Attached files
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| EX-10.1 - CONDOR HOSPITALITY TRUST, INC. | condor_8kex1716.htm |
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
January 1, 2016
Date of report (Date of earliest event reported)
Condor Hospitality Trust, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Maryland
(State or Other Jurisdiction of Incorporation)
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1-34087
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52-1889548
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(Commission File Number)
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(IRS Employer Identification No.)
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309 North Fifth Street
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Norfolk, NE
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68701
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(Address of Principal Executive Offices)
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(Zip Code)
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(402) 371-2520
(Registrant’s Telephone Number, Including Area Code)
Supertel Hospitality, Inc.
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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1.01 Entry into a Material Agreement.
Effective January 1, 2016, Condor Hospitality Trust, Inc. (the “Company”) and Strand Development Company LLC (“Strand) terminated management of certain hotels under the hotel management agreement dated June 19, 2015 pursuant to which Strand managed certain of the Company’s hotels. Effective January 1, 2016, certain of the Company hotels previously managed by Strand are managed by the following eligible independent operators:
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Three Company hotels in Pennsylvania and West Virginia managed by K Partners Hospitality Group LP (“K Partners”) pursuant to a hotel management agreement dated January 1, 2016 between K Partners and a wholly-owned subsidiary of the Company (a “TRS Lessee”); and
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Seven Company hotels in North Carolina, Tennessee, Virginia and West Virginia by Hotel Management Advisers, Inc. (“HMA”) pursuant to the existing hotel management agreement dated June 19, 2015with TRS Lessee.
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Strand has agreed to continue to manage three Savannah Suites hotels located in Atlanta, Georgia, Greenville, South Carolina and Savannah, Georgia under its hotel management agreement with the Company until those hotels are sold.
Hotel Management. The hotel management agreement with K Partners provides that the management company has control of all operational aspects of the hotels, including employee-related matters. The management company must generally maintain each hotel under its management in good repair and condition and make routine maintenance, repairs and minor alterations. Additionally, the management company must operate the hotels in accordance with the national franchise agreements that cover the hotels, which includes, as applicable, using franchisor sales and reservation systems as well as abiding by franchisors’ marketing standards. The management company may not assign its management agreement without our consent.
The management agreement generally requires the TRS Lessee to fund debt service, working capital needs and capital expenditures and fund the management company’s third-party operating expenses, except those expenses not related to the operation of the hotels. The TRS Lessee is responsible for obtaining and maintaining insurance policies with respect to the hotels.
Management Fee. K Partners will receive a monthly management fee with respect to the hotels it manages equal to 3% of the gross hotel income and may earn incentive fees. Incentive fees may be earned by K Partners for performance above budgeted expectations up to a maximum payout of 2% of gross hotel income as follows:
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0.5% of gross hotel income for achieving budget hotel net operating income (“NOI”);
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25% of any excess to budgeted NOI for the hotel portfolio under its management; and
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if K Partners achieves the budget NOI, it can also earn 25% of any excess to budget on gross hotel revenues for the hotel portfolio under its management.
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NOI is equal to gross hotel income less operating expenses (exclusive of management fees, certain insurance premiums and employee bonuses, and personal and real property taxes).
Term and Termination. The K Partners management agreement expires on December 31, 2016, and will renew for additional terms of one year unless either party to the agreement gives the other party written notice of termination at least 90 days before the end of a term.
