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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, 2000
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 1-14236
FelCor Lodging Trust Incorporated
(Exact name of registrant as specified in its charter)
MARYLAND 75-2541756
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
545 E. JOHN CARPENTER FRWY., SUITE 1300, IRVING, TEXAS 75062
(Address of principal executive offices) (Zip Code)
(972) 444-4900
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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COMMON STOCK NEW YORK STOCK EXCHANGE, INC.
$1.95 SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK NEW YORK STOCK EXCHANGE, INC.
DEPOSITARY SHARES REPRESENTING 9% SERIES B CUMULATIVE
REDEEMABLE PREFERRED STOCK NEW YORK STOCK EXCHANGE, INC.
Securities registered pursuant to Section 12(g) of the Act:
NONE
(Title of class)
Indicate by check mark whether the registrant (i) 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 for such shorter period that the
registrant was required to file such reports), and (ii) 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. [ ]
The aggregate market value of the common equity securities of the
registrant held by non-affiliates of the registrant, as of March 15, 2001, was
approximately $1.1 billion.
As of March 15, 2001, the registrant had issued and outstanding 53,105,335
shares of common stock.
DOCUMENTS INCORPORATED BY REFERENCE
The Registrant's definitive Proxy Statement pertaining to the 2001 Annual
Meeting of Stockholders (the "Proxy Statement") and filed or to be filed not
later than 120 days after the end of the fiscal year pursuant to Regulation 14A
is incorporated herein by reference into Part III.
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FELCOR LODGING TRUST INCORPORATED
INDEX
FORM 10-K
REPORT
ITEM NO. PAGE
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PART I
1. Business...............................................................................................1
2. Properties........................................................................................... 15
3. Legal Proceedings.....................................................................................18
4. Submission of Matters to a Vote of Security Holders...................................................18
PART II
5. Market for Registrant's Common Equity and Related Stockholder Matters.................................19
6. Selected Financial Data...............................................................................21
7. Management's Discussion and Analysis of Financial Condition and Results of Operations.................22
7A. Quantitative and Qualitative Disclosures About Market Risk............................................38
8. Financial Statements and Supplementary Data...........................................................38
9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure..................38
PART III
10. Directors and Executive Officers of the Company ......................................................39
11. Executive Compensation................................................................................39
12. Security Ownership of Certain Beneficial Owners and Management........................................39
13. Certain Relationships and Related Transactions........................................................39
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K......................................40
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PART I
ITEM 1. BUSINESS
FelCor Lodging Trust Incorporated ("FelCor"), a Maryland corporation,
is the nation's second largest hotel real estate investment trust ("REIT"). At
December 31, 2000, FelCor owned interests in 186 hotels with nearly 50,000 rooms
and suites (collectively the "Hotels") through its greater than 86% equity
interest in FelCor Lodging Limited Partnership (the "Operating Partnership").
FelCor, the Operating Partnership, and their subsidiaries are herein referred
to, collectively, as the "Company." At December 31, 2000, the Company owned 100%
interests in 161 Hotels, a 90% or greater interest in entities owning seven
hotels, a 60% interest in an entity owning two hotels and 50% interests in
separate entities that own 16 hotels. The Hotels are located in the United
States (35 states) and Canada, with concentrations in Texas (41 hotels),
California (19 hotels), Florida (18 hotels) and Georgia (15 hotels).
The Company is the owner of the largest number of Embassy Suites(R),
Crowne Plaza(R), Holiday Inn(R), and independently owned Doubletree(R) branded
hotels in the world. The following table provides a schedule of the Hotels, by
brand, at December 31, 2000:
BRAND TOTAL
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Hilton(R) Brands:
Embassy Suites ..................................................... 59
Doubletree and Doubletree Guest Suites(R) .......................... 14
Hampton Inn(R) ..................................................... 9
Hilton Suites(R) ................................................... 1
Homewood Suites(R) ................................................. 1
Bass Brands:
Holiday Inn ........................................................ 44
Crowne Plaza and Crowne Plaza Suites(R) ............................ 18
Holiday Inn Select(R) .............................................. 10
Holiday Inn Express(R) ............................................. 5
Starwood Brands:
Sheraton(R)and Sheraton Suites(R) .................................. 10
Westin(R) .......................................................... 1
Other Brands ............................................................. 14
----
Total Hotels .................................................... 186
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The Company seeks to increase operating cash flow through both internal
growth and selective acquisitions, while maintaining a flexible and conservative
capital structure. In addition to renovating, redeveloping and repositioning the
Company's acquired hotels, the Company may seek to acquire new upscale
properties that will benefit from affiliation with one of the premium brands
available to the Company through its strategic brand owner and manager
relationships with Hilton Hotels Corporation ("Hilton"), Bass plc ("Bass") and
Starwood Hotels & Resorts Worldwide, Inc. ("Starwood").
On July 28, 1998, the Company merged Bristol Hotel Company into FelCor,
acquiring its 107 primarily full-service hotels (the "Merger"). These hotels
added more than 28,000 rooms and suites to the Company's portfolio, more than
doubling the Company's size. The merger also provided diversification, both
geographically and by asset class, by adding hotels in many of its key markets
and broadening its portfolio in the full-service, upscale and midscale hotel
markets.
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In the second quarter of 2000, the Company identified 25 non-strategic
hotels and indicated its intent to sell these hotels. The Company expects gross
sale proceeds from these sales to be approximately $150 million and net proceeds
to be approximately $137 million (after deducting estimated transaction costs).
The Company anticipates that the sale of these 25 hotels will result in a book
loss of approximately $63 million. Accordingly, FelCor's Board of Directors
approved the establishment of a $63 million reserve in the second quarter of
2000 for hotels held for sale, to reflect the difference between book value and
the estimated market value of these hotels. In December 2000, the Company
completed the sale of one of these hotels held for sale and recorded a gain of
approximately $135,000.
In March 2001, the Company contributed eight of the hotels held for
sale to an entity in which the Company holds a 50% equity interest, and a
subsidiary of Interstate Hotels Corporation ("IHC") holds the other 50% equity
interest. Another subsidiary of IHC manages each of these hotels.
On January 1, 2001, the provisions of the REIT Modernization Act became
effective. These provisions:
o reduce the percentage of taxable income required to be distributed by a
REIT from 95% to 90% for taxable years after 2000; and
o subject to certain limitations, permit a REIT to own taxable
subsidiaries that engage in businesses previously prohibited to a REIT,
including, among other things, leasing hotels from a hotel REIT,
provided that the hotels in question continue to be managed by
unrelated third parties.
As a result of the REIT Modernization Act's enactment, the Company
undertook steps to realize the benefits the Act offers to REIT's by
o effective January 1, 2001, acquiring DJONT Operations, L.L.C. and its
consolidated subsidiaries ("DJONT"), which leased 85 of the Company's
hotels at December 31, 2000. The management contracts for all of the
DJONT leased hotels remained in place;
o effective January 1, 2001, completing the acquisition of leases for 12
hotels leased to Bristol Hotels & Resorts and its consolidated
subsidiaries ("Bristol"), and entering into management contracts with a
subsidiary of Bass for two of the hotels, a subsidiary of IHC for eight
of the hotels, with a subsidiary of Hilton for one of the hotels and
one hotel was sold;
o effective July 1, 2001, acquiring leases for the remaining 88 hotels
leased to Bristol and entering into long term management agreements
with a subsidiary of Bass to manage these hotels; and
o contributing the acquired Lessee and/or leases as acquired, to newly
created wholly owned taxable REIT subsidiaries ("TRS").
The Company believes that the advantages of holding the lessees and
leases in a TRS include (i) a more direct relationship with the hotel and the
brand managers, (ii) elimination of potential conflicts of interest and (iii)
the ability to present consolidated hotel level financial reporting.
As the Hotel leases are acquired, the Company's results of operations
will reflect hotel revenues and expenses rather than percentage lease revenue.
Pro forma consolidated statements of operations for the years ended December 31,
2000 and 1999, which reflect the acquisition of all the Hotel leases, are
contained in the Notes to the Consolidated Financial Statements of FelCor
Lodging Trust Incorporated appearing elsewhere herein.
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The Leases
At December 31, 2000, the Company leased 85 hotels to DJONT and leased
99 hotels to Bristol (Bristol together with DJONT, the "Lessees"). Bristol
became a subsidiary of Bass by virtue of a merger between Bristol and a
subsidiary of Bass in March 2000. Two of the Hotels were operated without a
lease.
At December 31, 2000, DJONT was a private company controlled by Thomas
J. Corcoran, Jr. the President, Chief Executive Officer and a Director of
FelCor. Subject to the receipt of certain lender consents, effective January 1,
2001, the Company acquired and contributed to a newly formed taxable REIT
subsidiary, all of the equity interests in DJONT. In consideration for the
acquisition of DJONT, the Operating Partnership issued an aggregate of 416,667
units of limited partnership interest valued at approximately $10 million,
which, together with DJONT's accumulated shareholders' deficit of $24.5 million,
will be expensed in the first quarter of 2001 as a lease termination cost.
Effective January 1, 2001, the Company completed the acquisition of 12
of the Bristol leases which were held by Bass. In consideration for the
acquisition of such leases, the Company issued to Bass 413,585 shares of FelCor
common stock valued at approximately $10 million. The Company has entered into
an agreement with IHC to manage eight of the hotels, two hotels are being
managed by a subsidiary of Bass under short term management contracts, one hotel
is being managed by a subsidiary of Hilton and one hotel was sold. In March
2001, the Company entered into an agreement with Bass to acquire the remaining
88 leases effective July 1, 2001. In consideration for the acquisition of such
leases, the Company will enter into long term management agreements with Bass
with regard to these hotels and issue to Bass100 shares of FelCor common stock.
A portion of the management fees with respect to the 88 hotels managed by Bass
under long term management agreements will be considered to be lease termination
costs and the Company will record a lease termination expense of approximately
$125 million in the third quarter of 2001. The Company will record a
corresponding liability of approximately $125 million that will be amortized
over the term of the applicable management agreements.
At January 1, 2001, (i) subsidiaries of Bass managed 91 of the Hotels,
(ii) subsidiaries of Hilton managed 72 of the Hotels, (iii) subsidiaries of
Starwood managed 11 of the Hotels, (iv) subsidiaries of IHC managed eight of the
Hotels and (v) three independent management companies managed the four remaining
Hotels.
THE INDUSTRY
The United States hotel industry profitability has improved each year
since 1992, the longest sustained growth in history. According to
PricewaterhouseCoopers LLP's Lodging Research Journal, after a period of
extended unprofitability in the late 1980's and early 1990's, during which time
the increase in supply of new hotel rooms significantly outpaced growth in room
demand, lodging industry revenues increased every year from 1992 through 2000.
The percentage growth in room demand exceeded percentage growth in new room
supply from 1992 through 1996. While 1997 and 1998 experienced the highest
number of new room starts in the prior 10 years, 1999 showed a decline in new
room starts from 1997-1998 levels. In spite of above-average increases in room
supply, according to PricewaterhouseCoopers LLP's January 2001 Lodging Research
Journal, room demand for the year 2000 reflected a growth rate of 3.7 percent,
which was the strongest since 1989. Increases in room rates of an estimated 4.9
percent contributed to a growth in revenue per available room ("RevPAR") of 5.5
percent for the year. Although 2000 was the first year in which hotel occupancy
had risen since 1995, PricewaterhouseCoopers indicated that occupancy in the
U.S. lodging industry is expected to fall and estimated slower RevPAR growth
during the first two quarters of 2001. However, it anticipates the lodging
industry will regain momentum towards the end of 2001 and estimates RevPAR
growth for 2001 to be 2.8%.
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Smith Travel Research, another leading provider of industry data,
classifies hotel chains into five distinct categories: Upper Upscale, Upscale,
Midscale with Food & Beverage, Midscale Without Food & Beverage, and Economy.
The Company remains focused primarily on properties in the Upper Upscale
(including Doubletree Guest Suites, Embassy Suites, Sheraton and Westin hotels),
Upscale (including Crowne Plaza, Doubletree hotels and Homewood Suites), and
Midscale With Food & Beverage (including Holiday Inn and Holiday Inn Select
hotels) categories, from which the Company derived approximately 97% of its room
and suite revenues in 2000. PricewaterhouseCoopers LLP's January 2001 Lodging
Research Journal projects that for 2001, RevPAR growth will be 2.3% for Upper
Upscale hotels, 2.4% for Upscale hotels, and 2.1% for hotels in the Midscale
With Food & Beverage category. The same publication projects 2001 changes in
supply and demand for each segment: Upper Upscale hotels, supply growth of 3.7%
with a demand growth of 2.3%; Upscale hotels, supply growth of 4.2% with a
demand growth of 3.7%; and hotels in the Midscale With Food & Beverage category
with a supply growth of 0.3% and a decline in demand of 0.5%.
BUSINESS STRATEGY
The Company seeks to increase operating cash flow through active asset
management. In addition to actively overseeing the operation of its hotels by
its lessees and their managers, the Company applies its asset management
expertise to the renovation, redevelopment and rebranding of its hotels, to the
maintenance of strong strategic relationships with its brand owners and
managers, and to maintaining financial flexibility and a conservative balance
sheet.
HOTEL RENOVATION, REDEVELOPMENT AND REBRANDING
The Company has historically sought to enhance the value of its
portfolio through:
o its practice of upgrading, renovating and/or redeveloping most of
its recently acquired hotels to enhance their competitive position,
and, in certain instances, rebranding them to improve their revenue
generating capacity; and
o its ongoing program for the maintenance of the Company's upgraded
hotel assets, which includes:
o the contribution of approximately 4% of total annual room and
suite revenue to a capital reserve, for routine capital
replacements and improvements; and
o ensuring that the Lessees' adhere to a rigorous maintenance and
repair program, resulting in the expenditure of more than 4% of
annual hotel revenues on maintenance of the Hotels.
For information regarding the Company's renovation, redevelopment and
rebranding activities during 2000 and 1999, see "Item 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations-Renovations,
Redevelopments and Rebrandings" contained elsewhere in this Annual Report on
Form 10-K for the year ended December 31, 2000.
MAINTENANCE OF STRONG STRATEGIC RELATIONSHIPS
The Company benefits from strategic brand owner and manager
relationships with Hilton (Embassy Suites and Doubletree), Bass (Crowne Plaza
and Holiday Inn) and Starwood (Sheraton and Westin).
o Hilton, which acquired Promus Hotel Corporation in November 1999,
has a hotel portfolio of more than 1,800 hotels with more than
300,000 guest rooms in 50 states and the District of Columbia, and
is the largest operator of full-service, all-suite hotels in the
United States. In addition to its Hilton and Conrad
International(R)-branded hotels, Hilton owns the Embassy Suites,
Doubletree and Doubletree Guest Suites brands and at December 31,
2000, managed 71 of the
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Company's hotels. As a result of its acquisition of Promus Hotel
Corporation, Hilton acquired an equity interest in the Company
having an aggregate value of approximately $34 million at December
31, 2000, and became a 50% partner in unconsolidated entities with
the Company in the ownership of 12 hotels and the holder of a 10%
equity interest in certain consolidated subsidiaries owning six
hotels. The relationship with Promus Hotel Corporation and its
Embassy Suites brand provided the foundation for the Company's
historical growth, and it expects to expand its relationship with
Hilton, as the successor to Promus.
o Bass is one of the largest hotel operating companies in the world.
Bass owns, operates or franchises more than 3,000 hotels
worldwide, with over 490,000 guest rooms in more than 100
countries around the world. Among the brands owned by Bass are
Crowne Plaza, Holiday Inn, Holiday Inn Select, Holiday Inn Express
and Inter-Continental(R). Bass, which acquired Bristol in March
2000, managed 100 of the Company's hotels at December 31, 2000.
Bass also owns FelCor common stock and Operating Partnership units
aggregating approximately 16.2% of the Company's outstanding
common stock and units.
o Starwood is one of the world's largest hotel operating companies.
Directly and through subsidiaries, Starwood owns, leases, manages
or franchises more than 725 properties in 80 countries. The
Company's strategic alliance with Starwood, coupled with the
purchase of seven Sheraton hotels in 1997, provided the Company
with its initial entry into the upscale, full-service, non-suite
hotel market. Starwood manages 11 of the Company's hotels and is a
40% joint venture partner in the ownership of two hotels and a 50%
joint venture partner in the ownership of one hotel.
MAINTENANCE OF FINANCIAL FLEXIBILITY
The Company is committed to maintaining substantial financial
flexibility. In funding its growth, the Company has used a broad selection of
financing sources to minimize the cost of capital, including public equity,
collateralized mortgage-backed securities, public and private debt, and asset
divestitures. It believes that its capital structure will continue to be among
the most conservative in the hotel REIT industry. It further believes its
financial flexibility should enable it to pursue selective expansion
opportunities and to take advantage of renovation, redevelopment and rebranding
opportunities to help it improve its hotels' competitive position.
FINANCING TRANSACTIONS
On April 26, 2000, the Company closed a 10-year, $145 million First
Mortgage Term Loan, which is collateralized by seven Sheraton hotels and carries
an 8.73% fixed interest rate. On May 2, 2000, the Company closed $186 million of
10-year, First Mortgage Term Loans which are collateralized by eight Embassy
Suites hotels and carry an 8.70% fixed interest rate. These loans are
non-recourse, mature in May 2010, and amortize over 25 years. The proceeds of
these loans were used to reduce borrowings under the Company's line of credit
(the "Line of Credit").
On August 1, 2000, the Company renewed its Line of Credit. The Line of
Credit was reduced from $850 million to $600 million and the maturity was
extended from July 2001 to August 2003. The effective interest rate on the
renewed Line of Credit ranges from 87.5 basis points to 250 basis points above
LIBOR depending on the Company's leverage and corporate rating. An extraordinary
charge of approximately $578,000 was recorded to write-off a portion of the
deferred financing costs associated with the Line of Credit.
On September 15, 2000, the Company completed the private placement of
$400 million of senior unsecured notes which mature in September, 2008 and bear
an interest rate of 9 1/2%. The notes were issued at a discount to yield 9.75%.
The proceeds were used to retire the $375 million floating rate senior term
loan,
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which matured in 2004, and to pay down the Line of Credit. An extraordinary
charge of approximately $3.3 million was recorded to write-off unamortized
deferred financing costs associated with the $375 million loan. The Company
subsequently completed an offer to exchange $400 million in aggregate principal
amount of the private placement senior notes for notes with identical terms
which were registered under the Securities Act of 1933.
On January 11, 2001, the Company completed the private placement of an
additional $100 million in 9 1/2% senior unsecured notes that mature in
September 2008. These notes were issued at a premium to yield an effective
interest rate of 9 1/8%. The proceeds were used initially to pay down the
Company's Line of Credit.
HOTEL OPERATING PERFORMANCE
Upscale and full service hotels like Embassy Suites, Crowne Plaza,
Holiday Inn and Holiday Inn Select, Doubletree Guest Suites, and Sheraton and
Sheraton Suites hotels account for approximately 97% of the Company's percentage
lease revenue.
For a detailed discussion of the Company's hotel operating performance,
see "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations-Results of Operations-The Hotels-Actual" contained
elsewhere in this Annual Report on Form 10-K for the year ended December 31,
2000.
SEASONALITY
The Hotels' operations historically have been seasonal in nature,
reflecting higher occupancy rates primarily during the first three quarters of
each year. This seasonality can be expected to cause fluctuations in quarterly
hotel income, particularly during the fourth quarter. To the extent cash flow
from operations is insufficient during any quarter, due to temporary or seasonal
fluctuations, the Company expects to utilize other cash on hand or borrowings
under the Line of Credit to make distributions to its equity holders.
COMPETITION
The hotel industry is highly competitive. Each of the Company's Hotels
is located in a developed area that includes other hotel properties and competes
for guests primarily with other full-service hotels in its immediate vicinity
and secondarily with other hotel properties in its geographic market. An
increase in the number of competitive hotel properties in a particular area
could have a material adverse effect on the occupancy, average daily rate
("ADR") and RevPAR of the Company's hotels in that area. The Company believes
that brand recognition, location, the quality of the hotel and services
provided, and price are the principal competitive factors affecting the
Company's hotels.
The Company competes for investment opportunities with other entities,
some of which have substantially greater financial resources than the Company.
These larger entities may generally be able to accept more risk than the Company
can prudently manage. Competition may generally reduce the number of suitable
investment opportunities offered to the Company and may increase the bargaining
power of owners seeking to sell their hotels.
PROPERTY TAXES
Each Hotel is subject to real and personal property taxes. During 2000,
real and personal property taxes incurred by the Company amounted to $63.2
million, or 11.4 % of the Company's total revenues. Real and personal property
taxes on the Hotels may increase as property tax rates change and as the
properties are assessed or reassessed by taxing authorities. FelCor's Vice
President, Taxes, Michael L. Hunter and his staff,
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work with the numerous taxing authorities, both directly and through independent
agents, to assure that the Hotels are fairly assessed and to minimize the
Company's tax liabilities.
TAX STATUS
FelCor has elected to be taxed as a REIT under Sections 856 through 860
of the Internal Revenue Code of 1986, as amended (the "Code"), commencing with
its initial taxable year ending December 31, 1994. As a REIT, FelCor generally
is not subject to federal income taxation at the corporate level, on its taxable
income that is distributed to its shareholders. The Company may, however, be
subject to certain state and local taxes on its income and property. A REIT is
subject to a number of organizational and operational requirements, including a
requirement that it distribute annually at least 90% of its taxable income. In
connection with FelCor's election to be taxed as a REIT, FelCor's Charter
imposes restrictions on the ownership and transfer of shares of its common
stock. FelCor has adopted the calendar year as its taxable year.
REIT Modernization Act
On December 17, 1999, the provisions of the REIT Modernization Act were
enacted into law. These provisions became effective January 1, 2001 and, among
other things:
o reduce the percentage of taxable income required to be distributed by a
REIT from 95% to 90%; and
o subject to certain limitations, permit a REIT to own taxable
subsidiaries that engage in businesses previously prohibited to a REIT,
including, among other things, leasing hotels from its parent hotel
REIT, provided that the hotels in question continue to be managed by
unrelated third parties.
This act and its potential impact on the Company are discussed in
further detail in "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations" contained elsewhere in this Annual Report
on Form 10-K for the year December 31, 2000.
LESSEE OPERATIONS
At December 31, 2000, the Lessees leased all but two of the Hotels
under Percentage Leases, pursuant to which the Lessee is obligated to pay the
Company the greater of a minimum Base Rent or Percentage Rent based on a
percentage of revenues. The Lessees have entered into and are responsible for
the payment of all fees under the franchise licenses and management agreements
relating to the Hotels, may hold the liquor licenses applicable to the Hotels,
own and maintain the inventories required for the operation of the Hotels, pay
for normal maintenance and repair expenses, enter into various operating,
maintenance and service agreements with respect to the Hotels, and are
responsible for compliance with the license, management and other agreements
affecting hotel operations. In addition, the Lessees provide asset management
services to the Hotels, including the supervision of the day-to-day operations
of the Hotels by the management companies engaged to manage such Hotels and the
establishment and implementation of capital expenditure programs.
DJONT and the Bristol Tenant Companies have provided audited financial
statements to the Company for inclusion elsewhere in this Form 10-K. See "Index
to Financial Statements" at page F-1.
REPAIRS AND MAINTENANCE
During the year ended December 31, 2000, approximately $41.0 million
and $32.2 million was spent by the Lessees on routine repairs and maintenance at
the Hotels leased by DJONT and Bristol, respectively. This represents
approximately 4.4% of total hotel revenues.
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EMPLOYEES
Mr. Corcoran entered into an employment agreement with the Company in
1994 that continues through 2001. None of FelCor's other executive officers has
an employment agreement with FelCor. In addition to Mr. Corcoran, the Company
had 50 other full-time employees at December 31, 2000. All persons employed in
the day-to-day operation of the Company's Hotels are employees of the management
companies engaged by the Lessees to operate such Hotels and are not employees of
the Company.
PERSONNEL AND OFFICE SHARING ARRANGEMENTS
The Company shares executive offices and certain employees with DJONT
and FelCor, Inc. (a private company controlled by Mr. Corcoran). Each entity
bears an allocated share of the costs thereof, including but not limited to
rent, compensation of certain personnel (other than Mr. Corcoran, whose
compensation is borne solely by the Company), office supplies, telephones and
depreciation of office furniture, fixtures and equipment. Any such allocation of
shared expenses to the Company is required to be approved by a majority of the
Independent Directors. During 2000, approximately $7.5 million (approximately
89.5% of all allocable expenses) were paid by the Company under this
arrangement.
CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS
CERTAIN STATEMENTS AND ANALYSES CONTAINED IN THIS ANNUAL REPORT ON FORM
10-K, IN FELCOR'S 2000 ANNUAL REPORT TO STOCKHOLDERS, OR THAT MAY IN THE FUTURE
BE MADE BY, OR BE ATTRIBUTABLE TO, THE COMPANY, MAY CONSTITUTE "FORWARD-LOOKING
STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995, AND CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH AS
"MAY," "WILL," "EXPECT," "ANTICIPATE," "ESTIMATE" OR "CONTINUE" OR THE NEGATIVE
THEREOF OR OTHER VARIATIONS THEREON OR COMPARABLE TERMINOLOGY. ALL OF SUCH
FORWARD-LOOKING STATEMENTS ARE BASED UPON PRESENT EXPECTATIONS AND ASSUMPTIONS
THAT MAY OR MAY NOT ACTUALLY OCCUR. THE FOLLOWING FACTORS CONSTITUTE CAUTIONARY
STATEMENTS IDENTIFYING IMPORTANT FACTORS, INCLUDING MATERIAL RISKS AND
UNCERTAINTIES, WITH RESPECT TO SUCH FORWARD-LOOKING STATEMENTS THAT COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE REFLECTED IN SUCH FORWARD-LOOKING
STATEMENTS OR IN THE COMPANY'S HISTORICAL RESULTS. EACH OF THE FOLLOWING
FACTORS, AMONG OTHERS, COULD ADVERSELY AFFECT THE ABILITY OF THE COMPANY TO MEET
ITS CURRENT EXPECTATIONS.
The Company has had increases in leverage that could adversely affect its
financial condition
As a result of its 1998 merger with Bristol Hotel Company, the
Company's leverage increased during 1998, and has increased further to fund its
renovation, redevelopment and rebranding program and share repurchase program.
The share repurchase program authorizes repurchases up to an aggregate maximum
of $300 million. Through December 31, 2000, the Company had repurchased
approximately 10.2 million shares of common stock under this program at an
aggregate cost of approximately $185 million.
At December 31, 2000 the Company had:
o approximately $1.8 billion in consolidated debt, of which
approximately $783 million was collateralized by mortgages or
capital leases;
o a ratio of consolidated debt to investment in hotels at cost
of 39.9%;
o a ratio of EBITDA to interest expense for the year ended
December 31, 2000, of 2.8-to-1; and
o $175 million of floating rate debt, which constituted 9.5% of
its total debt.
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Most of the Company's floating rate debt bears interest at a rate equal
to 2.00% plus the one month LIBOR rate. At December 31, 2000, the one month
LIBOR rate was 6.565%. Changes in economic conditions could result in higher
interest rates, thereby increasing the Company's interest expense on its
floating rate debt and reducing funds available for its current renovation,
redevelopment and rebranding plans and its share repurchase program.
The Company's leverage could have important consequences. For example,
it could:
o limit the Company's ability to obtain additional financing, if
needed, for working capital, renovation, redevelopment and
rebranding plans, acquisitions, debt service requirements or
other purposes;
o increase the Company's vulnerability to adverse economic and
industry conditions;
o require it to dedicate a substantial portion of its cash flow
from operations to payments on its debt, thereby reducing
funds available for operations, future business opportunities
or other purposes;
o limit its flexibility in planning for, or reacting to, changes
in its business and the industry in which it competes; and
o place it at a competitive disadvantage compared to competitors
that have less debt.
The Company may be unable to realize the anticipated benefits of its
renovations
The majority of its hotels either recently have been, or are in the
process of being, substantially renovated, redeveloped and, in certain cases,
rebranded. If the completion of the current renovation projects are
significantly delayed, the Company's operating results could be adversely
affected. In addition, no assurance can be given that the recently completed and
ongoing improvements will achieve the results anticipated when the decision was
made to invest in the improvements.
Conflicts of interest could adversely affect the Company's business
Certain FelCor directors. Subsidiaries of Bass currently manage 89 of
our hotels. Richard C. North, who joined FelCor's Board during 1998, is the
Group Finance Director of Bass plc, which is also the parent of Holiday
Hospitality Franchising, Inc. Holiday Hospitality is the franchisor of most of
the hotels managed by Bass and, together with its affiliates, owns FelCor common
stock and FelCor LP units aggregating approximately 16.2% of the Company's
outstanding common stock and units.
Issues may arise under the franchise agreements and management
contracts, and in the allocation of acquisition opportunities, that present
conflicts of interests due to the relationship of Mr. North to the companies
with which he is associated. As an example, in the event the Company enters into
new or additional transactions with Bristol, the interests of Mr. North, by
virtue of his relationship with Bass, may conflict with the Company's interests.
For example, in the selection of franchises under which the Company's hotels
will be operated, Mr. North by virtue of his relationship with Holiday
Hospitality, may have interests that conflict with the Company's interest. It is
anticipated that any director who has a conflict of interest with respect to an
issue presented to the FelCor board will abstain from voting upon that issue,
although he will have no legal obligation to do so. There are no provisions in
the Company's bylaws or charter that require an interested director to abstain
from voting upon an issue. Although each director has a fiduciary duty of
loyalty to the Company, there is a risk that, should an interested director vote
upon an issue in which he or one of his affiliates has an interest, his vote may
reflect a bias that could be contrary to the Company's best interests. In
addition, even if an interested director abstains from voting, the director's
participation in the meeting and
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discussion of an issue in which he or companies with which he is associated have
an interest could influence the votes of other directors regarding the issue.
Acquisition of lessees. As a result of the passage of the REIT
Modernization Act, FelCor was able to form or acquire taxable REIT subsidiaries
(TRSs) to acquire its existing hotel leases, and to serve as the lessee for any
hotels acquired after January 1, 2001. Subject to the receipt of consents from
certain lenders, the acquisition of DJONT was completed effective January 1,
2001. The acquisition of DJONT required negotiations between the Company and the
owners of DJONT, including Mr. Corcoran and the children of Charles N.
Mathewson, a director of FelCor. The interests of Mr. Corcoran and Mr. Mathewson
were in direct conflict with the interest of the Company in these negotiations
and, accordingly, they abstained from participation in the discussion and vote
on this matter. In December 2000, the Company sold one Bristol hotel and, on
January 1, 2001, terminated leases with respect to 12 hotels. In consideration
for the acquisition and termination of such leases, 413,585 shares of FelCor
common stock valued at approximately $10 million were issued to Bass. In March
2001, the Company entered into an agreement to acquire the remaining 88 leases
held by Bristol effective July 1, 2001. The acquisition of the leases held by
Bristol involved negotiations between the Company and Bass. Richard C. North, a
director of FelCor, is the Group Finance Director of Bass plc. The interest of
Bass in those negotiations was in direct conflict with the interests of the
Company. Mr. North abstained from participating in any discussion or vote by the
Board of Directors relating to these transactions.
Adverse tax consequences to certain affiliates on a sale of certain
hotels. Messrs. Corcoran and Mathewson may incur additional tax liability if the
Company sells its investments in six hotels that were acquired in July 1994 from
partnerships controlled by these individuals. Consequently, the Company's
interests could differ from Messrs. Corcoran and Mathewson's interests in the
event that a sale of any of these hotels is considered. Decisions regarding a
sale of any of these six hotels must be made by a majority of the independent
directors.
The Company has restrictive debt covenants that could adversely affect its
ability to run its business
At December 31, 2000, the Company had approximately $362 million
borrowed under its Line of Credit. It also had issued and outstanding an
aggregate of $700 million of senior notes. The indentures governing the senior
notes and the agreements governing the Line of Credit contain various
restrictive covenants including, among others, provisions restricting the
Company from:
o incurring indebtedness;
o making distributions;
o making investments;
o engaging in transactions with affiliates;
o incurring liens;
o merging or consolidating with another person;
o disposing of all or substantially all of its assets; or
o permitting limitations on the ability of its subsidiaries to
make payments to it.
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These restrictions may adversely affect the Company's ability to
finance its operations or engage in other business activities that may be in its
best interest.
In addition, certain of these agreements require the Company to
maintain certain specified financial ratios. Its ability to comply with such
ratios may be affected by events beyond its control. Under the most restrictive
of these provisions, the maximum additional debt that the Company could incur
for investment in hotel properties was limited to approximately $1 billion at
December 31, 2000. These covenants also may restrict its ability to engage in
certain transactions. In addition, any breach of these limitations could result
in the acceleration of most of the Company's debt. It may not be able to
refinance or repay this debt in full under such circumstances.
The Company will encounter industry related risks that may adversely affect
its business
Investing in hotel assets involves special risks. The Company has invested
only in hotel-related assets, and its hotels are subject to all of the risks
common to the hotel industry. These risks could adversely affect hotel occupancy
and the rates that can be charged for hotel rooms, and generally include:
o competition from other hotels;
o construction of more hotel rooms in a particular area than
needed to meet demand;
o increases in energy costs and other travel expenses that
reduce business and leisure travel;
o adverse effects of declines in general and local economic
activity;
o fluctuations in revenue caused by the seasonal nature of the
hotel industry;
o adverse effects of a downturn in the hotel industry; and
o risks generally associated with the ownership of hotels and
real estate, as discussed below.
The Company will be subject to the risks of hotel operations. Prior to
January 1, 2001, substantially all of the Hotels were leased to Bristol or DJONT
under leases providing for the payment of rent based, in part, upon revenues
from the hotels. Accordingly, the Company's operating risks were essentially
limited to changes in hotel revenues and to the lessees' ability to pay the rent
due under the leases. Following completion of the acquisition of DJONT and
leases held by Bristol, the acquisition of such leases, in addition to the
ownership expenses previously not borne by it, the Company will become subject
to the risk of fluctuating hotel operating expenses, including but not limited
to:
o wage and benefit costs;
o repair and maintenance expenses;
o the costs of gas and electricity, which have increased
significantly in recent months;
o the costs of liability insurance; and
o other operating expenses.
These operating expenses are more difficult to predict and control than revenue,
resulting in an increased risk of volatility in the Company's results of
operations.
The Company could face increased competition. Each of the Hotels
competes with other hotels in a given geographic area. A number of additional
hotel rooms have been or may be built in a number of the
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geographic areas in which the Company's hotels are located, which could
adversely affect the results of operations of these hotels. An oversupply of
hotel rooms could adversely affect both occupancy and rates in the markets in
which the Company's hotels are located. A significant increase in the supply of
Midprice, Upscale and Upper Upscale hotel rooms and suites, if demand fails to
increase proportionately, could have a severe adverse effect on the Company's
business, financial condition, and results of operations.
Acquisition growth opportunities have decreased. There has been
substantial consolidation in, and capital allocated to, the U.S. lodging
industry since the early 1990's. This generally has resulted in higher prices
for hotels. In addition, current market prices of FelCor's common stock make its
cost of equity capital relatively high. These conditions have resulted in fewer
attractive acquisition opportunities. An important part of the Company's
historical growth strategy has been the acquisition and, in many instances, the
renovation and repositioning of hotels at less than replacement cost. Continued
industry consolidation and competition for acquisitions could adversely affect
its growth prospects. The Company competes for hotel investment opportunities
with other companies, some of which have greater financial or other resources
than it has. Certain competitors may have a lower cost of capital and may be
able to pay higher prices or assume greater risks than would be prudent for the
Company to pay or assume.
The Company must comply with requirements of franchise agreements. Most
of its hotels are operated under various franchise licenses. Each license
agreement requires that the franchised hotel be maintained and operated in
accordance with certain standards. The franchisors also may require substantial
improvements to the hotels as a condition to the renewal or continuation of
these franchise licenses. If a franchise license terminates due to the Company's
failure to make required improvements or to otherwise comply with its terms, the
Company may be liable to the franchisor for a termination payment. These
termination payments would vary by franchise agreement and by hotel. The loss of
a substantial number of franchise licenses and the related termination payments
could have a material adverse effect on the Company's business, financial
condition and results of operations.
The ability to grow may be limited by the Company's ability to attract debt
financing
Since the merger with Bristol Hotel Company, the Company has focused on
its internal growth strategy, which includes the renovation, redevelopment and
rebranding of the Hotels to achieve improved revenue performance. It may not be
able to fund growth solely from cash provided from operating activities because
FelCor must distribute at least 90% of taxable income each year to maintain its
status as a REIT. Consequently, the Company must rely primarily upon the
availability of debt or equity capital to fund hotel acquisitions and
improvements. The ability of the Company to issue new equity securities is
largely dependent on the market prices of such securities, which have not been
high enough to effect a public offering of equity securities in recent years.
