334,804 21,767,326
Basic EPS 0.32 0.56
Diluted EPS 0.32 0.56
3. Investment in Unconsolidated Subsidiaries:
-----------------------------------------
Desert Ridge Joint Venture. In December 2000, the Company acquired a 44
percent interest in Desert Ridge Resort Partners, LLC (the "Desert Ridge
Joint Venture"), a joint venture with an affiliate of Marriott
International, Inc. and a partnership in which an affiliate of the Advisor
is the general partner. The Desert Ridge Joint Venture owns the Desert
Ridge Marriott Resort & Spa in Phoenix, Arizona (the "Desert Ridge
Property"), which is currently under construction. As of December 31, 2001,
the Company had made an initial capital contribution of approximately $8.8
million of its anticipated $25 million investment in the Desert Ridge Joint
Venture. The total cost of the Desert Ridge Property is estimated to be
$298 million. The Desert Ridge Property is secured by a mortgage of $179
million (the "Desert Ridge Mortgage"), which is scheduled to mature on
December 15, 2007. Although this resort property is currently under
construction, limited operations for the year ended December 31, 2001
resulted from a golf course located on the premises. Development of a
second golf course was completed and the course began operations in January
2002.
A portion of the Desert Ridge Mortgage bears interest at an annual rate of
185 basis points above three-month London Interbank Offered Rate (the
"LIBOR"). The Desert Ridge Joint Venture has entered into an interest rate
swap agreement (the "DRR Swap") to effectively convert the variable rate
portion of this mortgage to a fixed rate of 6.025 percent per annum. The
DRR Swap is being accounted for as a cash flow hedge. All terms of the DRR
Swap are identical to the terms of the underlying mortgage. The blended
interest rate on the aggregate principal amount of the $179 million
mortgage notes, including interest rate, swap costs, premiums for a debt
service insurance policy, and amortization of loan costs is approximately
10.13 percent per annum.
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2001, 2000 and 1999
3. Investment in Unconsolidated Subsidiaries - Continued:
-----------------------------------------------------
The following presents unaudited condensed financial information for the
Desert Ridge Joint Venture as of December 31:
2001 2000
-------------- --------------
Land, buildings and equipment, net $133,500,314 $43,803,084
Other assets 82,644,318 160,908,771
Mortgage and other notes payable 181,884,596 179,000,000
Other liabilities 26,969,771 9,800,036
Members' equity 7,290,265 15,911,819
Revenues 8,153,952 --
Cost of sales 2,235,307 --
Operating expenses 13,830,223 --
Net loss (7,911,578) --
Comprehensive loss (11,102,816) --
Waikiki Partnership. In July 2001, the Company acquired a 49 percent
interest in WB Resort Partners, L.P. (the "Waikiki Partnership"), a joint
venture with an affiliate of Marriott International, Inc. and a partnership
in which an affiliate of the Advisor is the general partner. The Waikiki
Partnership owns the Waikiki Beach Marriott in Honolulu, Hawaii (the
"Waikiki Property"), which is currently undergoing significant renovations.
As of December 31, 2001, the Company had made total capital contributions
of approximately $27.7 million of its anticipated $42 million investment in
the Waikiki Partnership. The total cost of the Waikiki Property is
estimated to be $215 million. The Waikiki Property is secured by a mortgage
in the amount of $130,000,000, which matures on August 15, 2006 and bears
annual interest at a rate of 8.53 percent. Although this resort property is
currently undergoing significant renovations, it has remained partially
open. Operations for the year ended December 31, 2001 resulted from the
operations of the open portion of the resort.
The following presents unaudited condensed financial information for the
Waikiki Partnership as of December 31, 2001:
Land, buildings and equipment, net $ 186,884,885
Other assets 9,069,876
Mortgage payable other notes payable 137,749,752
Other liabilities 18,196,841
Partners' equity 40,008,168
Revenues 10,166,841
Cost of sales 5,508,417
Operating expenses 13,988,956
Net loss (9,330,532)
Hilton Partnership. The Company and Hilton Hotels Corporation ("Hilton")
formed a partnership (the "Hilton Partnership") of which the Company owns a
70 percent interest and Hilton owns a 30 percent interest. The Hilton
Partnership owns four Properties: the Miami, Florida Property and the Costa
Mesa, California Property, which were contributed by the Company, and the
Auburn Hills, Michigan Property and the Portland, Oregon Property, which
were contributed by Hilton. The total value of the four Properties
contributed was valued at approximately $215,929,000. The Hilton
Partnership intends to spend approximately $21,000,000 for renovations to
the Miami, Florida and Costa Mesa, California Properties.
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2001, 2000 and 1999
3. Investment in Unconsolidated Subsidiaries - Continued:
-----------------------------------------------------
The Hilton Partnership's Properties are encumbered by a $100,000,000
mortgage, which has a term of five years and bears annual interest at a
variable rate equal to 230 basis points above 30-day LIBOR subject to a
three-year cap of 8.30 percent and a floor of 4.96 percent. The Company
intends to purchase an additional interest rate cap for the last two years
of the Hilton Mortgage term, prior to the maturity of the Hilton Cap. The
average annual interest rate incurred during the year ended December 31,
2001 was 4.96 percent.
The following presents unaudited condensed financial information for the
Hilton Partnership as of December 31, 2001:
Land, buildings and equipment, net $213,278,530
Other assets 10,573,028
Mortgages payable 100,000,000
Other liabilities 4,940,228
Partners' equity 118,911,330
Revenues 17,042,928
Cost of sales 7,094,949
Operating expenses 9,219,402
Net income 728,577
Comprehensive income 986,123
Interstate Partnership. On November 19, 2001, the Company and a subsidiary
of Interstate Property Corporation ("Interstate") formed a partnership (the
"Interstate Partnership") of which the Company owns an 85 percent interest
and Interstate owns a 15 percent interest. The Interstate Partnership owns
two Properties in Manchester, Connecticut. The total value of the
Properties obtained was approximately $20,372,000. One of the Properties is
secured by a mortgage of approximately $6,736,000, which was assumed by the
Interstate Partnership. The mortgage matures on January 1, 2011 and bears
annual interest of 8.32 percent.
The following presents unaudited condensed financial information for the
Interstate Partnership as of December 31, 2001:
Land, buildings and equipment, net $ 21,049,569
Other assets 571,152
Mortgage payable 6,723,384
Other liabilities 249,912
Partners' equity 14,647,425
Revenues 510,505
Cost of sales 174,607
Operating expenses 408,496
Net loss (72,598)
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2001, 2000 and 1999
4. Land, Buildings and Equipment:
-----------------------------
During the year ended December 31, 2001, the Company acquired seven
Properties throughout the United States, including one Property which is
under construction, resulting in a total of 43 Properties directly or
indirectly owned (35 directly and eight through joint ventures).
Substantially all of the Properties directly owned by the Company are
pledged as collateral to secure mortgage or other long-term financing.
Land, buildings and equipment consist of the following at December 31:
2001 2000
-------------- -------------
Land $ 106,173,723 $ 93,758,025
Buildings 521,230,538 446,132,337
Equipment 59,937,057 46,050,378
-------------- -------------
687,341,318 585,940,740
Less accumulated depreciation (29,182,487) (9,433,790)
Construction in progress 41,081,128 5,021,978
-------------- -------------
$ 699,239,959 $581,528,928
============== =============
At December 31, 2001, the Company leased substantially all of its land,
building and equipment to third parties lessees. The lease terms generally
range from five to 20 years and generally provide for minimum base annual
rental payments ranging from approximately $716,000 to $6,500,000. Lease
options allow the tenants to renew each of the leases for two to five
successive five-year to ten-year periods subject to the same terms and
conditions of the initial leases. In addition, the tenant pays all property
taxes and assessments and carries insurance coverage for public liability,
property damage, fire and extended coverage. Certain of the leases also
provide for increases in annual base rent. In addition to annual base rent,
the tenant may pay contingent rent computed as a percentage of gross sales
of the Property. No such contingent rent has been earned as of December 31,
2001, 2000 or 1999.
The following is a schedule of future minimum lease payments to be received
on the noncancellable operating leases at December 31, 2001:
2002 $ 74,985,725
2003 76,162,610
2004 76,162,610
2005 76,162,610
2006 76,162,610
Thereafter 611,638,925
----------------
$ 991,275,090
================
5. Prepaid Expenses and Other Assets:
---------------------------------
Other assets as of December 31, 2001 and 2000 were $ 6,796,398 and
$5,811,304, respectively, and consist primarily of acquisition fees and
expenses relating to Properties the Company intends to acquire.
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2001, 2000 and 1999
6. Indebtedness:
------------
On September 14, 2001, the Company obtained a revolving line of credit (the
"Revolving LOC") to fund acquisition and development of Properties and
investments in Mortgage Loans and Secured Equipment Leases. Under the terms
of the Revolving LOC, the Company is entitled to receive cash advances of
up to approximately $96.7 million for a five-year period. Interest payments
are due monthly with principal payments of $1,000 due at the end of each
loan year. Advances under the Revolving LOC bear interest at an annual rate
of 225 basis points above 30-day LIBOR (4.10 percent as of December 31,
2001) and are collateralized by certain hotel Properties. At December 31,
2001, $7,500,000 was outstanding under the Revolving LOC.
At December 31, 2001 and 2000, indebtedness collateralized by Properties,
consisted of:
December 31, 2001 December 31, 2000
--------------------- ---------------------
Mortgages payable, bearing interest rates ranging from 7.50
percent to 7.75 percent, with total monthly principal and
interest payments of $665,619, maturing July 31, 2009 $ 86,151,860 $ 87,555,326
Mortgages payable, bearing interest of 8.335 percent, with
monthly interest only payments of approximately $347,000,
maturing December 1, 2007 50,000,000 50,000,000
Mortgage payable, bearing interest of 8.29 percent, with
monthly principal and interest payments of $257,116,
maturing December 1, 2007 32,732,022 32,500,000
Construction loan facility for up to $55 million in
borrowings, bearing interest of London Interbank Offered
Rate ("LIBOR") plus 275 basis points, with monthly payments
of interest only, maturing November 15, 2003 42,118,898 9,897,341
Construction loan for up to $17 million in borrowings,
bearing interest of LIBOR plus 300 basis points, with
monthly payments of interest only, maturing September 15,
2003 5,768,173 --
Tax Increment Financing Note, bearing interest of 12.85
percent, with principal and interest payments made by
incremental property tax payments paid by tenant,
maturing December 1, 2017 9,684,609 9,684,609
--------------------- ---------------------
$ 226,455,562 $ 189,637,276
===================== =====================
The majority of the Company's debt arrangements allow for repayments
earlier than the stated maturity date. The weighted average effective
interest rates on mortgages and other notes payable was approximately 6.69
percent as of December 31, 2001.