The TRS Lessee may terminate the management agreement as follows:
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as to one or more hotels, upon the failure for other than capital related reasons within a 60 day period of Company or franchisor quality inspection if not remedied within 60 days;
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failure for other than capital related reasons of two consecutive franchisor quality inspections;
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with respect to a hotel, if the hotel fails to achieve performance as of the end of any fiscal year of: (a) NOI of at least 90% of budgeted NOI for the hotel, and (b) 95% of the benchmark for revenue per available room (RevPAR) for the hotel, subject to cure if for the subsequent three months NOI for the hotel is at least 100% of budgeted NOI and RevPAR for the hotel is at least 100% of the benchmark RevPAR;
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with respect to all hotels subject to the management agreement, if the hotels fails to achieve performance as of the end of a fiscal year of: (a) NOI of at least 90% of budgeted NOI for the hotels, and (b) 95% of the benchmark RevPAR for the hotels, subject to cure if for the subsequent three months NOI for the hotels is at least 100% of budgeted NOI and RevPAR for the hotels is at least 100% of the benchmark RevPAR;
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with respect to a hotel, after the management company has managed the hotel for a consecutive 12 month period, at any point, has a negative RevPAR change versus its competitive set, of greater than 10% for a running 12 month period, subject to cure if the hotel has a positive RevPAR change versus its competitive set for the subsequent three months;
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with respect to all hotels, if the management company, after 12 consecutive months of managing the hotels, has greater than 33% of its portfolio failing to achieve a positive RevPAR change against its competitive set, subject to the cure if 75% of the hotels achieve a positive RevPAR change versus its competitive set for the subsequent three months;
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with respect to one or more hotels upon sale or disposal of a hotel to any other person;
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with respect to one or more hotels at any time without reason, and the payment to the management company of at termination fee equal to 50% of the fee paid to the management company with respect to the hotel during a number of months prior to the notice of termination equal to the lesser of 12 months or the number of months remaining of the term of the management agreement;
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upon change of control of the TRS Lessee or the management company, provided that in connection with a termination solely for a change of control of the TRS Lessee, the TRS Lessee pays the management company a termination fee equal to 50% of the fee paid to the management company during a number of months prior to the notice of termination equal to the lesser of 12 months or the number of months remaining of the term of the management agreement;
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if tax laws change to allow a hotel REIT to self manage its properties and the payment to the management company of at termination fee equal to 50% of the fee paid to the management company during a number of months prior to the notice of termination equal to the lesser of 12 months or the number of months remaining of the term of the management agreement; and
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in the event of a default by the management company that has not been cured within the applicable cure period, if any.
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K Partners may terminate the management agreement as follows:
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upon the sale of four or more hotels in a 12-month period or 25% of the original portfolio of hotels subject to the management agreement, exclusive of any hotels for which TRS Lessee has offered a replacement hotel to the management company;
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upon a change of control of the TRS Lessee; and
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in the event of a default by the TRS Lessee that has not been cured within the applicable cure period, if any.
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Defaults and Indemnity. The following are events of default under the management agreement:
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the failure of a management company to diligently and efficiently operate the hotels pursuant to the management agreement;
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the failure of either party to pay amounts due to the other party pursuant to the management agreement;
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certain bankruptcy, insolvency or receivership events with respect to either party;
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the failure of either party to perform any of their obligations under the management agreement;
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default or termination of the franchise license for a hotel because of a management company;
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failure by the management company to pay, when due, the accounts payable for the hotels for which the management company was previously reimbursed;
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any of the hotels receives a failure or its equivalent in any quality inspection report from a franchisor if the deficiencies are within the management company’s reasonable control; and
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any of the hotels receives a failure in a franchisor’s inspection report if the deficiencies are within the management company’s reasonable control.
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With the exception of certain events of default as to which no cure period exists, if an event of default occurs and continues beyond the cure period set forth in the management agreement, the non-defaulting party has the option of terminating the agreement.
The management agreement provides that each party to the agreement, subject to certain exceptions, indemnifies and holds harmless the other party against any liabilities stemming from certain negligent acts or omissions, breach of contract, willful misconduct or tortuous actions by the indemnifying party or any of its affiliates.
The management agreement entered into with K Partners is an exhibit to this Form 8-K and incorporated herein by this reference.
Item 9.01. Financial Statements and Exhibits.
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(c)
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Exhibits.
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10.1
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Hotel Management Agreement, dated January 1, 2016 by and between TRS Leasing, Inc., TRS Subsidiary, LLC, and K Partners Hospitality Group LP
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Condor Hospitality Trust, Inc.
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Date: January 7, 2016
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By: /s/ Jonathan Gantt
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Name: Jonathan Gantt
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Title: Chief Financial Officer
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EXHIBIT INDEX
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Exhibit
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Description
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10.1
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Hotel Management Agreement, dated January 1, 2016 by and between TRS Leasing, Inc., TRS Subsidiary, LLC, and K Partners Hospitality Group LP
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