Consequently, the Company may be largely dependent upon its ability to attract
debt financing from public or institutional lenders. The Company can make no
assurance that it will be successful in attracting sufficient debt financing to
fund future growth at an acceptable cost. In addition, it currently has a policy
of limiting debt to not more than 50% of its investment in hotel assets, at
cost, which (unless waived or modified by its board of directors) could also
limit its ability to incur additional debt to fund continued growth. At December
31, 2000, the Company's consolidated debt represented 39.9% of its investment in
hotels at cost.
The recent mergers of Promus and Bristol create uncertainties for the
future
While the Company expects its positive historical relationships with
Promus and Bristol to continue with their successors, the mergers of Promus
Hotel Corporation into a subsidiary of Hilton, and of Bristol Hotels & Resorts
into a subsidiary of Bass, give rise to some uncertainties. Changes in
personnel, brand standards or operating methods could adversely affect
relationships, result in increases in required capital expenditures, reductions
in hotel revenues or other adverse consequences of which the Company is not
presently aware.
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The Company is subject to potential tax risks
The federal income tax laws governing REITs are complex. FelCor has
operated and intends to continue to operate in a manner that is intended to
qualify it as a REIT under the federal income tax laws. The REIT qualification
requirements are extremely complicated, however, and interpretations of the
federal income tax laws governing qualification as a REIT are limited.
Accordingly, FelCor cannot be certain that it has been or will continue to be
successful in operating so as to qualify as a REIT. At any time, new laws,
interpretations or court decisions may change the federal tax laws or the
federal income tax consequences of qualification as a REIT.
Failure to make required distributions would subject FelCor to tax. In
order to qualify as a REIT, each year FelCor must pay out to its shareholders at
least 90% of its taxable income (other than any net capital gain). To the extent
that FelCor satisfies the applicable distribution requirement, but distributes
less than 100% of its taxable income, it will be subject to federal corporate
income tax on its undistributed taxable income. In addition, FelCor will be
subject to a 4% nondeductible tax if the actual amount it pays out to its
shareholders in a calendar year is less than a minimum amount specified under
federal tax laws. FelCor's only source of funds to make such distributions comes
from distributions to FelCor from the Operating Partnership. Accordingly, it may
be required to borrow money or sell assets to make distributions sufficient to
enable it to pay out enough of its taxable income to satisfy the applicable
distribution requirement and to avoid corporate income tax and the 4% tax in a
particular year.
Failure to qualify as a REIT would subject FelCor to federal income
tax. If FelCor fails to qualify as a REIT, FelCor would be subject to federal
income tax on its taxable income. It might need to borrow money or sell hotels
in order to pay any such tax. If FelCor ceases to be a REIT, it no longer would
be required to distribute most of its taxable income to its shareholders. Unless
its failure to qualify as a REIT were excused under federal income tax laws,
FelCor could not re-elect REIT status until the fifth calendar year following
the year in which it failed to qualify.
Failure to have distributed Bristol Hotel Company's earnings and
profits in 1998 could cause FelCor to fail to qualify as a REIT. At the end of
any taxable year, a REIT may not have any accumulated earnings and profits
(described generally for federal income tax purposes as cumulative undistributed
net income) from a non-REIT corporation. Arthur Andersen LLP prepared and
provided to FelCor its computation of the accumulated earnings and profits of
Bristol Hotel Company through the date of the merger of Bristol Hotel Company
into FelCor, and the Company made a corresponding special one-time distribution
to its shareholders. However, the determination of accumulated earnings and
profits for federal income tax purposes is extremely complex and the
computations by Arthur Andersen LLP are not binding upon the IRS. Should the IRS
successfully assert that the accumulated earnings and profits of Bristol Hotel
Company were greater than the amount so distributed by FelCor, the Company may
fail to qualify as a REIT.
Sale of assets acquired from Bristol Hotel Company within ten years
after the Merger may result in tax. If, within ten years after the Merger, the
Company sells any assets acquired in the Merger and recognizes a taxable gain on
such sale, FelCor will be taxed at the highest corporate rate on an amount equal
to the lesser of (i) the amount of gain that FelCor recognizes at the time of
the sale or (ii) the amount of gain that FelCor would have recognized if it had
sold the asset at the time of the Merger for its then fair market value. The
sales of Bristol hotels that have been made to date have not resulted in any
material amount of tax liability. If FelCor is successful in selling all of the
hotels shown as assets held for sale, FelCor could incur a significant tax
liability, the amount of which cannot yet be determined.
Departure of key personnel, including Mr. Corcoran, could adversely affect
the Company's future operating results
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The Company will encounter risks that may adversely affect real estate
ownership
General Risks. The Company's investments in hotels are subject to the
numerous risks generally associated with owning real estate, including among
others:
o adverse changes in general or local economic or real estate
market conditions;
o changes in zoning laws;
o changes in traffic patterns and neighborhood characteristics;
o increases in assessed valuation and tax rates;
o increases in the cost of property insurance;
o governmental regulations and fiscal policies;
o the potential for uninsured or underinsured property losses;
o the impact of environmental laws and regulations; and
o other circumstances beyond its control.
Moreover, real estate investments are relatively illiquid, and the
Company may not be able to vary its portfolio in response to changes in economic
and other conditions.
Compliance with environmental laws may adversely affect the Company's
financial condition. Real estate owners are subject to numerous federal, state
and local environmental laws and regulations. Under these laws, a current or
prior owner of real estate may be liable for costs of cleaning up and removing
hazardous or toxic substances found on his property, whether or not he was
responsible for their presence. In addition, if an owner of real property
arranges for the disposal of hazardous or toxic substances at another site, it
may also be liable for the costs of cleaning up and removing such substances
from the disposal site, even if it did not own or operate the disposal site. A
property owner may also be liable to third parties for personal injuries or
property damage sustained as a result of its release of hazardous or toxic
substances (including asbestos-containing materials) into the environment.
Environmental laws may require one to incur substantial expenses and limit the
use of his properties. The Company could be liable for substantial amounts for a
failure to comply with applicable environmental laws, which may be enforced by
the government or, in certain instances, by private parties. The existence of
hazardous or toxic substances on a property can also adversely affect the value
of, and the owner's ability to use, sell or borrow against, the property.
No assurances can be given that future or amended laws, ordinances or
regulations or more stringent interpretations or enforcement policies of
existing environmental requirements, will not impose any material environmental
liability, or that the environmental condition of the hotels will not be
affected by changes (of which the Company is unaware) occurring subsequent to
the dates of such audits, by the condition of properties in the vicinity of such
hotels (such as the presence of leaking underground storage tanks) or by the
actions or unrelated third parties.
Compliance with Americans with Disabilities Act may adversely affect
the Company's financial condition. Under the Americans with Disabilities Act of
1990, all public accommodations (including hotels) are required to meet certain
federal requirements for access and use by disabled persons. The Company
believes that its hotels substantially comply with the requirements of the
Americans with Disabilities Act. However, a determination that the hotels are
not in compliance with that Act could result in liability for both governmental
fines and damages to private parties. If the Company were required to make
unanticipated major modifications to the hotels to comply with the requirements
of the Americans with Disabilities Act, it could adversely affect its ability to
pay its obligations.
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ITEM 2. PROPERTIES
THE HOTELS
The following table sets forth certain descriptive information
regarding the Hotels in which the Company had ownership interests at December
31, 2000:
YEAR NUMBER OF
LOCATION FRANCHISE BRAND ACQUIRED ROOMS/SUITES
- -------- --------------- -------- ------------
Birmingham, AL(1).......................................... Embassy Suites 1996 242
Montgomery (East I-85), AL................................. Holiday Inn 1998 213
Texarkana (I-30), AR(2).................................... Holiday Inn 1998 210
Flagstaff, AZ.............................................. Embassy Suites 1995 119
Phoenix (Airport - 44th St.), AZ........................... Embassy Suites 1998 229
Phoenix (Camelback), AZ.................................... Embassy Suites 1996 233
Phoenix, (Crescent), AZ(1)................................. Sheraton 1997 342
Scottsdale (Downtown), AZ(2)(3)............................ Fairfield Inn 1998 218
Tempe (ASU), AZ(1)......................................... Embassy Suites 1998 224
Anaheim (Disney(R)Area), CA(1)............................. Embassy Suites 1996 222
Burlingame (S.F. Airport So.), CA(2)....................... Embassy Suites 1995 339
Covina (I-10), CA(1)(4).................................... Embassy Suites 1997 264
Dana Point, CA............................................. Doubletree Guest Suites 1997 198
El Segundo (LAX Airport South), CA......................... Embassy Suites 1996 350
Irvine (Orange County Airport), CA......................... Crowne Plaza 1998 335
Milpitas, CA(1)............................................ Embassy Suites 1996 267
Milpitas (San Jose North), CA.............................. Crowne Plaza 1998 305
Napa, CA(1)................................................ Embassy Suites 1996 205
Oxnard (Mandalay Beach), CA................................ Embassy Suites 1996 249
Palm Desert, CA(1) ........................................ Embassy Suites 1998 198
Pleasanton, CA............................................. Crowne Plaza 1998 244
Santa Barbara, CA(1)....................................... Holiday Inn 1998 160
San Diego (On the Bay), CA(2).............................. Holiday Inn 1998 600
San Francisco (Financial District), CA(2).................. Holiday Inn 1998 566
San Francisco (Fisherman's Wharf), CA(2)................... Holiday Inn 1998 584
San Francisco (Union Square), CA........................... Crowne Plaza 1998 400
San Rafael (Marin Co.), CA(1)(4)........................... Embassy Suites 1996 235
South San Francisco (S.F. Airport North), CA(1)............ Embassy Suites 1996 312
Aurora (Denver Southeast), CO(7)........................... Doubletree 1998 248
Avon (Beaver Creek Resort), CO............................. Independent 1996 72
Hartford (Downtown), CT.................................... Crowne Plaza 1998 342
Stamford, CT(2)............................................ Holiday Inn Select 1998 383
Wilmington, DE(7).......................................... Doubletree 1998 244
Boca Raton, FL(3).......................................... Doubletree Guest Suites 1995 182
Boca Raton, FL............................................. Embassy Suites 1996 263
Cocoa Beach (Oceanfront Resort), FL........................ Holiday Inn 1998 500
Deerfield Beach, FL(1)..................................... Embassy Suites 1996 244
Ft. Lauderdale, FL(1)...................................... Embassy Suites 1996 359
Ft. Lauderdale (Cypress Creek), FL(1)...................... Sheraton Suites 1998 253
Jacksonville, FL........................................... Embassy Suites 1994 277
Kissimmee (Nikki Bird Resort), FL(2)....................... Holiday Inn 1998 529
Lake Buena Vista (Walt Disney World(R)), FL(2)............. Doubletree Guest Suites 1997 229
Miami (Airport), FL(2)..................................... Crowne Plaza 1998 304
Miami (Airport), FL(1)..................................... Embassy Suites 1996 314
Orlando (North), FL........................................ Embassy Suites 1994 277
Orlando (South), FL(1)..................................... Embassy Suites 1994 244
Orlando (International Drive Resort), FL................... Holiday Inn 1998 652
Orlando (Airport), FL...................................... Holiday Inn Select 1998 288
Tampa (Busch Gardens), FL(3)............................... Doubletree Guest Suites 1995 129
Tampa (Rocky Point), FL.................................... Doubletree Guest Suites 1997 203
Tampa (Near Busch Gardens), FL(2).......................... Holiday Inn 1998 395
Atlanta (Downtown), GA(3).................................. Courtyard by Marriott 1998 211
Atlanta (Airport), GA...................................... Crowne Plaza 1998 378
Atlanta (Powers Ferry), GA(1).............................. Crowne Plaza 1998 296
Atlanta (Buckhead), GA(1).................................. Embassy Suites 1996 317
Atlanta (Airport), GA...................................... Embassy Suites 1998 233
Atlanta (Perimeter Center), GA(1)(4)....................... Embassy Suites 1997 241
Atlanta (Downtown), GA(3).................................. Fairfield Inn 1998 242
Atlanta (Airport North), GA(1)............................. Holiday Inn 1998 493
Atlanta (Jonesboro South), GA(1)........................... Holiday Inn 1998 180
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YEAR NUMBER OF
LOCATION FRANCHISE BRAND ACQUIRED ROOMS/SUITES
- -------- --------------- -------- ------------
Atlanta (Perimeter Dunwoody), GA(1)................................ Holiday Inn Select 1998 250
Atlanta (Airport Gateway), GA...................................... Sheraton 1997 395
Atlanta (Galleria), GA(1).......................................... Sheraton Suites 1997 278
Brunswick, GA...................................................... Embassy Suites 1995 130
Columbus (Airport North), GA(2).................................... Holiday Inn 1998 223
Marietta, GA(3).................................................... Hampton Inn 1998 140
Davenport, IA(3)................................................... Hampton Inn 1998 132
Davenport, IA(3)................................................... Holiday Inn 1998 287
Chicago (Allerton), IL............................................. Crowne Plaza 1998 443
Chicago (Lombard), IL(1)(4)........................................ Embassy Suites 1995 262
Chicago (O'Hare), IL(1)............................................ Sheraton Suites 1997 297
Deerfield, IL(1)................................................... Embassy Suites 1996 237
Moline, IL(3)...................................................... Hampton Inn 1998 138
Moline (Airport), IL(3)............................................ Holiday Inn 1998 216
Moline (Airport), IL(3)............................................ Holiday Inn Express 1998 111
Indianapolis (North), IN(1)(4).................................... Embassy Suites 1996 222
Colby, KS(3)....................................................... Holiday Inn Express 1998 72
Great Bend, KS(3).................................................. Holiday Inn 1998 175
Hays, KS(3)........................................................ Hampton Inn 1998 116
Hays, KS(3)........................................................ Holiday Inn 1998 190
Overland Park, KS(1)(4)............................................ Embassy Suites 1997 199
Salina, KS(1)(3)................................................... Holiday Inn 1998 192
Salina (I-70), KS(2)(3)............................................ Holiday Inn Express Hotel & Suites 1998 93
Lexington, KY...................................................... Hilton Suites 1996 174
Lexington, KY(1)................................................... Sheraton Suites 1998 155
Baton Rouge, LA(1)................................................. Embassy Suites 1996 224
New Orleans, LA(1)................................................. Embassy Suites 1994 372
New Orleans (Chateau LeMoyne), LA(1)(2)(4)......................... Holiday Inn 1998 171
New Orleans (French Quarter), LA(1)(2)............................. Holiday Inn 1998 276
Boston (Marlborough), MA(1)........................................ Embassy Suites 1995 229
Boston (Government Center), MA(2).................................. Holiday Inn Select 1998 303
Baltimore (BWI), MD(7)............................................. Embassy Suites 1997 251
Troy, MI(7)........................................................ Embassy Suites 1997 251
Bloomington, MN.................................................... Embassy Suites 1997 219
Minneapolis (Airport), MN(1)....................................... Embassy Suites 1995 311
Minneapolis (Downtown), MN......................................... Embassy Suites 1995 218
St. Paul, MN(5).................................................... Embassy Suites 1995 210
Kansas City (Country Club Plaza), MO (1)(2)(4)..................... Embassy Suites 1997 266
Kansas City (Northeast), MO........................................ Holiday Inn 1998 167
St. Louis (Downtown), MO........................................... Embassy Suites 1998 297
St. Louis (Westport), MO(1)........................................ Holiday Inn 1998 318
Jackson (Downtown), MS(1).......................................... Crowne Plaza 1998 354
Jackson (Briarwood), MS(1)(3)...................................... Hampton Inn 1998 119
Jackson (North), MS(1)............................................. Holiday Inn Hotel & Suites 1998 224
Olive Branch (Whispering Woods Hotel and Conference Center), MS.... Independent 1998 179
Charlotte, NC(1)(4)................................................ Embassy Suites 1996 274
Raleigh/Durham, NC................................................. Doubletree Guest Suites 1997 203
Raleigh, NC(1)(4).................................................. Embassy Suites 1997 225
Omaha, NE.......................................................... Doubletree Guest Suites 1998 189
Omaha (Central), NE(1)............................................. Hampton Inn 1998 132
Omaha (Southwest), NE.............................................. Hampton Inn 1998 131
Omaha (I-80), NE(1)................................................ Holiday Inn 1998 383
Omaha (Old Mill Northwest), NE..................................... Crowne Plaza 1998 213
Omaha (Southwest), NE.............................................. Holiday Inn Express Hotel & Suites 1998 78
Omaha (Southwest), NE.............................................. Homewood Suites 1998 108
Parsippany, NJ(1)(4)............................................... Embassy Suites 1996 274
Piscataway, NJ(1).................................................. Embassy Suites 1996 225
Secaucus (Meadowlands), NJ(2)(4)................................... Embassy Suites 1997 261
Secaucus (Meadowlands), NJ......................................... Crowne Plaza 1998 301
Albuquerque (Mountain View), NM.................................... Holiday Inn 1998 360
Syracuse, NY....................................................... Embassy Suites 1997 215
Cleveland, OH...................................................... Embassy Suites 1995 268
Columbus, OH....................................................... Doubletree Guest Suites 1998 194
Dayton, OH(1)...................................................... Doubletree Guest Suites 1997 138
Tulsa, OK.......................................................... Embassy Suites 1994 240
Philadelphia (Center City), PA(1).................................. Crowne Plaza 1998 445
Philadelphia (Independence Mall), PA(1)............................ Holiday Inn 1998 364
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YEAR NUMBER OF
LOCATION FRANCHISE BRAND ACQUIRED ROOMS/SUITES
- -------- --------------- -------- ------------
Philadelphia (Society Hill), PA(1)......................... Sheraton 1997 365
Pittsburgh, PA(1)(2)....................................... Holiday Inn Select 1998 251
Charleston (Mills House), SC............................... Holiday Inn 1998 214
Greenville (Roper), SC..................................... Crowne Plaza 1998 208
Myrtle Beach (Kingston Plantation), SC..................... Embassy Suites 1996 255
Knoxville (Central), TN(2)................................. Holiday Inn 1998 242
Nashville (Airport), TN(3)................................. Doubletree Guest Suites 1997 138
Nashville, TN.............................................. Embassy Suites 1994 296
Nashville (Opryland/Airport), TN(2)........................ Holiday Inn Select 1998 385
Addison (North Dallas), TX(1).............................. Crowne Plaza 1998 429
Amarillo (I-40), TX(2)..................................... Holiday Inn 1998 247
Austin (Downtown), TX(7)................................... Doubletree Guest Suites 1997 189
Austin (Airport North), TX(1)(4)........................... Embassy Suites 1997 261
Austin (Town Lake), TX..................................... Holiday Inn 1998 320
Beaumont (Midtown I-10), TX................................ Holiday Inn 1998 253
Corpus Christi, TX(1)...................................... Embassy Suites 1995 150
Dallas (Alpha Road), TX.................................... Bristol House(R) 1998 127
Dallas (Market Center), TX(1).............................. Crowne Plaza 1998 354
Dallas (Park Central), TX (1).............................. Crowne Plaza Suites 1998 295
Dallas (Campbell Centre), TX(7)............................ Doubletree 1998 302
Dallas (DFW Airport South), TX............................. Embassy Suites 1998 305
Dallas (Love Field), TX(1)................................. Embassy Suites 1995 248
Dallas (Market Center), TX(1).............................. Embassy Suites 1997 244
Dallas (Park Central), TX.................................. Embassy Suites 1994 279
Dallas (Regal Row), TX(3).................................. Fairfield Inn 1998 204
Dallas (Downtown West End), TX............................. Hampton Inn 1998 311
Dallas, TX(1).............................................. Harvey Hotel 1998 313
Dallas (Park Central), TX(6)............................... Sheraton 1998 438
Dallas (Park Central), TX(6)............................... Westin 1997 545
Houston (Near the Galleria), TX(3)......................... Courtyard by Marriott 1998 209
Houston (Medical Center), TX(1)............................ Crowne Plaza 1998 297
Houston (Near the Galleria), TX(3)......................... Fairfield Inn 1998 107
Houston (I-10 East), TX(3)................................. Fairfield Inn 1998 160
Houston (I-10 East), TX(3)................................. Hampton Inn 1998 90
Houston (Medical Center), TX(1)(2)......................... Holiday Inn Hotel & Suites 1998 285
Houston (International Airport), TX(1)..................... Holiday Inn 1998 401
Houston (I-10 West), TX.................................... Holiday Inn Select 1998 345
Houston (Near Greenway Plaza), TX(1)....................... Holiday Inn Select 1998 355
Irving (DFW Airport North), TX(1).......................... Harvey Hotel 1998 506
Irving (DFW Airport North), TX(1).......................... Harvey Suites 1998 164
Midland (Country Villa), TX................................ Holiday Inn 1998 250
Odessa (Parkway Blvd.), TX................................. Holiday Inn Express Hotel & Suites 1998 186
Odessa (Centre), TX........................................ Holiday Inn Hotel & Suites 1998 245
Plano, TX(1)............................................... Harvey Hotel 1998 279
Plano, TX.................................................. Holiday Inn 1998 161
San Antonio (Airport), TX(1)(2)(4)......................... Embassy Suites 1997 261
San Antonio (Northwest), TX(1)(4).......................... Embassy Suites 1997 217
San Antonio (Downtown), TX(2).............................. Holiday Inn 1998 315
San Antonio (International Airport), TX.................... Holiday Inn Select 1998 397
Waco (I-35), TX............................................ Holiday Inn 1998 171
Salt Lake City (Airport), UT(2)............................ Holiday Inn 1998 191
Tyson's Corner, VA (1)(4).................................. Sheraton 1999 437
Burlington, VT(1).......................................... Sheraton 1997 309
Cambridge, Canada.......................................... Holiday Inn 1998 139
Kitchener (Waterloo), Canada............................... Holiday Inn 1998 182
Peterborough (Waterfront), Canada ......................... Holiday Inn 1998 155
Sarnia, Canada............................................. Holiday Inn 1998 151
Toronto (Yorkdale), Canada................................. Holiday Inn 1998 370
Toronto (Airport), Canada.................................. Holiday Inn Select 1998 444
- ----------
(1) Encumbered by mortgage debt.
(2) Situated on land leased under a long-term ground lease.
(3) This hotel is one of the 24 remaining non-strategic hotels that the
Company intends to sell.
(4) This hotel is one of 16 hotels owned by unconsolidated entities in
which the Company owns a 50% equity interest.
(5) Owned subject to a capitalized industrial revenue bond lease that
expires in 2011 and permits the Company to purchase the fee interest at
expiration for a nominal amount.
(6) This hotel is one of 2 hotels owned by a joint venture in which the
Company owns a 60% equity interest.
(7) This hotel is one of 6 hotels in which the Company owns a 90% equity
interest.
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THE PERCENTAGE LEASES
At December 31, 2000, each of the Hotels (with two exceptions) was
leased pursuant to a percentage lease. As a result of the acquisition of DJONT
on January 1, 2001, and the pending acquisition of the Bristol leases on July 1,
2001, all of the hotel leases will be held by our taxable REIT subsidiaries.
ITEM 3. LEGAL PROCEEDINGS
There is no litigation pending or known to be threatened against the
Company or affecting any of its Hotels other than claims arising in the ordinary
course of business or which are not considered to be material. Furthermore, most
of such claims are substantially covered by insurance. Management does not
believe that any claims known to it (individually or in the aggregate) will have
a material adverse effect on the Company, without regard to any potential
recoveries from insurers or other third parties.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
The Company's common stock is traded on the New York Stock Exchange
under the symbol "FCH." The following table sets forth for the indicated periods
the high and low sale prices for the common stock, as traded on such exchange.
HIGH LOW
---- ---
1999
First quarter .................................... $24 11/16 $21 5/8
Second quarter ................................... 26 1/8 20
Third quarter .................................... 21 5/8 16 11/16
Fourth quarter ................................... 18 3/8 16 1/4
2000
First quarter .................................... $18 3/4 $16 1/2
Second quarter ................................... 22 1/16 17 11/16
Third quarter .................................... 23 3/4 19 11/16
Fourth quarter ................................... 24 1/2 21 1/2
STOCKHOLDER INFORMATION
At March 15, 2001, the Company had approximately 560 holders of record
of its common stock and approximately 50 holders of record of the $1.95 Series A
Cumulative Convertible Preferred Stock (which is convertible into common stock).
It is estimated that there were approximately 28,000 beneficial owners, in the
aggregate, of the common stock and Series A Preferred Stock at that date.
IN ORDER TO COMPLY WITH CERTAIN REQUIREMENTS RELATED TO QUALIFI-
CATION OF THE COMPANY AS A REIT, THE COMPANY'S CHARTER LIMITS THE NUMBER
OF SHARES OF COMMON STOCK THAT MAY BE OWNED BY ANY SINGLE PERSON OR
AFFILIATED GROUP TO 9.9% OF THE OUTSTANDING COMMON STOCK.
DISTRIBUTION INFORMATION
The Company has adopted a policy of paying regular quarterly
distributions on its common stock, and cash distributions have been paid on the
Company's common stock with respect to each quarter since its inception. The
following table sets forth information regarding the declaration and payment of
distributions by the Company on its common stock during 1999 and 2000.
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QUARTER TO DISTRIBUTION DISTRIBUTION PER SHARE
WHICH DISTRIBUTION RECORD PAYMENT DISTRIBUTION
RELATES DATE DATE AMOUNT
------------------ ------------ ------------ ------------
1999
First quarter................................................... 4/15/99 4/30/99 $0.55
Second quarter.................................................. 7/15/99 7/30/99 $0.55
Third quarter................................................... 10/15/99 10/29/99 $0.55
Fourth quarter.................................................. 12/30/99 1/31/00 $0.55
2000
First quarter................................................... 4/14/00 4/28/00 $0.55
Second quarter.................................................. 7/14/00 7/31/00 $0.55
Third quarter................................................... 10/16/00 10/31/00 $0.55
Fourth quarter.................................................. 12/29/00 1/31/01 $0.55
The foregoing distributions represent approximately a 0% return of
capital in 2000 and an approximate 7.2% return of capital in 1999. In order to
maintain its qualification as a REIT, FelCor must make annual distributions to
its shareholders of at least 90% (95% prior to January 1, 2001) of its taxable
income (which does not include net capital gains). For the years ended December
31, 2000 and December 31, 1999, FelCor had annual distributions totaling $2.20
per common share, of which only $2.09 and $1.84 per share, respectively, were
required to satisfy the 95% REIT distribution test in the respective years.
Under certain circumstances FelCor may be required to make distributions in
excess of cash available for distribution in order to meet such REIT
distribution requirements. In such event, FelCor presently would expect to
borrow funds, or to sell assets for cash, to the extent necessary to obtain cash
sufficient to make the distributions required to retain its qualification as a
REIT for federal income tax purposes.
The Company currently anticipates that it will maintain at least the
current dividend rate for the immediate future, unless actual results of
operations, economic conditions or other factors differ from its current
expectations. Future distributions, if any, paid by the Company will be at the
discretion of the Board of Directors and will depend on its actual cash flow,
its financial condition, capital requirements, the annual distribution
requirements under the REIT provisions of the internal revenue code and such
other factors as the Board of Directors deems relevant.
RECENT SALES OF UNREGISTERED SECURITIES
In connection with the efforts of Bass plc ("Bass") to acquire Bristol,
in February 2000, a Bass subsidiary (Bass America, Inc.) contributed 4,713,185
outstanding shares of FelCor common stock to the Operating Partnership, in
exchange for a like number of units of limited partner interest therein. In
November 2000, Bass America, Inc. contributed an additional 1,000,000
outstanding shares of FelCor common stock to the Operating Partnership in
exchange for a like number of units of limited partner interest therein. Neither
the units issued by the Operating Partnership, nor the common stock issuable
upon redemption of such units, was registered under the Securities Act in
reliance upon certain exemptions from the registration requirements thereof,
including the exemption provided by Section 4(2) of that act.
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ITEM 6. SELECTED FINANCIAL DATA
The following tables set forth selected financial data for the Company
for the years ended December 31, 2000, 1999, 1998, 1997 and 1996 that has been
derived from the financial statements of the Company and the notes thereto,
audited by PricewaterhouseCoopers LLP, independent accountants. Such data should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Consolidated Financial Statements
and Notes thereto.
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
YEARS ENDED DECEMBER 31,
2000 1999 1998 (2) 1997 1996
------------ ------------ ------------ ------------ ------------
STATEMENT OF OPERATIONS DATA:
Total revenue ............................ $ 556,692 $ 504,001 $ 339,617 $ 176,651 $ 100,944
Income before nonrecurring items ......... $ 61,176(1) $ 131,957 $ 117,437 $ 63,835 $ 43,291
Net income ............................... $ 61,699(1) $ 131,080 $ 114,839 $ 63,650 $ 40,937
Net income applicable to common
shareholders .......................... $ 37,017(1) $ 106,345 $ 93,416 $ 51,853 $ 33,203
DILUTED EARNINGS PER SHARE:
Income applicable to common
shareholders before extraordinary
charge ................................ $ 0.74(1) $ 1.59 $ 1.92 $ 1.65 $ 1.53
Net income applicable to common
shareholders .......................... $ 0.67(1) $ 1.57 $ 1.86 $ 1.64 $ 1.43
OTHER DATA:
Cash dividends per common share .......... $ 2.20 $ 2.20 $ 2.545(3) $ 2.10 $ 1.92
Funds From Operations (4) ................ $ 288,636 $ 286,895 $ 217,363 $ 129,815 $ 77,141
EBITDA (4) ............................... $ 470,861 $ 432,690 $ 306,361 $ 165,613 $ 88,355
Weighted average common shares and
units outstanding ..................... 67,239 75,251 58,013 39,157 29,306
BALANCE SHEET DATA:
Total assets ............................. $ 4,103,603 $ 4,255,751 $ 4,175,383 $ 1,673,364 $ 978,788
Debt ..................................... $ 1,838,241 $ 1,833,954 $ 1,594,734 $ 476,819 $ 239,425
- ----------
(1) In the second quarter of 2000 the Company recorded a $63 million
reserve for the sale of non-strategic hotel assets, which is reflected
in the income statements presented for the period.
(2) On July 28, 1998, the Company completed the merger of Bristol Hotel
Company's real estate holdings with and into the Company. The merger
resulted in the net acquisition of 107 primarily full-service hotels in
return for approximately 31.0 million shares of newly issued common
stock.
(3) In 1998, the Company declared a special one-time distribution of
accumulated but undistributed earnings and profits as a result of the
merger of Bristol Hotel Company into FelCor, in addition to the regular
quarterly dividend of $0.55 per common share and $0.4875 per Series A
preferred share. The amount of the one-time distribution was $0.345 per
common share and $0.207 per Series A preferred share.
(4) A more detailed description of FFO and EBITDA is contained in the
"Funds From Operations" section of Management's Discussion and Analysis
of Financial Condition and Results of Operations.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
FelCor is the nation's second largest hotel REIT. At December 31, 2000,
it owned interests in 186 hotels with nearly 50,000 rooms and suites through its
greater than 86% equity interest in the Operating Partnership. Additional
organizational information relating to the Company, and the definitions of
certain capitalized terms, are contained in the Notes to Consolidated Financial
Statements of FelCor Lodging Trust Incorporated appearing elsewhere herein.
The Company is the owner of the largest number of Embassy Suites(R),
Crowne Plaza(R), Holiday Inn(R) and independently owned Doubletree(R) branded
hotels in the world. The Hotels are located in 35 states and Canada with
concentrations in Texas (41), California (19), Florida (18) and Georgia (15
hotels). The following table provides a schedule of the Hotels, by brand,
operated by each of the Company's Lessees at December 31, 2000:
NOT OPERATED
BRAND DJONT BRISTOL UNDER A LEASE TOTAL
----- ----- ------- ------------- -----
Hilton(R) Brands:
Embassy Suites.................................. 59 59
Doubletree and Doubletree Guest Suites(R)....... 14 14
Hampton Inn(R).................................. 9 9
Hilton Suites(R)................................ 1 1
Homewood Suites(R).............................. 1 1
Bass Brands:
Holiday Inn..................................... 43 1 44
Crowne Plaza and Crowne Plaza Suites(R)......... 18 18
Holiday Inn Select(R)........................... 10 10
Holiday Inn Express(R).......................... 5 5
Starwood Brands:
Sheraton(R)and Sheraton Suites(R)............... 10 10
Westin(R)....................................... 1 1
Other Brands.......................................... 13 1 14
--- --- --- ---
Total Hotels................................. 85 99 2 186
=== === === ===
The principal factors affecting the Company's results of operations are
changes in room and suite revenues reflected by revenue per available room
("RevPAR"), renovations, redevelopments, and rebrandings of hotels and
acquisitions.
The Company seeks to increase operating cash flow through both internal
growth and selective acquisitions, while maintaining a flexible and conservative
capital structure. In addition to renovating, redeveloping and repositioning the
Company's acquired hotels, the Company may seek to acquire existing or new
upscale properties that will benefit from affiliation with one of the premium
brands available to the Company through its strategic brand owner and manager
relationships with Hilton Hotels Corporation ("Hilton"), Bass and Starwood
Hotels & Resorts Worldwide, Inc. ("Starwood").
On July 28, 1998, the Company merged Bristol Hotel Company into FelCor,
acquiring its 107 primarily full-service hotels (the "Merger"). These hotels
added more than 28,000 rooms and suites to the Company's portfolio, more than
doubling the Company's size. The Merger also provided diversification, both
geographically and by asset class, by adding hotels in many of its key markets
and broadening its portfolio in the full-service, upscale and midscale hotel
markets.
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In 1999 and 2000, the Company completed the major portion of its
program of renovation, redevelopment and rebranding of hotels, which was
undertaken to improve under-performing assets and increase revenues. The Company
spent nearly $220 million in 1998, $222 million in 1999 and $95 million in 2000
on renovations, redevelopment, rebrandings, room additions to existing hotels
and other hotel improvements. Management believes that its strategy of
renovating, redeveloping and rebranding selected hotels continues to be
effective in improving revenue performance.
The Company's historical results of operations for 2000, 1999, and 1998
are summarized as follows (in millions, except percentages and hotel counts):
YEARS ENDED DECEMBER 31, PERCENTAGE CHANGE
------------------------------------------- -------------------------
2000 1999 1998(B) 00 VS 99 99 VS 98(B)
---------- ---------- ---------- --------- -----------
Hotels owned at year end .......................... 186 188 193 (1.1)% (2.6)%
Revenues .......................................... $ 556.7 $ 504.0 $ 339.6 10.5% 48.4%
Income before nonrecurring items .................. $ 61.2(a) $ 132.0 $ 117.4 (53.6)%(a) 12.4%
Net income applicable to common shareholders ...... $ 37.0(a) $ 106.3 $ 93.4 (65.2)%(a) 13.8%
Funds From Operations (FFO) ....................... $ 288.6 $ 286.9 $ 217.4 0.6% 32.0%
Earnings Before Interest, Taxes, Depreciation and
Amortization (EBITDA) ........................ $ 470.9 $ 432.7 $ 306.4 8.9% 41.2%
(a) Includes a reserve of $63 million established for the proposed
sale of 25 non-strategic hotels described under "Liquidity and
Capital Resources" below.
(b) Reflects the acquisition of the Bristol hotels effective July
28, 1998.
Historically the Company has been financed primarily with equity,
resulting in a conservative financial structure. The Company's emphasis on
maintaining this conservative approach is evidenced in part, by the following,
as of December 31, 2000:
o Interest coverage ratio of 2.8x
o Total debt to annual EBITDA of 4.1x
o Borrowing capacity under its Line of Credit of $238 million
o Consolidated debt equal to 39.9% of its investment in hotels
at cost
o Fixed interest rate debt comprising 91% of total debt
o Secured mortgage debt to total assets of 19%
o Debt of approximately $24 million maturing in 2001
On January 1, 2001, the provisions of the REIT Modernization Act became
effective. These provisions:
o reduce the percentage of taxable income required to be
distributed by a REIT from 95% to 90% for taxable years after
2000; and
o subject to certain limitations, permit a REIT to own taxable
subsidiaries that engage in businesses previously prohibited
to a REIT, including, among other things, leasing hotels from
a hotel REIT, provided that the hotels continue to be managed
by unrelated third parties.
As a result of the REIT Modernization Act's enactment, the Company,
undertook steps to realize the benefits the Act offers to REIT's by:
o effective January 1, 2001, acquiring DJONT which leased 85 of
the Company's hotels at December 31, 2000. The management
contracts for all of the DJONT leased hotels remained in
place.
o effective January 1, 2001, completing the acquisition of
leases for 12 hotels leased to Bristol and entering into
management contracts with a subsidiary of Bass for two of the
hotels, a subsidiary of Interstate Hotels Corporation for
eight hotels, with a subsidiary of Hilton for one of the
hotels and one hotel was sold.
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o effective July 1, 2001, acquiring leases for the remaining 88
hotels leased to Bristol and entering into long term
management agreements with a subsidiary of Bass to manage
these hotels.
o contributing the acquired lessee and/or leases as acquired, to
newly created, wholly-owned taxable REIT subsidiaries ("TRS").
The Company believes that the advantages of holding the lessees and
leases in a TRS include (i) a more direct relationship with the hotel and the
brand managers, (ii) elimination of potential conflicts of interest and (iii)
the ability to present consolidated hotel level financial reporting.