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2001, 2000 and 1999
6. Indebtedness - Continued:
------------------------
The following is a schedule of maturities for all long-term borrowings at
December 31, 2001:
2002 $ 3,136,602
2003 50,280,947
2004 2,561,298
2005 2,742,225
2006 2,869,490
Thereafter 164,865,000
----------------
Total $ 226,455,562
================
7. Stockholders' Equity:
------------------=-
On September 14, 2000, the Company commenced its third offering of up to
45,000,000 shares of common stock ($450,000,000) (the "2000 Offering"). Of
the 45,000,000 shares of common stock offered, up to 5,000,000 are
available to stockholders purchasing shares through the reinvestment plan.
As of July 1, 2001, the percentage of gross proceeds payable to the
managing dealer and its affiliates as expenses in connection with the
offering increased and is expected to remain at the higher level for the
remainder of the 2000 Offering. Since its formation, the Company has
received an initial $200,000 contribution from its Advisor and subscription
proceeds of $778,710,657 (77,871,066 shares), including $3,755,508 (375,552
shares) issued pursuant to Company's reinvestment plan.
On August 9, 2001, the Company filed a registration statement on Form S-11
with the Securities and Exchange Commission in connection with the proposed
sale by the Company of up to an additional 45,000,000 shares of common
stock ($450,000,000) (the "2002 Offering") in an offering expected to
commence immediately following the completion of the 2000 Offering. Of the
45,000,000 shares of common stock to be offered, up to 5,000,000 will be
available to stockholders purchasing shares through the reinvestment plan.
The price per share and the other terms of the 2002 Offering, including the
percentage of gross proceeds payable (i) to the managing dealer for selling
commissions and expenses in connection with the offering and (ii) to the
Advisor for acquisition fees, are substantially the same as those for the
2000 Offering for shares sold subsequent to July 1, 2001. CNL Securities
Corp., an affiliate of the Advisor, is the managing dealer for the
Company's equity offerings.
During the years ended December 31, 2001, 2000 and 1999, the Company
incurred $34,723,430, $24,808,156 and $26,632,124, respectively, in
offering costs, including $23,154,655, $16,113,399 and $18,475,145,
respectively, in commissions and marketing support and due diligence
expense reimbursement fees (see Note 8). Stock issuance costs are recorded
as a reduction in stockholders' equity.
The Company has a redemption plan such that prior to listing on a national
securities exchange or over-the-counter market, any stockholder (other than
the Advisor) may present all or any portion equal to at least 25 percent of
their shares for redemption, in accordance with the procedures outlined in
the Company's prospectus. The Company may, at its sole option, redeem the
shares to the extent it has sufficient available cash. During the years
ended December 31, 2001, 2000 and 1999, 251,373, 269,276 and 12,885 shares,
respectively, were redeemed for $2,321,634, $2,503,484 and $118,542,
respectively, and retired from shares outstanding of common stock. Shares
were redeemed for $9.20 per share.
For the years ended December 31, 2001, 2000 and 1999, approximately 52
percent, 63 percent and 75 percent, respectively, of the distributions
received by stockholders were considered to be ordinary income and
approximately 48 percent, 37 percent and 25 percent, respectively, were
considered a return of capital for federal income tax purposes. No amounts
distributed to the stockholders for the years ended December 31, 2001, 2000
and 1999 were required to be or have been treated by the Company as a
return of capital for purposes of calculating the stockholders' return on
their invested capital.
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2001, 2000 and 1999
8. Related Party Transactions:
--------------------------
Certain directors and officers of the Company hold similar positions with
the Advisor and the managing dealer, CNL Securities Corp. These affiliates
are entitled to receive fees and compensation in connection with the
offerings, and the acquisition, management and sale of the assets of the
Company.
During the years ended December 31, 2001, 2000 and 1999, the Company
incurred $21,803,780, $15,116,931 and $17,320,448 respectively, in selling
commissions due to CNL Securities Corp. for services in connection with its
offerings. A substantial portion of these amounts ($20,452,957, $14,557,335
and $16,164,488, respectively) were or will be paid by CNL Securities Corp.
as commissions to other broker-dealers.
In addition, CNL Securities Corp. is entitled to receive a marketing
support and due diligence expense reimbursement fee equal to 0.5 percent of
the total amount raised from the sale of shares, all or a portion of which
may be reallowed to other broker-dealers. During the years ended December
31, 2001, 2000 and 1999, the Company incurred $1,350,875, $1,016,468 and
$1,154,697, respectively, of such fees, the majority of which were
reallowed to other broker-dealers and from which all bona fide due
diligence expenses were paid.
CNL Securities Corp. also receives a soliciting dealer servicing fee based
upon the amount of 0.20 percent of "invested capital," as defined by the
Company's prospectus, from its first offering and the 2000 Offering. As of
December 31, 2001 and 2000, $293,002 and $300,145, respectively, of such
fees were incurred and payable at December 31, 2001 and 2000, respectively.
No fees were incurred in 1999.
The Advisor is entitled to receive acquisition fees for services in
identifying Properties and structuring the terms of leases of the
Properties and Mortgage Loans equal to 4.5 percent of the gross proceeds of
the offerings, loan proceeds from permanent financing and the line of
credit. During the years ended December 31, 2001, 2000 and 1999, the
Company incurred $21,056,878, $17,056,532 and $10,956,455, respectively, of
these fees based on offering proceeds, including $8,686,554, $8,002,944 and
$0, respectively, of debt acquisition fees.
The Advisor is entitled to receive fees in connection with the development,
construction, or renovation of a Property, generally equal to 4 percent of
project costs. During the years ended December 31, 2001 and 2000, the
Company incurred $2,107,404 and $2,125,857, respectively, of these fees. No
such fees were incurred during 1999.
The Company incurs operating expenses which, in general, are those expenses
relating to its administrations. Pursuant to the advisory agreement, the
Advisor is required to reimburse the Company the amount by which total
operating expenses exceed in any four consecutive fiscal quarters, the
greater of two percent of average invested assets or 25 percent of net
income. For the years ended December 31, 2001, 2000 and 1999, no amounts
were due from the Advisor.
The Company and the Advisor have entered into an advisory agreement
pursuant to which the Advisor receives a monthly asset management fee of
one-twelfth of 0.60 percent of the Company's real estate asset value and
the outstanding principal balance of any Mortgage Loans as of the end of
the preceding month. The management fee is limited to fees that are
competitive for similar services by third parties in the same geographic
area. During the years ended December 31, 2001, 2000 and 1999, the Company
incurred $3,326,688, $1,335,488 and $106,788, respectively, of these fees.
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2001, 2000 and 1999
8. Related Party Transactions - Continued:
--------------------------------------
The Advisor and its affiliates provide various administrative services to
the Company, including services related to accounting; financial, tax and
regulatory compliance reporting; stockholder distributions and reporting;
due diligence and marketing; and investor relations (including
administrative services in connection with the offerings), on a day-to-day
basis. The expenses incurred for these services were classified as follows:
Years Ended December 31,
2001 2000 1999
------------- ------------- -------------
Stock issuance costs $ 4,705,448 $ 3,851,925 $ 3,854,739
General operating and
administrative expenses 1,092,071 542,870 351,846
Land, buildings and equipment
on operating leases and
other assets -- -- 124
-------------- ------------- -------------
$ 5,797,519 $ 4,394,795 $ 4,206,709
============== ============= =============
The amounts due to related parties consisted of the following at December
31:
2001 2000
------------- ---------------
Due to the Advisor:
Expenditures incurred on behalf
of the Company for accounting
and administrative services $ 120,315 $ 531,220
Acquisition fees 202,178 209,254
------------- ---------------
322,493 740,474
------------- ---------------
Due to CNL Securities Corp.:
Commissions 678,061 598,899
Marketing support and due diligence
expense reimbursement fee 25,671 20,044
------------- ---------------
703,732 618,943
------------- ---------------
$ 1,026,225 $ 1,359,417
============= ===============
The Company maintains bank accounts in a bank in which certain officers and
directors of the Company serve as directors, and in which an affiliate of
the Advisor is a stockholder. The amount deposited with this bank was
$6,928,363 and $17,568,909 at December 31, 2001 and 2000, respectively.
Due from related parties at December 31, 2001 consists of $1,301,632, which
is due from an affiliate of the Advisor and $109,268 in operating
receivables, which are due from various affiliates.
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2001, 2000 and 1999
9. Concentration of Credit Risk:
----------------------------
Four of the Company's tenants contributed approximately 70 percent and 75
percent of total rental income for the years ended December 31, 2001 and
2000, respectively. In addition, a significant portion of the Company's
rental income was earned from properties operating as Marriott(R) brand
chains for the years ended December 31, 2001 and 2000. Although the Company
acquires Properties in various states and regions, carefully screens its
tenants in order to reduce risks of default and has acquired four Hilton
Properties through the Hilton Partnership, failure of these lessees or the
Marriott(R) brand chains could significantly impact the Company. Management
believes that the risk of a default is reduced by the Company's initial and
continuing due diligence procedures. It is expected that the percentage of
total rental income contribution by these lessees will decrease as
additional Properties are acquired during 2002 and subsequent years.
In addition, the hotel industry is generally characterized as being
intensely competitive. The Company's Properties do, and are expected to in
the future, compete with independently owned hotels, hotels which are part
of local or regional chains, and hotels in other well-known national
chains, including those offering different types of accommodations.
Additionally, any general downturn in the domestic hotel market could have
a negative impact on the Company's operations.
10. Earnings Per Share:
------------------
Basic EPS is computed by dividing income available to common stockholders
by the weighted average number of common shares outstanding for the period.