As a result of the acquisition of the hotel leases the Company will
report its results of operations showing hotel revenues and expenses rather than
percentage lease revenue. Pro forma consolidated statements of operations for
the years ended December 31, 2000 and 1999, which reflect the acquisition of the
hotel leases, are contained in the Notes to the Consolidated Financial
Statements of FelCor Lodging Trust Incorporated appearing elsewhere herein.
RESULTS OF OPERATIONS
THE COMPANY -- ACTUAL
Comparison of the Years Ended December 31, 2000 and 1999
For the year ended December 31, 2000, the Company recorded net income
of $61.7 million compared to $131.1 million for the year ended December 31,
1999. Included in expense for the year ended December 31, 2000, is a one-time
reserve of $63.0 million related to 25 non-strategic hotels that the Company has
identified as held for sale. The reserve represents the difference between the
net book value of the hotels and their estimated net sale proceeds. Net income
excluding the reserve would have been $124.7 million.
The Company's total revenues increased $52.7 million to $556.7 million
for the year ended December 31, 2000, compared to $504.0 million for the year
end December 31, 1999. This increase is principally from increased Percentage
Lease revenues of $46.0 million, which increased to $536.9 million from $490.9
million in the prior year.
Changes in the Hotels' room and suite revenues significantly affect the
Company because its principal source of revenue historically has been rent
payments from the Lessees under the Percentage Leases. The Percentage Leases
provide for rent based on a percentage of room and suite revenue, food and
beverage revenue, food and beverage rents, and in some instances, other hotel
revenues. During 2000 and 1999, Percentage Lease revenue derived from room and
suite revenue represented 90% and 91% of total Percentage Lease revenue,
respectively. RevPAR, which is a measure of room and suite revenue, increased by
7.0% in 2000 for all Hotels. This increase in RevPAR resulted from both
increases in average daily rate ("ADR") at the Hotels and increases in occupied
rooms ("Occupancy"). For the year ended December 31, 2000, ADR increased by 3.7%
over the prior year and Occupancy increased by 2.2 percentage points. The
Company's ability to achieve increases in room and suite revenue and RevPAR at
its Hotels is affected, among other things, by overall demand in the
marketplace, room supply and the success of the Company's renovation,
redevelopment and rebranding program. The Company had 59 hotels which had
undergone renovation, redevelopment or rebranding in either 1999 or 2000, which
are identified by the Company as non-comparable hotels. The non-comparable
hotels reflected increases in RevPAR of 10.1% which was greater than the results
for hotels that had not recently undergone renovation. (A more detailed
discussion of hotel room and suite revenue is contained in "The Hotels - Actual"
section of this Management's Discussion and Analysis of Financial Condition and
Results of Operations).
The Company generally seeks to improve those of its Hotels that
management believes can achieve increases in room and suite revenue and RevPAR
as a result of renovation, redevelopment and rebranding.
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27
Since the beginning of 1998, the Company spent nearly $440 million in capital
improvements to its Hotels. Management attributes much of the improvement in
RevPAR to these capital improvements.
Equity in income from unconsolidated entities increased by $6.3 million
in 2000 compared to 1999. The principal reasons for this increase in 2000 were
(i) a $3.7 million gain recorded in 2000 from the development and sale of the
Brighton Beach condominiums at Kingston Plantation in Myrtle Beach, South
Carolina, by an entity in which the Company owns a 50% equity interest and (ii)
the operations of a hotel in which the Company acquired a 50% equity interest in
the fourth quarter of 1999.
Total expenses increased $123.5 million in the year ended December 31,
2000, to $495.5 million from $372.0 million in 1999. Included in total expenses
is a reserve of $63.0 million, recorded in the second quarter of 2000, related
to the 25 non-strategic hotels the Company has identified as held for sale.
Total expenses, excluding the $63.0 million reserve for sale of non-strategic
hotels, increased by $60.5 million, and as a percentage of total revenue
increased to 78% from 74% in 1999. The major components of the increase in
expenses were interest expense; taxes, insurance and other; and depreciation
expense.
Interest expense increased by $33.2 million for the year ended December
31, 2000, compared to 1999, and increased as a percentage of total revenue from
24.9% to 28.5%. This increase is principally the result of the following items:
o The Company increased its average debt outstanding in 2000 by
approximately $197 million over the prior year. The increase
in average debt resulted principally from stock repurchases in
2000 of approximately $87 million and capital expenditures in
2000 totaling approximately $101.4 million.
o The average interest rate on the Company's indebtedness
increased from about 7% in 1999 to nearly 8% in 2000.
o The Company capitalized interest related to major renovations
of approximately $5.2 million in 1999, but because of reduced
renovation activity in 2000, the Company had only $1.1 million
of interest capitalized in 2000.
Taxes, insurance and other increased by $11.1 million in 2000, compared
to the prior year, and increased as a percentage of total revenue from 11.8% to
12.6%. This increase in expenses was principally from increases in real estate
and personal property taxes. The Company's real estate and personal property
taxes increased from higher assessed values generally resulting from the major
renovations completed over the past three years.
Depreciation expense increased by $7.8 million in 2000, compared to the
prior year, and decreased as a percentage of total revenue from 30.3% to 28.9%.
Depreciation expense increased principally as a result of additional
depreciation related to fixed asset additions of $95 million in 2000 and $222
million in 1999.
The Company also recorded gains on the sale of two hotels of $2.6
million and $1.8 million for the sale of excess land during the year ended
December 31, 2000 and an extraordinary charge of $3.9 million for the write-off
of deferred loan costs associated with debt which was retired prior to maturity.
Comparison of the Years Ended December 31, 1999 and 1998
For the years 1999 and 1998, FelCor had total revenue of $504.0 million
and $339.6 million, respectively, consisting primarily of Percentage Lease
revenue of $490.9 million and $328.0 million. The increase in revenue is
primarily attributable to the Company's acquisition and subsequent leasing,
pursuant to Percentage Leases, of interests in more than 100 hotels in 1998,
including the hotels that were acquired
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through the Merger on July 28, 1998. The hotels which were acquired during 1998,
including those acquired through the Merger, accounted for $151.1 million (93%)
of the change in Percentage Lease revenue for the twelve months ended December
31, 1999, compared to 1998. The 73 hotels owned throughout both of the years
ended December 31, 1999 and 1998 produced an increase in Percentage Lease
revenues of $10.9 million (or 1.9%) between 1998 and 1999.
Changes in room and suite revenues significantly affect the Company
because, historically, its principal source of revenue is rent payments from the
Lessees under the Percentage Leases. The Percentage Leases provide for rent
based on a percentage of room and suite revenue, food and beverage revenue, food
and beverage rents, and in some instances, other hotel revenues. In 1999 and
1998, Percentage Lease revenue derived from room and suite revenue represented
91% and 93% of total Percentage Lease revenue, respectively. The 73 hotels owned
throughout both 1999 and 1998 increased room and suite revenue by $11.6 million
(or 2%) in 1999, compared to 1998, and increased RevPAR by 1.4%. The RevPAR
increase was driven by an increase in ADR of 1.5%, despite a slight drop in
Occupancy of 0.1 percentage points. Of the 73 hotels, 18 had undergone
renovation in either 1998 or 1999. Those renovated hotels reflected increases in
ADR of 2.2% and in RevPAR of 1.9%, which was greater than the results for hotels
that had not undergone renovation. This reflects both the improvement from
renovation and the impact of taking rooms out of service for such renovation.
The Company generally seeks to improve those of its hotels that
management believes can achieve increases in room and suite revenue and RevPAR
as a result of renovation, redevelopment and rebranding. However, during the
course of such improvements hotel revenue performance is often adversely
affected, compared to the prior year, by such temporary factors as rooms and
suites out of service and disruptions of hotel operations. During 1999, FelCor
spent $177 million on the renovation, redevelopment and rebranding of its
hotels. As a result of the extensive renovations, FelCor's portfolio experienced
significant disruption during 1999, with approximately 350,000 room nights out
of service, or 2% of its portfolio. (A more detailed discussion of hotel room
and suite revenue is contained in the "The Hotels--Actual" section of this
Management's Discussion and Analysis of Financial Condition and Results of
Operations.)
Total expenses increased $149.9 million in the year ended December 31,
1999, to $372.0 million from $222.2 million in 1998. This increase resulted
primarily from the additional hotels acquired in July 1998 through the Merger.
Total expenses as a percentage of total revenue increased to 73.8% for
the twelve months ended December 31, 1999, compared to 65.4% in 1998. The major
components of the increase in expenses, as a percentage of total revenue, are
depreciation, land leases, and interest expense.
Depreciation increased, as a percentage of total revenue, to 30.4% in
the twelve months ended December 31, 1999, from 26.8% in 1998. The relative
increase in depreciation expense is primarily attributed to depreciation on
$341.4 million in capital expenditures made over the past two years,
approximately 40% of which are short-lived assets that are depreciated over 3 to
5 years.
Land lease expenses represent 3.5% of total revenue in 1999, as
compared to 2.4% in 1998. This increase, as a percentage of total revenue,
results primarily from the larger percentage of hotels subject to land leases
among those acquired through the Merger.
Interest expense increased, as a percentage of total revenue, to 24.9%
in the twelve months ended December 31, 1999, from 21.6% in 1998. This increase
in interest expense is attributed to the increased debt used to finance
renovations, higher interest rates on debt that was refinanced to extend
maturities and convert such debt from variable to fixed rates, the assumption of
debt related to the more highly leveraged Bristol assets, and borrowings to fund
the Company's stock repurchase program.
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General and administrative expenses and taxes, insurance and other
expense remained relatively constant as a percentage of total revenue in 1999
and 1998.
FUNDS FROM OPERATIONS AND EBITDA
The Company considers Funds From Operations ("FFO") and earnings before
interest, taxes, depreciation and amortization ("EBITDA") to be key measures of
a REIT's performance and should be considered along with, but not as an
alternative to, net income and cash flow as a measure of the Company's operating
performance and liquidity.
The White Paper on Funds From Operations approved by the Board of
Governors of the National Association of Real Estate Investment Trusts
("NAREIT") defines FFO as net income or loss (computed in accordance with GAAP),
excluding gains or losses from extraordinary items and sales of properties, plus
real estate related depreciation and amortization, after comparable adjustments
for the Company's portion of these items related to unconsolidated entities and
joint ventures. The Company believes that FFO and EBITDA are helpful to
investors as a measure of the performance of an equity REIT because, along with
cash flow from operating activities, financing activities and investing
activities, they provide investors with an indication of the ability of the
Company to incur and service debt, to make capital expenditures, to pay
dividends and to fund other cash needs. The Company computes FFO in accordance
with standards established by NAREIT. This may not be comparable to FFO reported
by other REITs that do not define the term in accordance with the current NAREIT
definition or that interpret the current NAREIT definition differently than the
Company. FFO and EBITDA do not represent cash generated from operating
activities as determined by GAAP, and should not be considered as an alternative
to net income (determined in accordance with GAAP) as an indication of the
Company's financial performance or to cash flow from operating activities
(determined in accordance with GAAP) as a measure of the Company 's liquidity,
nor do they necessarily reflect the funds available to fund the Company's cash
needs, including its ability to make cash distributions. FFO and EBITDA may
include funds that may not be available for management's discretionary use due
to functional requirements to conserve funds for capital expenditures and
property acquisitions, and other commitments and uncertainties.
The following table details the computation of Funds From Operations
(in thousands):
YEARS ENDED DECEMBER 31,
------------------------------------------------
2000 1999 1998
------------ ------------ ------------
FUNDS FROM OPERATIONS (FFO):
Net income ........................................................... $ 61,699 $ 131,080 $ 114,839
Reserve for hotels held for sale .................................. 63,000
Series B preferred share dividends ................................ (12,937) (12,937) (8,373)
Gain on sale of hotels ............................................ (2,595)
Extraordinary charge from write off of deferred financing fees ... 3,865 1,113 3,075
Depreciation ...................................................... 160,745 152,948 90,835
Depreciation for unconsolidated entities .......................... 10,167 9,995 10,487
Minority interest in Operating Partnership ........................ 4,692 4,696 6,500
------------ ------------ ------------
FFO .................................................................. $ 288,636 $ 286,895 $ 217,363
============ ============ ============
Weighted average common shares and units outstanding (a) ............. 67,239 75,251 58,013
(a) Weighted average common shares and units outstanding are computed
including dilutive options, unvested stock grants and assuming conversion of
Series A preferred stock to common stock.
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The following table details the computation of EBITDA (in thousands):
YEARS ENDED DECEMBER 31,
----------------------------------------
2000 1999 1998
---------- ---------- ----------
EBITDA:
Funds from operations ........................................... $ 288,636 $ 286,895 $ 217,363
Interest expense ............................................. 158,620 125,435 73,182
Interest expense of unconsolidated entities .................. 9,188 6,729 6,521
Amortization expense ......................................... 1,480 693 922
Series B preferred distributions ............................. 12,937 12,937 8,373
---------- ---------- ----------
EBITDA .......................................................... $ 470,861 $ 432,689 $ 306,361
========== ========== ==========
Weighted average common shares and units outstanding (a) ........ 67,239 75,251 58,013
(a) Weighted average common shares and units outstanding are computed
including dilutive options, unvested stock grants and assuming conversion of
Series A preferred stock to common stock.
THE HOTELS -- ACTUAL
Upscale and full service hotels like Embassy Suites, Crowne Plaza,
Holiday Inn and Holiday Inn Select, Doubletree and Doubletree Guest Suites, and
Sheraton and Sheraton Suites hotels account for approximately 97% of the
Company's Percentage Lease revenue and 98% of the Hotels' room and suite
revenue.
The Company believes that when analyzing the performance of the Hotels,
looking at "Comparable Hotels" is the most meaningful. The Company defines
"Comparable Hotels" as those not undergoing renovation, redevelopment or
rebranding in either of the comparison years. Major renovations generally have
an adverse affect on hotel earnings by taking rooms out of service and
disrupting hotel operations. "Non- comparable Hotels" are those undergoing
renovation, redevelopment or rebranding during either year.
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Comparison of the Hotels' Operating Statistics for the Years Ended December
31, 2000 and 1999
The following table sets forth historical Occupancy, ADR and RevPAR at
December 31, 2000 and 1999, and the percentage changes therein between the years
presented for the Hotels in which the Company had an ownership interest at
December 31, 2000. This information is presented regardless of the date of
acquisition.
OCCUPANCY
-----------------------------------------
2000 1999 VARIANCE
--------- --------- --------
Bristol Comparable Hotels ....................................................... 70.8% 69.9% 0.9 pts
DJONT Comparable Hotels ......................................................... 73.3% 71.7% 1.6 pts
Total Comparable Hotels (a) ................................................. 72.1% 70.8% 1.3 pts
Non-comparable Hotels (b) ....................................................... 70.4% 65.7% 4.7 pts
Total Hotels excluding hotels held for sale ............................ 71.5% 69.0% 2.5 pts
Hotels held for sale (c) ........................................................ 58.2% 59.4% (1.2) pts
Total Hotels .................................................. 70.4% 68.2% 2.2 pts
ADR
-----------------------------------------
2000 1999 VARIANCE
--------- --------- --------
Bristol Comparable Hotels ....................................................... $ 94.87 $ 91.23 4.0%
DJONT Comparable Hotels ......................................................... $ 126.57 $ 121.21 4.4%
Total Comparable Hotels (a) ................................................. $ 111.71 $ 107.09 4.3%
Non-comparable Hotels (b) ....................................................... $ 98.08 $ 95.42 2.8%
Total Hotels excluding hotels held for sale ............................ $ 106.87 $ 103.09 3.7%
Hotels held for sale (c) ........................................................ $ 69.58 $ 68.89 1.0%
Total Hotels .................................................. $ 104.42 $ 100.72 3.7%
REVPAR
-----------------------------------------
2000 1999 VARIANCE
--------- --------- --------
Bristol Comparable Hotels ....................................................... $ 67.13 $ 63.74 5.3 %
DJONT Comparable Hotels ......................................................... $ 92.75 $ 86.91 6.7 %
Total Comparable Hotels (a) ................................................. $ 80.52 $ 75.85 6.2 %
Non-comparable Hotels (b) ....................................................... $ 69.03 $ 62.72 10.1 %
Total Hotels excluding hotels held for sale ............................ $ 76.37 $ 71.13 7.4 %
Hotels held for sale (c) ........................................................ $ 40.46 $ 40.94 (1.2)%
Total Hotels .................................................. $ 73.52 $ 68.72 7.0 %
(a) Bristol Comparable Hotels include 44 hotels and DJONT
Comparable Hotels include 59 hotels which were not undergoing
renovation, redevelopment, or rebranding in either the 2000 or
1999 periods reported and exclude hotels held for sale.
(b) Non-comparable Hotels include 59 hotels undergoing
redevelopment in either the 2000 or 1999 periods reported and
exclude hotels held for sale.
(c) Hotels held for sale include three DJONT leased hotels and 21
Bristol leased hotels, consisting of two Courtyard by Marriott
hotels, five Fairfield Inn hotels, six Hampton Inn hotels,
eight Holiday-branded hotels, and three Doubletree Guest
Suites hotels.
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For the twelve months ended December 31, 2000, the Company's Comparable
Hotels' RevPAR increased compared to the same period in 1999, by 6.2%. For the
same period, the Comparable Hotels' ADR and Occupancy increased 4.3% and 1.3
percentage points, respectively. The total hotel portfolio RevPAR, excluding
hotels held for sale, increased 7.4%. The ADR and Occupancy for these hotels
increased 3.7% and 2.5 percentage points, respectively.
The DJONT Comparable Hotels are predominately Embassy Suites,
Doubletree and Doubletree Guest Suites, and Sheraton hotels. The Bristol
Comparable Hotels are predominately Holiday Inn and Crowne Plaza hotels. The
following table shows the Comparable Hotel RevPAR changes for the year ended
December 31, 2000, compared to 1999, by brand:
RevPAR PERCENTAGE OF TOTAL
Change ROOM REVENUE
------ -------------------
Embassy Suites 47 hotels 7.0% 41.0%
Holiday Inn 25 hotels 7.7% 28.1%
Crowne Plaza 13 hotels 4.6% 13.1%
Doubletree-branded 6 hotels 6.7% 5.2%
Sheraton 3 hotels 1.3% 7.7%
Other 9 hotels 0.5% 4.9%
-----
Total 103 hotels 6.2% 100.0%
=====
The Company attributes much of the improvement in RevPAR to the
renovation, rebranding and repositioning program in which the Company and, prior
to the Merger, Bristol Hotel Company has spent nearly $500 million since the
beginning of 1998. The Company's Hotels outperformed most other hotels in their
respective markets during the year and the Company expects its Hotels to
continue to favorably compare to other hotels in their markets.
Through the fourth quarter of 2000, the Company's Embassy Suites hotels
had experienced their sixth consecutive quarterly increase in Occupancy. The
Company's 47 Comparable Embassy Suites hotels achieved a 7.0% growth in RevPAR
for 2000, compared to the prior year. These hotels, which provide 41.0% of the
Comparable Hotel room revenues, increased their ADR by 5.2% and Occupancy by 1.3
percentage points. The Company's Comparable Doubletree-branded hotels had a 6.7%
RevPAR gain for the year, made up of increases in both Occupancy and ADR of 3.4
percentage points and 1.7%, respectively. The Company believes that, in addition
to recent renovations at the majority of these hotels, the Hilton/Promus merger
and the addition of the Hilton HHonors(R) guest frequency program has had and
will continue to have a positive impact on its Embassy Suites and
Doubletree-branded hotel revenues.
Bass completed its merger with Bristol Hotels & Resorts at the end of
the first quarter of 2000. The Company expects the integration of the Bristol
management team with Bass will continue to be beneficial to the development and
strengthening of the Crowne Plaza and Holiday brands.
The Company's 13 Comparable Crowne Plaza hotels (all of which were
renovated and rebranded from Holiday Inn and Harvey hotels), reported increased
RevPAR of 4.6% for 2000, compared to 1999. This increase resulted primarily from
a 2.6 percentage point increase in Occupancy between the periods. In addition to
the recent renovations, the Company attributes a portion of this improvement to
the change in marketing for the brand, which now supports the marketing of
Crowne Plaza with the Inter-Continental(R) brand.
The Company's Comparable Holiday-branded hotels increased RevPAR for
the year by 7.7%. The increase in RevPAR resulted from a 1.1 percentage point
increase in Occupancy and a 6.1% increase in ADR. The Company's 29 Comparable
Holiday-branded hotels with greater than 250 rooms (representing nearly 80% of
the Company's Holiday-branded revenue) reported an increase in RevPAR of 6.8%
for the full year 2000, which came from Occupancy and ADR increases of 2.2
percentage points and 3.6%, respectively.
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33
Approximately 63% of the Company's 2000 Comparable Hotel room revenues
were derived from four states: Texas, California, Florida and Georgia. Changes
in Comparable Hotel RevPAR during 2000 for hotels in these states, compared to
the same period in 1999, are illustrated in the following table:
REVPAR PERCENTAGE OF TOTAL
CHANGE ROOM REVENUE
------ ------------
Texas 28 hotels 4.0% 20.9%
California 16 hotels 14.8% 25.7%
Florida 10 hotels 3.6% 11.0%
Georgia 7 hotels 2.0% 5.8%
The Comparable Hotels in Texas, which account for approximately 20.9%
of FelCor's Comparable Hotel total room revenue, experienced the fourth
consecutive quarter with positive RevPAR growth compared to prior year. The
growth in supply from new hotels in most major markets in Texas appears to have
slowed and management believes that their recently renovated hotels will
continue to effectively compete in their market segments. The Company's 14
Comparable Hotels located in Dallas, which had been adversely affected by new
competition in recent years, had RevPAR increases of 5.5% for the fourth quarter
2000 and 3.8% for the year.
The Company's 59 Non-comparable Hotels reported an increase in RevPAR
of 10.1% for the twelve months ended December 31, 2000. These hotels were
profoundly affected by the Allerton Crowne Plaza (increased RevPAR by 89.5% for
the twelve month period), which was closed for renovation in 1998 and partially
reopened in the second quarter of 1999. The Non-comparable Hotels, excluding the
Allerton, reported increased RevPAR of 7.5%.
DJONT - ACTUAL
Comparison of the Years Ended December 31, 2000 and 1999
Total revenues increased to $879.7 million in the twelve months ended
December 31, 2000, from $797.7 million in the same period of 1999, an increase
of 10.3%. Total revenues consisted primarily of room and suite revenue of $709.8
million and $649.3 million for the twelve months of 2000 and 1999, respectively.
The increase in room and suite revenue of $60.5 million resulted
primarily from an increase in ADR of $5.15, and an increase in Occupancy of
2.4%.
Income before Percentage Lease rent increased $30.9 million for the
year ended December 31, 2000, compared to 1999, and expressed as a percentage of
total revenue remained constant at 37.9% for both years. Total expenses before
Percentage Lease rent increased $51.2 million.
The increase in total expenses before Percentage Lease rent is
principally related to the increased revenues; however, the introduction of
Hilton's HHonors frequent guest program is one of the reasons that the
additional revenues in 2000 did not serve to improve margins. It is believed by
management that much of the expense for the new frequency program, in the year
of inception, is start-up related and should serve to provide more incremental
profit in future years.
Percentage Lease rent increased by $37.2 million in 2000, compared to
1999, and increased as a percentage of total revenue from 38.6% in 1999 to 39.2%
in 2000. Percentage Lease rent as a percentage of total revenue increased
principally because percent rent on incremental room and suite revenues is
computed using the highest tier rate, therefore making disproportionate
increases in the expense.
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34
DJONT recorded a net loss of $11.2 million for the year ended December
31, 2000, compared to a loss of $4.9 million in 1999.
Management believes that its Embassy Suites and Doubletree-branded
hotels, collectively 73 hotels, should benefit from the November 1999 merger
between Hilton and Promus (the brand manager for all but two of DJONT's Embassy
Suites and Doubletree-branded hotels). Hilton's upscale hotel experience and
integration into Hilton's central reservation system, marketing infrastructure
and frequent stay program are believed to have the potential to drive both
incremental occupancy and rate.
Comparison of the Years Ended December 31, 1999 and 1998
Total revenues increased to $797.7 million in the twelve months ended
December 31, 1999, from $749.5 million in the same period of 1998, an increase
of 6.4%. Total revenues consisted primarily of room and suite revenue of $649.3
million and $618.1 million in the twelve months of 1999 and 1998, respectively.
The increase in total revenues is primarily a result of the acquisition
of twelve additional hotels in 1998. Room and suite revenues from the these 12
hotels, for the twelve months ended December 31, 1999 over 1998, increased 1.9%
or $10.6 million. The room and suite revenue for the 73 hotels which were leased
for all of 1999 and 1998, increased $11.6 million as a result of an increase in
ADR of $1.81, with a slight decrease in Occupancy of 0.1%.
DJONT's income before Percentage Lease rent decreased as a percentage
of total revenues from 38.8% in the twelve months ended December 31, 1998 to
37.9% in the twelve months ended December 31, 1999. For the twelve months ended
December 31, 1999, DJONT incurred losses of $4.9 million. This was largely due
to higher labor costs and related payroll benefits, increased reservation costs,
and increased fees related to the former Crown Sterling Suite hotels.
Percentage Lease rent remained relatively constant as a percentage of
total revenue in 1999 and 1998.
RENOVATIONS, REDEVELOPMENTS AND REBRANDINGS
The Company has historically sought to enhance the value of its
portfolio through:
o its practice of upgrading, renovating and/or redeveloping most
of its recently acquired hotels to enhance their competitive
position, and, in certain instances, rebranding them to
improve their revenue generating capacity; and
o its ongoing program for the maintenance of the Company's
upgraded hotel assets, which includes:
o the contribution of approximately 4% of total annual
hotel revenue to a capital reserve, for routine
capital replacements and improvements; and
o ensuring that the Lessees' adhere to a rigorous
maintenance and repair program, resulting in the
expenditure of more than 4% of annual hotel revenues
on maintenance of the Hotels.
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Renovation and Redevelopment Program
The Company has demonstrated its ability to successfully generate
returns on investments in renovations. Its renovation and rebranding of the 18
Crown Sterling Suites hotels, which were acquired during 1996 and 1997, achieved
an overall RevPAR increase of 47.7% between 1996 and 2000. During 1998, 1999,
and 2000, an aggregate of approximately $550 million in capital improvements and
other capital expenditures were made to the Company's hotels, with approximately
3% of total hotel room nights being lost due to renovation in 1998, 2% in 1999
and 1% in 2000. During 2000, the Company spent approximately $55.8 million under
its renovation and redevelopment program.
During 2001, the Company currently expects to spend approximately $20
million on the renovation of 8 hotels, approximately $28 million to complete
renovations started in 2000 at 46 hotels, and approximately $50 million for
other capital expenditures. The Company is currently reviewing the feasibility
of undertaking up to $64 million of additional renovations and room additions
during 2001. The Company currently expects an insignificant number of room
nights to be lost during 2001 as a result of renovations. By the end of 2001,
the Company will have spent more than $1 billion since 1994 on renovations and
other capital expenditures to its hotel portfolio, which should limit the need
for future renovation expenditures primarily to those necessary to maintain the
Hotels in their upgraded condition or to enhance a hotel's earning capability
through room addition or rebranding as deemed appropriate.
Capital Reserve
During 2000, approximately $45.0 million was contributed to the capital
reserve for capital replacements and improvements and approximately $45.6
million was spent on such replacements and improvements (which is in addition to
the $55.8 million spent under the renovation and redevelopment program described
above).
Repairs and Maintenance
During the year ended December 31, 2000, approximately $41.0 million
and $66.7 million were spent by the Lessees on routine repairs and maintenance
at the Hotels leased by DJONT and Bristol, respectively. This represents
approximately 4.4% of total 2000 hotel revenues.
LIQUIDITY AND CAPITAL RESOURCES
FelCor's principal source of cash to meet its cash requirements,
including distributions to shareholders and repayments of indebtedness, has
historically been its share of the Operating Partnership's cash flow from the
Percentage Leases. For the year ended December 31, 2000, cash flow provided by
operating activities, consisting primarily of Percentage Lease revenue, was
$277.3 million and Funds From Operations was $288.6 million.
DJONT recorded a net loss of $11.2 million for the year ended December
31, 2000. DJONT's accumulated deficit totaled $24.5 million at December 31,
2000. The losses in the current year are partially attributed to increased costs
of frequent guest programs instituted during the year and increased operating
costs which resulted in lower than anticipated operating margins.
Subject to the receipt of consents from certain lenders, effective
January 1, 2001, the Company acquired and contributed to a taxable REIT
subsidiary, all of the equity interests in DJONT. In consideration for the
acquisition of DJONT, the Operating Partnership issued an aggregate of 416,667
units of its limited partner interest (valued at $10 million based upon the
$23.125 closing share price of FelCor common stock on December 29, 2000), 50% to
an entity owned by Thomas J. Corcoran, Jr. and Hervey A. Feldman and 50% to an
entity owned by the children of Charles N. Mathewson. The Company will treat the
acquisition of DJONT,
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for financial reporting purposes, as a termination of the DJONT leases and,
accordingly, will expense the value of the Operating Partnership units issued as
consideration together with the $24.5 million accumulated shareholders' deficit
of DJONT, in the first quarter of 2001.
Effective January 1, 2001, the Company completed the acquisition of 12
of the Bristol leases which were held by Bass. In consideration for the
acquisition of such leases, the Company issued to Bass 413,585 shares of FelCor
common stock valued at approximately $10 million. Of the 12 hotels, (i) the
Company has entered into an agreement with Interstate Hotels Corporation ("IHC")
to manage eight of the hotels, (ii) two hotels are being managed by a subsidiary
of Bass under short term management contracts, (iii) one hotel is being managed
by a subsidiary of Hilton and (iv) one hotel was sold. In March 2001, the
Company entered into an agreement with Bass to acquire the remaining 88 leases
effective July 1, 2001. In consideration for the acquisition of such leases, the
Company will enter into long term management agreements with Bass with regard to
these hotels and issue to Bass 100 shares of FelCor common stock. A portion of
the management fees with respect to the 88 hotels managed by Bass under long
term management agreements will be considered to be lease termination costs for
financial reporting purposes and the Company will record a lease termination
expense of approximately $125 million in the third quarter of 2001. At that
time, the Company will record a corresponding liability of approximately $125
million that will be amortized over the term of the applicable management
agreements.
As a result of the effectiveness of the REIT Modernization Act, which,
among other things, allows the Company to own its lessees in taxable REIT
subsidiaries, and the acquisition of the Hotel leases in 2001, the Company will
be reporting the income and expenses of operating hotels rather than lease
income from the Percentage Leases. Any profits or losses from the TRS entities
holding the hotel leases, after applicable corporate taxes, will be reflected in
the Company's results of operations. Pro forma consolidated statements of
operations for the years ended December 31, 2000 and 1999, which reflect the
acquisition of the hotel leases, are contained in the Notes to the Consolidated
Financial Statements of FelCor Lodging Trust Incorporated, appearing elsewhere
herein.
In 2000, the Company identified 25 non-strategic hotels and indicated
its intent to sell these hotels. The Company expects gross sale proceeds from
these sales to be approximately $150 million and net proceeds to be
approximately $137 million (after deducting estimated transaction costs). The
Company anticipates that the sale of these 25 hotels will result in a book loss
of approximately $63 million. Accordingly, FelCor's Board of Directors approved
the establishment of a $63 million reserve in the second quarter of 2000 for
hotels held for sale, to reflect the difference between book value and the
estimated market value of these hotels. In December 2000, the Company completed
the sale of one of these hotels held for sale and recorded a gain of
approximately $135,000.
In March 2001, the Company contributed eight of the hotels held for
sale to an entity in which the Company holds a 50% equity interest, and a
subsidiary of IHC holds the other 50% equity interest. Another subsidiary of IHC
manages each of these hotels.
In January 2000, FelCor's Board of Directors authorized an increase in
its share repurchase program to an aggregate of $300 million. The stock
repurchases have been and, at the discretion of FelCor's management, may be made
from time to time at prevailing prices in the open market or through privately
negotiated transactions. FelCor funds the repurchase of stock through redemption
of the Operating Partnership's units, which redemptions are funded from existing
credit facilities and proceeds from the sale of assets. During 2000, FelCor
repurchased approximately 4.5 million shares of its outstanding common stock on
the open market for approximately $86.7 million. Since inception of the program,
FelCor has repurchased an aggregate of 10.3 million shares of its common stock
for a total of approximately $185.1 million.
The Company may incur indebtedness to make property acquisitions, to
purchase shares of its capital stock or to meet distribution requirements
imposed on a REIT under the Internal Revenue Code, to the extent that working
capital and cash flow from the Company's investments are insufficient for such
purposes. At
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37
December 31, 2000, the Company had $26.1 million of cash and cash equivalents
and had utilized $362 million under its $600 million revolving line of credit
(the "Line of Credit").
The following details the Company's debt outstanding at December 31,
2000 and 1999 (in thousands):
DECEMBER 31,
COLLATERAL INTEREST RATE MATURITY DATE 2000 1999
---------- ------------- ------------- ---- ----
FLOATING RATE DEBT:
Line of credit None LIBOR + 200bp August 2003 $ 112,000 $ 351,000
Senior term loan (a) LIBOR + 250bp March 2004 250,000
Mortgage debt 3 hotels LIBOR + 200bp February 2003 61,909 62,553
Other None LIBOR + 200bp Various 650 32,282
---------- ----------
Total floating rate debt 174,559 695,835
---------- ----------
FIXED RATE DEBT:
Line of credit - swapped None 7.66% August 2003 250,000 313,000
Publicly-traded term notes None 7.38% October 2004 174,505 174,377
Publicly-traded term notes None 7.63% October 2007 124,320 124,221
Publicly-traded term notes None 9.50% September 2008 394,731
Mortgage debt 15 hotels 7.24% November 2022 140,148 142,542
Senior term loan - swapped (a) 8.30% March 2004 125,000
Mortgage debt 7 hotels 7.54% April 2009 97,604 99,075
Mortgage debt 6 hotels 7.55% June 2009 73,389 74,483
Mortgage debt 7 hotels 8.73% May 2010 144,032
Mortgage debt 8 hotels 8.70% May 2010 184,829
Other 13 hotels 6.96% - 7.23% 2000 - 2005 80,124 85,421
---------- ----------
Total fixed rate debt 1,663,682 1,138,119
---------- ----------
Total debt $1,838,241 $1,833,954
========== ==========
- ----------
(a) The senior term loan was retired early from the proceeds of publicly
traded term notes issued in 2000.
The Line of Credit contains various affirmative and negative covenants,
including limitations on total indebtedness, total secured indebtedness, and
cash distributions, as well as the obligation to maintain a certain minimum
tangible net worth and certain minimum interest and debt service coverage
ratios. At December 31, 2000, the Company was not in default with respect to
such covenants.
The Company's other borrowings contain affirmative and negative
covenants that are generally equal to or less restrictive than the Line of
Credit. The mortgage debt is nonrecourse to the Company (with certain
exceptions) and contains provisions allowing for the substitution of collateral
upon satisfaction of certain conditions. Most of the mortgage debt is
prepayable, subject, however, to various prepayment penalties, yield
maintenance, or defeasance obligations.
The Company took several steps, during the year ended December 31,
2000, to increase its proportion of fixed rate debt, improve its debt maturity
profile, diversify its funding sources and expand its financial flexibility.
On April 26, 2000, the Company closed a 10-year, $145 million First
Mortgage Term Loan, which is collateralized by seven Sheraton hotels and carries
an 8.73% fixed interest rate. On May 2, 2000, the Company closed $186 million of
10-year, First Mortgage Term Loans which are collateralized by eight Embassy
Suites hotels and carry an 8.70% fixed interest rate. These loans are
non-recourse, mature in May 2010, and amortize over 25 years. The proceeds of
these loans were used to reduce borrowings under the Company's Line of Credit.
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38
On August 1, 2000, the Company renewed its Line of Credit. The Line of
Credit was reduced from $850 million to $600 million and the maturity was
extended from July 2001 to August 2003. The effective interest rate on the
renewed Line of Credit ranges from 87.5 basis points to 250 basis points above
LIBOR depending on the Company's leverage and corporate rating. An extraordinary
charge of approximately $578,000 was recorded to write-off a portion of the
deferred financing costs associated with the Line of Credit.
On September 15, 2000, the Company completed the private placement of
$400 million of senior unsecured notes that mature in September 2008 and bear an
interest rate of 9 1/2%. The notes were issued at a discount to yield 9 3/4%.
The proceeds were used to retire the $375 million floating rate senior term
loan, which matured in 2004, and to pay down the Line of Credit. An
extraordinary charge of approximately $3.3 million was recorded to write-off
unamortized deferred financing costs associated with the $375 million loan. The
Company subsequently completed an offer to exchange $400 million in aggregate
principal amount of the private placement senior notes for notes with identical
terms which were registered under the Securities Act of 1933.
On January 11, 2001, the Company completed the private placement of an
additional $100 million in 9 1/2% senior unsecured notes that mature in
September 2008. These notes were issued at a premium to yield an effective rate
of 91/8%. The proceeds were used initially to pay down the Company's Line of
Credit.
The Company had interest rate swap agreements with a total notional
amount of $250 million that were outstanding at December 31, 2000 and which were
designated as cash flow hedges. These interest rate swap agreements modify a
portion of the interest characteristics of the Company's outstanding debt under
its line of credit without an exchange of the underlying principal amount and
effectively convert variable rate debt to a fixed rate. The fixed rates to be
paid, and the variable rate to be received by the Company at December 31, 2000
are summarized in the following table:
SWAP RATE
RECEIVED
SWAP RATE (VARIABLE) AT SWAP
NOTIONAL AMOUNT PAID (FIXED) 12/31/00 MATURITY
- --------------- ------------ ------------- ------------
$ 25 million 5.5575% 6.8213% July 2001(a)
25 million 5.5480% 6.8213% July 2001(a)
75 million 5.5550% 6.8213% July 2001(a)
100 million 5.7955% 6.8213% July 2003
25 million 5.8260% 6.8213% July 2003
- -------------
$ 250 million
=============
(a) The variable rate payer has the option to terminate this swap in
July 2001; if not so terminated, it matures July 2003.
To provide for additional financing flexibility, the Company has
approximately $946 million of common stock, preferred stock, debt securities,
and/or common stock warrants available for offerings under shelf registration
statements previously declared effective.
In the event of a significant economic downturn, the Company believes
that its Hotels will continue to benefit from the Company's extensive capital
expenditure programs. Most future renovation and redevelopment expenditures are
discretionary and are expected to be funded from the Company's cash flow.
The Company's $252.6 million in cash flow used in financing activities
for the year ended December 31, 2000, relates primarily to the repurchase of
approximately 4.5 million shares of FelCor's common stock for approximately
$86.7 million and distributions aggregating $168.8 million.
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INFLATION
Operators of hotels, in general, possess the ability to adjust room
rates daily to reflect the effects of inflation. Competitive pressures may,
however, limit the Company's ability to raise room rates. Recently, some utility
costs have increased at a faster rate than overall inflation. The Company may
not be able to increase room rates sufficiently to offset the increased utility
costs. However, in certain markets, the Company's Hotels have charged their
guests a utility surcharge to help offset such increases.
SEASONALITY
The Hotels' operations historically have been seasonal in nature,
reflecting higher occupancy rates primarily during the first three quarters of
each year. This seasonality can be expected to cause fluctuations in the
Company's quarterly revenue, particularly during the fourth quarter. To the
extent cash flow from operations is insufficient during any quarter, due to
temporary or seasonal fluctuations in revenue, the Company expects to utilize
cash on hand or borrowings under the Line of Credit to make distributions to its
equity holders.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
Portions of this Annual Report on Form 10-K include forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. Although the Company believes that the expectations reflected in such
forward-looking statements are based upon reasonable assumptions, it can give no
assurance that its expectations will be achieved. A number of important factors
which, among others, could adversely affect the ability of the Company to meet
its current expectations are disclosed in conjunction with the forward-looking
statements and under "Cautionary Factors That May Affect Future Results" in Item
1 of this Annual Report on Form 10-K ("Cautionary Statements"). Subsequent
written and oral forward-looking statements made by or attributable to the
Company or persons acting on its behalf are expressly qualified in their
entirety by the Cautionary Statements.
RECENTLY ISSUED STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS
Effective January 1, 2001, the Company will adopt SFAS No. 133
Accounting for Derivative Instruments and Hedging Activities, ("SFAS 133" or the
"Statement"). SFAS 133 will be adopted as a change in accounting principle and
cannot be applied retroactively to financial statements of prior periods.
SFAS 133 requires derivatives to be recorded on the balance sheet as an
asset or liability at fair value. The Statement also requires that the Company
record derivatives that are not hedges at fair value through earnings, unless
specific hedge accounting criteria are met. Special accounting for qualifying
hedges allows the Company to offset a derivative instrument's gains and losses
against related results on the hedged item in the income statement, to the
extent effective, and requires that the Company must formally document,
designate and assess the effectiveness of transactions that receive hedge
accounting. The Company's interest rate swap contracts outstanding as of January
1, 2001, have been designated as cash flow hedges.
Cash Flow Hedges
The Company has entered into six interest rate swap agreements, with a
total notional amount of $250 million. Three of these agreements, at the option
of the variable rate payer, may be terminated in July 2001 or otherwise
terminate in July 2003 along with the other three agreements. Under these
arrangements, the Company receives the one month LIBOR rate and pays a fixed
rate of 5.548% to 5.826%. Prior to adoption of FAS 133, the Company treated
these swaps as hedges and accounted for them as such. The Company has not
recorded any amounts on the Consolidated Balance Sheet as of December 31, 2000
in connection with these instruments and the net effect of the hedges was to
record interest expense at the fixed rate of 7.548% to 7.826% on $250 million of
variable rate debt. The Company has designated these swaps as cash flow hedges
of variable future cash flows associated with the interest on its Line of Credit
facility through July 2003. Upon adoption, the Company will record the fair
value of these swaps as an asset on its balance
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sheet valued at $248,000, with a corresponding credit to other comprehensive
income. The Company will record subsequent changes in fair value of the swaps
through other comprehensive income, except for changes related to
ineffectiveness, during the period these instruments are designated as hedges.
The Company has no other derivative instruments, including embedded
derivatives under SFAS 133.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's primary market risk exposure is to changes in interest
rates on its floating rate debt. The Company manages the risk of increasing
interest rates on its floating rate debt through the use of interest rate swaps,
which effectively convert variable rate debt to a fixed rate, by locking the
interest rates paid. The Company had entered into interest rate swap contracts
relating to debt of $250 million at December 31, 2000.
The following table provides information about the Company's financial
instruments that are sensitive to changes in interest rates, including interest
rate swaps and debt obligations. For debt obligations at December 31, 2000, the
table presents scheduled maturities and weighted average interest rates by
maturity dates. For interest rate swaps, the table presents notional amounts and
weighted average interest rates by contractual maturity dates. Weighted average
variable rates are based on implied forward rates in the yield curve as of
December 31, 2000. The fair value of the Company's fixed rate debt indicates the
estimated principal amount of debt having the same debt service requirements
which could have been borrowed at December 31, 2000 at then current market
interest rates. The fair value of the Company's variable to fixed interest rate
swaps indicates the estimated amount that would have been received by the
Company had they been sold at December 31, 2000.
EXPECTED MATURITY DATE
(IN THOUSANDS)
2001 2002 2003 2004 2005 THEREAFTER TOTAL FAIR VALUE
-------- ------- --------- --------- -------- ----------- ----------- -----------
LIABILITIES
Debt:
Fixed rate $ 23,092 $13,039 $ 34,906 $ 189,228 $ 43,127 $ 1,116,732 $ 1,420,124 $ 1,231,177
Average interest rate 9.43% 8.19% 8.09% 7.44% 8.67% 5.17%
Variable rate $ 711 $ 785 $ 422,413 $ 650 $ 424,559 $ 424,559
Average interest rate 9.21% 9.50% 9.24% 9.63%
Discount accretion $ (6,443)
-----------
Total debt $ 1,838,241
===========
INTEREST RATE DERIVATIVES
Interest rate swaps:
Variable to fixed $125,000(a) $ 125,000 $ 250,000 $ 248
Average pay rate 5.61% 5.75%
Average receive rate 6.57% 5.89%
(a) The variable rate payer has the option to terminate this swap in July
2001; if not so terminated, it matures July 2003.
Swap contracts, such as those described above, contain a credit risk,
in that the counterparties may be unable to fulfill the terms of the agreement.
The Company minimizes that risk by evaluating the creditworthiness of its
counterparties, who are limited to major banks and financial institutions, and
does not anticipate nonperformance by the counterparties.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Included herein beginning at page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The information called for by this Item is contained in the Company's
definitive Proxy Statement for its 2001 Annual Meeting of Stockholders, and
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information called for by this Item is contained in the Company's
definitive Proxy Statement for its 2001 Annual Meeting of Stockholders, and
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information called for by this Item is contained in the Company's
definitive Proxy Statement for its 2001 Annual Meeting of Stockholders, and
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information called for by this Item is contained in the Company's
definitive Proxy Statement for its 2001 Annual Meeting of Stockholders, and
incorporated herein by reference.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
Included herein at pages F-1 through F-53.
2. Financial Statement Schedules
The following financial statement schedule is included herein at page
F-28.
Schedule III - Real Estate and Accumulated Depreciation for FelCor
Lodging Trust Incorporated
All other schedules for which provision is made in Regulation S-X are
either not required to be included herein under the related instructions or are
inapplicable or the related information is included in the footnotes to the
applicable financial statement and, therefore, have been omitted.
3. Exhibits
The following exhibits are filed as part of this Annual Report on Form
10-K:
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
2.1 - Agreement and Plan of Merger by and between the Registrant and
Bristol Hotel Company ("Bristol") dated as of March 23, 1998
(filed as Exhibit 2.1 to the Registrant's Form 8-K dated April
23, 1998, and incorporated herein by reference).
3.1 - Articles of Amendment and Restatement dated June 22, 1995,
amending and restating the Charter of the Registrant, as
amended or supplemented by Articles of Merger dated June 23,
1995, Articles Supplementary dated April 30, 1996, Articles of
Amendment dated August 8, 1996, Articles of Amendment dated
June 16, 1997, Articles of Amendment dated October 30, 1997,
Articles Supplementary dated May 6, 1998, Articles of Merger
and Articles of Amendment dated July 27, 1998, and Certificate
of Correction dated March 11, 1999 (filed as Exhibit 3.1 to
the Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1998 (the "1998 10-K") and
incorporated herein by reference).
3.1.1 - Certificate of Correction to the Articles of Merger between
FelCor Lodging Trust Incorporated and Bristol Hotel Company,
dated August 31, 1999 (filed as Exhibit 3.1.1 to the
Registrant's Form 10-Q dated September 30, 1999 ("September
1999 10-Q") and incorporated herein by reference).
3.2 - Bylaws of the Registrant, as amended (filed as Exhibit 3.2 to
the Registrant's Registration Statement on Form S-11 (file no.
333-98332) and incorporated herein by reference).
4.1 - Form of Share Certificate for Common Stock (filed as Exhibit
4.1 to the Registrant's Form 10- Q for the quarter ended June
30, 1996, and incorporated herein by reference).
4.2 - Form of Share Certificate for $1.95 Series A Cumulative
Convertible Preferred Stock (filed as Exhibit 4.4 to the
Registrant's Form 8-K dated May 1, 1996, and incorporated
herein by reference).
4.3 - Form of Share Certificate for 9% Series B Cumulative
Redeemable Preferred Stock (filed as Exhibit 4.5 to the
Registrant's Form 8-K dated May 29, 1998, and incorporated
herein by reference).
4.4 - Deposit Agreement dated April 30, 1998, between the Registrant
and SunTrust Bank, Atlanta, as preferred share depositary
(filed as Exhibit 4.6 to the Registrant's Form 8-K dated May
29, 1998, and incorporated herein by reference).
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EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
4.5 - Form of Depositary Receipt evidencing the Depositary Shares
(filed as Exhibit 4.7 to the Registrant's Form 8-K dated May
29, 1998, and incorporated herein by reference).
4.6 - Indenture dated as of April 22, 1996 by and between the
Registrant and SunTrust Bank, Atlanta, Georgia, as Trustee
(filed as Exhibit 4.2 to the Registrant's Form 8-K dated May
1, 1996 and incorporated herein by reference).
4.7 - Indenture dated as of October 1, 1997 by and among FelCor
Lodging Limited Partnership, formerly FelCor Suites Limited
Partnership (the "Partnership"), the Registrant, the
Subsidiary Guarantors named therein and SunTrust Bank,
Atlanta, Georgia, as Trustee (filed as Exhibit 4.1 to the
Registration Statement on Form S-4 (file no. 333-39595) and
the other co- registrants named therein and incorporated
herein by reference).
4.7.1 - First Amendment to Indenture dated as of February 5, 1998 by
and among the Registrant, the Partnership, the Subsidiary
Guarantors named therein and SunTrust Bank, Atlanta, Georgia,
as Trustee (filed as Exhibit 4.2 to the Registrant's
Registration Statement on Form S-4 (file no. 333- 39595) and
incorporated herein by reference).
4.7.2 - Second Amendment to Indenture and First Supplemental Indenture
dated as of December 30, 1998, by and among the Registrant,
the Partnership, the Subsidiary Guarantors named therein and
SunTrust Bank, Atlanta, Georgia, as Trustee (filed as Exhibit
4.7.2 to the 1998 10-K and incorporated herein by reference).
4.7.3 - Third Amendment to Indenture dated as of March 30,1999 by and
among the Partnership, the Registrant, the Subsidiary
Guarantors named therein and SunTrust Bank, Atlanta (filed as
Exhibit 4.7.3 to the Registrant's Form 10-Q for the quarter
ended March 31,1999 ("March 1999 10-Q") and incorporated
herein by reference).
4.7.4 - Second Supplemental Indenture dated as of August 1, 2000, by
and among the Partnership, the Registrant, the Subsidiary
Guarantors named therein, who are signatories thereto, and
SunTrust Bank (filed as Exhibit 4.2.4 to the Partnership's
Registration Statement on Form S-4 (file no. 333- 47506) and
incorporated herein by reference).
4.8 - Indenture dated as of September 15, 2000, by and among the
Partnership, the Registrant, the Subsidiary Guarantors named
therein, and SunTrust Bank, as Trustee (filed as Exhibit 4.3
to the Partnership's Registration Statement on Form S-4 (file
no. 333-47506) and incorporated herein by reference).
10.1 - Amended and Restated Agreement of Limited Partnership of the
Partnership (filed as Exhibit 10.1 to the Registrant's Annual
Report on Form 10-K/A Amendment No. 1 for the fiscal year
ended December 31, 1994 (the "1994 10-K/A") and incorporated
herein by reference).
10.1.1 - First Amendment to Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of November 17, 1995
by and among the Registrant, Promus Hotels, Inc. and all of
the persons or entities who are or shall in the future become
of the limited partners of the Partnership (filed as Exhibit
10.1.1 to the Registrant's Annual Report on Form 10-K, as
amended, for the fiscal year ended December 31, 1995 (the
"1995 10-K") and incorporated herein by reference).
10.1.2 - Second Amendment to Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of January 9, 1996
between the Registrant and all of the persons or entities who
are or shall in the future become limited partners of the
Partnership (filed as Exhibit 10.1.2 to the Registrant's 1995
10-K and incorporated herein by reference).
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EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
10.1.3 - Third Amendment to Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of January 10, 1996 by
and among the Registrant, MarRay-LexGreen, Inc. and all of the
persons and entities who are or shall in the future become
limited partners of the Partnership (filed as Exhibit 10.1.3
to the Registrant's 1995 10-K and incorporated herein by
reference).
10.1.4 - Fourth Amendment to the Amended and Restated Agreement of
Limited Partnership of the Partnership dated as of January 10,
1996 by and among the Registrant, Piscataway-Centennial
Associates Limited Partnership and all of the persons or
entities who are or shall in the future become limited
partners of the Partnership (filed as Exhibit 10.1.4 to the
Registrant's 1995 10-K and incorporated herein by reference).
10.1.5 - Fifth Amendment to Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of May 2, 1996,
between the Registrant and all of the persons or entities who
are or shall in the future become limited partners of the
Partnership, adopting Addendum No. 2 to Amended and Restated
Agreement of Limited Partnership of the Partnership dated as
of May 2, 1996 (filed as Exhibit 10.1.5 to the Registrant's
Form 10-Q for the quarter ended June 30, 1996, and
incorporated herein by reference).
10.1.6 - Sixth Amendment to Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of September 16, 1996,
by and among the Registrant, John B. Urbahns, II and all of
the persons or entities who are or shall in the future become
limited partners of the Partnership (filed as Exhibit 10.1.6
to the Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1996, and incorporated herein by
reference).
10.1.7 - Seventh Amendment to Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of May 16, 1997, by
and among the Registrant, PMB Associates, Ltd. and all of the
persons or entities who are or shall in the future become
limited partners of the Partnership (filed as Exhibit 10.1.7
to the Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1997, and incorporated herein by
reference).
10.1.8 - Eighth Amendment to Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of February 6, 1998,
by and among the Registrant, Columbus/Front Ltd. and all of
the persons or entities who are or shall in the future become
limited partners of the Partnership (filed as Exhibit 10.1.8
to the Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1997, and incorporated herein by
reference).
10.1.9 - Ninth Amendment to Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of May 1, 1998,
between the Registrant and all of the persons or entities who
are or shall in the future become limited partners of the
Partnership, adopting Addendum No. 3 to Amended and Restated
Agreement of Limited Partnership dated as of May 1, 1998
(filed as Exhibit 10.1.9 to the Registrant's Form 8-K dated
May 29, 1998, and incorporated herein by reference).
10.1.10 - Tenth Amendment to Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of June 22, 1998, by
and among the Registrant, Schenley Hotel Associates, and all
of the persons or entities who are or shall in the future
become limited partners of the Partnership (filed as Exhibit
10.1.10 to the Registrant's Form 10-Q for the quarter ended
October 30, 1998, and incorporated herein by reference).
10.1.11 - Eleventh Amendment to Amended and Restated Agreement of
Limited Partnership of the Partnership dated as of July 28,
1998, between the Registrant and all of the persons or
entities who are or shall in the future become limited
partners of the Partnership, changing the name of the
Partnership to "FelCor Lodging Limited Partnership" (filed as
Exhibit 10.1.11 to the Registrant's Form 10-Q for the quarter
ended October 30, 1998, and incorporated herein by reference).
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EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
-------- ----------------------
10.1.12 - Twelfth Amendment to Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of December 29, 1998,
between the Registrant and all of the persons or entities who
are or shall in the future become limited partners of the
Partnership, amending certain provisions of the Partnership
Agreement (filed as Exhibit 10.1.12 to the Registrant's 1998
10-K and incorporated herein by reference).
10.1.13 - Thirteenth Amendment to Amended and Restated Agreement of
Limited Partnership of the Partnership dated as of December
31, 1998, by and between the Registrant, FelCor Nevada
Holdings, L.L.C. and all of the persons or entities who are or
shall in the future become limited partners of the Partnership
(filed as Exhibit 10.1.13 to the Registrant's 1998 10-K and
incorporated herein by reference).
10.1.14 - Fourteenth Amendment to Amended and Restated Agreement of
Limited Partnership of the Partnership dated as of March 1,
1999, by and among the Registrant, Huie Properties, Ltd., and
all of the persons or entities who are or shall in the future
become limited partners of the Partnership (filed as Exhibit
10.1.14 to the Registrant's 1998 10-K and incorporated herein
by reference).
10.1.15 - Fifteenth Amendment to Amended and Restated Agreement of
Limited Partnership of the Partnership dated as of October 15,
1999, by and among the Registrant, SRS Properties Limited
Partnership, and all of the persons and entities who are or
shall in the future become limited partners of the
Partnership. (filed as Exhibit 10.1.15 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended December
31, 1999 (the "1999 10-K") and incorporated herein by
reference).
10.1.16 - Sixteenth Amendment to Amended and Restated Agreement of
Limited Partnership of the Partnership dated as of February
27, 2000, by and among the Registrant, Bass America, Inc., and
all of the persons and entities who are or shall in the future
become limited partners of the Partnership. (filed as Exhibit
10.1.16 to the Registrant's 1999 10-K and incorporated herein
by reference).
10.1.17 - Seventeenth Amendment to Amended and Restated Agreement of
Limited Partnership of the Partnership dated as of November 1,
2000, by and among the Registrant, Bass America, Inc., and all
of the persons and entities who are or shall in the future
become limited partners of the Partnership.
10.2 - Form of Lease Agreement between the Partnership as Lessor and
DJONT Operations, L.L.C. or its subsidiaries ("DJONT") as
Lessee (filed as Exhibit 10.2.1 to the Registrant's 1995 10-K
and incorporated herein by reference).
10.2.1 - Omnibus Lease Amendment Agreement dated as of June 30, 1998
among the Registrant, the Partnership and DJONT to clarify the
meaning of Article III of the lease as represented by the
actual course of dealing between lessors and lessees under
such leases (filed as Exhibit 10.19 to the Registrant's Form
10-Q for the quarter ended June 30, 1998, and incorporated
herein by reference).
10.3 - Form of Lease Agreement between the Partnership as Lessor and
a subsidiary of Bristol Hotels & Resorts ("BHR") as Lessee
(the "Bristol Lease Agreement") (filed as Exhibit 10.3 to the
Registrant's 1998 10-K and incorporated herein by reference).
10.3.1 - Amended and Restated Master Hotel Agreement dated as of July
27, 1998 among the Registrant, the Partnership, BHR and the
lessors and lessees named therein (filed as Exhibit 10.17 to
the Registrant's Form 8-K dated August 10, 1998, and
incorporated herein by reference).
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EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
10.4 - Employment Agreement dated as of July 28, 1994 between the
Registrant and Thomas J. Corcoran, Jr. (filed as Exhibit 10.8
to the Registrant's 1994 10-K/A and incorporated herein by
reference).
10.5 - Restricted Stock and Stock Option Plan of the Registrant
(filed as Exhibit 10.9 to the Registrant's 1994 10- K/A and
incorporated herein by reference).
10.6 - Savings and Investment Plan of the Registrant (filed as
Exhibit 10.10 to the Registrant's 1994 10- K/A and
incorporated herein by reference).
10.7 - 1995 Restricted Stock and Stock Option Plan of the Registrant
(filed as Exhibit 10.9.2 to the Registrant's 1995 10- K and
incorporated herein by reference).
10.8 - Non-Qualified Deferred Compensation Plan, as amended and
restated July 1999 (filed as exhibit 10.9 to the Registrant's
Form 10-Q for the quarter ended September 30,1999 ("September
1999 10-Q") and incorporated herein by reference).
10.9 - 1998 Restricted Stock and Stock Option Plan (filed as Exhibit
4.2 to the Registrant's Registration Statement on Form S-8
(file no. 333-66041) and incorporated herein by reference).
10.10 - Second Amended and Restated 1995 Equity Incentive Plan (filed
as Exhibit 99.1 to the Registrant's Post-Effective Amendment
on Form S-3 to Form S-4 Registration Statement (file no.
333-50509) and incorporated herein by reference).
10.11 - Amended and Restated Stock Option Plan for Non-Employee
Directors (filed as Exhibit 99.2 to the Registrant's
Post-Effective Amendment on Form S-3 to Form S-4 Registration
Statement (file no. 333-50509) and incorporated herein by
reference).
10.12 - Form of Severance Agreement for executive officers and certain
key employees of the Registrant (filed as Exhibit 10.13 to the
Registrant's 1998 10-K and incorporated herein by reference).
10.13 - Agreement dated as of April 15, 1995 among the Registrant, the
Partnership, FelCor, Inc., Thomas J. Corcoran, Jr. and Hervey
A. Feldman relating to purchase of securities (filed as
Exhibit 10.15 to the Registrant's Registration Statement on
Form S-11 (file no. 333-91870) and incorporated herein by
reference).
10.14 - Voting and Cooperation Agreement dated as of March 23, 1998
among the Registrant, Bristol, Bass America Inc., Holiday
Corporation and United/Harvey Holdings, L.P. (filed as Exhibit
99.7 to the Registrant's Registration Statement on Form S-4
(file no. 333-50509) and incorporated herein by reference).
10.15 - Spin-Off Agreement dated as of March 23, 1998 among Bristol,
Bristol Hotel Management Corporation and Bristol Hotel and
Resorts, Inc., as agreed to by the Registrant (filed as
Exhibit 99.8 to the Registrant's Registration Statement on
Form S-4 (file no. 333-50509) and incorporated herein by
reference).
10.16 - Stockholders' and Registration Rights Agreement dated as of
July 27, 1998 by and among the Registrant, Bass America, Inc.,
Holiday Corporation, Bass plc, United/Harvey Investors I,
L.P., United/Harvey Investors II, L.P., United/Harvey
Investors III, L.P., United/Harvey Investors IV, L.P., and
United/Harvey Investors V, L.P. (filed as Exhibit 10.18 to the
Registrant's Form 8-K dated August 10, 1998, and incorporated
herein by reference).
10.17 - Sixth Amended and Restated Credit Agreement dated as of
December 18, 2000, among the Registrant, the Partnership and
FelCor Canada Co., as Borrowers, the Lenders party thereto,
The
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EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
Chase Manhattan Bank and The Chase Manhattan Bank of Canada,
as Administrative Agents, Chase Securities, Inc., as Joint
Lead Arranger, Joint Book Manager and Syndication Agent,
Bankers Trust Company, as Joint Lead Arranger, Joint Book
Manager and Documentation Agent, Bank of America, N.A. and
Wells Fargo Bank, National Association, as Documentation
Agents.
10.18 - Loan Agreement dated as of October 10, 1997 among Bristol
Lodging Company, Bristol Lodging Holding Company, Nomura Asset
Capital Corporation as administrative agent and collateral
agent for Lenders and Bankers Trust Company as co-agent for
Lenders (filed as Exhibit 10.10 to the Bristol Hotel Company
Annual Report on Form 10-K for the year ended December 31,
1997 and incorporated herein by reference).
10.18.1 - First Amendment to Loan Agreement and Ancillary Loan Documents
made as of May 28, 1999, among FelCor Lodging Company, L.L.C.,
FelCor Lodging Holding Company, L.L.C. and LaSalle National
Bank, as Trustee for Nomura Asset Securities Corporation
Commercial Pass-Through Certificates Series 1998-D6, as
administrative agent and collateral agent (filed as Exhibit
10.19.1 to the Registrant's 1999 10-K and incorporated herein
by reference).
10.19 - Deed of Trust, Security Agreement, Assignment of Leases and
Rents, Fixture Filing and Financing Statement, Dated March 1,
1999, by FelCor Hotel Company II, Ltd., as Grantor, to Howard
E. Schreiber, Trustee, in trust for the benefit of Banker
Trust Company, as Beneficiary (filed as Exhibit 10.21 to the
Registrant's March 1999 10-Q and incorporated herein by
reference).
10.20 - Loan Agreement, dated April 1, 1999, among the Registrant and
the Partnership, as Borrower, The Lenders Party Thereto and
The Chase Manhattan Bank, as Administrative Agent and
Collateral Agent (filed as Exhibit 10.22.1 to the Registrant's
March 1999 10-Q and incorporated herein by reference).
10.20.1 - Guaranty, dated April 1, 1999, made by each of the named
Guarantors therein, who are signatories thereto (filed as
Exhibit 10.22.2 to the Registrant's March 1999 10-Q and
incorporated herein by reference).
10.20.2 - Pledge and Security Agreement, dated April 1, 1999, made by
each of the named Pledgors therein, who are signatories
thereto, in favor of The Chase Manhattan Bank, as Collateral
Agent (filed as Exhibit 10.22.3 to the Registrant's March 1999
10-Q and incorporated herein by reference).
10.20.3 - Second Amendment to Loan Agreement dated as of August 20,1999,
among the Registrant and the Partnership, as Borrower, the
financial institutions party thereto, and The Chase Manhattan
Bank, as Administrative Agent (filed as Exhibit 10.22.4 to the
Registrant's September 1999 10-Q and incorporated herein by
reference).
10.20.4 - Third Amendment to Loan Agreement dated as of December 1,1999,
among the Registrant and the Partnership, as Borrower, the
financial institutions party thereto, and The Chase Manhattan
Bank, as Administrative Agent (filed as Exhibit 10.21.4 to the
Registrant's 1999 10-K and incorporated herein by reference).
10.20.5 - Fourth Amendment to Loan Agreement dated as of August 7, 2000,
among the Registrant and the Partnership, as Borrower, the
financial institutions party thereto, and The Chase Manhattan
Bank, as Administrative Agent (filed as Exhibit 10.21.6 to the
Partnership's Registration Statement on Form S-4 (file no.
333-47506) and incorporated herein by reference).
10.21 - Form of Mortgage, Security Agreement and Fixture Filing by and
between FelCor/CSS Holdings, L.P. as Mortgagor and The
Prudential Insurance Company of America, as Mortgagee (filed
as Exhibit 10.23 to the Registrant's March 1999 10-Q and
incorporated herein by reference).
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EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
10.21.1 - Promissory Note dated April 1, 1999, in the original principal
amount of $100,000,000 made by FelCor/CSS Holdings, Ltd.,
payable to the order of The Prudential Insurance Company of
America (filed as Exhibit 10.23.1 to the Registrant's Form
10-Q for the quarter ended June 30,1999 ("June 1999 10-Q") and
incorporated herein by reference).
10.22 - Form of Deed of Trust, Security Agreement and Fixture Filing,
each dated as of May 12, 1999, from FelCor/MM Holdings, L.P.,
as Borrower, in favor of Fidelity National Title Insurance
Company, as Trustee, and Massachusetts Mutual Life Insurance
Company, as Beneficiary, each covering a separate hotel and
securing one of the separate Promissory Notes described in
Exhibit 10.23.1, also executed by FelCor/CSS Holdings, L.P.
with respect to the Embassy Suites-Anaheim and Embassy
Suites-Deerfield Beach, and by the Partnership with respect to
the Embassy Suites- Palm Desert (filed as Exhibit 10.24.2 to
the Registrant's June 1999 10-Q and incorporated herein by
reference).
10.22.1 - Form of six separate Promissory Notes each dated May 12, 1999,
made by FelCor/MM Holdings, L.P. payable to the order of
Massachusetts Mutual Life Insurance Company in the respective
original principal amounts of $12,500,000 (Embassy
Suites-Dallas Market Center), $14,000,000 (Embassy
Suites-Dallas Love Field), $12,450,000 (Embassy Suites-Tempe),
$11,550,000 (Embassy Suites-Anaheim), $8,900,000 (Embassy
Suites-Palm Desert), $15,600,000 (Embassy Suites-Deerfield
Beach) (filed as Exhibit 10.24.1 to the Registrant's June 1999
10-Q and incorporated herein by reference).
10.23 - Form Deed of Trust and Security Agreement and Fixture Filing
with Assignment of Leases and Rents, each dated as of April
20, 2000, from FelCor/MM S-7 Holdings, L.P., as Mortgagor, in
favor of Massachusetts Mutual Life Insurance Company and
Teachers Insurance and Annuity Association of America, as
Mortgagee, each covering a separate hotel and securing one of
the separate Promissory Notes described in Exhibit 10.24.2
(filed as Exhibit 10.24 to the Registrant's Form 10-Q for the
quarter ended June 30, 2000 (the "June 2000 10-Q") and
incorporated herein by reference).
10.23.1 - Form of Accommodation Cross-Collateralization Mortgage and
Security Agreement, each dated as of April 20, 2000, executed
by FelCor/MM S-7 Holdings, L.P., in favor of Massachusetts
Mutual Life Insurance Company and Teachers Insurance and
Annuity Association of America (filed as Exhibit 10.24.1 to
the Registrant's June 2000 10-Q and incorporated herein by
reference).
10.23.2 - Form of fourteen separate Promissory Notes each dated April
20, 2000, each made by FelCor/MM S-7 Holdings, L.P., each
separately payable to the order of Massachusetts Mutual Life
Insurance Company and Teachers Insurance and Annuity
Association of America, respectively, in the respective
original principal amounts of $13,500,000 (Phoenix (Crescent),
Arizona), $13,500,000 (Phoenix (Crescent), Arizona),
$6,500,000 (Cypress Creek/Ft. Lauderdale, Florida), $6,500,000
(Cypress Creek/Ft. Lauderdale, Florida), $9,000,000 (Atlanta
Galleria, Georgia), $9,000,000 (Atlanta Galleria, Georgia),
$12,500,000 (Chicago O'Hare Airport, Illinois), $12,500,000
(Chicago O'Hare Airport, Illinois), $3,500,000 (Lexington,
Kentucky), $3,500,000 (Lexington, Kentucky), $17,000,000
(Philadelphia Society Hill, Philadelphia), $17,000,000
(Philadelphia Society Hill, Philadelphia), $10,500,000 (South
Burlington, Vermont), and, $10,500,000 (South Burlington,
Vermont) (filed as Exhibit 10.24.2 to the Registrant's June
2000 10-Q and incorporated herein by reference).
10.24 - Form Deed of Trust and Security Agreement, each dated as of
May 2, 2000, from each of FelCor/CMB Buckhead Hotel, L.L.C.,
FelCor/CMB Marlborough Hotel, L.L.C., FelCor/CMB Deerfield
Hotel, L.L.C., FelCor/CMB Corpus Holdings, L.P., FelCor/CMB
Orsouth Holdings, L.P., FelCor/CMB New Orleans Hotel, L.L.C.,
FelCor/CMB Piscataway Hotel, L.L.C., and FelCor/CMB SSF
Holdings, L.P., each as Borrower, in favor of The Chase
Manhattan Bank, as
-46-
49
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
Beneficiary, each covering a separate hotel and securing one
of the separate Promissory Notes described in Exhibit 10.25.1
(filed as Exhibit 10.25 to the Registrant's June 2000 10-Q and
incorporated herein by reference).
10.24.1 - Form of eight separate Promissory Notes each dated May 2,
2000, made by FelCor/CMB Buckhead Hotel, L.L.C., FelCor/CMB
Marlborough Hotel, L.L.C., FelCor/CMB Deerfield Hotel, L.L.C.,
FelCor/CMB Corpus Holdings, L.P., FelCor/CMB Orsouth Holdings,
L.P., FelCor/CMB New Orleans Hotel, L.L.C., FelCor/CMB
Piscataway Hotel, L.L.C., and FelCor/CMB SSF Holdings, L.P.,
each separately payable to the order of The Chase Manhattan
Bank in the respective original principal amounts of
$38,250,000 (Atlanta Buckhead, Georgia), $20,500,000 (Boston
Marlborough, Massachusetts), $16,575,000 (Chicago Deerfield,
Illinois), $5,338,000 (Corpus Christi, Texas), $25,583,000
(Orlando South, Florida), $32,650,000 (New Orleans,
Louisiana), $20,728,000 (Piscataway, New Jersey), and
$26,268,000 (South San Francisco, California) (filed as
Exhibit 10.25.1 to the Registrant's June 2000 10-Q and
incorporated herein by reference).
10.25 - Registration Rights Agreement dated as of September 8, 2000
among the Registrant, the Partnership, Deutsche Banc
Securities Inc., Chase Securities Inc., Morgan Stanley & Co.
Incorporated, Banc of America Securities LLC, Banc One Capital
Markets, Inc., Credit Lyonnais Securities (USA) Inc., and
Scotia Capital (USA) Inc. (filed as Exhibit 10.26 to the
Partnership's Registration Statement on Form S-4 (file no.
333-47506) and incorporated herein by reference).
10.26 - Registration Rights Agreement dated as of January 11, 2001
among the Registrant, the Partnership and Deutsche Bank
Securities Inc.
21 - List of Subsidiaries of the Registrant.
23.1 - Consent of PricewaterhouseCoopers LLP.
23.2 - Consent of Deloitte & Touche LLP
(b) Reports on Form 8-K.
- None filed.
-47-
50
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.
FELCOR LODGING TRUST INCORPORATED
By: /s/ Lawrence D. Robinson
-------------------------------------
Lawrence D. Robinson
Executive Vice President
Date: March 29, 2001
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.
DATE SIGNATURE
---- ---------
March 29, 2001 /s/ Donald J. McNamara
---------------------------------------------------------------
Donald J. McNamara
Chairman of the Board and Director
March 29, 2001 /s/ Thomas J. Corcoran, Jr.
---------------------------------------------------------------
Thomas J. Corcoran, Jr.
President and Director (Chief Executive Officer)
March 29, 2001 /s/ Lester C. Johnson
---------------------------------------------------------------
Lester C. Johnson
Senior Vice President and Controller
(Principal Financial Officer and Principal Accounting Officer)
March , 2001
---------------------------------------------------------------
Melinda J. Bush, Director
March 27, 2001 /s/ Richard S. Ellwood
---------------------------------------------------------------
Richard S. Ellwood, Director
March 27, 2001 /s/ Richard O. Jacobson
---------------------------------------------------------------
Richard O. Jacobson, Director
March 27, 2001 /s/ Charles A. Ledsinger, Jr.
---------------------------------------------------------------
Charles A. Ledsinger, Jr., Director
March 27, 2001 /s/ Robert H. Lutz, Jr.
---------------------------------------------------------------
Robert H. Lutz, Jr., Director
March 26, 2001 /s/ Charles N. Mathewson
---------------------------------------------------------------
Charles N. Mathewson, Director
March , 2001
---------------------------------------------------------------
Thomas A. McChristy, Director
March , 2001
---------------------------------------------------------------
Richard C. North, Director
March 29, 2001 /s/ Michael D. Rose
---------------------------------------------------------------
Michael D. Rose, Director
48
51
FELCOR LODGING TRUST INCORPORATED
INDEX TO FINANCIAL STATEMENTS
PART I - FINANCIAL INFORMATION
FELCOR LODGING TRUST INCORPORATED
Report of Independent Accountants.................................................................................F-2
Consolidated Balance Sheets - December 31, 2000 and 1999..........................................................F-3
Consolidated Statements of Operations for the years ended December 31, 2000, 1999 and 1998........................F-4
Consolidated Statements of Shareholders' Equity for the years ended December 31, 2000, 1999 and 1998............. F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2000, 1999 and 1998........................F-6
Notes to Consolidated Financial Statements........................................................................F-7
Report of Independent Accountants on Financial Statement Schedule................................................F-27
Schedule III - Real Estate and Accumulated Depreciation as of December 31, 2000..................................F-28
DJONT OPERATIONS, L.L.C.