Diluted EPS reflects the potential dilution that could occur if other
contracts to issue common stock were exercised and shared in the earnings
of the Company. For the years ended December 31, 2001, 2000 and 1999,
approximately 7.2 million and 5.5 million shares, respectively, were
considered dilutive after the application of the "if converted method" and
were included in the denominator of the diluted EPS calculation. For the
year ended December 31, 2001, approxiamately 1.8 million shares relating to
potentially dilutive securities were anti-dilutive and were excluded from
the calculation.
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2001, 2000 and 1999
10. Earnings Per Share - Continued:
------------------------------
The following represents the calculation of earnings per share and the
weighted average number of shares of potentially dilutive common stock for
the years ended December 31, 2001, 2000 and 1999:
2001 2000 1999
-------------- -------------- --------------
Basic Earnings Per Share:
Net earnings $ 19,328,376 $ 20,670,462 $ 7,515,988
============== ============== ==============
Weighted average number of shares outstanding 64,457,643 38,698,066 15,890,212
============== ============== ==============
Basic earnings per share $ 0.30 $ 0.53 $ 0.47
============== ============== ==============
Diluted Earnings Per Share:
Net earnings $ 19,328,376 $ 20,670,462 $ 7,515,988
Additional income attributable to investment in
unconsolidated subsidiary assuming all
Preferred Shares were converted -- 3,563,543 2,129,899
-------------- -------------- --------------
Adjusted net earnings assuming dilution $ 19,328,376 $ 24,234,005 $ 9,645,887
============== ============== ==============
Weighted average number of shares outstanding 64,457,643 38,698,066 15,890,212
Assumed conversion of Preferred Stock -- 7,187,676 5,547,647
-------------- -------------- --------------
Adjusted weighted average number of
shares outstanding 64,457,643 45,885,742 21,437,859
============== ============== ==============
Diluted earnings per share $ 0.30 $ 0.53 $ 0.45
============== ============== ==============
11. Commitments and Contingencies:
-----------------------------
In connection with the acquisition of an 89 percent interest in the CNL
Philadelphia Annex, LLC, the Company and the minority interest holder each
have the right to obligate the other to sell or buy, respectively, the 11
percent interest in CNL Philadelphia Annex, LLC. These rights are effective
five years after the hotel's opening, which is planned for November 2004.
In connection with the purchase of two Properties in June 2000, the Company
may be required to make an additional payment (the "Earnout Provision") not
to exceed $2,471,500 if certain earnout provisions are achieved by June 1,
2003. As of December 31, 2001, no such amounts were payable under this
agreement.
From time to time the Company may be exposed to litigation arising from the
operation of its business. Management does not believe that resolutions of
these matters will have a material adverse effect on the Company's
financial condition or results of operations.
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2001, 2000 and 1999
11. Commitments and Contingencies - Continued:
-----------------------------------------
The Company has commitments to (i) acquire three hotel Properties for an
anticipated aggregate purchase price of approximately $90 million, (ii) to
invest approximately $15 million in two new joint ventures, (iii) to fund
the remaining total of $31 million in the Desert Ridge Joint Venture and
the Waikiki Partnership, and (iv) to acquire a 10 percent interest in a
limited partnership that owns an office building located in Orlando,
Florida, in which the Advisor and its affiliates lease office space for
approximately $300,000, and (v) to fund the development of a new hotel
Property for approximately $88 million. The Company also has committed to
fund its prorata share of working capital shortfalls and construction
commitments for the Hilton Partnership and Interstate Partnership if
shortfalls arise, and has guaranteed the debt service for several of its
subsidiaries and partnerships. The acquisition of each of these additional
Properties is subject to the fulfillment of certain conditions. In order to
acquire these Properties, the Company must obtain additional funds through
the receipt of additional offering proceeds and/or advances on the
Revolving LOC. There can be no assurance that any or all of the conditions
will be satisfied or, if satisfied, that one or more of these Properties
will be acquired by the Company.
12. Selected Quarterly Financial Data:
---------------------------------
The following table presents selected unaudited quarterly financial data
for each full quarter during the years ended December 31, 2001 and 2000:
2001 Quarter First Second Third Fourth Year
------------ -------------- -------------- -------------- --------------- ---------------
Revenue $16,713,199 $18,202,364 $19,029,243 $17,517,738 $71,462,544
Net income 5,529,222 7,058,222 3,890,425 2,850,507 19,328,376
Earnings per share:
Basic 0.11 0.12 0.06 0.01 0.30
Diluted 0.11 0.12 0.06 0.01 0.30
2000 Quarter First Second Third Fourth Year
------------ -------------- -------------- -------------- --------------- ---------------
Revenue $5,581,157 $6,690,682 $8,540,296 $ 15,287,084 $ 36,099,219
Net income 3,945,084 4,642,940 5,251,624 6,830,814 20,670,462
Earnings per share:
Basic 0.13 0.13 0.13 0.14 0.53
Diluted 0.12 0.13 0.13 0.15 0.53
13. Subsequent Events:
-----------------
During the period January 1, 2002 through January 25, 2002, the Company
received subscription proceeds for an additional 1,589,242 shares
($15,892,422) of common stock.
On January 1, 2002, the Company declared distributions totaling $4,998,298,
or $0.064583 per share, of common stock, payable in March 2002, to
stockholders of record on January 1, 2002.
On January 18, 2002, the Company acquired a SpringHill Suites(TM) by
Marriott(R) and a Townplace Suites(TM) by Marriott(R), both located in
Manhattan Beach, California and a SpringHill Suites(TM) by Marriott(R)
located in Plymouth Meeting, Pennsylvania for approximately $62 million.
The Company plans to operate these Properties using Marriott, an
independent third party manager.
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2001, 2000 and 1999
13. Subsequent Events - Continued:
-----------------------------
On January 18, 2002, the Company acquired a 25 percent interest in a joint
venture with Publications International, Ltd. ("PIL"), Hilton, and Marriott
that owns a 77.5 percent interest in a joint venture with Exxon Mobil
Corporation and PIL ("EMTG"). EMTG owns the licensing rights to the Mobil
Travel Guide. The licensing rights entitle EMTG to assemble, edit, publish
and sell the Mobil Travel Guide and use such rights to generate additional
products using the Mobil Travel Guide brand. The Company's total capital
contribution will be $3.4 million, of which $1,787,500 was funded on
January 18, 2002 with the remainder to be funded by June 30, 2002.
On February 22, 2002, the Company took assignment of its leases with
Western International, Inc. for seven Hotel Investors' Properties.
Effective January 1, 2002, these Properties will be operated by the Company
using affiliates of Marriott as an independent third party manager and the
operations of these Properties will be reflected in the results of the
Company. The Company paid consideration of approximately $54,000 for this
assignment.
The Company currently is seeking additional Properties.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The information required by this Item is incorporated by reference to the
Company's Definitive Proxy Statement to be filed with the Commission no later
than April 30, 2002.
Item 11. Executive Compensation
The information required by this Item is incorporated by reference to the
Company's Definitive Proxy Statement to be filed with the Commission no later
than April 30, 2002.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this Item is incorporated by reference to the
Company's Definitive Proxy Statement to be filed with the Commission no later
than April 30, 2002.
Item 13. Certain Relationships and Related Transactions
The information required by this Item is incorporated by reference to the
Company's Definitive Proxy Statement to be filed with the Commission no later
than April 30, 2002.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are filed as part of this report.
1. Consolidated Financial Statements
Report of Independent Certified Public Accountants
Consolidated Balance Sheets at December 31, 2001 and 2000
Consolidated Statements of Earnings for the years ended December 31,
2001, 2000 and 1999
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 2001, 2000 and 1999
Consolidated Statements of Cash Flows for the years ended December 31,
2001, 2000 and 1999
Notes to Consolidated Financial Statements
2. Financial Statement Schedules
Schedule III - Real Estate and Accumulated Depreciation at December
31, 2001
Notes to Schedule III - Real Estate and Accumulated Depreciation at
December 31, 2001
All other Schedules are omitted as the required information is
inapplicable or is presented in the financial statements or notes
thereto.
3. Exhibits
(a) Exhibits
3.1 CNL-American Realty Fund, Inc. Amended and Restated Articles
of Incorporation (Previously filed as Exhibit 3.2 to the
Registrant's Registration Statement on Form S-11 (Registration
No. 333-9943) (the "1996 Form S-11") and incorporated herein by
reference.)
3.2 CNL American Realty Fund, Inc. Bylaws (Previously filed as
Exhibit 3.3 to the 1996 Form S-11 and incorporated herein by
reference.)
3.3 CNL American Realty Fund, Inc. Articles of Amendment to the
Amended and Restated Articles of Incorporation dated June 3, 1998
(Previously filed as Exhibit 3.4 to the 1996 Form S-11 and
incorporated herein by reference.)
3.4 Articles of Amendment to the Amended and Restated Articles of
Incorporation of CNL Hospitality Properties, Inc. dated May 26,
1999 (Previously filed as Exhibit 3.5 to the Registrant's
Registration Statement on Form S-11 (Registration No. 333-67787)
(the 1998 Form S-11") and incorporated herein by reference.)
3.5 Articles of Amendment to the Amended and Restated Articles of
Incorporation of CNL Hospitality Properties, Inc. dated June 27,
2000 (Previously filed as Exhibit 3.6 to the Registrant's
Registration Statement on Form S-11 (File No. 333-89691) (the
"1999 Form S-11") and incorporated by reference).
3.6 Amendment No. 1 to the Bylaws of CNL Hospitality Properties,
Inc. (Previously filed as Exhibit 3.7 to the 1999 Form S-11 and
incorporated herein by reference.)
3.7 Amendment No. 2 to the Bylaws of CNL Hospitality Properties,
Inc. (Previously filed as Exhibit 3.8 to the 1999 Form S-11 and
incorporated herein by reference.)
4.1 Reinvestment Plan (Previously filed as Exhibit 4.4 to the
1996 Form S-11 and incorporated herein by reference.)
4.2 CNL-American Realty Fund, Inc. Amended and Restated Articles
of Incorporation (Previously filed as Exhibit 3.2 to the 1996
Form S-11 and incorporated herein by reference.)
4.3 CNL American Realty Fund, Inc. Bylaws (Previously filed as
Exhibit 3.3 to the 1996 Form S-11 and incorporated herein by
reference.)
4.4 Articles of Amendment to the Amended and Restated Articles of
Incorporation of CNL American Realty Fund, Inc. dated June 3,
1998 (Previously filed as Exhibit 3.4 to the 1996 Form S-11 and
incorporated herein by reference.)