Report of Independent Accountants................................................................................F-32
Consolidated Balance Sheets - December 31, 2000 and 1999.........................................................F-33
Consolidated Statements of Operations for the years ended December 31, 2000, 1999 and 1998.......................F-34
Consolidated Statements of Shareholders' Deficit for the years ended December 31, 2000, 1999 and 1998............F-35
Consolidated Statements of Cash Flows for the years ended December 31, 2000, 1999 and 1998.......................F-36
Notes to Consolidated Financial Statements.......................................................................F-37
BRISTOL HOTELS & RESORTS TENANT COMPANIES
Independent Auditors' Report.....................................................................................F-41
Combined Balance Sheet - December 31, 2000.......................................................................F-42
Combined Statements of Operations for the nine months ended December 31, 2000
and the three months ended March 31, 2000 (Predecessor).....................................................F-43
Combined Statements of Stockholder's Equity - March 31, 2000 (Predecessor)
and December 31, 2000.......................................................................................F-44
Combined Statements of Cash Flows for the nine months ended December 31, 2000
and the three months ended March 31, 2000 (Predecessor).....................................................F-45
Notes to the Combined Financial Statements.......................................................................F-46
F-1
52
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
of FelCor Lodging Trust Incorporated:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, shareholders' equity and cash flows
present fairly, in all material respects, the financial position of FelCor
Lodging Trust Incorporated at December 31, 2000 and 1999, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 2000, in conformity with accounting principles
generally accepted in the United States of America. These financial statements
are the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements 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.
PricewaterhouseCoopers LLP
Dallas, Texas
February 5, 2001,
except for footnotes 1 and 20,
as to which the date is March 28, 2001
F-2
53
FELCOR LODGING TRUST INCORPORATED
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2000 AND 1999
(IN THOUSANDS)
ASSETS
2000 1999
----------- -----------
Investment in hotels, net of accumulated depreciation of
$473,101 in 2000 and $330,555 in 1999 ...................................... $ 3,750,275 $ 4,035,344
Investment in unconsolidated entities .......................................... 128,593 136,718
Assets held for sale ........................................................... 129,294
Cash and cash equivalents ...................................................... 26,060 36,123
Due from Lessees ............................................................... 28,058 18,394
Note receivable from unconsolidated entity ..................................... 7,695 7,760
Deferred expenses, net of accumulated amortization of
$7,146 in 2000 and $4,491 in 1999 ........................................... 23,944 15,473
Other assets ................................................................... 9,684 5,939
----------- -----------
Total assets ............................................................ $ 4,103,603 $ 4,255,751
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Debt, net of discount of $6,443 in 2000 and $1,401 in 1999 ..................... $ 1,838,241 $ 1,833,954
Distributions payable .......................................................... 33,957 39,657
Accrued expenses and other liabilities ......................................... 94,232 65,480
Minority interest in Operating Partnership, 8,597 and 2,991 units issued and
outstanding at December 31, 2000 and 1999, respectively ..................... 252,294 90,078
Minority interest in other partnerships ........................................ 50,774 51,671
----------- -----------
Total liabilities .............................................................. 2,269,498 2,080,840
----------- -----------
Commitments and contingencies
Shareholders' equity:
Preferred stock, $.01 par value, 20,000 shares authorized:
Series A Cumulative
Preferred Stock, 5,981 and 6,050 shares issued and
outstanding at December 31, 2000 and 1999, respectively ................... 149,515 151,250
Series B Redeemable Preferred Stock, 58 shares issued and outstanding ....... 143,750 143,750
Common stock, $.01 par value, 200,000 shares authorized, 69,415 and
69,291 shares issued at December 31, 2000 and 1999, respectively ............ 694 693
Additional paid-in capital ..................................................... 2,064,909 2,138,477
Distributions in excess of earnings ............................................ (201,598) (119,385)
----------- -----------
2,157,270 2,314,785
Less: Common stock in treasury, at cost, 16,906 and 6,975 shares
at December 31, 2000 and 1999, respectively ................................. (323,165) (139,874)
----------- -----------
Total shareholders' equity ............................................. 1,834,105 2,174,911
----------- -----------
Total liabilities and shareholders' equity ............................. $ 4,103,603 $ 4,255,751
=========== ===========
The accompanying notes are an integral part of these consolidated
financial statements.
F-3
54
FELCOR LODGING TRUST INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS For
the years ended December 31, 2000, 1999, and 1998
(in thousands, except per share data)
2000 1999 1998
------------- ------------- -------------
Revenues:
Percentage lease revenue ............................................. $ 536,907 $ 490,893 $ 328,035
Equity in income from unconsolidated entities ........................ 14,820 8,484 7,017
Other revenue ........................................................ 4,965 4,624 4,565
------------- ------------- -------------
Total revenues .................................. 556,692 504,001 339,617
------------- ------------- -------------
Expenses:
General and administrative ........................................... 12,256 9,122 5,254
Depreciation ......................................................... 160,745 152,948 90,835
Taxes, insurance and other ........................................... 70,648 59,572 37,158
Land leases .......................................................... 21,985 17,558 8,130
Interest expense ..................................................... 158,620 125,435 73,182
Reserve for hotels held for sale ..................................... 63,000
Minority interest in Operating Partnership .......................... 4,692 4,696 6,500
Minority interest in other partnerships .............................. 3,570 2,713 1,121
------------- ------------- -------------
Total expenses ................................. 495,516 372,044 222,180
------------- ------------- -------------
Income before nonrecurring items ..................................... 61,176 131,957 117,437
Gain on sale of assets ............................................... 4,388 236 477
Extraordinary charge from write off of deferred financing fees ....... 3,865 1,113 3,075
------------- ------------- -------------
Net income ........................................................... 61,699 131,080 114,839
Preferred dividends .................................................. 24,682 24,735 21,423
------------- ------------- -------------
Net income applicable to common shareholders ......................... $ 37,017 $ 106,345 $ 93,416
============= ============= =============
Per common share data:
Basic:
Income applicable to common shareholders
before extraordinary charge ................................ $ 0.74 $ 1.59 $ 1.93
Extraordinary charge ........................................... (0.07) (0.02) (0.06)
------------- ------------- -------------
Net income applicable to common shareholders ................... $ 0.67 $ 1.57 $ 1.87
============= ============= =============
Weighted average common shares outstanding ..................... 55,264 67,392 49,968
Diluted:
Income applicable to common shareholders
before extraordinary charge ................................ $ 0.74 $ 1.59 $ 1.92
Extraordinary charge ........................................... (0.07) (0.02) (0.06)
------------- ------------- -------------
Net income applicable to common shareholders ................... $ 0.67 $ 1.57 $ 1.86
============= ============= =============
Weighted average common shares and equivalents outstanding ..... 55,519 67,581 50,314
The accompanying notes are an integral part of these consolidated
financial statements.
F-4
55
FELCOR LODGING TRUST INCORPORATED
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
(IN THOUSANDS)
COMMON STOCK
------------------
NUMBER ADDITIONAL DISTRIBUTIONS TOTAL
PREFERRED OF PAID-IN IN EXCESS OF TREASURY SHAREHOLDERS'
STOCK SHARES AMOUNT CAPITAL EARNINGS STOCK EQUITY
--------- ------- ------ ----------- ------------- --------- ------------
BALANCE AT DECEMBER 31, 1997 $ 151,250 37,802 $ 378 $ 1,001,747 $ (33,771) $ (41,106) $1,078,498
Issuance of common shares, net of
offering expenses 31,482 315 1,151,038 1,151,353
Forfeiture of restricted common stock
awards (381) (381)
Allocation to minority interest (5,848) (5,848)
Issuance of Series B preferred
stock, net of offering expenses 143,750 (4,687) 139,063
Distributions/dividends declared:
$2.545 per common share (138,484) (138,484)
$2.157 per Series A preferred share (13,050) (13,050)
$1.44 per Series B depositary
preferred share (8,373) (8,373)
Net income 114,839 114,839
--------- ------- ------ ----------- ---------- --------- ----------
BALANCE AT DECEMBER 31, 1998 295,000 69,284 693 2,142,250 (78,839) (41,487) 2,317,617
Issuance of common shares 7 5 5
Repurchase of common shares (98,387) (98,387)
Allocation to minority interest (3,778) (3,778)
Distributions/dividends declared:
$2.20 per common share (146,891) (146,891)
$1.95 per Series A preferred share (11,797) (11,797)
$2.25 per Series B depositary
preferred share (12,938) (12,938)
Net income 131,080 131,080
--------- ------- ------ ----------- ---------- --------- ----------
BALANCE AT DECEMBER 31, 1999 295,000 69,291 693 2,138,477 (119,385) (139,874) 2,174,911
Issuance of common shares 124 1 (890) 4,340 3,451
Conversion of Series A preferred stock (1,735) 811 924
Repurchase of common shares (86,681) (86,681)
Purchase of options (1,861) (1,861)
Contribution of shares in exchange for
operating partnership units (101,874) (101,874)
Allocation to minority interest (71,628) (71,628)
Distributions/dividends declared:
$2.20 per common share (119,230) (119,230)
$1.95 per Series A preferred share (11,744) (11,744)
$2.25 per Series B depositary
preferred share (12,938) (12,938)
Net income 61,699 61,699
--------- ------- ------ ----------- ---------- --------- ----------
BALANCE AT DECEMBER 31, 2000 $ 293,265 69,415 $ 694 $ 2,064,909 $ (201,598) $(323,165) $1,834,105
========= ======= ====== =========== ========== ========= ==========
The accompanying notes are an integral part of these consolidated
financial statements.
F-5
56
FELCOR LODGING TRUST INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
(IN THOUSANDS)
2000 1999 1998
----------- ----------- -----------
Cash flows from operating activities:
Net income .......................................................... $ 61,699 $ 131,080 $ 114,839
Adjustments to reconcile net income to net cash provided
by operating activities:
Gain on sale of assets ........................................... (4,388) (236) (477)
Depreciation ..................................................... 160,745 152,948 90,835
Reserve for hotels held for sale ................................. 63,000
Amortization of deferred financing fees .......................... 3,936 1,816 1,985
Amortization of unearned officers' and directors' compensation ... 1,478 652 830
Equity in income from unconsolidated entities .................... (14,820) (8,484) (7,017)
Extraordinary charge for write off of deferred financing fees .... 3,865 1,113 3,075
Minority interest in Operating Partnership ....................... 4,692 4,696 6,500
Minority interest in other partnerships .......................... 3,570 2,713 1,121
Changes in assets and liabilities, net of effects of acquisitions:
Due from Lessees ................................................. (9,664) 574 (3,035)
Deferred financing fees .......................................... (16,964) (9,313) (4,348)
Other assets ..................................................... (5,339) (282) (602)
Accrued expenses and other liabilities ........................... 25,494 5,088 (11,123)
----------- ----------- -----------
Net cash flow provided by operating activities ......... 277,304 282,365 192,583
----------- ----------- -----------
Cash flows used in investing activities:
Acquisition of hotels ............................................ (10,802) (326,276)
Acquisition of unconsolidated entities ........................... (7,452) (4,230)
Improvements and additions to hotels ............................. (95,235) (222,320) (119,107)
Note receivable from unconsolidated entity ....................... (7,766)
Bristol interim credit facility .................................. (120,000)
Sale of assets ................................................... 35,111 15,476 7,815
Cash distributions from unconsolidated entities .................. 25,358 19,581 19,066
----------- ----------- -----------
Net cash flow used in investing activities ............. (34,766) (205,517) (550,498)
----------- ----------- -----------
Cash flows provided by (used in) financing activities:
Proceeds from borrowings ......................................... 997,424 1,034,667 1,013,003
Repayment of borrowings .......................................... (992,635) (804,915) (658,524)
Proceeds from sale of preferred stock ............................ 143,750
Costs associated with public offerings ........................... (4,687)
Purchase of treasury stock ....................................... (86,681) (98,387)
Buyback of assumed stock options ................................. (1,861)
Proceeds from exercise of stock options .......................... 8 3,884
Distributions paid to minority interest .......................... (5,229)
Distributions paid to limited partners ........................... (14,190) (7,559) (6,671)
Distributions paid to common shareholders ........................ (124,738) (173,244) (98,754)
Dividends paid to preferred shareholders ......................... (24,691) (25,987) (16,937)
----------- ----------- -----------
Net cash flow provided by (used in) financing activities (252,601) (75,417) 375,064
----------- ----------- -----------
Net change in cash and cash equivalents .................................. (10,063) 1,431 17,149
Cash and cash equivalents at beginning of years .......................... 36,123 34,692 17,543
----------- ----------- -----------
Cash and cash equivalents at end of years ................................ $ 26,060 $ 36,123 $ 34,692
=========== =========== ===========
Supplemental cash flow information - interest paid ....................... $ 143,594 $ 125,085 $ 72,215
----------- ----------- -----------
The accompanying notes are an integral part of these consolidated
financial statements.
F-6
57
FELCOR LODGING TRUST INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
FelCor Lodging Trust Incorporated ("FelCor") is the nation's second
largest hotel real estate investment trust ("REIT"). At December 31, 2000, it
owned interests in 186 hotels with nearly 50,000 rooms and suites (collectively
the "Hotels") through its greater than 86% equity interest in FelCor Lodging
Limited Partnership (the "Operating Partnership"). FelCor, the Operating
Partnership, and their subsidiaries are herein referred to, collectively, as the
"Company". At December 31, 2000, the Company owned 100% of the interest in 161
of the Hotels, a 90% or greater interest in entities owning seven hotels, a 60%
interest in an entity owning two hotels and 50% interests in separate entities
that own 16 hotels.
The following table provides a schedule of the Hotels, by brand,
operated by each of the Company's lessees at December 31, 2000:
NOT OPERATED
BRAND DJONT BRISTOL UNDER A LEASE TOTAL
----- ----- ------- ------------- -----
Hilton(R)Brands:
Embassy Suites(R) 59 59
Doubletree(R)and Doubletree Guest Suites(R) 14 14
Hampton Inn(R) 9 9
Hilton Suites(R) 1 1
Homewood Suites(R) 1 1
Bass Brands:
Holiday Inn(R) 43 1 44
Crowne Plaza(R)and Crowne Plaza Suites(R) 18 18
Holiday Inn Select(R) 10 10
Holiday Inn Express(R) 5 5
Starwood Brands:
Sheraton(R)and Sheraton Suites(R) 10 10
Westin(R) 1 1
Other Brands 13 1 14
--- -- --- ----
Total Hotels 85 99 2 186
=== == === ====
The Hotels are located in the United States (35 states) and Canada,
with a concentration in Texas (41 hotels), California (19 hotels), Florida (18
hotels) and Georgia (15 hotels). The following table provides information
regarding the net acquisition and disposition of hotels through December 31,
2000:
NET HOTELS
ACQUIRED/(DISPOSED OF)
----------------------
1994 7
1995 13
1996 23
1997 30
1998 120
1999 (5)
2000 (2)
-----
186
=====
On January 1, 2001, the provisions of the REIT Modernization Act became
effective. These provisions reduce the percentage of taxable income required to
be distributed by a REIT from 95% to 90% for taxable years after 2000 and
subject to certain limitations, permit a REIT to own taxable subsidiaries that
engage in businesses previously prohibited to a REIT, including, among other
things, leasing hotels from a hotel REIT, provided that the hotels continue to
be managed by unrelated third parties.
F-7
58
FELCOR LODGING TRUST INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. ORGANIZATION -- (CONTINUED)
At December 31, 2000, the Company leased 85 hotels to DJONT Operations,
L.L.C., a Delaware limited liability company, or a consolidated subsidiary
thereof (collectively "DJONT") and leased 99 hotels to Bristol Hotels & Resorts
and its consolidated subsidiaries ("Bristol" and, together with DJONT,
the"Lessees"). Bristol became a subsidiary of Bass plc ("Bass") by virtue of a
merger between Bristol and a subsidiary of Bass on March 31, 2000. Two of the
Hotels were operated without a lease.
At December 31, 2000, DJONT was a private company controlled by Thomas
J. Corcoran, Jr., the President, Chief Executive Officer and a Director of
FelCor. Subject to the receipt of certain lender consents, effective January 1,
2001, the Company acquired and contributed to a newly formed taxable REIT
subsidiary, all of the equity interests in DJONT. In consideration for the
acquisition of DJONT, the Operating Partnership issued an aggregate of 416,667
units of limited partnership interest valued at approximately $10 million,
which, together with DJONT's accumulated shareholders' deficit of $24.5 million,
will be expensed in the first quarter of 2001 as a lease termination cost.
Effective January 1, 2001, the Company completed the acquisition of 12
of the Bristol leases which were held by Bass. In consideration for the
acquisition of such leases, the Company issued to Bass 413,585 shares of FelCor
common stock valued at approximately $10 million. Of the 12 hotels, (i) the
Company has entered into an agreement with Interstate Hotels Corporation ("IHC")
to manage eight of the hotels, (ii) two hotels are being managed by a subsidiary
of Bass under short term management contracts, (iii) one hotel is being managed
by a subsidiary of Hilton Hotels Corporation ("Hilton") and (iv) one hotel was
sold. In March 2001, the Company entered into an agreement with Bass to acquire
the remaining 88 leases effective July 1, 2001. In consideration for the
acquisition of such leases, the Company will enter into long term management
agreements with Bass with regard to these hotels and issue to Bass 100 shares of
FelCor common stock. A portion of the management fees with respect to the 88
hotels managed by Bass under long term management agreements will be considered
to be lease termination costs and the Company will record a lease termination
expense of approximately $125 million in the third quarter of 2001. At that
time, the Company will record a corresponding liability of approximately $125
million that will be amortized over the term of the applicable management
agreements.
At January 1, 2001, (i) subsidiaries of Bass managed 91 of the Hotels,
(ii) subsidiaries of Hilton managed 72 of the Hotels, (iii) subsidiaries of
Starwood Hotels & Resorts Worldwide, Inc. ("Starwood") managed 11 of the Hotels,
(iv) subsidiaries of IHC managed eight of the Hotels and (v) three independent
management companies managed the four remaining Hotels.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation -- The consolidated financial statements
include the accounts of FelCor, the Operating Partnership, and their
consolidated subsidiaries. All significant intercompany balances and
transactions have been eliminated.
Use of Estimates -- The preparation of the financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Investment in Hotels -- Hotels are stated at cost and are depreciated
using the straight-line method over estimated useful lives ranging from 31 to 40
years for buildings and improvements and three to seven years for furniture,
fixtures, and equipment.
F-8
59
FELCOR LODGING TRUST INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
The Company periodically reviews the carrying value of each Hotel to
determine if circumstances exist indicating an impairment in the carrying value
of the investment in the hotel or that depreciation periods should be modified.
If facts or circumstances support the possibility of impairment, the Company
will prepare a projection of the undiscounted future cash flows, without
interest charges, of the specific hotel and determine if the investment in such
hotel is recoverable based on the undiscounted future cash flows. If impairment
is indicated, an adjustment will be made to the carrying value of the hotel
based on discounted future cash flows. The Company does not believe that there
are any factors or circumstances indicating impairment of any of its investment
in the Hotels except as reflected in reserve established for the assets held for
sale.
Maintenance and repairs are the responsibility of the Lessees; major
renewals and betterments by the Company are capitalized. Upon the sale or
disposition of a fixed asset, the asset and related accumulated depreciation are
removed from the accounts and the related gain or loss is included in
operations.
Investment in Unconsolidated Entities --The Company owns a 50% interest
in various partnerships or limited liability companies in which the partners
jointly make all material decisions concerning the business affairs and
operations. The Company also owns a 97% nonvoting interest in an entity.
Accordingly, the Company does not control these entities and carries its
investment in unconsolidated entities at cost, plus its equity in net earnings,
less distributions received since the date of acquisition. Equity in net
earnings is adjusted for the straight-line amortization, over a 40-year period,
of the difference between the Company's cost and its proportionate share of the
underlying net assets at the date of acquisition.
Cash and Cash Equivalents -- All highly liquid investments with a
maturity of three months or less when purchased are considered to be cash
equivalents.
Deferred Expenses -- Deferred expenses, consisting primarily of loan
costs, are recorded at cost. Amortization is computed using the interest method
over the maturity of the related debt.
Revenue Recognition -- Percentage lease revenue is reported as income
when earned.
Capitalized Interest -- The Company capitalizes interest and certain
other costs relating to hotels undergoing major renovations and redevelopments.
Such costs capitalized in 2000, 1999 and 1998 were approximately $2.0 million,
$7.4 million and $5.9 million, respectively.
Net Income Per Common Share -- Basic earnings per share have been
computed by dividing net income available to common shareholders by the weighted
average number of common shares outstanding. Diluted earnings per share have
been computed by dividing net income available to common shareholders by the
weighted average number of common shares and equivalents outstanding. Common
stock equivalents represent shares issuable upon exercise of stock options and
unvested officers' restricted stock grants.
At December 31, 2000, 1999, and 1998, the Company's Series A Cumulative
Preferred Stock, if converted to common shares, would be antidilutive;
accordingly the Series A Cumulative Preferred Stock is not assumed to be
converted in the computation of diluted earnings per share.
Distributions and Dividends -- FelCor and the Operating Partnership pay
regular quarterly distributions on their Common Stock and Units. Additionally,
the Company pays regular quarterly dividends on preferred stock in accordance
with its preferred stock dividend requirements. FelCor's ability to make
distributions is dependent on its receipt of quarterly distributions from the
Operating Partnership.
F-9
60
FELCOR LODGING TRUST INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
For 2000, FelCor paid regular dividends of $2.20 per common share,
$1.95 per share of $1.95 Series A Cumulative Preferred Stock ("Series A
preferred stock"), and $2.25 per depositary share evidencing its 9% Series B
Redeemable Preferred Stock ("Series B preferred stock").
Minority Interest in Operating Partnership -- Minority interest in the
Operating Partnership represents the proportionate share of the equity in the
Operating Partnership not owned by FelCor. Income is allocated to minority
interest based on the weighted average percentage ownership throughout the year.
Income Taxes -- The Company has elected to be treated as a REIT under
Sections 856 to 860 of the Internal Revenue Code. Accordingly, no provision for
federal income taxes has been reflected in the financial statements.
3. INVESTMENT IN HOTELS
Investment in hotels at December 31, 2000 and 1999, consists of the
following (in thousands):
2000 1999
----------- -----------
Land ................................... $ 321,994 $ 346,862
Building and improvements .............. 3,477,006 3,616,269
Furniture, fixtures and equipment ...... 409,011 383,931
Construction in progress ............... 15,365 18,837
----------- -----------
4,223,376 4,365,899
Accumulated depreciation ............... (473,101) (330,555)
----------- -----------
$ 3,750,275 $ 4,035,344
=========== ===========
4. INVESTMENT IN UNCONSOLIDATED ENTITIES
At December 31, 2000, the Company owned 50% interests in separate
entities owning 16 hotels, a parcel of undeveloped land, and a condominium
management company. The Company also owned a 97% nonvoting interest in an entity
that owns an annex to a hotel owned by the Company and holds a 50% interest in
an entity that has developed condominiums for sale. The Company accounts for its
investments in these unconsolidated entities under the equity method.
Summarized unaudited combined financial information for 100% of these
unconsolidated entities is as follows (in thousands):
DECEMBER 31,
------------------------
2000 1999
---------- ----------
Balance sheet information:
Investment in hotels.............................. $ 294,941 $ 337,444
Non-recourse mortgage debt........................ $ 225,302 $ 254,668
Equity............................................ $ 82,986 $ 101,120
YEARS ENDED DECEMBER 31,
2000 1999 1998
---------- ---------- ----------
Statements of operations information:
Total revenues ................................... $ 80,761 $ 69,146 $ 57,006
Net income ....................................... $ 30,729 $ 21,726 $ 17,438
Net income attributable to the Company ........... $ 16,962 $ 10,626 $ 8,719
Amortization of cost in excess of book value ..... (2,142) (2,142) (1,702)
---------- ---------- ----------
Equity in income from unconsolidated entities .... $ 14,820 $ 8,484 $ 7,017
========== ========== ==========
F-10
61
FELCOR LODGING TRUST INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. ASSETS HELD FOR SALE
In the second quarter of 2000, the Company identified 25 hotels that it
considered non-strategic and announced its intention to sell such hotels by June
30, 2001. In connection with the decision to sell these hotels, the Company
recorded a reserve of $63 million representing the difference between the net
book value of these hotels and the estimated net proceeds. No depreciation
expense has been recorded on these hotels since June 30, 2000. Percentage rent
income related to the assets held for sale, less costs associated with those
assets, were included in the Company's results of operations for the year ended
December 31, 2000, and represented net income of approximately $16 million.
During 2000, one of these hotels was sold and the Company recognized a gain of
approximately $135,000. At December 31, 2000, assets held for sale, which
represent the 24 remaining hotels, are reported net of the $63 million reserve.
6. DEBT
Debt at December 31, 2000 and 1999, consists of the following (in
thousands):
DECEMBER 31,
-----------------------------
COLLATERAL INTEREST RATE MATURITY DATE 2000 1999
---------- ------------- ------------- ------------- ------------
FLOATING RATE DEBT:
Line of credit None LIBOR + 200bp August 2003 $ 112,000 $ 351,000
Senior term loan (a) LIBOR + 250bp March 2004 250,000
Mortgage debt 3 hotels LIBOR + 200bp February 2003 61,909 62,553
Other None LIBOR + 200bp Various 650 32,282
------------- ------------
Total floating rate debt 174,559 695,835
------------- ------------
FIXED RATE DEBT:
Line of credit - swapped None 7.66% August 2003 250,000 313,000
Publicly-traded term notes None 7.38% October 2004 174,505 174,377
Publicly-traded term notes None 7.63% October 2007 124,320 124,221
Publicly-traded term notes None 9.50% October 2008 394,731
Mortgage debt 15 hotels 7.24% November 2007 140,148 142,542
Senior term loan - swapped (a) 8.30% March 2004 125,000
Mortgage debt 7 hotels 7.54% April 2009 97,604 99,075
Mortgage debt 6 hotels 7.55% June 2009 73,389 74,483
Mortgage debt 7 hotels 8.73% May 2010 144,032
Mortgage debt 8 hotels 8.70% May 2010 184,829
Other 13 hotels 6.96% - 7.23% 2000-2005 80,124 85,421
------------- ------------
Total fixed rate debt 1,663,682 1,138,119
------------- ------------
Total debt $ 1,838,241 $ 1,833,954
============= ============
(a) Collateralized by stock and partnership interests in certain
subsidiaries of FelCor. The senior term loan was retired early
from the proceeds of publicly traded term notes issued in
2000.
One month LIBOR at December 31, 2000 was 6.565%.
The Company's $600 million line of credit (the "Line of Credit")
contains various affirmative and negative covenants including limitations on
total indebtedness, total secured indebtedness, and cash distributions, as well
as the obligation to maintain certain minimum tangible net worth and certain
minimum interest and debt service coverage ratios. At December 31, 2000, the
Company was in compliance with all such covenants.
The Company's other borrowings contain affirmative and negative
covenants that are generally equal to or less restrictive than the Line of
Credit. Most of the mortgage debt is non-recourse to the Company (with certain
exceptions) and contains provisions allowing for the substitution of collateral
upon satisfaction of
F-11
62
FELCOR LODGING TRUST INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. DEBT -- (CONTINUED)
certain conditions. Most of the mortgage debt is prepayable, subject, however,
to various prepayment penalties, yield maintenance, or defeasance obligations.
On April 26, 2000, the Company completed a 10-year, $145 million First
Mortgage Term Loan, which is collateralized by seven Sheraton hotels and carries
an 8.73% fixed interest rate. On May 2, 2000, the Company closed $186 million of
10-year, First Mortgage Term Loans which are collateralized by eight Embassy
Suites hotels and carry an 8.70% fixed interest rate. These loans are
non-recourse, mature in May 2010, and amortize over 25 years. The proceeds of
these loans were used to reduce borrowings under the Company's Line of Credit.
On August 1, 2000, the Company renewed its Line of Credit. The Line of
Credit was reduced from $850 million to $600 million and the maturity was
extended from July 2001 to August 2003. The effective interest rate on the
renewed Line of Credit ranges from 87.5 basis points to 250 basis points above
LIBOR depending on the Company's leverage and corporate rating. An extraordinary
charge of approximately $578,000 was recorded to write-off a portion of the
deferred financing costs associated with the Line of Credit.
On September 15, 2000, the Company completed the private placement of
$400 million of senior unsecured notes which mature in September, 2008 and bear
an interest rate of 9 1/2%. The notes were issued at a discount to yield 9 3/4%.
The proceeds were used to retire the $375 million floating rate senior term
loan, which matured in 2004, and to pay down the Line of Credit. An
extraordinary charge of approximately $3.3 million was recorded to write-off
unamortized deferred financing costs associated with the $375 million loan.
During the fourth quarter of 2000, the Company exchanged the $400 million in
aggregate principal amount of the private placement senior notes for notes with
identical terms which were registered under the Securities Act of 1933.
Future scheduled principal payments on debt obligations at December 31,
2000 are as follows (in thousands):
YEAR
2001......................................................... $ 23,802
2002......................................................... 13,825
2003......................................................... 457,319
2004......................................................... 189,228
2005......................................................... 43,129
2006 and thereafter.......................................... 1,117,381
------------
1,844,684
Discount accretion over term................................. (6,443)
------------
$ 1,838,241
============
To manage the relative mix of its debt between fixed and variable rate
instruments, the Company has entered into interest rate swap agreements with
four financial institutions. These interest rate swap agreements modify a
portion of the interest characteristics of the Company's outstanding debt under
its Line of Credit without an exchange of the underlying principal amount and
effectively convert variable rate debt to a fixed rate. The fixed rates to be
paid and the variable rate to be received by the Company at December 31, 2000,
are summarized in the following table:
F-12
63
FELCOR LODGING TRUST INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. DEBT -- (CONTINUED)
SWAP RATE
RECEIVED
SWAP RATE (VARIABLE) AT SWAP
NOTIONAL AMOUNT PAID (FIXED) 12/31/00 MATURITY
- --------------- ------------ ---------- -------------
$ 25 million 5.5575% 6.8213% July 2001(a)
25 million 5.5480% 6.8213% July 2001(a)
75 million 5.5550% 6.8213% July 2001(a)
100 million 5.7955% 6.8213% July 2003
25 million 5.8260% 6.8213% July 2003
- -------------
$250 million
=============
(a) The variable rate payer has the option to terminate this swap
in July 2001; if not so terminated, it matures July 2003.
The differences to be paid or received by the Company under the terms
of the interest rate swap agreements are accrued as interest rates change and
recognized as an adjustment to interest expense by the Company, pursuant to the
terms of its interest rate agreement, and will have a corresponding effect on
its future cash flows. During 2000, the Company received a net $1.8 million
under the interest rate swaps and paid a net $1.7 million and $383,000 during
1999 and 1998, respectively. Agreements such as these contain a credit risk in
that the counterparties may be unable to meet the terms of the agreement. The
Company minimizes that risk by evaluating the creditworthiness of its
counterparties, who are limited to major banks and financial institutions, and
does not anticipate nonperformance by the counterparties.
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107 requires
disclosures about the fair value for all financial instruments, whether or not
recognized, for financial statement purposes. Disclosures about fair value of
financial instruments are based on pertinent information available to management
as of December 31, 2000. Considerable judgement is necessary to interpret market
data and develop estimated fair value. Accordingly, the estimates presented
herein are not necessarily indicative of the amounts that could be realized on
disposition of the financial instruments. The use of different market
assumptions and/or estimation methodologies may have a material effect on the
estimated fair value amounts.
Management estimates the fair value of (i) accounts receivable,
accounts payable and accrued expenses approximate carrying value due to the
relatively short maturity of these instruments; (ii) the note receivable
approximates carrying value based upon effective borrowing rates for issuance of
debt with similar terms and remaining maturities; (iii) the borrowings under the
Line of Credit and various other mortgage notes approximate carrying value
because these borrowings accrue interest at floating interest rates based on
market. The estimated fair value of the Company's fixed rate debt of $1.4
billion is $1.2 billion at December 31, 2000, based on current market interest
rates estimated by the Company for similar debt with similar maturities.
The Company manages its debt portfolio by using interest rate swaps to
achieve an overall desired position of fixed and floating rates. The fair value
of interest rate hedge contracts is estimated based on quotes from the market
makers of these instruments and represents the estimated amounts the Company
would expect to receive or pay to terminate the contracts. Credit and market
risk exposures are limited to the net interest differentials. The estimated
unrealized net gain on these instruments was approximately $248,000 at December
31, 2000, which represents the amount the Company would receive to terminate the
agreements based on current market rates.
F-13
64
FELCOR LODGING TRUST INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. CAPITAL STOCK
As of December 31, 2000, the Company had approximately $946 million of
common stock, preferred stock, debt securities, and/or common stock warrants
available for offerings under shelf registration statements previously declared
effective.
Preferred Stock
The Board of Directors is authorized to provide for the issuance of up
to 20,000,000 shares of preferred stock in one or more series, to establish the
number of shares in each series, to fix the designation, powers preferences and
rights of each such series, and the qualifications, limitations or restrictions
thereof.
In 1996, the Company issued 6.1 million shares of its Series A
preferred stock at $25 per share. The Series A preferred stock bears an annual
dividend equal to the greater of $1.95 per share or the cash distributions
declared or paid for the corresponding period on the number of shares of common
stock into which the Series A preferred stock is then convertible. Each share of
the Series A preferred stock is convertible at the shareholder's option to
0.7752 shares of common stock, subject to certain adjustments, and may not be
redeemed by the Company before April 30, 2001. During 2000, holders of 69,400
shares of Series A preferred stock converted their shares to 53,798 common
shares which were issued from treasury shares.
On May 1, 1998, the Company issued 5.75 million depositary shares,
representing 57,500 shares of its Series B preferred stock, at $25 per
depositary share. The Series B preferred stock and the corresponding depositary
shares may be called by FelCor at par on or after May 7, 2003, have no stated
maturity, sinking fund or mandatory redemption, and are not convertible into any
other securities of FelCor. The Series B preferred stock has a liquidation
preference of $2,500 per share (equivalent to $25 per depositary share) and is
entitled to annual dividends at the rate of 9% of the liquidation preference
(equivalent to $2.25 annually per depositary share).
At December 31, 2000, all dividends then payable on the Series A and
Series B preferred stock had been paid.
Operating Partnership Units
FelCor is the sole general partner of the Operating Partnership and is
obligated to contribute the net proceeds from any issuance of its equity
securities to the Operating Partnership in exchange for units of partnership
interest ("Units") corresponding in number and terms to the equity securities
issued by it. Units of limited partner interest may also be issued by the
Operating Partnership to third parties in exchange for cash or property, and
Units so issued to third parties are redeemable at the option of the holders
thereof for a like number of shares of FelCor common stock or, at the option of
FelCor, for the cash equivalent thereof.
In connection with the efforts of Bass to acquire Bristol, a Bass
subsidiary contributed approximately 4.7 million and 1 million outstanding
FelCor common shares held by it to the Operating Partnership in exchange for a
like number of units of limited partnership interest on February 28 and November
1, 2000, respectively. This exchange reduced FelCor's percentage ownership in
the Operating Partnership from approximately 95% to approximately 86%. The
shares were recorded in treasury at an average of $17.83 per share which
represented fair market value on the dates of exchange (aggregating $101.9
million) and increased the minority interest liability related to the Operating
Partnership for a like amount.
F-14
65
FELCOR LODGING TRUST INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. CAPITAL STOCK -- (CONTINUED)
Treasury Stock Repurchase Program
On September 3, 1999, FelCor announced that its Board of Directors (the
"Board") had authorized the Company to repurchase up to $100 million of its
outstanding common shares. On January 4, 2000, the Board approved a $200 million
increase in its stock repurchase program. At December 31, 2000, the Company had
completed the repurchase of approximately 10.3 million common shares at a cost
of approximately $185.1 million (of the $300 million authorized), which has been
recorded as treasury stock.
9. TAXES, INSURANCE AND OTHER
Taxes, insurance and other is comprised of the following for the years
ended December 31, 2000, 1999, and 1998 (in thousands):
2000 1999 1998
---------- ---------- ----------
Real estate and personal property taxes .......... $ 63,207 $ 52,118 $ 32,892
Property insurance ............................... 4,065 3,481 2,341
State franchise taxes and Canadian income tax .... 3,376 3,973 1,609
Other ............................................ 316
---------- ---------- ----------
Total taxes, insurance, and other ....... $ 70,648 $ 59,572 $ 37,158
========== ========== ==========
10. LAND LEASES
The Company leases land occupied by certain hotels from third parties
under various operating leases. Certain leases contain contingent rent features
based on gross revenue at the respective hotels. Future minimum lease payments
under the Company's land lease obligations at December 31, 2000, are as follows
(in thousands):
YEAR
2001 $ 4,863
2002 4,756
2003 4,706
2004 4,773
2005 4,573
2006 and thereafter 135,978
----------
$ 159,649
==========
11. GAIN ON SALE OF ASSETS
On December 11, 2000, the Company completed the sale of its Four Points
by Sheraton(R) hotel - Leominster, Massachusetts (one of the 25 hotels
designated as held for sale), for a gross price of $10.5 million which resulted
in a gain of approximately $135,000.
On September 27, 2000, the Company completed the sale of its Embassy
Suites hotel, Los Angeles International Airport - North, California for a gross
price of approximately $23.3 million. The Company recorded a gain of
approximately $2.5 million.
F-15
66
FELCOR LODGING TRUST INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. GAIN ON SALE OF ASSETS -- (CONTINUED)
During the third quarter of 2000, the Company sold two acres of vacant
excess land adjacent to its Embassy Suites hotel - Fort Lauderdale, Florida and
a billboard in Dallas, Texas, for an aggregate of $1.3 million and recorded a
gain of approximately $0.9 million.
On June 30, 2000, the Company sold 31 acres of vacant excess land
adjacent to its Whispering Woods Hotel in Olive Branch, Mississippi, for
approximately $1 million and recorded a gain of $0.9 million.
12. COMMITMENTS AND RELATED PARTY TRANSACTIONS
Through December 31, 2000, the Company shared the executive offices and
certain employees with FelCor, Inc., and DJONT, and each company paid its share
of the costs thereof, including an allocated portion of the rent, compensation
of certain personnel (other than Mr. Corcoran, whose compensation is borne
solely by the Company), office supplies, telephones, and depreciation of office
furniture, fixtures, and equipment. Any such allocation of shared expenses to
the Company is required to be approved by a majority of the Independent
Directors. During 2000, 1999, and 1998, the Company paid approximately $7.5
million (approximately 89.4%), $5.7 million (approximately 89.5%), and $2.8
million (approximately 63%), respectively, of the allocable expenses under this
arrangement.
Included in the mortgage debt of the unconsolidated entities is a
mortgage loan payable to the Company in the amount of $7.7 million and $7.8
million for 2000 and 1999, respectively. The note bears a fixed interest rate of
8% per annum with a 30 year amortization, matures on December 31, 2004, and is
collateralized by a Mortgage and Assignment of Leases and Rents with respect to
a hotel annex owned by an entity in which the Company has a 97% nonvoting
interest.
13. SUPPLEMENTAL CASH FLOW DISCLOSURE
The Company purchased certain assets and assumed certain liabilities in
connection with the acquisition of hotels in 1998. During 1999 the Company
purchased the land related to three hotels, which previously had been leased.
These purchases were recorded under the purchase method of accounting. The fair
values of the acquired assets and liabilities recorded at the date of
acquisition are as follows (in thousands):
1999 1998
----------- -----------
Assets acquired ............................. $ 19,776 $ 2,427,027
Liabilities assumed ......................... (7,800) (940,906)
Common Stock and Units issued ............... (1,174) (1,152,856)
Minority interest contribution .............. (6,989)
----------- -----------
Net cash paid ...................... $ 10,802 $ 326,276
=========== ===========
Approximately $34.0 million, $39.7 million, and $67.3 million of
aggregate preferred stock dividends and common stock distributions had been
declared as of December 31, 2000, 1999, and 1998, respectively. These amounts
were paid in the following January of each year.
In 1998, the Company entered into a joint venture, in which the Company
contributed a hotel with a net book value of $53.9 million for a 60% equity
interest in the venture. The Company has consolidated this venture in the
financial statements and recorded increases of $34.4 million in investment in
hotels and minority interest in other partnerships.
F-16
67
FELCOR LODGING TRUST INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
14. STOCK BASED COMPENSATION PLANS
FelCor sponsors three restricted stock and stock option plans (the
"FelCor Plans"). In addition, upon completion of the merger with Bristol Hotel
Company (the "Merger"), FelCor assumed two stock option plans previously
sponsored by Bristol Hotel Company (the "Bristol Plans"). FelCor was initially
obligated to issue up to 1,271,103 shares of its common stock pursuant to the
Bristol Plans. No additional options may be awarded under the Bristol Plans. The
FelCor Plans and the Bristol Plans are referred to collectively as the "Plans".
The Company applies APB Opinion 25 and related interpretations in
accounting for the Plans. In 1995 the Financial Accounting Standards Board
("FASB") issued FASB Statement No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123") which, if fully adopted by the Company, would change
the methods the Company applies in recognizing the cost of the Plans. Adoption
of the cost recognition provisions of SFAS 123 is optional and the Company has
decided not to adopt the provisions of SFAS 123. However, pro forma disclosures,
as if the Company adopted the cost recognition provisions of SFAS 123, are
required by SFAS 123 and are presented below.
Stock Options
FelCor is authorized to issue 2,950,000 shares of common stock under
the FelCor Plans pursuant to awards granted in the form of incentive stock
options, non-qualified stock options, and restricted stock. All options have
10-year contractual terms and vest over five equal annual installments (20% per
year), beginning in the year following the date of grant.
The options outstanding under the Bristol Plans generally vest either
in four equal annual installments (25% per year) beginning in the second year
following the original date of award, in five equal annual installments (20% per
year) beginning in the year following the original date of award, or on a single
date that is three to five years following the original date of the award.
A summary of the status of FelCor's non-qualified stock options under
the Plans as of December 31, 2000, 1999, and 1998, and the changes during the
years are presented below:
2000 1999 1998
------------------------- ------------------------ ------------------------
WEIGHTED WEIGHTED WEIGHTED
# SHARES OF AVERAGE # SHARES OF AVERAGE # SHARES OF AVERAGE
UNDERLYING EXERCISE UNDERLYING EXERCISE UNDERLYING EXERCISE
OPTIONS PRICES OPTIONS PRICES OPTIONS PRICES
----------- ---------- ---------- ---------- ---------- ----------
Outstanding at beginning of the year ..... 2,496,773 $ 22.32 2,540,466 $ 22.53 1,670,500 $ 29.96
Granted (a)(b) ........................... 69,000 $ 19.50 9,750 $ 22.13 2,445,813 $ 20.54
Exercised ................................ (760) $ 10.33 (332,915) $ 11.67
Retired (c) .............................. (349,443) $ 12.28
Forfeited (b)(c) ......................... (315,550) $ 26.75 (52,683) $ 32.41 (1,242,932) $ 31.51
---------- ---------- ----------
Outstanding at end of year ............... 1,900,780 $ 23.33 2,496,773 $ 22.32 2,540,466 $ 22.53
========== ========== ==========
Exercisable at end of year ............... 804,066 $ 24.64 906,675 $ 24.58 796,499 $ 24.64
(a) 1998 grants include options covering 1,271,103 shares of Common
Stock issuable as a result of the assumption of the Bristol Plans.
(b) To enable FelCor to preserve its stock options as a meaningful
element of compensation in 1998, existing option holders under the
FelCor Plans employed by FelCor on a full-time basis were offered the
opportunity to exchange their existing options (having exercise prices
ranging from $26.44 to $38.56 per share) for a lesser number of new
options having an equal value under the Black-Scholes option pricing
model. Twenty-two employees accepted this offer in 1998, surrendering
for cancellation existing options covering an aggregate of 1,151,500
shares of Common Stock at a
F-17
68
FELCOR LODGING TRUST INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
14. STOCK BASED COMPENSATION PLANS -- (CONTINUED)
weighted average exercise price of $32.807 per share for new options
covering an aggregate of 840,393 shares of Common Stock at an exercise
price of $22.125 per share. The new options have the same expiration
dates and vesting schedules as the options surrendered for
cancellation; however, none of the new options were exercisable prior
to January 1, 2000.
(c) In the second quarter of 2000 the Company purchased options
covering an aggregate of 349,443 shares of FelCor's common stock for
approximately $1.9 million. These options were held by employees of
Bristol and were issued in substitution for stock options previously
granted by Bristol Hotel Company that were outstanding at the time of
its merger with FelCor in 1998. These options so purchased and retired
had exercise prices ranging from $10.33 to $16.95 per share and the
majority of these options were scheduled to vest in the third quarter
of 2000. The purchase price was recorded as a reduction in additional
paid in capital.
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------------------- -------------------------------
NUMBER WGTD. AVG. NUMBER
RANGE OF OUTSTANDING REMAINING WGTD AVG. EXERCISABLE WGTD. AVG.
EXERCISE PRICES AT 12/31/00 LIFE EXERCISE PRICE AT 12/31/00 EXERCISE PRICE
- ---------------- ----------- ------------------- -------------- ----------- --------------
$10.33 to $29.92 1,735,841 6.46 $22.21 663,155 $22.36
$30.28 to $36.63 164,939 6.48 $35.09 140,911 $35.38
- ---------------- ----------- ---- ------ -------- ------
$10.33 to $36.63 1,900,780 6.46 $23.33 804,066 $24.64
The fair value of each stock option granted is estimated on the date of
grant using the Black-Scholes option pricing model with the following weighted
average assumptions: dividend yield of 11.28%; risk free interest rates are
different for each grant and range from 4.65% to 6.58%; the expected lives of
options are 6 years; and volatility of 18.22% for 2000 grants, 18.44% for 1999
grants, and 32.90% for grants issued in 1998. The weighted average fair value of
options granted during 2000, 1999, and 1998 was $0.90, $1.07, and $3.35 per
share, respectively.
Restricted Stock
A summary of the status of the Company's restricted stock grants as of
December 31, 2000, 1999, and 1998 and the changes during the years are presented
below:
2000 1999 1998
--------------------- ------------------------ --------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
FAIR MARKET FAIR MARKET FAIR MARKET
VALUE VALUE VALUE
# SHARES AT GRANT # SHARES AT GRANT # SHARES AT GRANT
-------- ----------- --------- ------------ ------------ ------------
Outstanding at beginning of the year ..... 125,375 $ 28.35 125,375 $ 28.97 115,500 $ 29.03
Granted:
With 5-year pro rata vesting .......... 210,100 $ 23.50 5,000 $ 21.25
Vest 100% at grant date ............... 4,875 $ 35.63
Forfeited.................................
--------- ---------- ------------
Outstanding at end of year ............... 335,475 $ 25.55 125,375 $ 28.97 125,375 $ 28.97
========= ========== ============
Vested at end of year .................... 107,975 $ 28.77 83,575 $ 28.35 65,175 $ 28.26
F-18
69
FELCOR LODGING TRUST INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
14. STOCK BASED COMPENSATION PLANS -- (CONTINUED)
Pro Forma Net Income and Net Income Per Common Share
Had the compensation cost for the Company's stock-based compensation
plans been determined in accordance with SFAS 123, the Company's net income and
net income per common share for 2000, 1999, and 1998 would approximate the pro
forma amounts below (in thousands, except per share data):
DECEMBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998
--------------------------- --------------------------- ---------------------------
AS REPORTED PRO FORMA AS REPORTED PRO FORMA AS REPORTED PRO FORMA
SFAS 123 charge ................... $ 1,636 $ 1,606 $ 1,799
APB 25 charge ..................... $ 1,478 $ 652 $ 830
Net income applicable to
common shareholders ............ $ 37,017 $ 36,859 $ 106,345 $ 105,391 $ 93,416 $ 92,446
Diluted net income applicable
to common shareholders
per common share ............... $ 0.67 $ 0.66 $ 1.57 $ 1.56 $ 1.86 $ 1.84
The effects of applying SFAS 123 in this pro forma disclosure are not
indicative of future amounts.
15. EMPLOYEE BENEFITS
The Company offers a 401(k) plan, health insurance benefits and a
deferred compensation plan to its employees. In 2000, the Company's matching
contribution to the 401(k) plan was $412,271 and the cost of health insurance
benefits were $349,000. The deferred compensation plan offered by the Company is
available only to directors and employees making in excess of $100,000 annually.
The Company makes no matching or other contributions to the deferred
compensation plan other than the payment of its operating and administrative
expenses.
F-19
70
FELCOR LODGING TRUST INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
16. SEGMENT INFORMATION
The Company has determined that its reportable segments are those that
are consistent with the Company's method of internal reporting, which segments
its business by Lessee. The Company's Lessees at December 31, 2000, were DJONT
and Bristol. Prior to July 28, 1998 (the date of the Merger), the Company had
only one lessee, DJONT.
The following tables present information about the reportable segments
for the years ended December 31, 2000, 1999 and 1998 (in thousands):
CORPORATE
NOT
SEGMENT ALLOCABLE CONSOLIDATED
YEAR ENDED DECEMBER 31, 2000 DJONT BRISTOL TOTAL TO SEGMENTS TOTAL
----------- ----------- ----------- ----------- ------------
Statement of Operations Information:
Percentage lease revenue ......................... $ 277,283 $ 259,624 $ 536,907 $ 536,907
Equity in income from unconsolidated
entities ................................... $ 13,898 $ 922 $ 14,820 $ 14,820
Expenses:
Depreciation ................................ $ 83,974 $ 76,479 $ 160,453 $ 292 $ 160,745
Reserve for assets held for sale ............ $ 9,510 $ 53,490 $ 63,000 $ 63,000
Interest expense ............................ $ 158,620 $ 158,620
Income (loss) before nonrecurring items .......... $ 156,512 $ 75,559 $ 232,071 $ (170,895) $ 61,176
Gain on sale of assets ........................... $ 3,105 $ 1,283 $ 4,388 $ 4,388
Income (loss) before extraordinary charge ........ $ 159,617 $ 76,842 $ 236,459 $ (170,895) $ 65,564
Funds From Operations:
Income (loss) before extraordinary charge ........ $ 159,617 $ 76,842 $ 236,459 $ (170,895) $ 65,564
Series B preferred dividends ..................... (12,937) (12,937)
Reserve for hotels held for sale ................. 9,510 53,490 63,000 63,000
Gain on sale of hotels ........................... (2,461) (134) (2,595) (2,595)
Depreciation ..................................... 83,974 76,479 160,453 292 160,745
Depreciation from unconsolidated entities ........ 9,426 741 10,167 10,167
Minority interest in Operating Partnership ....... 4,692 4,692
----------- ----------- ----------- ----------- -----------
Funds from operations ............................ $ 260,066 $ 207,418 $ 467,484 $ (178,848) $ 288,636
=========== =========== =========== =========== ===========
Weighted average common shares and
units outstanding (a) ......................... 67,239
Other Information:
Investment in unconsolidated entities .... $ 112,654 $ 15,939 $ 128,593 $ 128,593
Total assets ............................. $ 1,860,847 $ 2,179,321 $ 4,040,168 $ 63,435 $ 4,103,603
Capital expenditures ..................... $ 34,865 $ 60,370 $ 95,235 $ 95,235
F-20
71
FELCOR LODGING TRUST INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
16. SEGMENT INFORMATION -- (CONTINUED)
CORPORATE
NOT
SEGMENT ALLOCABLE CONSOLIDATED
YEAR ENDED DECEMBER 31, 1999 DJONT BRISTOL TOTAL TO SEGMENTS TOTAL
- ---------------------------- ----------- ----------- ----------- ----------- ------------
Statement of Operations Information:
Percentage lease revenue ..................... $ 256,128 $ 234,765 $ 490,893 $ 490,893
Equity in income from unconsolidated
entities ............................... $ 7,725 $ 759 $ 8,484 $ 8,484
Expenses:
Depreciation ............................ $ 80,969 $ 71,748 $ 152,717 $ 231 $ 152,948
Interest expense ........................ $ 125,435 $ 125,435
Income (loss) before nonrecurring items ...... $ 147,868 $ 118,949 $ 266,817 $ (134,860) $ 131,957
Gain on sale of hotels ....................... $ 236 $ 236
Income (loss) before extraordinary charge .... $ 147,868 $ 118,949 $ 266,817 $ (134,624) $ 132,193
Funds From Operations:
Income (loss) before extraordinary charge .... $ 147,868 $ 118,949 $ 266,817 $ (134,624) $ 132,193
Series B preferred dividends ................. (12,937) (12,937)
Depreciation ................................. 80,969 71,748 152,717 231 152,948
Depreciation from unconsolidated entities .... 9,248 747 9,995 9,995
Minority interest in Operating Partnership ... 4,696 4,696
----------- ----------- ----------- ----------- -----------
Funds from operations ........................ $ 238,085 $ 191,444 $ 429,529 $ (142,634) $ 286,895
=========== =========== =========== =========== ===========
Weighted average common shares and
units outstanding (a) ..................... 75,251
Other Information:
Investment in unconsolidated entities $ 120,556 $ 16,162 $ 136,718 $ 136,718
Total assets ......................... $ 1,940,247 $ 2,243,916 $ 4,184,163 $ 68,555 $4,252,718
Capital expenditures ................. $ 51,587 $ 170,733 $ 222,320 $ 222,320
F-21
72
FELCOR LODGING TRUST INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
16. SEGMENT INFORMATION -- (CONTINUED)
CORPORATE
NOT
SEGMENT ALLOCABLE CONSOLIDATED
YEAR ENDED DECEMBER 31, 1998 DJONT BRISTOL TOTAL TO SEGMENTS TOTAL
- ---------------------------- ------------ ------------ ------------ ------------ ------------
Statement of Operations Information:
Percentage lease revenue ......................... $ 237,555 $ 90,480 $ 328,035 $ 328,035
Equity in income from unconsolidated
entities ................................... $ 6,744 $ 273 $ 7,017 $ 7,017
Expenses:
Depreciation ............................... $ 71,055 $ 19,619 $ 90,674 $ 161 $ 90,835
Interest expense ........................... $ 73,182 $ 73,182
Income before nonrecurring item .................. $ 143,736 $ 54,233 $ 197,969 $ (80,532) $ 117,437
Gain on sale of hotels ........................... $ 477 $ 477
Income (loss) before extraordinary charge ........ $ 143,736 $ 54,233 $ 197,969 $ (80,055) $ 117,914
Funds From Operations:
Income (loss) before extraordinary charge ........ $ 143,736 $ 54,233 $ 197,969 $ (80,055) $ 117,914
Series B preferred dividends ..................... (8,373) (8,373)
Depreciation ..................................... 71,055 19,619 90,674 161 90,835
Depreciation from unconsolidated entities ........ 10,254 233 10,487 10,487
Minority interest in Operating Partnership ....... 6,500 6,500
------------ ------------ ------------ ------------ ------------
Funds from operations ............................ $ 225,045 $ 74,085 $ 299,130 $ (81,767) $ 217,363
============ ============ ============ ============ ============
Weighted average common shares and
units outstanding (a) ......................... 58,013
Other Information:
Investment in unconsolidated entities .... $ 123,507 $ 16,792 $ 140,299 $ 140,299
Total assets ............................. $ 2,022,975 $ 2,093,328 $ 4,116,303 $ 59,080 $ 4,175,383
Capital expenditures ..................... $ 65,264 $ 65,839 $ 131,103 $ 131,103
(a) Weighted average common shares and units outstanding are computed
including dilutive options and unvested stock grants, and assuming
conversion of Series A preferred stock to common stock.
The following table sets forth Percentage Lease revenue and investment
in hotel assets represented by the following geographical areas as of and for
the years ended December 31, 2000, 1999 and 1998 (in thousands):
PERCENTAGE LEASE REVENUE INVESTMENT IN HOTEL ASSETS
------------------------ --------------------------
2000 1999 1998 2000 1999 1998
-------- --------- --------- ----------- ----------- -----------
California............... $118,857 $ 97,283 $ 63,733 $ 681,714 $ 698,942 $ 642,965
Texas.................... 97,157 94,782 52,220 862,199 891,626 854,558
Florida.................. 66,014 61,516 45,719 530,933 542,298 519,280
Georgia.................. 40,183 39,247 23,691 316,267 355,519 349,429
Other States............. 200,836 186,248 138,437 1,752,303 1,802,220 1,705,220
Canada................... 13,860 11,817 5,123 79,960 75,294 62,202
-------- --------- --------- ----------- ----------- -----------
Total........... $536,907 $ 490,893 $ 328,923 $ 4,223,376 $ 4,365,899 $ 4,133,654
======== ========= ========= =========== =========== ===========
F-22
73
FELCOR LODGING TRUST INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
17. PRO FORMA INFORMATION (UNAUDITED)
The following unaudited Pro Forma Statements of Operations for the
years ended December 31, 2000 and 1999 are presented as if the acquisition of
DJONT and acquisition of the Bristol leases occurred on January 1, 1999.
The following unaudited Pro Forma Consolidated Statements of Operations
for the periods presented are not necessarily indicative of what actual results
operations of the Company would have been assuming such transactions had been
completed at the beginning of the respective periods presented, nor does it
purport to represent the results of operations for future periods.
2000 1999
------------- -------------
(IN THOUSANDS,
EXCEPT PER SHARE DATA)
Revenues:
Hotel operating revenue:
Room and suite revenue .................................... $ 1,309,301 $ 1,208,954
Food and beverage revenue ................................. 261,551 228,271
Other operating departments ............................... 93,616 98,642
Other revenue ............................................... 4,965 4,624
------------- -------------
Total revenues ............................................ 1,669,433 1,540,491
------------- -------------
Expenses:
Hotel operating expenses .................................... 539,665 519,333
Undistributed operating expenses:
Property operating costs .................................. 676,507 592,507
General and administrative ................................ 13,329 10,112
Reserve for assets held for sale .......................... 63,000
Depreciation .............................................. 161,836 153,498
Total operating expenses .............................. 1,454,337 1,275,450
------------- -------------
Operating income .................................................. 215,096 265,041
Interest expense ............................................ (166,191) (133,305)
Equity in income from unconsolidated entities ............... 11,551 8,534
Minority interest ........................................... (7,419) (8,052)
------------- -------------
Income before nonrecurring items .................................. 53,037 132,218
Gain on sale of assets ...................................... 4,388 236
Extraordinary charge ........................................ (3,865) (1,113)
------------- -------------
Net income ........................................................ 53,560 131,341
Preferred dividends ............................................... (24,682) (24,735)
------------- -------------
Net income applicable to common shareholders ...................... $ 28,878 $ 106,606
============= =============
Diluted Earnings per share:
Net income (loss) applicable to common shareholders ....... $ 0.52 $ 1.57
============= =============
Weighted average shares outstanding ....................... 55,933 67,995
F-23
74
FELCOR LODGING TRUST INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
18. RECENTLY ISSUED STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS
Effective January 1, 2001, the Company will adopt SFAS No. 133
Accounting for Derivative Instruments and Hedging Activities, ("SFAS 133" or the
"Statement"). SFAS 133 will be adopted as a change in accounting principle and
cannot be applied retroactively to financial statements of prior periods.
SFAS 133 requires that the Company record derivatives on the balance
sheet as an asset or liability at fair value. The Statement also requires that
the Company record derivatives that are not hedges at fair value through
earnings, unless specific hedge accounting criteria are met. Special accounting
for qualifying hedges allows the Company to offset a derivative instrument's
gains and losses against related results on the hedged item in the income
statement, to the extent effective, and requires that the Company formally
document, designate and assess the effectiveness of transactions that receive
hedge accounting.
The Company's interest rate swap contracts outstanding as of January 1,
2001, have been designated as cash flow hedges.
Cash flow hedges
The Company has entered into six interest rate swap agreements, with a
total notional amount of $250 million. Three of these agreements, at the option
of the variable rate payer, may be terminated in July 2001 or otherwise
terminate in July 2003 along with the other three agreements. Under these
arrangements, the Company receives the one month LIBOR rate and pays a fixed
rate of 5.548% to 5.826%. Prior to adoption of FAS 133, the Company treated
these swaps as hedges and accounted for them as such. The Company has not
recorded any amounts on the Consolidated Balance Sheet as of December 31, 2000
in connection with these instruments and the net effect of the hedges was to
record interest expense at the fixed rate of 7.548% to 7.826% on $250 million of
variable rated debt. The Company has designated these swaps as cash flow hedges
of variable future cash flows associated with the interest on its Line of Credit
facility through July 2003. Upon adoption, the Company will record the fair
value of these swaps as an asset on its balance sheet valued at $248,000, with a
corresponding credit to other comprehensive income. The Company will record
subsequent changes in fair value of the swaps through other comprehensive
income, except for changes related to ineffectiveness, during the period these
instruments are designated as hedges.
The Company has no other derivative instruments, including embedded
derivatives under SFAS 133.
F-24
75
FELCOR LODGING TRUST INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
19. QUARTERLY OPERATING RESULTS (UNAUDITED)
The Company's unaudited consolidated quarterly operating data for the
years ended December 31, 2000 and 1999, follows (in thousands, except per share
data). In the opinion of management, all adjustments (consisting of normal
recurring accruals) necessary for a fair presentation of quarterly results have
been reflected in the data. It is also management's opinion, however, that
quarterly operating data for hotel enterprises are not indicative of results to
be achieved in succeeding quarters or years. In order to obtain a more accurate
indication of performance, there should be a review of operating results,
changes in shareholders' equity and cash flows for a period of several years.
FIRST SECOND THIRD FOURTH
2000 QUARTER QUARTER QUARTER QUARTER
---- ---------- ---------- ---------- ----------
Total revenues ..................................................... $ 126,805 $ 137,865 $ 140,476 $ 151,546
---------- ---------- ---------- ----------
Reserve for hotels held for sale ................................... $ 63,000
Income (loss) before nonrecurring items ............................ $ 18,927 $ (29,775) $ 30,853 $ 41,171
Extraordinary charge from write off of deferred financing fee ...... $ 3,865
Net income (loss) applicable to common shareholders ................ $ 12,743 $ (35,074) $ 24,211 $ 35,137
Diluted per common share data:
Net income (loss) applicable to common shareholders ........... $ 0.21 $ (0.64) $ 0.44 $ 0.66
Weighted average common shares outstanding .................... 59,377 54,945 54,579 53,202
FIRST SECOND THIRD FOURTH
1999 QUARTER QUARTER QUARTER QUARTER
---- ---------- ---------- ---------- ----------
Total revenues ..................................................... $ 126,917 $ 135,187 $ 124,082 $ 117,815
Income before nonrecurring items ................................... $ 36,747 $ 41,935 $ 30,021 $ 23,254
Extraordinary charge from write off of deferred financing fee ...... $ 1,113
Net income applicable to common shareholders ....................... $ 30,563 $ 34,638 $ 23,837 $ 17,306
Diluted per common share data:
Net income applicable to common shareholders .................. $ 0.45 $ 0.51 $ 0.35 $ 0.26
Weighted average common shares outstanding .................... 68,344 68,351 68,221 65,543
20. SUBSEQUENT EVENTS
Effective January 1, 2001, subject to the receipt of certain lender
consents, the Company acquired and contributed to a newly formed taxable REIT
subsidiary, all of the equity interests in DJONT. In consideration for the
acquisition of DJONT, the Company issued an aggregate of 416,667 units of
limited partnership interest valued at approximately $10 million, which,
together with DJONT's accumulated shareholders' deficit of $24.5 million, will
be expensed in the first quarter of 2001 as a lease termination cost.
Effective January 1, 2001, the Company completed the acquisition of 12
of the Bristol leases. In consideration for the acquisition of such leases, the
Company issued to Bass 413,585 shares of FelCor common stock valued at
approximately $10 million. In March 2001, the Company entered into an agreement
with Bass to acquire the remaining 88 leases effective July 1, 2001. In
consideration for the acquisition of such leases, the Company will enter into
long term management agreements with Bass with regard to these hotels and issue
to Bass 100 shares of FelCor common stock. A portion of the management fees with
respect to the 88 hotels managed by Bass under long term management agreements
will be considered to be lease termination costs and the Company will record a
lease termination expense of approximately $125 million in the third quarter of
2001. At that time, the Company will record a corresponding liability of
approximately $125 million, that will be amortized over the term of the
applicable management agreements.
F-25
76
FELCOR LODGING TRUST INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
20. SUBSEQUENT EVENTS -- (CONTINUED)
On January 11, 2001, FelCor completed the private placement of an
additional $100 million in 9 1/2% senior unsecured notes that mature in
September, 2008. These notes were issued at a premium to yield an effective rate
of 9 1/8%. The proceeds were used initially to pay down the Company's Line of
Credit.
In March 2001, the Company contributed eight of the hotels held for
sale to an entity in which the Company holds a 50% equity interest and a
subsidiary of IHC holds the other 50% equity interest. The Company contributed
assets with a book value of approximately $77 million. Another subsidiary of IHC
manages each of these hotels.
F-26
77
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
of FelCor Lodging Trust Incorporated:
Our audits of the consolidated financial statements referred to in our report
dated February 5, 2001 except for footnotes 1 and 20 as to which the date is
March 28, 2001, appearing on page F-2 of the Annual Report on Form 10-K of
FelCor Lodging Trust Incorporated (which report and consolidated financial
statements are included in this Annual Report on Form 10-K) also included an
audit of the financial statement schedule listed in Item 14(a)(2) of this Form
10-K. In our opinion, this financial statement schedule presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements.