4.5 Articles of Amendment to the Amended and Restated Articles of
Incorporation of CNL Hospitality Properties, Inc. dated May 26,
1999 (Previously filed as Exhibit 3.5 to the 1998 Form S-11 and
incorporated herein by reference.)
4.6 Articles of Amendment to the Amended and Restated Articles of
Incorporation of CNL Hospitality Properties, Inc. dated June 27,
2000 (Previously filed as Exhibit 3.6 to the 1999 Form S-11 and
incorporated herein by reference.)
4.7 Amendment No. 1 to the Bylaws of CNL Hospitality Properties,
Inc. (Previously filed as Exhibit 3.7 to the 1999 Form S-11 and
incorporated herein by reference.)
4.8 Amendment No. 2 to the Bylaws of CNL Hospitality Properties,
Inc. (Previously filed as Exhibit 3.8 to the 1999 Form S-11 and
incorporated herein by reference.)
10.1 Advisory Agreement dated as of June 17, 2001, between CNL
Hospitality Properties, Inc. and CNL Hospitality Corp.
(Previously filed as Exhibit 10.2 to the 1999 Form S-11
Registration No. 333-89691) (the "1999 Form S-11") and
incorporated herein by reference.)
10.2 Indemnification Agreement between CNL Hospitality
Properties, Inc. and Lawrence A. Dustin dated February 24, 1999.
Each of the following directors and/or officers has signed a
substantially similar agreement as follows: James M. Seneff, Jr.,
Robert A. Bourne, G. Richard Hostetter, J. Joseph Kruse, Richard
C. Huseman, Charles A. Muller, Jeanne A. Wall and Lynn E. Rose,
dated July 9, 1997; C. Brian Strickland dated October 31, 1998;
John A. Griswold, dated January 7, 1999; Charles E. Adams and
Craig M. McAllaster, dated February 10, 1999; Matthew W. Kaplan
dated February 24, 1999; and Thomas J. Hutchison III dated May
16, 2000 (Previously filed as Exhibit 10.2 to the Form 10-Q filed
on May 17, 1999 and incorporated herein by reference.)
10.3 Agreement of Limited Partnership of CNL Hospitality
Partners, LP (Previously filed as Exhibit 10.10 to the 1996 Form
S-11 and incorporated herein by reference.)
10.4 Hotel Purchase and Sale Contract between CNL Real Estate
Advisors, Inc. and Gwinnett Residence Associates, LLC, relating
to the Residence Inn - Gwinnett Place (Previously filed as
Exhibit 10.11 to the 1996 Form S-11 and incorporated herein by
reference.)
10.5 Assignment and Assumption Agreement between CNL Real Estate
Advisors, Inc. and CNL Hospitality Partners, LP, relating to the
Residence Inn - Gwinnett Place (Previously filed as Exhibit 10.12
to the 1996 Form S-11 and incorporated herein by reference.)
10.6 Hotel Purchase and Sale Contract between CNL Real Estate
Advisors, Inc. and Buckhead Residence Associates, LLC, relating
to the Residence Inn - Buckhead (Lenox Park) (Previously filed as
Exhibit 10.13 to the 1996 Form S-11 and incorporated herein by
reference.)
10.7 Assignment and Assumption Agreement between CNL Real Estate
Advisors, Inc. and CNL Hospitality Partners, LP, relating to the
Residence Inn - Buckhead (Lenox Park) (Previously filed as
Exhibit 10.14 to the 1996 Form S-11 and incorporated herein by
reference.)
10.8 Lease Agreement between CNL Hospitality Partners, LP and STC
Leasing Associates, LLC, dated August 1, 1998, relating to the
Residence Inn - Gwinnett Place (Previously filed as Exhibit 10.15
to the 1996 Form S-11 and incorporated herein by reference.)
10.9 Lease Agreement between CNL Hospitality Partners, LP and STC
Leasing Associates, LLC, dated August 1, 1998, relating to the
Residence Inn - Buckhead (Lenox Park) (Previously filed as
Exhibit 10.16 to the 1996 Form S-11 and incorporated herein by
reference.)
10.10 Master Revolving Line of Credit Loan Agreement with CNL
Hospitality Properties, Inc., CNL Hospitality Partners, LP and
Colonial Bank, dated July 31, 1998 (Previously filed as Exhibit
10.17 to the 1996 Form S-11 and incorporated herein by
reference.)
10.11 Master Loan Agreement by and between CNL Hotel Investors,
Inc. and Jefferson-Pilot Life Insurance Company, dated February
24, 1999 (Previously filed as Exhibit 10.18 to the 1996 Form S-11
and incorporated herein by reference.)
10.12 Securities Purchase Agreement between CNL Hospitality
Properties, Inc. and Five Arrows Realty Securities II L.L.C.,
dated February 24, 1999 (Previously filed as Exhibit 10.19 to the
1996 Form S-11 and incorporated herein by reference.)
10.13 Subscription and Stockholders' Agreement among CNL Hotel
Investors, Inc., Five Arrows Realty Securities II L.L.C., CNL
Hospitality Partners, LP and CNL Hospitality Properties, Inc.,
dated February 24, 1999 (Previously filed as Exhibit 10.20 to the
1996 Form S-11 and incorporated herein by reference.)
10.14 Registration Rights Agreement by and between CNL
Hospitality Properties, Inc. and Five Arrows Realty Securities II
L.L.C., dated February 24, 1999 (Previously filed as Exhibit
10.21 to the 1996 Form S-11 and incorporated herein by
reference.)
10.15 First Amendment to Lease Agreement between CNL Hospitality
Partners, LP and STC Leasing Associates, LLC, dated August 1,
1998, related to the Residence Inn - Gwinnett Place, (amends
Exhibit 10.8 above) and the First Amendment to Agreement of
Guaranty, dated August 1, 1998 (amends Agreement of Guaranty
attached as Exhibit I to 10.8 above) (Previously filed as Exhibit
10.8 to the Form 10-Q filed on November 10, 1999 and incorporated
herein by reference.)
10.16 First Amendment to Lease Agreement between CNL Hospitality
Partners, LP and STC Leasing Associates, LLC, dated August 1,
1998, related to the Residence Inn - Buckhead (Lenox Park)
(amends Exhibit 10.9 above) and the First Amendment to Agreement
of Guaranty, dated August 1, 1998 (amends Agreement of Guaranty
attached as Exhibit I to 10.9 above) (Previously filed as Exhibit
10.9 to the Form 10-Q filed on November 10, 1999 and incorporated
herein by reference.)
10.17 Lease Agreement between Courtyard Annex, L.L.C. and City
Center Annex Tenant Corporation, dated November 15, 1999,
relating to the Courtyard - Philadelphia (Previously filed as
Exhibit 10.22 to the 1998 Form S-11 and incorporated herein by
reference.)
10.18 First Amended and Restated Limited Liability Company
Agreement of Courtyard Annex, L.L.C., relating to the Courtyard -
Philadelphia (Previously filed as Exhibit 10.23 to the 1998 Form
S-11 and incorporated herein by reference.)
10.19 Purchase and Sale Agreement between Marriott International,
Inc., CBM Annex, Inc., Courtyard Annex, Inc., as Sellers, and CNL
Hospitality Partners, LP, as Purchaser, dated November 15, 1999,
relating to the Courtyard - Philadelphia (Previously filed as
Exhibit 10.24 to the 1998 Form S-11 and incorporated herein by
reference.)
10.20 Lease Agreement between CNL Hospitality Partners, LP, and
RST4 Tenant LLC, dated December 10, 1999, relating to the
Residence Inn - Mira Mesa (Previously filed as Exhibit 10.25 to
the 1998 Form S-11 and incorporated herein by reference.)
10.21 Purchase and Sale Agreement between Marriott International,
Inc., TownePlace Management Corporation and Residence Inn by
Marriott, Inc., as Sellers, and CNL Hospitality Partners, LP, as
Purchaser, dated November 24, 1999, relating to the Residence Inn
- Mira Mesa and the TownePlace Suites - Newark (Previously filed
as Exhibit 10.26 to the 1998 Form S-11 and incorporated herein by
reference.)
10.22 Lease Agreement between CNL Hospitality Partners, LP and
WYN Orlando Lessee, LLC, dated May 31, 2000, relating to the
Wyndham Denver Tech Center (Previously filed as Exhibit 10.29 to
the 1998 Form S-11 and incorporated herein by reference.)
10.23 Lease Agreement between CNL Hospitality Partners, LP and
WYN Orlando Lessee, LLC, dated May 31, 2000, relating to the
Wyndham Billerica (Previously filed as Exhibit 10.30 to the 1998
Form S-11 and incorporated herein by reference.)
10.24 Purchase and Sale Agreement between CNL Hospitality Corp.,
as Buyer, and WII Denver Tech, LLC and PAH Billerica Realty
Company, LLC, as Sellers, and Wyndham International, Inc.,
relating to the Wyndham Denver Tech Center and the Wyndham
Billerica (Previously filed as Exhibit 10.31 to the 1998 Form
S-11 and incorporated herein by reference.)
10.25 Lease Agreement between CNL Hospitality Partners, LP and
RST4 Tenant LLC, dated June 17, 2000, relating to the Courtyard -
Palm Desert and the Residence Inn - Palm Desert (Previously filed
as Exhibit 10.32 to the 1999 Form S-11 and incorporated by
reference).
10.26 Purchase and Sale Agreement between PDH Associates LLC, as
Seller, and CNL Hospitality Corp., as Buyer, dated January 19,
2000, relating to the Courtyard - Palm Desert and the Residence
Inn - Palm Desert (Previously filed as Exhibit 10.33 to the 1999
Form S-11 and incorporated by reference).
10.27 Amendment to Purchase and Sale Agreement between PDH
Associates LLC and CNL Hospitality Corp., dated January 19, 2000,
relating to Courtyard - Palm Desert and the Residence Inn - Palm
Desert (amends Exhibit 10.26 above) (Previously filed as Exhibit
10.34 to the 1999 Form S-11 and incorporated by reference).
10.28 Assignment Agreement between CNL Hospitality Corp. and CNL
Hospitality Partners, LP, relating to the Courtyard - Palm Desert
and the Residence Inn - Palm Desert (Previously filed as Exhibit
10.35 to the 1999 Form S-11 and incorporated by reference).
10.29 Lease Agreement between CNL Hospitality Partners, LP and
RST4 Tenant LLC, dated July 28, 2000, relating to the SpringHill
Suites - Gaithersburg (Previously filed as Exhibit 10.36 to the
1999 Form S-11 and incorporated by reference).
10.30 Purchase and Sale Agreement between SpringHill SMC
Corporation, as Seller, and CNL Hospitality Partners, LP, as
Purchaser, and joined in by Marriott International, Inc., dated
June 30, 2000, relating to the SpringHill Suites - Gaithersburg
(Previously filed as Exhibit 10.37 to the 1999 Form S-11 and
incorporated by reference).
10.31 Lease Agreement between CNL Hospitality Partners, LP and
RST4 Tenant LLC, dated July 28, 2000, relating to the Residence
Inn - Merrifield (Previously filed as Exhibit 10.38 to the 1999
Form S-11 and incorporated by reference).
10.32 Purchase and Sale Agreement between TownePlace Management
Corporation and Residence Inn by Marriott, Inc., as Sellers, and
CNL Hospitality Partners, LP, as Purchaser, and joined in by
Marriott International, Inc., dated November 24, 1999, relating
to the Residence Inn - Merrifield (Previously filed as Exhibit
10.39 to the 1999 Form S-11 and incorporated by reference).
10.33 First Amendment to Purchase and Sale Agreement between
TownePlace Management Corporation and Residence Inn by Marriott,
as Sellers, and CNL Hospitality Partners, LP, as Purchaser, and
joined in by Marriott International, Inc., dated November 24,
1999, relating to the Residence Inn - Mira Mesa, SpringHill
Suites - Gaithersburg, Residence Inn - Merrifield, and TownePlace
Suites - Newark (amends Exhibits 10.21, 10.30, and 10.32 above)
(Previously filed as Exhibit 10.40 to the 1999 Form S-11 and
incorporated by reference).
10.34 Lease Agreement between CNL Hospitality Partners, LP and
CCCL Leasing LLC, dated August 18, 2000, relating to the
Courtyard - Alpharetta (Previously filed as Exhibit 10.41 to the
1999 Form S-11 and incorporated by reference).
10.35 Lease Agreement between CNL Hospitality Partners, LP and
CCCL Leasing LLC, dated August 18, 2000, relating to the
Residence Inn - Cottonwood (Previously filed as Exhibit 10.42 to
the 1999 Form S-11 and incorporated by reference).
10.36 Lease Agreement between CNL Hospitality Partners, LP and
CCCL Leasing LLC, dated August 18, 2000, relating to the
TownePlace Suites - Mt. Laurel (Previously filed as Exhibit 10.43
to the 1999 Form S-11 and incorporated by reference).
10.37 Lease Agreement between CNL Hospitality Partners, LP and
CCCL Leasing LLC, dated August 18, 2000, relating to the
TownePlace Suites - Scarborough (Previously filed as Exhibit
10.44 to the 1999 Form S-11 and incorporated by reference).
10.38 Lease Agreement between CNL Hospitality Partners, LP and
CCCL Leasing LLC, dated August 18, 2000, relating to the
TownePlace Suites - Tewksbury (Previously filed as Exhibit 10.45
to the 1999 Form S-11 and incorporated by reference).
10.39 Purchase and Sale Agreement between Residence Inn by
Marriott, Inc., Courtyard Management Corporation, SpringHill SMC
Corporation and TownePlace Management Corporation, as Sellers,
CNL Hospitality Partners, LP, as Purchaser, CCCL Leasing LLC, as
Tenant, Crestline Capital Corporation, Marriott International,
Inc., and joined in by CNL Hospitality Properties, Inc., dated
August 18, 2000, relating to the Residence Inn - Cottonwood,
Courtyard - Alpharetta and Overland Park SpringHill Suites -
Raleigh, and TownePlace Suites - Mt. Laurel, Scarborough and
Tewksbury (Previously filed as Exhibit 10.46 to the 1999 Form
S-11 and incorporated by reference).
10.40 First Amendment to Purchase and Sale Agreement between
Residence Inn by Marriott, Inc., Courtyard Management
Corporation, SpringHill SMC Corporation and TownePlace Management
Corporation, as Sellers, CNL Hospitality Partners, LP, as
Purchaser, CCCL Leasing LLC, as tenant, Crestline Capital
Corporation, and Marriott International, Inc., dated August 18,
2000, relating to the Residence Inn - Cottonwood, Courtyard -
Alpharetta, and Overland Park SpringHill Suites - Raleigh and
TownePlace Suites - Mt. Laurel, Scarborough and Tewksbury
(Previously filed as Exhibit 10.47 to the 1999 Form S-11 and
incorporated by reference).
10.41 Lease Agreement between CNL Hospitality Partners, LP and
RST4 Tenant LLC, dated November 4, 2000, relating to the
TownePlace Suites - Newark (Previously filed as Exhibit 10.48 to
the 1999 Form S-11 and incorporated herein by reference.)
10.42 Lease Agreement between LLB C-Hotel, L.L.C. and LLB Tenant
Corporation, dated October 12, 2000, relating to the Courtyard -
Little Lake Bryan (Previously filed as Exhibit 10.49 to the 1999
Form S-11 and incorporated herein by reference.)
10.43 Lease Agreement between LLB F-Inn, L.L.C. and LLB Tenant
Corporation, dated October 12, 2000, relating to the Fairfield
Inn - Little Lake Bryan (Previously filed as Exhibit 10.50 to the
1999 Form S-11 and incorporated herein by reference.)
10.44 First Amendment to Lease Agreement between LLB C-Hotel,
L.L.C. and LLB Tenant Corporation, dated November 17, 2000,
relating to the Courtyard - Little Lake Bryan (amends Exhibit
10.42 above) (Previously filed as Exhibit 10.51 to the 1999 Form
S-11 and incorporated herein by reference.)
10.45 First Amendment to Lease Agreement between LLB F-Inn,
L.L.C. and LLB Tenant Corporation, dated November 17, 2000,
relating to the Fairfield Inn - Little Lake Bryan (amends Exhibit
10.43 above) (Previously filed as Exhibit 10.52 to the 1999 Form
S-11 and incorporated herein by reference.)
10.46 Purchase and Sale Agreement between Marriott International,
Inc., as Seller, and CNL Hospitality Partners, LP, as Purchaser,
dated September 17, 1998, relating to the Courtyard - Little Lake
Bryan, the Fairfield Inn - Little Lake Bryan and the SpringHill
Suites - Little Lake Bryan (Previously filed as Exhibit 10.53 to
the 1999 Form S-11 and incorporated herein by reference.)
10.47 Second Amendment to Lease Agreement between CNL LLB C-Hotel
Management, LP (formerly LLB C-Hotel, L.L.C.) and LLB Tenant
Corporation, dated December 15, 2000, relating to the Courtyard -
Little Lake Bryan (amends Exhibits 10.42 and 10.44 above)
(Previously filed as Exhibit 10.54 to the 1999 Form S-11 and
incorporated herein by reference.)
10.48 Second Amendment to Lease Agreement between CNL LLB F-Inn
Management, LP (formerly LLB F-Inn L.L.C.) and LLB Tenant
Corporation, dated December 15, 2000, relating to the Fairfield
Inn - Little Lake Bryan (amends Exhibits 10.43 and 10.45 above)
(Previously filed as Exhibit 10.55 to the 1999 Form S-11 and
incorporated herein by reference.)
10.49 Indenture Agreement among Desert Ridge Resort, LLC, as
Issuer; Bank One, National Association, as Trustee; and Financial
Structures Limited, as Insurer, dated December 15, 2000, relating
to the Desert Ridge Property (Previously filed as Exhibit 10.56
to the 1999 Form S-11 and incorporated herein by reference.)
10.50 Form of Lease Agreement (Previously filed as Exhibit 10.57
to the Registrant's Registration Statement on Form S-11 -
Registration No. 333-67124, the "2001 Form S-11", and
incorporated herein by reference.)
21. Subsidiaries of the Registrant (Filed herewith.)
27. Financial Data Schedule (Filed herewith.)
(b) The Registrant did not file any reports on Form 8-K during the quarter
ended December 31, 2001.
(d) Other Financial Information
The Company is required to file audited financial information of
a guarantor, Marriott International, Inc. ("Marriott"), of
several of its tenants as a result of Marriott guaranteeing lease
payments for several of the Company's tenants which leased more
than 20 percent of the Company's total assets for the year ended
December 31, 2001. Marriott is a public company and as the date
hereof, had not filed its Form 10-K; therefore, the financial
statements are not available to the Company to include in this
filing. The Company will file this financial information under
cover of a Form 10-K/A as soon as it is available.
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 4th day of
March, 2002.
CNL HOSPITALITY PROPERTIES, INC.