PricewaterhouseCoopers LLP
Dallas, Texas
February 5, 2001
F-27
78
FELCOR LODGING TRUST INCORPORATED
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 2000
(IN THOUSANDS)
COST CAPITALIZED SUBSEQUENT
INITIAL COST TO ACQUISITION
--------------------------------- ---------------------------------
BUILDINGS FURNITURE BUILDINGS FURNITURE
AND AND AND AND
DESCRIPTION OF PROPERTY ENCUMBRANCES LAND IMPROVEMENTS FIXTURES LAND IMPROVEMENTS FIXTURES
- ----------------------- ------------ ------ ------------ --------- ------ ------------ ---------
Birmingham, AL (1) $ 12,298 $2,843 $29,286 $ 160 $ 653 $ 4,132
Montgomery E. (I-85), AL (2) 836 7,272 251 2,669 1,038
Texarkana (I-30), AR (2) 5,245 162 1,438 521
Flagstaff, AZ (1) 900 6,825 268 1,605 1,329
Phoenix (Airport - 44th St.), AZ (1) 2,969 25,828 891 1,357 2,598
Phoenix (Camelback), AZ (1) 38,998 612 4,695 935 5,782
Phoenix (Crescent), AZ (3) 26,820 3,608 29,583 2,886 166 1,159
Tempe (ASU), AZ (1) 12,183 3,951 34,371 1,185 915 2,768
Anaheim (Disney(R)Area), CA (1) 11,302 2,548 14,832 607 546 3,836
Burlingame (San Francisco A/P So.), CA (1) 39,929 818 200 4,426
Dana Point, CA (5) 1,787 15,545 536 644 2,907
El Segundo (LAX Airport South), CA (1) 2,660 17,997 798 557 6,392
Irvine (Orange County Airport), CA (6) 4,981 43,338 1,494 1,745 744
Milpitas, CA (1) 21,180 4,021 23,677 562 1,041 4,713
Milpitas (San Jose N.), CA (6) 4,153 36,130 1,246 5,810 1,964
Napa, CA (1) 11,127 3,287 14,205 494 997 3,594
Oxnard (Mandalay Beach), CA (1) 2,930 22,124 879 1,174 5,871
Palm Desert, CA (1) 8,709 2,368 20,598 710 1,607 2,855
Pleasanton, CA (6) 3,169 27,569 951 159 295
San Diego (On the Bay), CA (2) 68,633 2,123 282 1,052
San Francisco (Financial District), CA (2) 21,679 670 1,426 2,014
San Francisco (Fisherman's Wharf), CA (2) 62,203 1,924 749 756
San Francisco (Union Square), CA (6) 8,514 74,075 2,554 3,513 1,390
Santa Barbara, CA (2) 5,535 1,692 14,723 508 103 292
So. San Francisco (SF Airport No.), CA (1) 26,118 3,418 31,737 527 827 5,017
Aurora (Denver Southeast), CO (7) 2,432 21,158 730 439 2,112
Avon (Beaver Creek Resort), CO (8) 1,134 9,864 340 (16) 79 1,125
Hartford Downtown, CT (6) 2,327 20,243 698 5,981 3,221
Stamford, CT (9) 37,356 1,155 1,548 999
Wilmington, DE (7) 1,379 12,487 431 9,486 3,582
Boca Raton, FL (1) 1,868 16,253 560 90 4,006
Cocoa Beach (Oceanfront Resort), FL (2) 2,304 20,046 691 9,350 3,808
Deerfield Beach, FL (1) 15,265 4,522 29,443 917 69 989 5,016
Ft. Lauderdale, FL (1) 16,300 5,329 47,850 903 (163) 1,457 5,771
Ft. Lauderdale (Cypress Creek), FL (11) 12,913 3,009 26,177 903 972 2,681
Jacksonville, FL (1) 1,130 9,608 456 4,877 2,330
Kissimmee (Nikki Bird Resort), FL (2) 31,652 979 6,261 2,238
Lake Buena Vista (Disney World(R)), FL (5) 2,896 25,196 869 245 2,944
Miami (Airport), FL (6) 26,146 809 993 1,429
Miami (Airport), FL (1) 13,177 4,135 24,950 1,171 315 6,289
Orlando (Airport), FL (9) 2,564 22,310 769 1,675 428
Orlando (Int'l Drive Resort), FL (2) 5,142 44,735 1,543 4,593 1,948
Orlando (North), FL (1) 1,673 14,218 684 5,072 2,711
Orlando (South), FL (1) 25,437 1,632 13,870 799 375 2,349
Tampa (Near Busch Gardens), FL (2) 9,534 295 11,176 2,200
Tampa Rocky Point, FL (5) 2,142 18,639 643 1,121 2,473
Atlanta (Airport), GA (6) 40,943 1,266 132 623
Atlanta (Airport), GA (1) 22,342 770 2,568 1,149 1,568
Atlanta (Airport Gateway), GA (3) 5,113 22,857 2,105 201 3,988
Atlanta (Airport North), GA (2) 17,255 34,531 1,068 265 739
Atlanta Buckhead, GA (1) 38,031 7,303 38,996 2,437 670 2,557
GROSS AMOUNTS AT WHICH ACCUMULATED NET BOOK
CARRIED AT CLOSE OF PERIOD DEPRECIATION VALUE
-------------------------------------------- BUILDINGS AND BUILDINGS AND
BUILDINGS FURNITURE IMPROVEMENTS; IMPROVEMENTS;
AND AND FURNITURE & FURNITURE &
DESCRIPTION OF PROPERTY LAND IMPROVEMENTS FIXTURES TOTAL FIXTURES FIXTURES
- ----------------------- ------- ------------ --------- ----- ------------- -------------
Birmingham, AL (1) $ 2,843 $29,939 $ 4,292 $ 37,074 $ 6,685 $30,389
Montgomery E. (I-85), AL (2) 836 9,941 1,289 12,066 1,056 11,010
Texarkana (I-30), AR (2) 6,683 683 7,366 620 6,746
Flagstaff, AZ (1) 900 8,430 1,597 10,927 2,558 8,369
Phoenix (Airport - 44th St.), AZ (1) 2,969 27,185 3,489 33,643 2,447 31,196
Phoenix (Camelback), AZ (1) 4,695 39,933 6,394 51,022 9,725 41,297
Phoenix (Crescent), AZ (3) 3,608 29,749 4,045 37,402 4,996 32,406
Tempe (ASU), AZ (1) 3,951 35,286 3,953 43,190 3,513 39,677
Anaheim (Disney(R)Area), CA (1) 2,548 15,378 4,443 22,369 5,600 16,769
Burlingame (San Francisco A/P So.), CA (1) 40,129 5,244 45,373 8,919 36,454
Dana Point, CA (5) 1,787 16,189 3,443 21,419 3,488 17,931
El Segundo (LAX Airport South), CA (1) 2,660 18,554 7,190 28,404 7,872 20,532
Irvine (Orange County Airport), CA (6) 4,981 45,083 2,238 52,302 3,547 48,755
Milpitas, CA (1) 4,021 24,718 5,275 34,014 6,984 27,030
Milpitas (San Jose N.), CA (6) 4,153 41,940 3,210 49,303 3,324 45,979
Napa, CA (1) 3,287 15,202 4,088 22,577 4,553 18,024
Oxnard (Mandalay Beach), CA (1) 2,930 23,298 6,750 32,978 7,303 25,675
Palm Desert, CA (1) 2,368 22,205 3,565 28,138 2,697 25,441
Pleasanton, CA (6) 3,169 27,728 1,246 32,143 2,143 30,000
San Diego (On the Bay), CA (2) 68,915 3,175 72,090 5,167 66,923
San Francisco (Financial District), CA (2) 23,105 2,684 25,789 2,106 23,683
San Francisco (Fisherman's Wharf), CA (2) 62,952 2,680 65,632 4,722 60,910
San Francisco (Union Square), CA (6) 8,514 77,588 3,944 90,046 6,077 83,969
Santa Barbara, CA (2) 1,692 14,826 800 17,318 1,187 16,131
So. San Francisco (SF Airport No.), CA (1) 3,418 32,564 5,544 41,526 8,121 33,405
Aurora (Denver Southeast), CO (7) 2,432 21,597 2,842 26,871 2,653 24,218
Avon (Beaver Creek Resort), CO (8) 1,118 9,943 1,465 12,526 2,449 10,077
Hartford Downtown, CT (6) 2,327 26,224 3,919 32,470 2,905 29,565
Stamford, CT (9) 38,904 2,154 41,058 3,049 38,009
Wilmington, DE (7) 1,379 21,973 4,013 27,365 1,828 25,537
Boca Raton, FL (1) 1,868 16,343 4,566 22,777 5,217 17,560
Cocoa Beach (Oceanfront Resort), FL (2) 2,304 29,396 4,499 36,199 2,998 33,201
Deerfield Beach, FL (1) 4,591 30,432 5,933 40,956 8,003 32,953
Ft. Lauderdale, FL (1) 5,166 49,307 6,674 61,147 11,072 50,075
Ft. Lauderdale (Cypress Creek), FL (11) 3,009 27,149 3,584 33,742 2,609 31,133
Jacksonville, FL (1) 1,130 14,485 2,786 18,401 3,777 14,624
Kissimmee (Nikki Bird Resort), FL (2) 37,913 3,217 41,130 3,373 37,757
Lake Buena Vista (Disney World(R)), FL (5) 2,896 25,441 3,813 32,150 3,765 28,385
Miami (Airport), FL (6) 27,139 2,238 29,377 2,489 26,888
Miami (Airport), FL (1) 4,135 25,265 7,460 36,860 8,560 28,300
Orlando (Airport), FL (9) 2,564 23,985 1,197 27,746 1,760 25,986
Orlando (Int'l Drive Resort), FL (2) 5,142 49,328 3,491 57,961 3,660 54,301
Orlando (North), FL (1) 1,673 19,290 3,395 24,358 5,063 19,295
Orlando (South), FL (1) 1,632 14,245 3,148 19,025 4,685 14,340
Tampa (Near Busch Gardens), FL (2) 20,710 2,495 23,205 2,119 21,086
Tampa Rocky Point, FL (5) 2,142 19,760 3,116 25,018 2,842 22,176
Atlanta (Airport), GA (6) 41,075 1,889 42,964 3,151 39,813
Atlanta (Airport), GA (1) 2,568 23,491 2,338 28,397 2,018 26,379
Atlanta (Airport Gateway), GA (3) 5,113 23,058 6,093 34,264 5,007 29,257
Atlanta (Airport North), GA (2) 34,796 1,807 36,603 2,612 33,991
Atlanta Buckhead, GA (1) 7,303 39,666 4,994 51,963 6,989 44,974
LIFE UPON
WHICH
DEPRECIATION
DATE OF DATE IN STATEMENT
DESCRIPTION OF PROPERTY CONSTRUCTION ACQUIRED IS COMPUTED
- ----------------------- ------------ --------- ------------
Birmingham, AL (1) 1987 01-03-96 5 - 40 Yrs
Montgomery E. (I-85), AL (2) 1964 07-28-98 5 - 40 Yrs
Texarkana (I-30), AR (2) 1970 07-28-98 5 - 40 Yrs
Flagstaff, AZ (1) 1988 02-16-95 5 - 40 Yrs
Phoenix (Airport - 44th St.), AZ (1) 1981 05-04-98 5 - 40 Yrs
Phoenix (Camelback), AZ (1) 1985 01-03-96 5 - 40 Yrs
Phoenix (Crescent), AZ (3) 1986 06-30-97 5 - 40 Yrs
Tempe (ASU), AZ (1) 1986 05-04-98 5 - 40 Yrs
Anaheim (Disney(R)Area), CA (1) 1987 01-03-96 5 - 40 Yrs
Burlingame (San Francisco A/P So.), CA (1) 1986 11-06-95 5 - 40 Yrs
Dana Point, CA (5) 1992 02-21-97 5 - 40 Yrs
El Segundo (LAX Airport South), CA (1) 1985 03-27-96 5 - 40 Yrs
Irvine (Orange County Airport), CA (6) 1986 07-28-98 5 - 40 Yrs
Milpitas, CA (1) 1987 01-03-96 5 - 40 Yrs
Milpitas (San Jose N.), CA (6) 1987 07-28-98 5 - 40 Yrs
Napa, CA (1) 1985 05-08-96 5 - 40 Yrs
Oxnard (Mandalay Beach), CA (1) 1986 05-08-96 5 - 40 Yrs
Palm Desert, CA (1) 1984 05-04-98 5 - 40 Yrs
Pleasanton, CA (6) 1986 07-28-98 5 - 40 Yrs
San Diego (On the Bay), CA (2) 1965 07-28-98 5 - 40 Yrs
San Francisco (Financial District), CA (2) 1970 07-28-98 5 - 40 Yrs
San Francisco (Fisherman's Wharf), CA (2) 1970 07-28-98 5 - 40 Yrs
San Francisco (Union Square), CA (6) 1970 07-28-98 5 - 40 Yrs
Santa Barbara, CA (2) 1969 07-28-98 5 - 40 Yrs
So. San Francisco (SF Airport No.), CA (1) 1988 01-03-96 5 - 40 Yrs
Aurora (Denver Southeast), CO (7) 1989 03-15-98 5 - 40 Yrs
Avon (Beaver Creek Resort), CO (8) 1989 02-20-96 5 - 40 Yrs
Hartford Downtown, CT (6) 1973 07-28-98 5 - 40 Yrs
Stamford, CT (9) 1984 07-28-98 5 - 40 Yrs
Wilmington, DE (7) 1972 03-20-98 5 - 40 Yrs
Boca Raton, FL (1) 1989 02-28-96 5 - 40 Yrs
Cocoa Beach (Oceanfront Resort), FL (2) 1960 07-28-98 5 - 40 Yrs
Deerfield Beach, FL (1) 1987 01-03-96 5 - 40 Yrs
Ft. Lauderdale, FL (1) 1986 01-03-96 5 - 40 Yrs
Ft. Lauderdale (Cypress Creek), FL (11) 1986 05-04-98 5 - 40 Yrs
Jacksonville, FL (1) 1986 07-28-94 5 - 40 Yrs
Kissimmee (Nikki Bird Resort), FL (2) 1974 07-28-98 5 - 40 Yrs
Lake Buena Vista (Disney World(R)), FL (5) 1987 07-28-97 5 - 40 Yrs
Miami (Airport), FL (6) 1987 01-03-96 5 - 40 Yrs
Miami (Airport), FL (1) 1983 07-28-98 5 - 40 Yrs
Orlando (Airport), FL (9) 1984 07-28-98 5 - 40 Yrs
Orlando (Int'l Drive Resort), FL (2) 1972 07-28-98 5 - 40 Yrs
Orlando (North), FL (1) 1985 07-28-94 5 - 40 Yrs
Orlando (South), FL (1) 1985 07-28-94 5 - 40 Yrs
Tampa (Near Busch Gardens), FL (2) 1966 07-28-98 5 - 40 Yrs
Tampa Rocky Point, FL (5) 1986 07-28-97 5 - 40 Yrs
Atlanta (Airport), GA (6) 1975 07-28-98 5 - 40 Yrs
Atlanta (Airport), GA (1) 1989 05-04-98 5 - 40 Yrs
Atlanta (Airport Gateway), GA (3) 1986 06-30-97 5 - 40 Yrs
Atlanta (Airport North), GA (2) 1967 07-28-98 5 - 40 Yrs
Atlanta Buckhead, GA (1) 1988 10-17-96 5 - 40 Yrs
F-28
79
FELCOR LODGING TRUST INCORPORATED
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
COST CAPITALIZED SUBSEQUENT
INITIAL COST TO ACQUISITION
--------------------------------- ------------------------------
BUILDINGS FURNITURE BUILDINGS FURNITURE
AND AND AND AND
DESCRIPTION OF PROPERTY ENCUMBRANCES LAND IMPROVEMENTS FIXTURES LAND IMPROVEMENTS FIXTURES
- ----------------------- ------------ ------ ------------ --------- ------ ------------ --------
Atlanta (Galleria), GA (11) 17,880 5,052 28,507 2,526 477 626
Atlanta (Jonesboro South), GA (2) 2,869 864 7,515 259 137 507
Atlanta Perimeter, GA (9) 10,708 20,556 636 188 502
Atlanta Powers Ferry, GA (6) 10,444 3,410 29,672 1,023 555 550
Brunswick, GA (1) 705 6,067 247 28 1,067
Columbus (Airport North), GA (2) 7,026 217 1,965 856
Chicago (Allerton), IL (6) 3,343 29,086 1,003 54,918 7,758
Chicago (O'Hare), IL (3) 24,833 8,178 37,043 2,887 337 1,334
Deerfield, IL (1) 16,480 2,305 20,054 692 531 1,570
Lexington, KY (14) 1,955 13,604 587 155 1,992
Lexington, KY (11) 6,953 21,644 746 2,488 396 669
Baton Rouge, LA (1) 7,906 2,350 19,092 525 1 618 4,090
New Orleans (French Quarter), LA (2) 24,147 5,263 45,793 1,579 272 621
New Orleans, LA (1) 32,463 2,570 22,300 895 4,806 3,261
Boston (Government Center), MA (9) 45,452 1,406 4,495 1,105
Boston (Marlborough), MA (1) 20,383 948 8,143 325 761 12,994 5,154
Baltimore (BWI), MD (1) 2,568 22,433 770 (2) 1,272 2,279
Troy, MI (1) 2,968 25,905 909 1,212 2,013
Bloomington, MN (1) 2,038 17,731 611 529 3,285
Minneapolis (Airport), MN (1) 15,617 5,417 36,508 602 249 3,307
Minneapolis (Downtown), MN (1) 818 16,820 505 227 3,519
St. Paul, MN (1) 1,156 17,315 849 90 3,455
Kansas City (Northeast), MO (2) 973 8,461 292 12 2,602
St. Louis (Downtown), MO (1) 3,179 27,659 954 1,274 2,332
St. Louis (Westport), MO (2) 2,767 24,072 830 192 448
Jackson (Downtown), MS (6) 5,036 2,226 19,370 668 116 329
Jackson (North), MS (15) 5,438 1,643 14,296 493 221 394
Olive Branch (Whispering Woods
Conference Center), MS (8) 1,247 12,155 419 (158) 1,564 1,496
Raleigh/Durham, NC (5) 2,124 18,476 637 99 1,890
Omaha (Central), NE (5) 1,877 16,328 563 215 1,796
Omaha (Central), NE (12) 518 4,504 155 816 484
Omaha (I-80), NE (2) 6,154 1,795 15,614 538 2,289 1,853
Omaha (Old Mill Northwest), NE (6) 979 8,519 294 4,669 2,459
Omaha (Southwest), NE (12) 464 4,036 139 613 263
Omaha, (Southwest) NE (13) 923 8,029 277 864 392
Omaha (Southwest), NE (15) 373 3,245 112 12 118
Piscataway, NJ (1) 20,609 1,755 17,563 527 843 2,924
Secaucus (Meadowlands), NJ (6) 2,356 20,497 707 4,254 5,981
Albuquerque (Mountain View), NM (2) 1,322 11,505 397 120 547
Syracuse, NY (1) 1,483 13,756 1,330 274 417
Cleveland, OH (1) 1,755 15,329 527 1,852 2,436
Columbus, OH (5) 1,918 16,691 576 760 1,077
Dayton, OH (5) 6,707 1,140 11,223 342 149 1,109 391
Tulsa, OK (1) 525 7,344 3,117 636 2,591
Philadelphia (Center City), PA (6) 5,793 50,395 1,738 2,470 1,349
Philadelphia (Independence Mall), PA (2) 14,000 3,184 27,704 955 5,861 2,154
Philadelphia (Society Hill), PA (3) 33,773 4,542 45,121 1,536 1,056 2,872
Pittsburgh, PA (9) 15,500 25,170 773 1,692 1,913
Charleston (Mills House), SC (2) 3,270 28,446 981 347 2,376
Greenville (Roper), SC (6) 1,551 13,492 465 670 782
Myrtle Beach (Kingston Plantation), SC (1) 2,940 24,988 1,470 1,557 4,913
GROSS AMOUNTS AT WHICH ACCUMULATED NET BOOK
CARRIED AT CLOSE OF PERIOD DEPRECIATION VALUE
-------------------------------------------- BUILDINGS AND BUILDINGS AND
BUILDINGS FURNITURE IMPROVEMENTS; IMPROVEMENTS;
AND AND FURNITURE & FURNITURE &
DESCRIPTION OF PROPERTY LAND IMPROVEMENTS FIXTURES TOTAL FIXTURES FIXTURES
- ----------------------- ------- ------------ --------- ----- ------------- -------------
Atlanta (Galleria), GA (11) 5,052 28,984 3,152 37,188 4,433 32,755
Atlanta (Jonesboro South), GA (2) 864 7,652 766 9,282 648 8,634
Atlanta Perimeter, GA (9) 20,744 1,138 21,882 1,641 20,241
Atlanta Powers Ferry, GA (6) 3,410 30,227 1,573 35,210 2,365 32,845
Brunswick, GA (1) 705 6,095 1,314 8,114 1,692 6,422
Columbus (Airport North), GA (2) 8,991 1,073 10,064 931 9,133
Chicago (Allerton), IL (6) 3,343 84,004 8,761 96,108 5,351 90,757
Chicago (O'Hare), IL (3) 8,178 37,380 4,221 49,779 5,676 44,103
Deerfield, IL (1) 2,305 20,585 2,262 25,152 3,634 21,518
Lexington, KY (14) 1,955 13,759 2,579 18,293 3,390 14,903
Lexington, KY (11) 2,488 22,040 1,415 25,943 1,890 24,053
Baton Rouge, LA (1) 2,351 19,710 4,615 26,676 5,911 20,765
New Orleans (French Quarter), LA (2) 5,263 46,065 2,200 53,528 3,575 49,953
New Orleans, LA (1) 2,570 27,106 4,156 33,832 6,896 26,936
Boston (Government Center), MA (9) 49,947 2,511 52,458 3,459 48,999
Boston (Marlborough), MA (1) 1,709 21,137 5,479 28,325 5,821 22,504
Baltimore (BWI), MD (1) 2,566 23,705 3,049 29,320 3,330 25,990
Troy, MI (1) 2,968 27,117 2,922 33,007 3,553 29,454
Bloomington, MN (1) 2,038 18,260 3,896 24,194 3,151 21,043
Minneapolis (Airport), MN (1) 5,417 36,757 3,909 46,083 8,013 38,070
Minneapolis (Downtown), MN (1) 818 17,047 4,024 21,889 5,539 16,350
St. Paul, MN (1) 1,156 17,405 4,304 22,865 5,938 16,927
Kansas City (Northeast), MO (2) 973 8,473 2,894 12,340 1,705 10,635
St. Louis (Downtown), MO (1) 3,179 28,933 3,286 35,398 2,722 32,676
St. Louis (Westport), MO (2) 2,767 24,264 1,278 28,309 1,943 26,366
Jackson (Downtown), MS (6) 2,226 19,486 997 22,709 1,651 21,058
Jackson (North), MS (15) 1,643 14,517 887 17,047 1,267 15,780
Olive Branch (Whispering Woods
Conference Center), MS (8) 1,089 13,719 1,915 16,723 1,473 15,250
Raleigh/Durham, NC (5) 2,124 18,575 2,527 23,226 2,752 20,474
Omaha (Central), NE (5) 1,877 16,543 2,359 20,779 2,930 17,849
Omaha (Central), NE (12) 518 5,320 639 6,477 475 6,002
Omaha (I-80), NE (2) 1,795 17,903 2,391 22,089 1,338 20,751
Omaha (Old Mill Northwest), NE (6) 979 13,188 2,753 16,920 1,426 15,494
Omaha (Southwest), NE (12) 464 4,649 402 5,515 394 5,121
Omaha, (Southwest) NE (13) 923 8,893 669 10,485 720 9,765
Omaha (Southwest), NE (15) 373 3,257 230 3,860 351 3,509
Piscataway, NJ (1) 1,755 18,406 3,451 23,612 4,493 19,119
Secaucus (Meadowlands), NJ (6) 2,356 24,751 6,688 33,795 2,890 30,905
Albuquerque (Mountain View), NM (2) 1,322 11,625 944 13,891 1,070 12,821
Syracuse, NY (1) 1,483 14,030 1,747 17,260 2,253 15,007
Cleveland, OH (1) 1,755 17,181 2,963 21,899 3,910 17,989
Columbus, OH (5) 1,918 17,451 1,653 21,022 1,987 19,035
Dayton, OH (5) 1,289 12,332 733 14,354 1,196 13,158
Tulsa, OK (1) 525 7,980 5,708 14,213 6,727 7,486
Philadelphia (Center City), PA (6) 5,793 52,865 3,087 61,745 4,264 57,481
Philadelphia (Independence Mall), PA (2) 3,184 33,565 3,109 39,858 3,021 36,837
Philadelphia (Society Hill), PA (3) 4,542 46,177 4,408 55,127 5,320 49,807
Pittsburgh, PA (9) 26,862 2,686 29,548 2,277 27,271
Charleston (Mills House), SC (2) 3,270 28,793 3,357 35,420 2,609 32,811
Greenville (Roper), SC (6) 1,551 14,162 1,247 16,960 1,315 15,645
Myrtle Beach (Kingston Plantation), SC (1) 2,940 26,545 6,383 35,868 6,201 29,667
LIFE UPON
WHICH
DEPRECIATION
DATE OF DATE IN STATEMENT
DESCRIPTION OF PROPERTY CONSTRUCTION ACQUIRED IS COMPUTED
- ----------------------- ------------ --------- ------------
Atlanta (Galleria), GA (11) 1990 06-30-97 5 - 40 Yrs
Atlanta (Jonesboro South), GA (2) 1973 07-28-98 5 - 40 Yrs
Atlanta Perimeter, GA (9) 1985 07-28-98 5 - 40 Yrs
Atlanta Powers Ferry, GA (6) 1981 07-28-98 5 - 40 Yrs
Brunswick, GA (1) 1988 07-19-95 5 - 40 Yrs
Columbus (Airport North), GA (2) 1969 07-28-98 5 - 40 Yrs
Chicago (Allerton), IL (6) 1923 07-28-98 5 - 40 Yrs
Chicago (O'Hare), IL (3) 1994 06-30-97 5 - 40 Yrs
Deerfield, IL (1) 1987 06-20-96 5 - 40 Yrs
Lexington, KY (14) 1987 01-10-96 5 - 40 Yrs
Lexington, KY (11) 1989 05-04-98 5 - 40 Yrs
Baton Rouge, LA (1) 1985 01-03-96 5 - 40 Yrs
New Orleans (French Quarter), LA (2) 1969 07-28-98 5 - 40 Yrs
New Orleans, LA (1) 1984 12-01-94 5 - 40 Yrs
Boston (Government Center), MA (9) 1968 07-28-98 5 - 40 Yrs
Boston (Marlborough), MA (1) 1988 06-30-95 5 - 40 Yrs
Baltimore (BWI), MD (1) 1987 03-20-97 5 - 40 Yrs
Troy, MI (1) 1987 03-20-97 5 - 40 Yrs
Bloomington, MN (1) 1980 02-01-97 5 - 40 Yrs
Minneapolis (Airport), MN (1) 1986 11-06-95 5 - 40 Yrs
Minneapolis (Downtown), MN (1) 1984 11-15-95 5 - 40 Yrs
St. Paul, MN (1) 1983 11-15-95 5 - 40 Yrs
Kansas City (Northeast), MO (2) 1975 07-28-98 5 - 40 Yrs
St. Louis (Downtown), MO (1) 1985 05-04-98 5 - 40 Yrs
St. Louis (Westport), MO (2) 1979 07-28-98 5 - 40 Yrs
Jackson (Downtown), MS (6) 1975 07-28-98 5 - 40 Yrs
Jackson (North), MS (15) 1957 07-28-98 5 - 40 Yrs
Olive Branch (Whispering Woods
Conference Center), MS (8) 1972 07-28-98 5 - 40 Yrs
Raleigh/Durham, NC (5) 1987 07-28-97 5 - 40 Yrs
Omaha (Central), NE (5) 1973 02-01-97 5 - 40 Yrs
Omaha (Central), NE (12) 1965 07-28-98 5 - 40 Yrs
Omaha (I-80), NE (2) 1991 07-28-98 5 - 40 Yrs
Omaha (Old Mill Northwest), NE (6) 1974 07-28-98 5 - 40 Yrs
Omaha (Southwest), NE (12) 1986 07-28-98 5 - 40 Yrs
Omaha, (Southwest) NE (13) 1989 07-28-98 5 - 40 Yrs
Omaha (Southwest), NE (15) 1996 07-28-98 5 - 40 Yrs
Piscataway, NJ (1) 1988 01-10-96 5 - 40 Yrs
Secaucus (Meadowlands), NJ (6) N/A 07-28-98 5 - 40 Yrs
Albuquerque (Mountain View), NM (2) 1968 07-28-98 5 - 40 Yrs
Syracuse, NY (1) 1989 06-30-97 5 - 40 Yrs
Cleveland, OH (1) 1990 11-17-95 5 - 40 Yrs
Columbus, OH (5) 1985 02-04-98 5 - 40 Yrs
Dayton, OH (5) 1987 12-30-97 5 - 40 Yrs
Tulsa, OK (1) 1985 07-28-94 5 - 40 Yrs
Philadelphia (Center City), PA (6) 1970 07-28-98 5 - 40 Yrs
Philadelphia (Independence Mall), PA (2) 1972 07-28-98 5 - 40 Yrs
Philadelphia (Society Hill), PA (3) 1986 10-01-97 5 - 40 Yrs
Pittsburgh, PA (9) 1988 07-28-98 5 - 40 Yrs
Charleston (Mills House), SC (2) 1982 07-28-98 5 - 40 Yrs
Greenville (Roper), SC (6) 1984 07-28-98 5 - 40 Yrs
Myrtle Beach (Kingston Plantation), SC (1) 1987 12-05-96 5 - 40 Yrs
F-29
80
FELCOR LODGING TRUST INCORPORATED
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
COST CAPITALIZED SUBSEQUENT
INITIAL COST TO ACQUISITION
--------------------------------- ------------------------------
BUILDINGS FURNITURE BUILDINGS FURNITURE
AND AND AND AND
DESCRIPTION OF PROPERTY ENCUMBRANCES LAND IMPROVEMENTS FIXTURES LAND IMPROVEMENTS FIXTURES
- ----------------------- ------------ ---- ------------ ---------- ---- ------------ --------
Knoxville (Central), TN (2) 11,586 358 1,512 1,009
Nashville, TN (1) 1,118 9,506 961 265 2,201
Nashville (Opryland/Airport), TN (9) 27,889 863 1,849 1,671
Addison (North Dallas), TX (6) 18,180 4,938 42,965 1,482 293 889
Amarillo (I-40), TX (2) 5,754 178 2,591 861
Austin (Downtown), TX (5) 2,508 21,908 752 829 576
Austin (Town Lake), TX (2) 21,551 667 750 1,605
Beaumont (Midtown I-10), TX (2) 685 5,964 206 1,872 703
Corpus Christi, TX (1) 5,307 1,113 9,618 390 51 396 1,656
Dallas, TX (19) 3,536 13,564 420 2,409 264 617
Dallas (Alpha Road), TX (17) 9,795 53 1,623 (1,678) 1,713
Dallas (Campbell Center), TX (7) 3,208 27,907 962 988 1,981
Dallas, (DFW Airport South), TX (1) 35,156 1,212 4,041 448 3,906
Dallas (Downtown West End), TX (12) 1,953 16,989 586 155 96
Dallas (Love Field), TX (1) 13,699 1,934 16,674 757 371 1,775
Dallas (Market Center), TX (6) 12,830 4,079 35,486 1,224 559 817
Dallas (Market Center), TX (1) 12,231 2,560 23,751 2,182 413 536
Dallas (Park Central), TX (6) 15,723 30,513 944 5,623 201 654
Dallas (Park Central), TX (1) 1,497 12,722 647 703 2,399
Dallas (Park Central), TX (3) 1,720 28,550 4,130 125 989
Dallas (Park Central), TX (20) 4,513 43,125 2,507 4,437 2,477
Houston (I-10 West), TX (9) 3,055 26,575 916 191 316
Houston (Int'l Airport), TX (2) 13,088 3,890 33,842 1,167 173 438
Houston (Medical Center), TX (6) 6,214 2,493 21,687 748 581 505
Houston (Medical Center), TX (15) 8,248 2,284 19,869 685 2,029 1,744
Houston (Near Greenway), TX (9) 6,944 3,418 29,736 1,025 327 1,104
Irving (DFW Airport North), TX (19) 28,006 56,714 1,754 10,039 654 1,663
Irving (DFW Airport North), TX (21) 10,766 1,546 13,453 464 145 2,158
Midland (Country Villa), TX (2) 404 3,517 121 68 291
Odessa (Centre), TX (15) 487 4,238 146 58 363
Odessa (Parkway Blvd), TX (13) 370 3,218 111 38 202
Plano, TX (19) 4,813 1,813 15,775 544 467 1,124
Plano, TX (2) 885 7,696 265 113 284
San Antonio (Downtown), TX (2) 22,246 688 524 562
San Antonio (Int'l Airport), TX (9) 3,371 29,326 1,011 1,825 778
Waco (I-35), TX (2) 574 4,994 172 93 306
Salt Lake City (Airport), UT (2) 5,346 165 2,725 1,046
Burlington, VT (3) 20,860 3,136 27,283 941 446 1,731
Cambridge, Canada (2) 481 4,188 144 1,082 841
Kitchener (Waterloo), Canada (2) 9,441 292 1,543 715
Peterbourough (Waterfront), Canada (2) 735 6,391 220 632 593
Sarnia, Canada (2) 271 2,359 81 1,093 810
Toronto (Airport), Canada (9) 21,168 655 3,137 1,679
Toronto (Yorkdale), Canada (2) 1,578 13,725 473 4,372 1,261
-------- -------- ---------- -------- ------- -------- --------
Total $751,995 $287,816 $3,213,820 $123,687 $34,178 $263,186 $285,324
======== ======== ========== ======== ======= ======== ========
GROSS AMOUNTS AT WHICH ACCUMULATED NET BOOK
CARRIED AT CLOSE OF PERIOD DEPRECIATION VALUE
------------------------------------------- BUILDINGS AND BUILDINGS AND
BUILDINGS FURNITURE IMPROVEMENTS; IMPROVEMENTS;
AND AND FURNITURE & FURNITURE &
DESCRIPTION OF PROPERTY LAND IMPROVEMENTS FIXTURES TOTAL FIXTURES FIXTURES
- ----------------------- ---- ------------ --------- ----- ------------- -------------
Knoxville (Central), TN (2) 13,098 1,367 14,465 1,306 13,159
Nashville, TN (1) 1,118 9,771 3,162 14,051 4,493 9,558
Nashville (Opryland/Airport), TN (9) 29,738 2,534 32,272 2,420 29,852
Addison (North Dallas), TX (6) 4,938 43,258 2,371 50,567 3,702 46,865
Amarillo (I-40), TX (2) 8,345 1,039 9,384 793 8,591
Austin (Downtown), TX (5) 2,508 22,737 1,328 26,573 2,857 23,716
Austin (Town Lake), TX (2) 22,301 2,272 24,573 2,116 22,457
Beaumont (Midtown I-10), TX (2) 685 7,836 909 9,430 731 8,699
Corpus Christi, TX (1) 1,164 10,014 2,046 13,224 3,062 10,162
Dallas, TX (19) 2,409 13,828 1,037 17,274 1,211 16,063
Dallas (Alpha Road), TX (17) 1,623 8,117 1,766 11,506 2,787 8,719
Dallas (Campbell Center), TX (7) 3,208 28,895 2,943 35,046 2,462 32,584
Dallas, (DFW Airport South), TX (1) 4,041 35,604 5,118 44,763 3,426 41,337
Dallas (Downtown West End), TX (12) 1,953 17,144 682 19,779 1,287 18,492
Dallas (Love Field), TX (1) 1,934 17,045 2,532 21,511 4,325 17,186
Dallas (Market Center), TX (6) 4,079 36,045 2,041 42,165 2,876 39,289
Dallas (Market Center), TX (1) 2,560 24,164 2,718 29,442 3,772 25,670
Dallas (Park Central), TX (6) 5,623 30,714 1,598 37,935 2,462 35,473
Dallas (Park Central), TX (1) 1,497 13,425 3,046 17,968 4,475 13,493
Dallas (Park Central), TX (3) 1,720 28,675 5,119 35,514 3,169 32,345
Dallas (Park Central), TX (20) 4,513 47,562 4,984 57,059 6,446 50,613
Houston (I-10 West), TX (9) 3,055 26,766 1,232 31,053 2,116 28,937
Houston (Int'l Airport), TX (2) 3,890 34,015 1,605 39,510 2,675 36,835
Houston (Medical Center), TX (6) 2,493 22,268 1,253 26,014 1,847 24,167
Houston (Medical Center), TX (15) 2,284 21,898 2,429 26,611 2,206 24,405
Houston (Near Greenway), TX (9) 3,418 30,063 2,129 35,610 2,502 33,108
Irving (DFW Airport North), TX (19) 10,039 57,368 3,417 70,824 4,883 65,941
Irving (DFW Airport North), TX (21) 1,546 13,598 2,622 17,766 1,200 16,566
Midland (Country Villa), TX (2) 404 3,585 412 4,401 391 4,010
Odessa (Centre), TX (15) 487 4,296 509 5,292 393 4,899
Odessa (Parkway Blvd), TX (13) 370 3,256 313 3,939 305 3,634
Plano, TX (19) 1,813 16,242 1,668 19,723 1,530 18,193
Plano, TX (2) 885 7,809 549 9,243 704 8,539
San Antonio (Downtown), TX (2) 22,770 1,250 24,020 1,876 22,144
San Antonio (Int'l Airport), TX (9) 3,371 31,151 1,789 36,311 2,532 33,779
Waco (I-35), TX (2) 574 5,087 478 6,139 494 5,645
Salt Lake City (Airport), UT (2) 8,071 1,211 9,282 759 8,523
Burlington, VT (3) 3,136 27,729 2,672 33,537 2,986 30,551
Cambridge, Canada (2) 481 5,270 985 6,736 563 6,173
Kitchener (Waterloo), Canada (2) 10,984 1,007 11,991 882 11,109
Peterbourough (Waterfront), Canada (2) 735 7,023 813 8,571 678 7,893
Sarnia, Canada (2) 271 3,452 891 4,614 197 4,417
Toronto (Airport), Canada (9) 24,305 2,334 26,639 2,215 24,424
Toronto (Yorkdale), Canada (2) 1,578 18,097 1,734 21,409 1,409 20,000
------- ---------- -------- ---------- -------- ----------
Total 321,994 $3,477,006 $409,011 $4,208,011 $473,101 $3,734,910
======= ========== ======== ========== ======== ==========
LIFE UPON
WHICH
DEPRECIATION
DATE OF DATE IN STATEMENT
DESCRIPTION OF PROPERTY CONSTRUCTION ACQUIRED IS COMPUTED
- ----------------------- ------------ -------- -------------
Knoxville (Central), TN (2) 1966 07-28-98 5 - 40 Yrs
Nashville, TN (1) 1985 07-28-94 5 - 40 Yrs
Nashville (Opryland/Airport), TN (9) 1981 07-28-98 5 - 40 Yrs
Addison (North Dallas), TX (6) 1985 07-28-98 5 - 40 Yrs
Amarillo (I-40), TX (2) 1970 07-28-98 5 - 40 Yrs
Austin (Downtown), TX (5) 1987 03-20-97 5 - 40 Yrs
Austin (Town Lake), TX (2) 1967 07-28-98 5 - 40 Yrs
Beaumont (Midtown I-10), TX (2) 1967 07-28-98 5 - 40 Yrs
Corpus Christi, TX (1) 1984 07-19-95 5 - 40 Yrs
Dallas, TX (19) 1988 07-28-98 5 - 40 Yrs
Dallas (Alpha Road), TX (17) 1997 07-28-98 5 - 40 Yrs
Dallas (Campbell Center), TX (7) 1982 05-29-98 5 - 40 Yrs
Dallas, (DFW Airport South), TX (1) 1985 07-28-98 5 - 40 Yrs
Dallas (Downtown West End), TX (12) 1969 07-28-98 5 - 40 Yrs
Dallas (Love Field), TX (1) 1986 03-29-95 5 - 40 Yrs
Dallas (Market Center), TX (6) 1983 07-28-98 5 - 40 Yrs
Dallas (Market Center), TX (1) 1980 06-30-97 5 - 40 Yrs
Dallas (Park Central), TX (6) 1981 07-28-98 5 - 40 Yrs
Dallas (Park Central), TX (1) 1985 07-28-94 5 - 40 Yrs
Dallas (Park Central), TX (3) 1972 11-01-98 5 - 40 Yrs
Dallas (Park Central), TX (20) 1983 06-30-97 5 - 40 Yrs
Houston (I-10 West), TX (9) 1969 07-28-98 5 - 40 Yrs
Houston (Int'l Airport), TX (2) 1971 07-28-98 5 - 40 Yrs
Houston (Medical Center), TX (6) 1973 07-28-98 5 - 40 Yrs
Houston (Medical Center), TX (15) 1984 07-28-98 5 - 40 Yrs
Houston (Near Greenway), TX (9) 1984 07-28-98 5 - 40 Yrs
Irving (DFW Airport North), TX (19) 1987 07-28-98 5 - 40 Yrs
Irving (DFW Airport North), TX (21) 1989 07-28-98 5 - 40 Yrs
Midland (Country Villa), TX (2) 1979 07-28-98 5 - 40 Yrs
Odessa (Centre), TX (15) 1982 07-28-98 5 - 40 Yrs
Odessa (Parkway Blvd), TX (13) 1977 07-28-98 5 - 40 Yrs
Plano, TX (19) 1983 07-28-98 5 - 40 Yrs
Plano, TX (2) 1983 07-28-98 5 - 40 Yrs
San Antonio (Downtown), TX (2) 1968 07-28-98 5 - 40 Yrs
San Antonio (Int'l Airport), TX (9) 1981 07-28-98 5 - 40 Yrs
Waco (I-35), TX (2) 1970 07-28-98 5 - 40 Yrs
Salt Lake City (Airport), UT (2) 1963 07-28-98 5 - 40 Yrs
Burlington, VT (3) 1967 12-04-97 5 - 40 Yrs
Cambridge, Canada (2) 1969 07-28-98 5 - 40 Yrs
Kitchener (Waterloo), Canada (2) 1965 07-28-98 5 - 40 Yrs
Peterbourough (Waterfront), Canada (2) 1965 07-28-98 5 - 40 Yrs
Sarnia, Canada (2) 1970 07-28-98 5 - 40 Yrs
Toronto (Airport), Canada (9) 1970 07-28-98 5 - 40 Yrs
Toronto (Yorkdale), Canada (2) 1970 07-28-98 5 - 40 Yrs
Total
F-30
81
FELCOR LODGING TRUST INCORPORATED
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
Balance at December 31, 1997 $ 1,562,724 Depreciation expense during the period $ 50,682
-----------
Additions during the period 2,537,222 Balance at December 31, 1997 87,400
-----------
Balance at December 31, 1998 $ 4,099,946 Depreciation expense during the period 90,672
-----------
Additions during the period 247,116 Balance at December 31, 1998 $ 178,072
-----------
Balance at December 31, 1999 $ 4,347,062 Depreciation expense during the period 152,483
-----------
Sold Hotels in 2000 (31,921) Balance at December 31, 1999 $ 330,555
Hotels Held for Sale (206,000) Sold Hotels in 2000
Additions during the period 98,870 Hotels Held for Sale (13,706)
=========== Depreciation expense during the period 160,452
Balance at December 31, 2000 $ 4,208,011 ===========
Balance at December 31, 2000 $ 473,101
COST CAPITALIZED SUBSEQUENT
INITIAL COST TO ACQUISITION
--------------------------------- ------------------------------
BUILDINGS FURNITURE BUILDINGS FURNITURE
AND AND AND AND
DESCRIPTION OF PROPERTY ENCUMBRANCES LAND IMPROVEMENTS FIXTURES LAND IMPROVEMENTS FIXTURES
- ----------------------- ------------ ---- ------------ ---------- ---- ------------ --------
Scottsdale (Downtown), AZ (4) 12,430 384 24 151
Boca Raton, FL (5) 5,433 2,796 468 243 1,316
Tampa (Busch Gardens), FL (5) 672 12,387 226 134 991
Atlanta (Downtown), GA (10) 2,025 17,618 608 25 202
Atlanta, (Downtown), GA (4) 1,266 11,017 380 213 494
Marietta, GA (12) 952 8,285 286 467 587
Davenport, IA (12) 434 3,776 130 405 372
Davenport, IA (2) 547 4,763 164 1,333 1,003
Moline, IL (12) 505 4,398 152 535 470
Moline (Airport), IL (2) 822 7,149 247 1,240 1,039
Moline (Airport), IL (13) 232 2,021 70 383 429
Colby, KS (13) 339 2,950 102 228 48
Great Bend, KS (2) 549 4,780 165 215 372
Hays, KS (12) 243 2,112 73 306 267
Hays, KS (2) 597 5,190 179 43 183
Salina, KS (2) 4,891 502 4,370 151 66 341
Salina (I-70), KS (13) 341 2,964 102 (14) 95
Jackson (Briarwood), MS (12) 626 747 6,501 224 144 191
Nashville (Airport), TN (5) 1,073 9,331 322 624 1,114
Dallas (Regal Row), TX (4) 778 6,770 233 19 76
Houston (Galleria), TX (10) 1,855 16,143 557 177 322
Houston (Galleria), TX (4) 465 4,047 140 19 135
Houston (I-10 East), TX (4) 586 5,099 176 66 300
Houston (I-10 East), TX (12) 478 4,155 143 196 236
------ ------- -------- ------ ------ -------
Total $5,517 $21,441 $161,052 $5,682 $7,091 $10,734
Reserve for assets held for sale
GROSS AMOUNTS AT WHICH ACCUMULATED NET BOOK
CARRIED AT CLOSE OF PERIOD DEPRECIATION VALUE
------------------------------------------- BUILDINGS AND BUILDINGS AND
BUILDINGS FURNITURE IMPROVEMENTS; IMPROVEMENTS;
AND AND FURNITURE & FURNITURE &
DESCRIPTION OF PROPERTY LAND IMPROVEMENTS FIXTURES TOTAL FIXTURES FIXTURES
- ----------------------- ---- ------------ --------- ----- ------------- -------------
Scottsdale (Downtown), AZ (4) 12,454 535 12,989 731 12,258
Boca Raton, FL (5) 5,433 3,039 1,784 10,256 1,538 8,718
Tampa (Busch Gardens), FL (5) 672 12,521 1,217 14,410 2,118 12,292
Atlanta (Downtown), GA (10) 2,025 17,643 810 20,478 1,056 19,422
Atlanta, (Downtown), GA (4) 1,266 11,230 874 13,370 721 12,649
Marietta, GA (12) 952 8,752 873 10,577 631 9,946
Davenport, IA (12) 434 4,181 502 5,117 238 4,879
Davenport, IA (2) 547 6,096 1,167 7,810 328 7,482
Moline, IL (12) 505 4,933 622 6,060 282 5,778
Moline (Airport), IL (2) 822 8,389 1,286 10,497 455 10,042
Moline (Airport), IL (13) 232 2,404 499 3,135 148 2,987
Colby, KS (13) 339 3,178 150 3,667 195 3,472
Great Bend, KS (2) 549 4,995 537 6,081 344 5,737
Hays, KS (12) 243 2,418 340 3,001 131 2,870
Hays, KS (2) 597 5,233 362 6,192 338 5,854
Salina, KS (2) 502 4,436 492 5,430 307 5,123
Salina (I-70), KS (13) 341 2,950 197 3,488 186 3,302
Jackson (Briarwood), MS (12) 747 6,645 415 7,807 392 7,415
Nashville (Airport), TN (5) 1,073 9,955 1,436 12,464 1,240 11,224
Dallas (Regal Row), TX (4) 778 6,789 309 7,876 406 7,470
Houston (Galleria), TX (10) 1,855 16,320 879 19,054 1,010 18,044
Houston (Galleria), TX (4) 465 4,066 275 4,806 258 4,548
Houston (I-10 East), TX (4) 586 5,165 476 6,227 352 5,875
Houston (I-10 East), TX (12) 478 4,351 379 5,208 301 4,907
------- -------- ------- -------- ------- --------
Total $21,441 $168,143 $16,416 $206,000 $13,706 $192,294
Reserve for assets held for sale (63,000)
---------
$129,294
=========
LIFE UPON
WHICH
DEPRECIATION
DATE OF DATE IN STATEMENT
DESCRIPTION OF PROPERTY CONSTRUCTION ACQUIRED IS COMPUTED
- ----------------------- ------------ -------- -------------
Scottsdale (Downtown), AZ (4) 1970 07-28-98 5 - 40 Yrs
Boca Raton, FL (5) 1989 11-15-95 5 - 40 Yrs
Tampa (Busch Gardens), FL (5) 1985 11-15-95 5 - 40 Yrs
Atlanta (Downtown), GA (10) 1963 07-28-98 5 - 40 Yrs
Atlanta, (Downtown), GA (4) 1963 07-28-98 5 - 40 Yrs
Marietta, GA (12) 1986 07-28-98 5 - 40 Yrs
Davenport, IA (12) 1985 07-28-98 5 - 40 Yrs
Davenport, IA (2) 1966 07-28-98 5 - 40 Yrs
Moline, IL (12) 1985 07-28-98 5 - 40 Yrs
Moline (Airport), IL (2) 1961 07-28-98 5 - 40 Yrs
Moline (Airport), IL (13) 1996 07-28-98 5 - 40 Yrs
Colby, KS (13) 1998 07-28-98 5 - 40 Yrs
Great Bend, KS (2) 1964 07-28-98 5 - 40 Yrs
Hays, KS (12) 1985 07-28-98 5 - 40 Yrs
Hays, KS (2) 1966 07-28-98 5 - 40 Yrs
Salina, KS (2) 1986 07-28-98 5 - 40 Yrs
Salina (I-70), KS (13) 1997 07-28-98 5 - 40 Yrs
Jackson (Briarwood), MS (12) 1985 07-28-98 5 - 40 Yrs
Nashville (Airport), TN (5) 1988 06-05-97 5 - 40 Yrs
Dallas (Regal Row), TX (4) 1969 07-28-98 5 - 40 Yrs
Houston (Galleria), TX (10) 1968 07-28-98 5 - 40 Yrs
Houston (Galleria), TX (4) 1968 07-28-98 5 - 40 Yrs
Houston (I-10 East), TX (4) 1984 07-28-98 5 - 40 Yrs
Houston (I-10 East), TX (12) 1969 07-28-98 5 - 40 Yrs
Total
Reserve for assets held for sale
1.Embassy Suites 19. Harvey Hotel
2.Holiday Inn 20. Westin
3.Sheraton 21. Harvey Suites
4.Fairfield Inn
5.Doubletree Guest Suites
6.Crowne Plaza
7.Doubletree
8.Independents
9.Holiday Inn Select
10.Courtyard by Marriott
11.Sheraton Suites
12.Hampton Inn
13.Holiday Inn Express
14.Hilton Suites
15.Holiday Inn Hotel & Suites
16.Homewood Suites
17.Bristol House(R)
18.Crowne Plaza Suites
F-31
82
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
of FelCor Lodging Trust Incorporated:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, shareholders' deficit and cash flows
present fairly, in all material respects, the financial position of DJONT
Operations, L.L.C. at December 31, 2000 and 1999, and the consolidated results
of its operations and its cash flows for each of the three years ended December
31, 2000, 1999 and 1998, in conformity with accounting principles generally
accepted in the United States of America. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements 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.