By: ROBERT A. BOURNE
Vice Chairman President and Treasurer
/s/ Robert A. Bourne
-----------------------------------
ROBERT A. BOURNE
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ James M. Seneff, Jr. Chairman of the Board and Chief March 4, 2002
- ----------------------------
James M. Seneff, Jr. Executive Officer (Principal
Executive Officer)
/s/ Robert A. Bourne Vice Chairman President and Treasurer March 4, 2002
- ---------------------------
Robert A. Bourne
/s/ Matthew W. Kaplan Director March 4, 2002
- ---------------------------
Matthew W. Kaplan
/s/ C. Brian Strickland Senior Vice President, Finance & March 4, 2002
- ---------------------------
C. Brian Strickland Administration (Principal Financial
and Accounting Officer)
/s/ Charles E. Adams Independent Director March 4, 2002
- ---------------------------
Charles E. Adams
/s/ Lawrence A. Dustin Independent Director March 4, 2002
- ---------------------------
Lawrence A. Dustin
/s/ John A. Griswold Independent Director March 4, 2002
- ----------------------------
John A. Griswold
/s/ Craig M. McAllaster Independent Director March 4, 2002
- ----------------------------
Craig M. McAllaster
CNL HOSPITALITY PROPERTIES, INC. AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2001
Properties the Company Costs Capitalized
has Invested in Under Initial Costs Subsequent to Acquisition
Operating Leases: -------------------------------------- --------------------------
Carrying
Encumbrances Land Buildings Equipment Improvements Costs
------------ ------------ ------------ ------------ ------------ ------------
Residence Inn by Marriott:
Atlanta, Georgia $ -- $ 1,907,479 $ 13,459,040 $ 1,270,174 $ 173,319 $ --
Duluth, Georgia -- 1,019,497 10,017,402 1,140,942 137,147 --
Orlando, Florida 30,275,405 3,532,687 -- -- 29,151,193 --
Merrifield, Virginia -- 2,621,040 15,499,358 2,011,476 (83,503) --
Palm Desert, California -- 2,186,790 14,211,931 1,375,396 4,533 --
Las Vegas, Nevada 17,311,184 3,784,463 28,809,831 1,333,202 2,023,789 --
Plano, Texas 5,758,406 1,409,287 9,876,280 682,567 724,519 --
Phoenix, Arizona 10,296,526 2,215,181 18,670,889 1,090,121 1,275,027 --
Salt Lake, Utah -- 2,329,871 11,658,677 1,479,849 4,324 --
San Diego, California -- 2,002,314 12,924,317 1,701,280 28,850 --
Courtyard by Marriott:
Alpharetta, Georgia -- 2,460,479 10,916,325 1,392,450 16,515 --
Edison, NJ 5,768,173 2,770,068 -- -- 4,108,368 --
Oakland, CA -- 3,238,826 17,607,812 1,124,658 -- --
Orlando, Florida 17,305,000 9,025,240 24,583,035 4,284,741 -- --
Overland Park, KS -- 1,419,211 13,014,165 2,316,808 -- --
Palm Desert, California -- 1,488,906 11,268,720 1,598,905 21,206 --
Philadelphia, Pennsylvania 42,416,631 7,408,660 55,819,611 5,160,389 293,611 --
Plano, Texas 6,510,287 1,686,729 10,511,792 770,295 809,923 --
Scottsdale Arizona 10,649,081 2,869,201 16,474,852 948,896 1,257,180 --
Seattle, Washington 18,370,567 7,552,190 28,558,057 1,464,447 2,487,775 --
Weston, Florida 11,843,493 1,809,838 -- -- 12,007,933 --
Marriott Suites:
Dallas, Texas 17,255,810 2,777,725 28,900,548 1,954,411 1,927,209 --
Springhill Suites:
Centerville, VA -- 1,482,115 9,431,634 1,222,799 -- --
Charlotte, NC -- 1,602,996 9,307,241 1,588,179 (144,540) --
Durham, NC -- 1,039,753 6,924,761 1,401,381 12,218 --
Gaithersburg, Maryland -- 2,592,431 11,931,078 1,683,008 (70,407) --
Orlando, Florida 17,740,000 8,749,895 26,380,932 3,716,553 -- --
Richmond, VA -- 844,603 9,367,961 830,897 -- --
TownePlace Suites:
Mount Laurel, New Jersey -- 1,223,679 6,395,420 623,253 7,290 --
Newark, California -- 2,304,707 10,828,211 1,353,030 -- --
Scarborough, Maine -- 918,734 6,108,981 611,883 11,786 --
Tewksbury, Massachusetts -- 1,059,743 7,982,137 590,519 3,410 --
Wyndham:
Billerica, Massachusetts -- 3,838,446 20,471,101 2,255,001 -- --
Denver, Colorado -- 3,882,969 13,436,260 2,094,428 -- --
Fairfield Inn:
Orlando, Florida 14,955,000 9,076,860 20,318,202 3,362,656 -- --
------------ ------------ ------------ ------------ ------------ ------------
$226,455,563 $106,132,613 $511,666,564 $ 54,434,594 $ 56,188,675 $ --
============ ============ ============ ============ ============ ============
Date
of Con- Date
Land Buildings Equipment Total Depreciation struction Acquired
------------ ------------- ------------- ------------ ------------- --------- --------
$ 1,913,900 $ 13,504,345 $ 1,391,767 $ 16,810,012 $ 1,789,595 1997 Aug-98
1,022,920 10,051,037 1,241,031 12,314,988 1,433,546 1997 Aug-98
3,532,687 -- 3,335,648 32,683,880 -- 2002 Feb-02
2,609,542 15,431,362 2,007,468 20,048,372 951,941 2000 Jul-00
2,186,790 14,211,931 1,379,929 17,778,650 827,822 1999 Jun-00
4,319,014 30,126,172 1,506,099 35,951,285 1,219,707 1998 Feb-99
1,608,347 10,327,414 756,892 12,692,653 471,264 1998 Feb-99
2,528,072 19,517,746 1,205,400 23,251,218 803,908 1999 Jun-99
2,329,926 11,658,956 1,483,839 15,472,721 670,663 1999 Aug-00
2,002,314 12,924,317 1,730,130 16,656,761 1,180,676 1999 Dec-99
2,460,595 10,916,842 1,408,331 14,785,768 630,449 2000 Aug-00
2,770,068 -- -- 6,878,437 -- 2002 Jul-02*
3,238,826 17,607,812 1,124,658 21,971,296 -- 2001 Dec-01
9,025,240 24,583,035 4,284,741 37,893,016 1,373,202 2000 Nov-00
1,419,211 13,014,165 2,316,808 16,750,184 601,633 2000 Feb-01
1,488,906 11,268,720 1,620,111 14,377,737 766,165 1999 Jun-00
4,405,982 58,878,490 5,397,800 68,682,271 4,705,198 1999 Nov-99
1,924,977 10,991,880 861,882 13,778,739 513,132 1998 Feb-99
3,274,472 17,221,808 1,053,849 21,550,129 707,440 1999 Jun-99
8,618,928 29,852,202 1,591,339 40,062,469 1,183,928 1999 Jun-99
1,813,062 -- 847,495 13,817,771 -- 2002 Feb-02
3,170,076 30,221,096 2,168,721 35,559,893 1,350,339 1998 Feb-99
1,482,115 9,431,634 1,222,799 12,136,548 307,857 2000 Mar-01
1,602,996 9,307,241 1,443,639 12,353,875 344,673 2001 Mar-01
1,039,753 6,924,761 1,413,599 9,378,114 342,934 2000 Feb-01
2,581,008 11,878,503 1,676,600 16,136,111 759,829 2000 Jul-00
8,749,895 26,380,932 3,716,553 38,847,380 1,238,462 2000 Dec-00
844,603 9,367,961 830,897 11,043,461 -- 2001 Dec-01
1,224,035 6,397,283 628,324 8,249,642 332,383 1999 Aug-00
2,304,707 10,828,211 1,353,030 14,485,948 541,322 2000 Nov-00
822,710 6,196,767 631,907 7,651,384 325,062 1999 Aug-00
1,059,771 7,982,351 593,686 9,635,808 377,006 1999 Aug-00
3,838,446 20,471,101 2,255,001 26,564,548 1,320,375 1999 Jun-00
3,882,969 13,436,260 2,094,428 19,413,657 1,005,593 1999 Jun-00
9,076,860 20,318,202 3,362,656 32,757,718 1,106,386 2000 Nov-00
- ------------- ------------- ------------- ------------ -------------
$ 106,173,723 $ 521,230,538 $ 59,937,057 $728,422,446 $ 29,182,487
============= ============= ============= ============ =============
*Estimated completion date (property under construction)
(1) Transactions in real estate and accumulated depreciation during 2001, 2000
and 1999 are summarized as follows:
Accumulated
Cost(2)(4) Depreciation
------------- ------------
Properties the Company has Invested
in Under Operating Leases:
Balance, December 31, 1998 $ 28,752,549 $ 384,166
Acquisitions 85,078,556 --
Depreciation expense (3) -- 1,219,168
------------- ------------
Balance, December 31, 1999 113,831,105 1,603,334
Acquisitions 477,131,613 --
Depreciation expense (3) -- 7,830,456
------------- ------------
Balance, December 31, 2000 590,962,718 9,433,790
Acquisitions 137,459,728 --
Depreciation expense (3) -- 19,748,697
------------- ------------
Balance, December 31, 2001 $728,422,446 $29,182,487
============= ============
(2) As of December 31, 2001, 2000 and 1999, the aggregate cost of the
Properties owned by the Company and its subsidiaries for federal income tax
purposes was $728,422,446, $590,962,718 and $113,831,105, respectively. All
of the leases are treated as operating leases for federal income tax
purposes.
(3) Depreciation expense is computed for buildings and equipment based upon
estimated lives of 40 and seven years, respectively.
(4) During the years ended December 31, 2001, 2000 and 1999, the Company
incurred acquisition fees totaling $5,473,005, $16,182,043 and $4,470,836,
respectively, paid to the Advisor. Acquisition fees are included in land
and buildings on operating leases at December 31, 2001, 2000 and 1999.
EXHIBIT INDEX
Exhibit Number
3.1 CNL-American Realty Fund, Inc. Amended and Restated Articles
of Incorporation (Previously filed as Exhibit 3.2 to the
Registrant's Registration Statement on Form S-11 (Registration
No. 333-9943) (the "1996 Form S-11") and incorporated herein by
reference.)
3.2 CNL American Realty Fund, Inc. Bylaws (Previously filed as
Exhibit 3.3 to the 1996 Form S-11 and incorporated herein by
reference.)
3.3 CNL American Realty Fund, Inc. Articles of Amendment to the
Amended and Restated Articles of Incorporation dated June 3, 1998
(Previously filed as Exhibit 3.4 to the 1996 Form S-11 and
incorporated herein by reference.)
3.4 Articles of Amendment to the Amended and Restated Articles of
Incorporation of CNL Hospitality Properties, Inc. dated May 26,
1999 (Previously filed as Exhibit 3.5 to the Registrant's
Registration Statement on Form S-11 (Registration No. 333-67787)
(the 1998 Form S-11") and incorporated herein by reference.)
3.5 Articles of Amendment to the Amended and Restated Articles of
Incorporation of CNL Hospitality Properties, Inc. dated June 27,
2000 (Previously filed as Exhibit 3.6 to the Registrant's
Registration Statement on Form S-11 (File No. 333-89691) (the
"1999 Form S-11") and incorporated by reference).
3.6 Amendment No. 1 to the Bylaws of CNL Hospitality Properties,
Inc. (Previously filed as Exhibit 3.7 to the 1999 Form S-11 and
incorporated herein by reference.)
3.7 Amendment No. 2 to the Bylaws of CNL Hospitality Properties,
Inc. (Previously filed as Exhibit 3.8 to the 1999 Form S-11 and
incorporated herein by reference.)
4.1 Reinvestment Plan (Previously filed as Exhibit 4.4 to the
1996 Form S-11 and incorporated herein by reference.)
4.2 CNL-American Realty Fund, Inc. Amended and Restated Articles
of Incorporation (Previously filed as Exhibit 3.2 to the 1996
Form S-11 and incorporated herein by reference.)
4.3 CNL American Realty Fund, Inc. Bylaws (Previously filed as
Exhibit 3.3 to the 1996 Form S-11 and incorporated herein by
reference.)
4.4 Articles of Amendment to the Amended and Restated Articles of
Incorporation of CNL American Realty Fund, Inc. dated June 3,
1998 (Previously filed as Exhibit 3.4 to the 1996 Form S-11 and
incorporated herein by reference.)
4.5 Articles of Amendment to the Amended and Restated Articles of
Incorporation of CNL Hospitality Properties, Inc. dated May 26,
1999 (Previously filed as Exhibit 3.5 to the 1998 Form S-11 and
incorporated herein by reference.)
4.6 Articles of Amendment to the Amended and Restated Articles of
Incorporation of CNL Hospitality Properties, Inc. dated June 27,
2000 (Previously filed as Exhibit 3.6 to the 1999 Form S-11 and
incorporated herein by reference.)
4.7 Amendment No. 1 to the Bylaws of CNL Hospitality Properties,
Inc. (Previously filed as Exhibit 3.7 to the 1999 Form S-11 and
incorporated herein by reference.)
4.8 Amendment No. 2 to the Bylaws of CNL Hospitality Properties,
Inc. (Previously filed as Exhibit 3.8 to the 1999 Form S-11 and
incorporated herein by reference.) 10.1 Advisory Agreement dated
as of June 17, 2001, between CNL Hospitality Properties, Inc. and
CNL Hospitality Corp. (Previously filed as Exhibit 10.2 to the
1999 Form S-11 Registration No. 333-89691) (the "1999 Form S-11")
and incorporated herein by reference.)
10.2 Indemnification Agreement between CNL Hospitality
Properties, Inc. and Lawrence A. Dustin dated February 24, 1999.
Each of the following directors and/or officers has signed a
substantially similar agreement as follows: James M. Seneff, Jr.,
Robert A. Bourne, G. Richard Hostetter, J. Joseph Kruse, Richard
C. Huseman, Charles A. Muller, Jeanne A. Wall and Lynn E. Rose,
dated July 9, 1997; C. Brian Strickland dated October 31, 1998;
John A. Griswold, dated January 7, 1999; Charles E. Adams and
Craig M. McAllaster, dated February 10, 1999; Matthew W. Kaplan
dated February 24, 1999; and Thomas J. Hutchison III dated May
16, 2000 (Previously filed as Exhibit 10.2 to the Form 10-Q filed
on May 17, 1999 and incorporated herein by reference.)
10.3 Agreement of Limited Partnership of CNL Hospitality
Partners, LP (Previously filed as Exhibit 10.10 to the 1996 Form
S-11 and incorporated herein by reference.)
10.4 Hotel Purchase and Sale Contract between CNL Real Estate
Advisors, Inc. and Gwinnett Residence Associates, LLC, relating
to the Residence Inn - Gwinnett Place (Previously filed as
Exhibit 10.11 to the 1996 Form S-11 and incorporated herein by
reference.)
10.5 Assignment and Assumption Agreement between CNL Real Estate
Advisors, Inc. and CNL Hospitality Partners, LP, relating to the
Residence Inn - Gwinnett Place (Previously filed as Exhibit 10.12
to the 1996 Form S-11 and incorporated herein by reference.)
10.6 Hotel Purchase and Sale Contract between CNL Real Estate
Advisors, Inc. and Buckhead Residence Associates, LLC, relating
to the Residence Inn - Buckhead (Lenox Park) (Previously filed as
Exhibit 10.13 to the 1996 Form S-11 and incorporated herein by
reference.)
10.7 Assignment and Assumption Agreement between CNL Real Estate
Advisors, Inc. and CNL Hospitality Partners, LP, relating to the
Residence Inn - Buckhead (Lenox Park) (Previously filed as
Exhibit 10.14 to the 1996 Form S-11 and incorporated herein by
reference.)
10.8 Lease Agreement between CNL Hospitality Partners, LP and STC
Leasing Associates, LLC, dated August 1, 1998, relating to the
Residence Inn - Gwinnett Place (Previously filed as Exhibit 10.15
to the 1996 Form S-11 and incorporated herein by reference.)
10.9 Lease Agreement between CNL Hospitality Partners, LP and STC
Leasing Associates, LLC, dated August 1, 1998, relating to the
Residence Inn - Buckhead (Lenox Park) (Previously filed as
Exhibit 10.16 to the 1996 Form S-11 and incorporated herein by
reference.)
10.10 Master Revolving Line of Credit Loan Agreement with CNL
Hospitality Properties, Inc., CNL Hospitality Partners, LP and
Colonial Bank, dated July 31, 1998 (Previously filed as Exhibit
10.17 to the 1996 Form S-11 and incorporated herein by
reference.)
10.11 Master Loan Agreement by and between CNL Hotel Investors,
Inc. and Jefferson-Pilot Life Insurance Company, dated February
24, 1999 (Previously filed as Exhibit 10.18 to the 1996 Form S-11
and incorporated herein by reference.)
10.12 Securities Purchase Agreement between CNL Hospitality
Properties, Inc. and Five Arrows Realty Securities II L.L.C.,
dated February 24, 1999 (Previously filed as Exhibit 10.19 to the
1996 Form S-11 and incorporated herein by reference.)
10.13 Subscription and Stockholders' Agreement among CNL Hotel
Investors, Inc., Five Arrows Realty Securities II L.L.C., CNL
Hospitality Partners, LP and CNL Hospitality Properties, Inc.,
dated February 24, 1999 (Previously filed as Exhibit 10.20 to the
1996 Form S-11 and incorporated herein by reference.)
10.14 Registration Rights Agreement by and between CNL
Hospitality Properties, Inc. and Five Arrows Realty Securities II
L.L.C., dated February 24, 1999 (Previously filed as Exhibit
10.21 to the 1996 Form S-11 and incorporated herein by
reference.)
10.15 First Amendment to Lease Agreement between CNL Hospitality
Partners, LP and STC Leasing Associates, LLC, dated August 1,
1998, related to the Residence Inn - Gwinnett Place, (amends
Exhibit 10.8 above) and the First Amendment to Agreement of
Guaranty, dated August 1, 1998 (amends Agreement of Guaranty
attached as Exhibit I to 10.8 above) (Previously filed as Exhibit
10.8 to the Form 10-Q filed on November 10, 1999 and incorporated
herein by reference.)
10.16 First Amendment to Lease Agreement between CNL Hospitality
Partners, LP and STC Leasing Associates, LLC, dated August 1,
1998, related to the Residence Inn - Buckhead (Lenox Park)
(amends Exhibit 10.9 above) and the First Amendment to Agreement
of Guaranty, dated August 1, 1998 (amends Agreement of Guaranty
attached as Exhibit I to 10.9 above) (Previously filed as Exhibit
10.9 to the Form 10-Q filed on November 10, 1999 and incorporated
herein by reference.)
10.17 Lease Agreement between Courtyard Annex, L.L.C. and City
Center Annex Tenant Corporation, dated November 15, 1999,
relating to the Courtyard - Philadelphia (Previously filed as
Exhibit 10.22 to the 1998 Form S-11 and incorporated herein by
reference.)
10.18 First Amended and Restated Limited Liability Company
Agreement of Courtyard Annex, L.L.C., relating to the Courtyard -
Philadelphia (Previously filed as Exhibit 10.23 to the 1998 Form
S-11 and incorporated herein by reference.)
10.19 Purchase and Sale Agreement between Marriott International,
Inc., CBM Annex, Inc., Courtyard Annex, Inc., as Sellers, and CNL
Hospitality Partners, LP, as Purchaser, dated November 15, 1999,
relating to the Courtyard - Philadelphia (Previously filed as
Exhibit 10.24 to the 1998 Form S-11 and incorporated herein by
reference.)
10.20 Lease Agreement between CNL Hospitality Partners, LP, and
RST4 Tenant LLC, dated December 10, 1999, relating to the
Residence Inn - Mira Mesa (Previously filed as Exhibit 10.25 to
the 1998 Form S-11 and incorporated herein by reference.)
10.21 Purchase and Sale Agreement between Marriott International,
Inc., TownePlace Management Corporation and Residence Inn by
Marriott, Inc., as Sellers, and CNL Hospitality Partners, LP, as
Purchaser, dated November 24, 1999, relating to the Residence Inn
- Mira Mesa and the TownePlace Suites - Newark (Previously filed
as Exhibit 10.26 to the 1998 Form S-11 and incorporated herein by
reference.)
10.22 Lease Agreement between CNL Hospitality Partners, LP and
WYN Orlando Lessee, LLC, dated May 31, 2000, relating to the
Wyndham Denver Tech Center (Previously filed as Exhibit 10.29 to
the 1998 Form S-11 and incorporated herein by reference.)
10.23 Lease Agreement between CNL Hospitality Partners, LP and
WYN Orlando Lessee, LLC, dated May 31, 2000, relating to the
Wyndham Billerica (Previously filed as Exhibit 10.30 to the 1998
Form S-11 and incorporated herein by reference.)
10.24 Purchase and Sale Agreement between CNL Hospitality Corp.,
as Buyer, and WII Denver Tech, LLC and PAH Billerica Realty
Company, LLC, as Sellers, and Wyndham International, Inc.,
relating to the Wyndham Denver Tech Center and the Wyndham
Billerica (Previously filed as Exhibit 10.31 to the 1998 Form
S-11 and incorporated herein by reference.)
10.25 Lease Agreement between CNL Hospitality Partners, LP and
RST4 Tenant LLC, dated June 17, 2000, relating to the Courtyard -
Palm Desert and the Residence Inn - Palm Desert (Previously filed
as Exhibit 10.32 to the 1999 Form S-11 and incorporated by
reference).
10.26 Purchase and Sale Agreement between PDH Associates LLC, as
Seller, and CNL Hospitality Corp., as Buyer, dated January 19,
2000, relating to the Courtyard - Palm Desert and the Residence
Inn - Palm Desert (Previously filed as Exhibit 10.33 to the 1999
Form S-11 and incorporated by reference).
10.27 Amendment to Purchase and Sale Agreement between PDH
Associates LLC and CNL Hospitality Corp., dated January 19, 2000,
relating to Courtyard - Palm Desert and the Residence Inn - Palm
Desert (amends Exhibit 10.26 above) (Previously filed as Exhibit
10.34 to the 1999 Form S-11 and incorporated by reference).
10.28 Assignment Agreement between CNL Hospitality Corp. and CNL
Hospitality Partners, LP, relating to the Courtyard - Palm Desert
and the Residence Inn - Palm Desert (Previously filed as Exhibit
10.35 to the 1999 Form S-11 and incorporated by reference).
10.29 Lease Agreement between CNL Hospitality Partners, LP and
RST4 Tenant LLC, dated July 28, 2000, relating to the SpringHill
Suites - Gaithersburg (Previously filed as Exhibit 10.36 to the
1999 Form S-11 and incorporated by reference).
10.30 Purchase and Sale Agreement between SpringHill SMC
Corporation, as Seller, and CNL Hospitality Partners, LP, as
Purchaser, and joined in by Marriott International, Inc., dated
June 30, 2000, relating to the SpringHill Suites - Gaithersburg
(Previously filed as Exhibit 10.37 to the 1999 Form S-11 and
incorporated by reference).
10.31 Lease Agreement between CNL Hospitality Partners, LP and
RST4 Tenant LLC, dated July 28, 2000, relating to the Residence
Inn - Merrifield (Previously filed as Exhibit 10.38 to the 1999
Form S-11 and incorporated by reference).
10.32 Purchase and Sale Agreement between TownePlace Management
Corporation and Residence Inn by Marriott, Inc., as Sellers, and
CNL Hospitality Partners, LP, as Purchaser, and joined in by
Marriott International, Inc., dated November 24, 1999, relating
to the Residence Inn - Merrifield (Previously filed as Exhibit
10.39 to the 1999 Form S-11 and incorporated by reference).
10.33 First Amendment to Purchase and Sale Agreement between
TownePlace Management Corporation and Residence Inn by Marriott,
as Sellers, and CNL Hospitality Partners, LP, as Purchaser, and
joined in by Marriott International, Inc., dated November 24,
1999, relating to the Residence Inn - Mira Mesa, SpringHill
Suites - Gaithersburg, Residence Inn - Merrifield, and TownePlace
Suites - Newark (amends Exhibits 10.21, 10.30, and 10.32 above)
(Previously filed as Exhibit 10.40 to the 1999 Form S-11 and
incorporated by reference).
10.34 Lease Agreement between CNL Hospitality Partners, LP and
CCCL Leasing LLC, dated August 18, 2000, relating to the
Courtyard - Alpharetta (Previously filed as Exhibit 10.41 to the
1999 Form S-11 and incorporated by reference).
10.35 Lease Agreement between CNL Hospitality Partners, LP and
CCCL Leasing LLC, dated August 18, 2000, relating to the
Residence Inn - Cottonwood (Previously filed as Exhibit 10.42 to
the 1999 Form S-11 and incorporated by reference).
10.36 Lease Agreement between CNL Hospitality Partners, LP and
CCCL Leasing LLC, dated August 18, 2000, relating to the
TownePlace Suites - Mt. Laurel (Previously filed as Exhibit 10.43
to the 1999 Form S-11 and incorporated by reference).
10.37 Lease Agreement between CNL Hospitality Partners, LP and
CCCL Leasing LLC, dated August 18, 2000, relating to the
TownePlace Suites - Scarborough (Previously filed as Exhibit
10.44 to the 1999 Form S-11 and incorporated by reference).
10.38 Lease Agreement between CNL Hospitality Partners, LP and
CCCL Leasing LLC, dated August 18, 2000, relating to the
TownePlace Suites - Tewksbury (Previously filed as Exhibit 10.45
to the 1999 Form S-11 and incorporated by reference).
10.39 Purchase and Sale Agreement between Residence Inn by
Marriott, Inc., Courtyard Management Corporation, SpringHill SMC
Corporation and TownePlace Management Corporation, as Sellers,
CNL Hospitality Partners, LP, as Purchaser, CCCL Leasing LLC, as
Tenant, Crestline Capital Corporation, Marriott International,
Inc., and joined in by CNL Hospitality Properties, Inc., dated
August 18, 2000, relating to the Residence Inn - Cottonwood,
Courtyard - Alpharetta and Overland Park SpringHill Suites -
Raleigh, and TownePlace Suites - Mt. Laurel, Scarborough and
Tewksbury (Previously filed as Exhibit 10.46 to the 1999 Form
S-11 and incorporated by reference).
10.40 First Amendment to Purchase and Sale Agreement between
Residence Inn by Marriott, Inc., Courtyard Management
Corporation, SpringHill SMC Corporation and TownePlace Management
Corporation, as Sellers, CNL Hospitality Partners, LP, as
Purchaser, CCCL Leasing LLC, as tenant, Crestline Capital
Corporation, and Marriott International, Inc., dated August 18,
2000, relating to the Residence Inn - Cottonwood, Courtyard -
Alpharetta, and Overland Park SpringHill Suites - Raleigh and
TownePlace Suites - Mt. Laurel, Scarborough and Tewksbury
(Previously filed as Exhibit 10.47 to the 1999 Form S-11 and
incorporated by reference).
10.41 Lease Agreement between CNL Hospitality Partners, LP and
RST4 Tenant LLC, dated November 4, 2000, relating to the
TownePlace Suites - Newark (Previously filed as Exhibit 10.48 to
the 1999 Form S-11 and incorporated herein by reference.)
10.42 Lease Agreement between LLB C-Hotel, L.L.C. and LLB Tenant
Corporation, dated October 12, 2000, relating to the Courtyard -
Little Lake Bryan (Previously filed as Exhibit 10.49 to the 1999
Form S-11 incorporated herein by reference.)
10.43 Lease Agreement between LLB F-Inn, L.L.C. and LLB Tenant
Corporation, dated October 12, 2000, relating to the Fairfield
Inn - Little Lake Bryan (Previously filed as Exhibit 10.50 to the
1999 Form S-11 and incorporated herein by reference.)
10.44 First Amendment to Lease Agreement between LLB C-Hotel,
L.L.C. and LLB Tenant Corporation, dated November 17, 2000,
relating to the Courtyard - Little Lake Bryan (amends Exhibit
10.42 above) (Previously filed as Exhibit 10.51 to the 1999 Form
S-11 and incorporated herein by reference.)
10.45 First Amendment to Lease Agreement between LLB F-Inn,
L.L.C. and LLB Tenant Corporation, dated November 17, 2000,
relating to the Fairfield Inn - Little Lake Bryan (amends Exhibit
10.43 above) (Previously filed as Exhibit 10.52 to the 1999 Form
S-11 and incorporated herein by reference.)
10.46 Purchase and Sale Agreement between Marriott International,
Inc., as Seller, and CNL Hospitality Partners, LP, as Purchaser,
dated September 17, 1998, relating to the Courtyard - Little Lake
Bryan, the Fairfield Inn - Little Lake Bryan and the SpringHill
Suites - Little Lake Bryan (Previously filed as Exhibit 10.53 to
the 1999 Form S-11 and incorporated herein by reference.)
10.47 Second Amendment to Lease Agreement between CNL LLB C-Hotel
Management, LP (formerly LLB C-Hotel, L.L.C.) and LLB Tenant
Corporation, dated December 15, 2000, relating to the Courtyard -
Little Lake Bryan (amends Exhibits 10.42 and 10.44 above)
(Previously filed as Exhibit 10.54 to the 1999 Form S-11 and
incorporated herein by reference.)
10.48 Second Amendment to Lease Agreement between CNL LLB F-Inn
Management, LP (formerly LLB F-Inn L.L.C.) and LLB Tenant
Corporation, dated December 15, 2000, relating to the Fairfield
Inn - Little Lake Bryan (amends Exhibits 10.43 and 10.45 above)
(Previously filed as Exhibit 10.55 to the 1999 Form S-11 and
incorporated herein by reference.)
10.49 Indenture Agreement among Desert Ridge Resort, LLC, as
Issuer; Bank One, National Association, as Trustee; and Financial
Structures Limited, as Insurer, dated December 15, 2000, relating
to the Desert Ridge Property (Previously filed as Exhibit 10.56
to the 1999 Form S-11 and incorporated herein by reference.)
10.50 Form of Lease Agreement (Previously filed as Exhibit 10.57
to the 1999 Registrant's Registration Statement on Form S-11 -
Registration No. 333-67124, the "2001 Form S-11", and
incorporated herein by reference.)
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
The following is a list of the subsidiaries of the registrant and the state of
incorporation for each:
Name of Subsidiary State of Incorporation
------------------ ----------------------
CNL Hospitality GP Corp. Delaware
CNL Hospitality LP Corp. Delaware
CNL Hospitality Partners, LP Delaware
CNL Hotel Investors, Inc. Maryland
CNL Philadelphia Annex, LLC Delaware
CNL Philadelphia Hospitality Management, Inc. Delaware
CNL LLB LP Holding, Ltd. Florida
CNL LLB SHS Management, LP Delaware
CNL LLB F-Inn Management, LP Delaware
CNL LLB C-Hotel Management, LP Delaware
CNL LLB SHS Management Corp. Delaware
CNL LLB F-Inn Management Corp. Delaware
CNL C-Hotel Management Corp. Delaware
CNL LLB GP Holding Corp. Florida
CNL Phoenix GP Corp. Delaware
CNL DRR Investor, LP Delaware
CNL WBR GP Corp. Delaware
CNL WBR Investor, L.P. Delaware
CNL CY-Edison, LLC Delaware
CNL Hotel CY-Edison, LP Delaware
CNL CY-Weston, LLC Florida
CNL Hotel CY-Weston, Ltd. Florida
CNL RI-Orlando, LLC Florida
CNL Hotel RI-Orlando, Ltd. Florida
CNL MI-4, LLC Delaware
CNL Hotel MI-4, LP Delaware
CNL Hospitality Leasing Corp. Delaware
CNL HHC, LLC Delaware
CNL IHC, LLC Delaware