PricewaterhouseCoopers LLP
Dallas, Texas
March 7, 2001
F-32
83
DJONT OPERATIONS, L.L.C.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2000 AND 1999
(IN THOUSANDS)
ASSETS 2000 1999
---- ----
Cash and cash equivalents ................................... $ 25,583 $ 20,127
Accounts receivable, net .................................... 30,689 28,601
Inventories ................................................. 4,367 4,260
Prepaid expenses ............................................ 3,084 1,444
Other assets ................................................ 2,907 5,791
Investment in real estate, net of accumulated depreciation of
$482 in 2000 and $530 in 1999 ............................ 10,954 11,436
--------- ---------
Total assets ........................................... $ 77,584 $ 71,659
========= =========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Accounts payable ............................................ $ 18,656 $ 12,742
Due to FelCor Lodging Trust Incorporated .................... 31,771 22,064
Accrued expenses and other liabilities ...................... 40,072 37,121
Minority interest ........................................... 3,927 5,113
Debt ........................................................ 7,695 7,761
--------- ---------
Total liabilities ...................................... 102,121 84,801
--------- ---------
Commitments and contingencies
Shareholders' deficit:
Capital ..................................................... 1 1
Accumulated deficit ......................................... (24,538) (13,143)
--------- ---------
Total shareholders' deficit ............................ (24,537) (13,142)
--------- ---------
Total liabilities and shareholders' deficit ............ $ 77,584 $ 71,659
========= =========
The accompanying notes are an integral part of these consolidated
financial statements.
F-33
84
DJONT OPERATIONS, L.L.C.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
(IN THOUSANDS)
2000 1999 1998
---- ---- ----
Revenues:
Room and suite revenue .................. $ 709,802 $ 649,323 $ 618,122
Food and beverage revenue ............... 112,594 87,212 77,834
Food and beverage rent .................. 5,045 5,212 4,792
Gain on sale of Brighton condos ......... 3,851
Other revenue ........................... 48,437 55,903 48,781
--------- --------- ---------
Total revenues ................. 879,729 797,650 749,529
--------- --------- ---------
Expenses:
Property operating costs ................ 194,810 190,798 169,955
General and administrative .............. 65,970 61,025 56,995
Advertising and promotion ............... 67,691 56,450 51,105
Repair and maintenance .................. 41,048 38,555 36,374
Utilities ............................... 32,039 29,700 28,799
Management and incentive fees ........... 24,766 22,514 23,636
Franchise fees .......................... 20,330 19,253 18,102
Food and beverage expenses .............. 84,542 66,514 65,924
Percentage lease expenses ............... 344,699 307,532 289,891
Lessee overhead expenses ................ 1,073 991 1,990
Liability insurance ..................... 3,227 2,518 1,258
Interest expense ........................ 618 682
Depreciation and amortization ........... 482 530
Minority interest ....................... 3,243 (90)
Other ................................... 6,403 5,589 4,656
--------- --------- ---------
Total expenses ................. 890,941 802,561 748,685
--------- --------- ---------
Net income (loss) ............................... $ (11,212) $ (4,911) $ 844
========= ========= =========
The accompanying notes are an integral part of these consolidated
financial statements.
F-34
85
DJONT OPERATIONS, L.L.C.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
(IN THOUSANDS)
Balance at December 31, 1998 ................... $ (8,231)
Net loss ....................................... (4,911)
--------
Balance at December 31, 1999 ................... $(13,142)
Net loss ....................................... (11,212)
Distributions .................................. (183)
--------
Balance at December 31, 2000 ................... $(24,537)
========
The accompanying notes are an integral part of these consolidated
financial statements.
F-35
86
DJONT OPERATIONS, L.L.C.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
(IN THOUSANDS)
2000 1999 1998
------ ------ -----
Cash flows from operating activities:
Net income (loss) ............................................................ $(11,212) $ (4,911) $ 844
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization ................................................ 482 530
Minority interest in partnership income ...................................... 3,243 (90)
Changes in assets and liabilities:
Accounts receivable ..................................................... (2,088) (1,040) (7,287)
Inventories ............................................................. (107) 121 (915)
Prepaid expenses ........................................................ (1,640) (973) 836
Other assets ............................................................ 2,668 (1,744) 950
Due to FelCor Lodging Trust Incorporated ................................ 9,707 5,189 (2,033)
Accounts payable, accrued expenses and other liabilities ................ 8,865 (5,488) 10,459
-------- -------- --------
Net cash flow provided by (used in) operating activities ........... 9,918 (8,406) 2,854
-------- -------- --------
Cash flows used in financing activities:
Distributions paid to minority interest .............................. (4,213)
Distributions to owners .............................................. (183)
Repayment of borrowings .............................................. (66) (5)
-------- -------- --------
Net cash flow used in financing activities ...................... (4,462) (5)
-------- -------- --------
Net change in cash and cash equivalents .............................................. 5,456 (8,411) 2,854
Cash and cash equivalents at beginning of years ...................................... 20,127 28,538 25,684
-------- -------- --------
Cash and cash equivalents at end of years ............................................ $ 25,583 $ 20,127 $ 28,538
======== ======== ========
Supplemental cash flow information - interest paid ................................... $ 618 $ 682
-------- --------
The accompanying notes are an integral part of these consolidated
financial statements.
F-36
87
DJONT OPERATIONS, L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
Effective January 1, 2001, subject to the receipt of certain lender
consents, FelCor Lodging Limited Partnership (the "Operating Partnership")
acquired and contributed to a wholly owned consolidated subsidiary, all of the
equity interests in DJONT. In consideration for the acquisition of DJONT, the
Operating Partnership issued an aggregate of 416,667 units of limited
partnership interest valued at approximately $10 million to DJONT's
shareholders.
Eighty-five of the hotels in which the Operating Partnership had an
ownership interest at December 31, 2000 (the "Hotels"), were leased to DJONT
pursuant to percentage leases ("Percentage Leases"). Certain entities owning
interests in DJONT and the managers of certain hotels have agreed to make loans
to DJONT of up to an aggregate of approximately $17.3 million to the extent
necessary to enable DJONT to pay rent and other obligations due under the
respective Percentage Leases relating to a total of 38 of the Hotels. No loans
were outstanding under such agreements at December 31, 2000.
At December 31, 2000, 59 of the Hotels were operated as Embassy
Suites(R) hotels, 14 were operated as Doubletree(R) or Doubletree Guest
Suites(R) hotels, ten were operated as Sheraton(R) or Sheraton Suites(R) hotels,
one was operated as a Westin(R) hotel and one was operated as a Hilton Suites(R)
hotel. Seventy-one of the Hotels were managed by subsidiaries of Hilton Hotels
Corporation ("Hilton"). Hilton is the largest operator of all-suite,
full-service hotels in the United States. Of the remaining Hotels, 11 were
managed by subsidiaries of Starwood Hotels and Resorts Worldwide, Inc.
("Starwood") and three were managed by independent management companies.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation -- Investments in affiliates in which the Company
has the ability to exercise significant influence, but not control, are
accounted for by the equity method. All other investments in affiliates are
carried at cost. Intercompany transactions are eliminated.
Use of Estimates -- The preparation of the financial statements in
conformity with generally accepted accounting principals requires management to
make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Cash and Cash Equivalents -- All highly liquid investments with a
maturity of three months or less when purchased are considered to be cash
equivalents.
Inventories -- Inventories are stated at the lower of cost or market.
Investment in Real Estate -- Hotels are stated at cost and are
depreciated using the straight-line method over estimated useful lives of forty
years for buildings and improvements and five to seven years for furniture,
fixtures, and equipment.
The carrying value of the property is periodically reviewed to
determine if circumstances indicate an impairment in the carrying value of the
investment or that depreciation periods should be modified. If facts or
circumstances support the possibility of impairment, DJONT will prepare a
projection of the undiscounted future cash flows, without interest charges, of
the hotel and determine if the investment in the property is recoverable based
on the undiscounted future cash flows. If impairment is indicated, an adjustment
will be made to the carrying value of the real estate based on discounted future
cash flows. DJONT does not believe that there are any factors or circumstances
indicating impairment of any of its investment in real estate.
F-37
88
DJONT OPERATIONS, L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Revenue Recognition -- Revenue is recognized as earned. Ongoing credit
evaluations are performed and an allowance for potential credit losses is
provided against the portion of accounts receivable which is estimated to be
uncollectible. Such losses have been within management's expectations.
Income Taxes -- At December 31, 2000, DJONT was a limited liability
company which is taxed for federal income tax purposes as a partnership and,
accordingly, all taxable income or loss flows through to the shareholders.
3. COMMITMENTS AND RELATED PARTY TRANSACTIONS
The Percentage Lease expense is based on a percentage of room and suite
revenues, food and beverage revenues, and food and beverage rents of the Hotels.
Both the base rent and the threshold room and suite revenue in each lease
computation is subject to adjustments in the Consumer Price Index ("CPI"). The
adjustment is calculated at the beginning of each calendar year for the hotels
acquired prior to July of the previous year. The adjustment in any lease year
may not exceed 7%. The CPI adjustments made in January 2001, 2000 and 1999 were
1.05%, 0.55% and 0.55%, respectively.
Other than real estate and personal property taxes, casualty insurance,
capital improvements and maintenance of underground utilities and structural
elements, which are obligations of the Operating Partnership, the Percentage
Leases require DJONT to pay rent, liability insurance premiums, operating costs,
utilities and other charges incurred in the operation of the leased hotels.
DJONT typically pays a franchise fee ranging from 4% to 5% of suite
revenue, and marketing and reservation fees ranging from 1% to 3.5% of room and
suite revenue. In the cases where there is not a separate franchise agreement,
the right to use the brand name is included in the management agreement. Base
management fees typically range from 2% to 3% of applicable hotel revenues.
Incentive management fees are based upon the hotel's net income before overhead
and typically range from 50% to 100% subject to a maximum annual payment of
between 2% and 3% of total revenues. In many cases managers and franchisors have
agreed to subordinate all or a portion of their fees at a specific hotel or
group of hotels either for a set period of time, or until the hotel or group of
hotels provides a predetermined return to the Lessee, or both.
DJONT shares the executive offices and certain employees with FelCor
and FelCor, Inc., and each company bears its share of the costs thereof,
including an allocated portion of the rent, compensation of certain personnel,
office supplies, telephones and depreciation of office furniture, fixtures and
equipment. Such allocation of shared expenses is approved by a majority of
FelCor's independent directors. During 2000, 1999 and 1998, DJONT paid
approximately $752,000 (approximately 10%), $660,000 (approximately 10%) and
$1.6 million (approximately 37%), respectively, of the allocable expenses under
this agreement.
4. GAIN ON SALE OF ASSETS
DJONT holds 3% equity interest and 100% voting interest in Kingston
Plantation Development Corporation ("KPDC") and records the results of its
operations on a consolidated basis. During 2000, an entity in which KPDC owns a
50% equity interest completed the construction and sale of 200 condominium units
adjacent to the Embassy Suites hotel - Myrtle Beach at Kingston Plantation, SC.
DJONT
F-38
89
DJONT OPERATIONS, L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. GAIN ON SALE OF ASSETS-- (CONTINUED)
has included in total revenue a $3.9 million gain on the sale of the
condominiums by the venture. KPDC's 97% non-voting interest is shown as minority
interest expense. KPDC distributed $4.2 million to its shareholders during the
quarter, of which $126,000 represented DJONT's 3% equity interest.
5. DEBT
DJONT has reflected as a liability, a mortgage note, dated November 24,
1998, from a wholly-owned subsidiary of KPDC payable to FelCor Lodging Limited
Partnership. The note bears a fixed interest rate of 8% per annum with a 30 year
amortization and matures on December 31, 2004.
The indebtedness is collateralized by a Mortgage and Assignment of
Leases and Rents with respect to the New Orleans Embassy Suites Hotel Annex.
Future scheduled principal payments on the debt are as follows (in thousands):
2001.................................. $ 71
2002.................................. 77
2003.................................. 83
2004.................................. 7,464
-------
$ 7,695
=======
6. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107 requires
disclosures about the fair value for all financial instruments, whether or not
recognized, for financial statement purposes. Disclosures about fair value of
financial instruments are based on pertinent information available to management
as of December 31, 2000. Considerable judgement is necessary to interpret market
data and develop estimated fair value. Accordingly, the estimates presented
herein are not necessarily indicative of the amounts that could be realized on
disposition of the financial instruments. The use of different market
assumptions and/or estimation methodologies may have a material effect on the
estimated fair value amounts.
Management estimates the fair value of accounts receivable, accounts
payable and accrued expenses approximate carrying value due to the relatively
short maturity of these instruments; and the borrowing under the mortgage note
approximates carrying value because it accrues interest at a fixed rate which
approximates market rates.
7. SUPPLEMENTAL CASH FLOW DISCLOSURE
DJONT recorded certain real estate and assumed certain liabilities in
connection with its investment in KPDC in 1999. The assets and liabilities,
related to KPDC and recorded at December 31, 1999, are as follows (in
thousands):
Investment in real estate......................... $11,436
Other assets acquired............................. 1,458
-------
$12,894
=======
Liabilities assumed............................... $ 7,781
Minority interest contribution.................... 5,113
-------
$12,894
=======
F-39
90
DJONT OPERATIONS, L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. SUPPLEMENTAL CASH FLOW DISCLOSURE -- (CONTINUED)
During 2000, KPDC's unconsolidated subsidiary distributed land with a
carrying value of $342,000 to the minority interest holder. Accordingly, KPDC
has reduced its investment in the joint venture and reduced minority interest by
the corresponding amount.
F-40
91
INDEPENDENT AUDITORS' REPORT
To the Stockholder
Bristol Hotels & Resorts Tenant Companies
We have audited the accompanying combined balance sheet of Bristol Hotels &
Resorts Tenant Companies (the "Company") as of December 31, 2000, and the
related combined statements of operations, stockholder's equity, and cash flows
for the nine months ended December 31, 2000. We have also audited the combined
statements of operations, stockholder's equity, and cash flows for the three
months ended March 31, 2000 (Predecessor). These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards 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. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, such combined financial statements present fairly, in all
material respects, the financial position of the Company at December 31, 2000,
and the results of its operations and its cash flows for the nine months ended
December 31, 2000 and for the three months ended March 31, 2000 (Predecessor) in
conformity with accounting principles generally accepted in the United States of
America.
DELOITTE & TOUCHE LLP
March 30, 2001
Atlanta, GA
F-41
92
BRISTOL HOTELS & RESORTS TENANT COMPANIES
COMBINED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE DATA)
- --------------------------------------------------------------------------------
DECEMBER 31,
ASSETS 2000
CURRENT ASSETS:
Cash and cash equivalents $ 3,494
Accounts receivable - Net of allowance of $1,067 36,214
Inventory 6,628
Prepaid rent 14,672
Deferred tax 5,696
Other current assets 4,683
--------
Total current assets 71,387
INTANGIBLE ASSET - Net of amortization of $5,735 124,265
DEFERRED INCOME TAX 354
--------
$196,006
========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 26,725
Accrued occupancy, sales and use tax 6,817
Accrued rent 11,117
Advance deposits 2,830
Due to parent and affiliates 17,509
--------
Total current liabilities 64,998
--------
COMMITMENTS AND CONTINGENCIES --
STOCKHOLDER'S EQUITY:
Common stock ($0.01 par value, 5,000 shares
(issued and outstanding) --
Paid-in capital 129,324
Retained earnings 1,684
--------
Total stockholder's equity 131,008
--------
$196,006
========
See notes to combined financial statements.
F-42
93
On April 2, 2000, Bass PLC, through its wholly owned subsidiary Bass (U.S.A.),
Inc. ("Bass"), acquired all of the outstanding shares of common stock of Bristol
Hotels & Resorts. The purchase method of accounting was used to record assets
acquired and liabilities assumed by Bass. As a result of the acquisition,
purchase accounting, and certain costs of the Predecessor, the accompanying
financial statements of the Predecessor and the Company are not comparable in
all material respects since the financial statements report results of
operations, stockholder's equity and cash flows of these two separate entities.
BRISTOL HOTELS & RESORTS TENANT COMPANIES
COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
- --------------------------------------------------------------------------------
COMPANY PREDECESSOR
------------------- --------------------
FOR THE NINE MONTHS FOR THE THREE MONTHS
ENDED DECEMBER 31, ENDED MARCH 31,
2000 2000
REVENUE
Rooms $ 461,978 $ 143,952
Food and beverage 115,176 36,645
Other 27,657 4,000
--------- ---------
Total revenue 604,811 184,597
OPERATING COSTS AND EXPENSES
Departmental expenses:
Rooms 128,721 40,241
Food and beverage 84,817 26,454
Other operating departments 11,216 3,842
Undistributed operating expenses:
Administrative and general 57,920 21,159
Marketing 42,377 14,171
Property occupancy costs 70,338 16,306
Tenant lease expense 199,338 62,916
Depreciation and amortization 5,735 175
--------- ---------
Total operating costs and expenses 600,462 185,264
--------- ---------
OPERATING INCOME (LOSS) 4,349 (667)
INTEREST INCOME 133 35
--------- ---------
INCOME (LOSS) BEFORE INCOME TAXES 4,482 (632)
INCOME TAX EXPENSE (BENEFIT) 2,798 (267)
--------- ---------
NET INCOME (LOSS) $ 1,684 $ (365)
========= =========
See notes to combined financial statements.
F-43
94
On April 2, 2000, Bass PLC, through its wholly owned subsidiary Bass (U.S.A.),
Inc. ("Bass"), acquired all of the outstanding shares of common stock of Bristol
Hotels & Resorts. The purchase method of accounting was used to record assets
acquired and liabilities assumed by Bass. As a result of the acquisition,
purchase accounting, and certain costs of the Predecessor, the accompanying
financial statements of the Predecessor and the Company are not comparable in
all material respects since the financial statements report results of
operations, stockholder's equity and cash flows of these two separate entities.
BRISTOL HOTELS & RESORTS TENANT COMPANIES
COMBINED STATEMENTS OF STOCKHOLDER'S EQUITY
(In Thousands)
- --------------------------------------------------------------------------------
CAPITAL IN TOTAL
COMMON EXCESS OF RETAINED STOCKHOLDER'S
STOCK PAR VALUE EARNINGS EQUITY
------ --------- ---------- -------------
PREDECESSOR:
BALANCES at December 31, 1999 -- $ 10,040 $ 1,105 $ 11,145
Net (Loss) (365) (365)
---- --------- --------- ---------
BALANCES at March 31, 2000 -- $ 10,040 $ 740 $ 10,780
---- ========= ========= =========
- --------------------------------------------------------------------------------------------------
COMPANY:
Purchase of assets and assumption of liabilities -- $ 129,324 $ -- $ 129,324
Net Income -- 1,684 1,684
---- --------- --------- ---------
BALANCES at December 31, 2000 -- $ 129,324 $ 1,684 $ 131,008
==== ========= ========= =========
See notes to combined financial statements.
F-44
95
On April 2, 2000, Bass PLC, through its wholly owned subsidiary Bass (U.S.A.),
Inc. ("Bass"), acquired all of the outstanding shares of common stock of Bristol
Hotels & Resorts. The purchase method of accounting was used to record assets
acquired and liabilities assumed by Bass. As a result of the acquisition,
purchase accounting, and certain costs of the Predecessor, the accompanying
financial statements of the Predecessor and the Company are not comparable in
all material respects since the financial statements report results of
operations, stockholder's equity and cash flows of these two separate entities
BRISTOL HOTELS & RESORTS TENANT COMPANIES
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
- --------------------------------------------------------------------------------
COMPANY PREDECESSOR
------------ -------------
FOR THE NINE FOR THE THREE
MONTHS ENDED MONTHS ENDED
DECEMBER 31, TO MARCH 31,
2000 2000
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 1,684 $ (365)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 5,735 175
Accounts receivable 1,992 (5,611)
Inventory (473) (257)
Prepaid rent 958 (1,517)
Deferred income tax (1,492) (1,182)
Other current assets (3,494) (67)
Other assets -- 10
Accounts payable and accrued expenses (5,319) 5,637
Accrued sales and use tax (1,720) 2,211
Accrued rent (4,828) 7,464
Advance deposits (613) 1,007
Due to parent and affiliates 7,697 (7,449)
------- -------
Net cash provided by operating activities 127 56
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Improvements to property and equipment -- (687)
------- -------
Net cash used in investing activities -- (687)
------- -------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 127 (631)
------- -------
CASH AND CASH EQUIVALENTS, beginning of period 3,367 3,998
------- -------
CASH AND CASH EQUIVALENTS, end of period $ 3,494 $ 3,367
======= =======
See notes to combined financial statements.
F-45
96
BRISTOL HOTELS & RESORTS TENANT COMPANIES
NOTES TO THE COMBINED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2000 AND FOR THE
NINE MONTHS ENDED DECEMBER 31, 2000 AND THREE MONTHS ENDED MARCH 31, 2000
(PREDECESSOR)
- --------------------------------------------------------------------------------
1. ORGANIZATION
Bristol Hotel & Resorts Tenant Companies (the "Company" and
"Predecessor"), represent five wholly owned subsidiaries of Bristol Hotels
& Resorts (BH&R), a Delaware corporation, which operate as a single
segment within the hospitality industry. On April 2, 2000, Bass PLC,
through a subsidiary, Bass (U.S.A.), Inc., completed the acquisition of
the remaining outstanding 90.1% of ownership interest in BH&R for total
consideration of $157 million. Together the Company accounts for the
operations of 101 hotels and properties, operated pursuant to long term
operating leases.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principals of Combination - The accompanying combined financial statements
include the accounts of the following five tenant companies: Bristol Hotel
Tenant Company, Bristol Lodging Tenant Company, Bristol Hospitality Tenant
Company, Bristol Salt Lake Tenant Company, and Bristol Hotel Tenant
Company Canada. All significant intercompany accounts and transactions
have been eliminated. The effects of the purchase transaction on April 2,
2000, mentioned above, have been reflected within the financial statements
of the Company. Assets and liabilities assumed in the purchase were
recorded at fair value as of March 31, 2000, the effective date of the
transaction. Excess of the amount paid over working capital has been
recorded as purchased operating leases.
Cash and Cash Equivalents - Cash and cash equivalents include unrestricted
cash in banks and cash on hand. Liquid investments purchased with an
original maturity of three months or less are considered to be cash
equivalents.
Inventory - Inventory, consisting primarily of food and beverage products
as well as consumable supplies, is carried at the lower of cost or market.
Cost is determined on the first-in, first-out basis.
Prepaid Rent - In accordance with property leases with FelCor Lodging
Trust ("FelCor"), the Company must prepay each month's base rent on the
last day of the prior month. At December 31, 2000, this amount was
approximately $14.7 million.
Intangible Asset - The cost of purchased operating leases is being
amortized on a straight-line basis over the remaining lives of the lease
contracts, approximately 17 years.
Use of Estimates - The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect
amounts reported as assets and liabilities and contingent assets and
liabilities in these financial statements. Actual results could differ
from these estimates.
Recognition of Revenue - Revenue is recognized when services are rendered.
Services are deemed to be rendered at the date upon which a guest occupies
a room and/or utilizes the hotel's services.
F-46
97
Long-Lived Assets - The Company reviews long-lived assets used in
operations and goodwill when indicators of impairment are present.
Impairment losses are recorded when the undiscounted cash flows estimated
to be generated by those assets are less than the asset's carrying amount.
Income Taxes - The Company accounts for income taxes under the Statement
of Financial Accounting Standards No. 109, Accounting for Income Taxes
("SFAS No. 109"). SFAS No. 109 requires the recognition of deferred tax
liabilities and assets for the expected future tax consequences of events
that have been included in the financial statements or tax returns. Under
this method, deferred tax liabilities and assets are determined based on
the difference between the financial statement and tax basis of assets and
liabilities using currently enacted tax rates in effect for the years in
which the differences are expected to reverse.
New Accounting Pronouncements - In June 1998, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting
Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and
Hedging Activities" and in June 2000, the FASB issued SFAS No. 138, which
amends certain provisions of SFAS 133 to clarify four areas causing
difficulties in implementation. The amendment included expanding the
normal purchase and sale exemption for supply contracts, permitting the
offsetting of certain intercompany foreign currency derivatives and thus
reducing the number of third party derivatives, permitting hedge
accounting for foreign-currency denominated assets and liabilities, and
redefining interest rate risk to reduce sources of ineffectiveness. The
Company adopted the provisions of SFAS 133 and the corresponding
amendments under SFAS 138 on October 1, 2000. SFAS 133, as amended by SFAS
138, does not have a material impact on the Company's combined results of
operations, financial position, or cash flows.
3. FELCOR LEASES
Of the 101 hotels operated by the Company, 100 are subject to long-term
operating leases with FelCor. The principal terms of the FelCor leases are
summarized below, although certain terms vary from hotel to hotel.
Term - The leases are for initial terms of three to 15 years, with renewal
options on the same terms for a total of 15 years. If a lease has been
extended to 15 years, the Company may renew the lease for an additional
five years at then current market rates.
F-47
98
Rent - The Company will pay rent equal to the greater of base rent or
percentage rent (contingent rent). The percentage rent is based on
specified percentages of various revenue streams. Those percentages will
vary within the following ranges:
Room revenues: 0% to 10% up to a first revenue
breakpoint amount specified for each
hotel, then 70% from such first
breakpoint to the second revenue
breakpoint, then 60% thereafter.
Food and beverage revenues: 5% to 25%
Other revenues: Varying percentages depending on the
nature and source of such revenues.
The base rent and the thresholds for computing percentage rent under the
leases will be adjusted annually to reflect changes in the Consumer Price
Index. Rent may be renegotiated if there are material changes in the
markets in which the Company operates. Base rent paid for the nine months
ended December 31, 2000 was $138.3 million and for the three months ended
March 31, 2000 (Predecessor) was $43.3 million. The remaining tenant lease
expense was percentage rent in excess of the base amount of $61.0 million
and $19.6 million for the nine months ended December 31, 2000 and for the
three months ended March 31, 2000 (Predecessor), respectively.
Future minimum (base) lease payment amounts at December 31, 2000 are as
follows (in thousands):
2001 $188,065
2002 193,707
2003 199,518
2004 196,081
2005 195,318
Thereafter 694,067
----------
$1,666,756
==========
Termination - Upon the sale of a property to a third party, FelCor may
terminate the lease. The Company would be entitled to damages upon any
termination to which it did not consent consisting of a monthly payment
equal to one-twelfth of 75% of the cash flow derived from the lease for
the prior 12 months. The payment, for the majority of the assets, would be
due for a period equal to the remainder of the lease term for the
terminated lease. A lease may also be terminated by FelCor if the Company
fails to satisfy certain performance targets, liquid net worth tests,
defaults under a franchise agreement, or for other criteria. Either party
may terminate upon a breach by the other party of the agreements under the
lease.
F-48
99
Insurance, Property Taxes, and Ground Leases - FelCor will pay all real
estate and personal property taxes (other than with respect to personal
property of the Company), property insurance premiums, and ground lease
payments on the leased hotels. The Company will pay for all liability
insurance on the leased hotels, which includes extended coverage,
comprehensive general public liability, and other insurance appropriate
and customary for properties similar to the leased hotels.
4. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following at December
31, 2000 (in thousands):
Accrued payroll $12,805
Accrued utilities 2,666
Accrued franchise fees 2,509
Trade accounts payable 686
Other accrued expenses 8,059
-------
$26,725
=======
5. RELATED PARTY TRANSACTIONS
A subsidiary of BH&R maintains centralized disbursement and cash
management systems, and from time to time may advance sums for payment of
expenses on behalf of the Company prior to receiving reimbursement. This
may result in amounts due to or from the Parent and affiliates. As of
December 31, 2000, the Company owed BH&R and affiliates approximately
$17.5 million.
A reconciliation of cash transferred to other BH&R subsidiaries and
expenses paid on behalf of the company by other subsidiaries for the three
and nine months ended March 31, 2000 (Predecessor) and December 31, 2000,
respectively, follows (in thousands):
Due to parent and affiliates, December 31, 1999 (Predecessor) $ 12,755
Net cash transferred to other BH&R subsidiaries (178,985)
Expenses paid on behalf of Company 171,536
---------
Due to parent and affiliates, March 31, 2000 (Predecessor) 5,306
Net cash transferred to other BH&R subsidiaries (606,801)
Expenses paid on behalf of Company 619,004
---------
Due to parent and affiliates, December 31, 2000 $ 17,509
=========
A subsidiary of the BH&R provides management services for the leased
properties. The fees are based on a percentage of revenues. The Company
paid management fees for the nine months ended December 31, 2000 of $16.8
million for the three months ended March 31, 2000 (Predecessor) of $5.6
million. These amounts are included in property occupancy costs on the
accompanying statements of operations.
A subsidiary of BH&R owns its own proprietary hotel brands, Harvey Hotels
and Bristol. Five properties operated by the Company operate hotels under
these brands, and incurred royalty fees of $1.2 million for the nine
months ended December 31, 2000 and $0.5 million for the three months
F-49
100
ended March 31, 2000 (Predecessor). These amounts are included in rooms
departmental expense on the accompanying statements of operations.
The Company has entered into Franchise Agreements with Bass or its
affiliates, that generally require the payment of franchise fees of 5% of
room revenues. Amounts paid to Bass pursuant to franchise agreements and
related marketing, reservation services, frequent guest programs, and
royalty fee agreements were $37.4 million for the nine months ended
December 31, 2000 and $11.3 million for the three months ended March 31,
2000 (Predecessor).
7. INCOME TAXES
The Company files a consolidated federal income tax return with Bass
(U.S.A.) Incorporated, its ultimate U.S. parent company. The Company's
income tax provision and related tax asset and liability accounts are
computed as if the Company filed a separate income tax return. The
Company's current federal tax liability is shown on the accompanying
balance sheets as a component of the Payable to affiliated company
balance. The state income tax receivable or liability is separately
stated.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax asset balance as of
December 31, 2000 are (in thousands):
U.S. CANADA TOTAL
--- ------ -----
Allowance for accounts receivable $ 429 $ 429
Accrued expenses 2,050 2,050
Accrued reserves 3,217 3,217
------ ------
Total current deferred tax assets 5,696 5,696
Depreciation 635 $(281) 354
------ ----- ------
Total long-term deferred tax assets 635 (281) 354
------ ----- ------
Total deferred tax assets $6,331 $(281) $6,050
====== ===== ======
F-50
101
Significant components of the provision (benefit) for income taxes for the
nine months ended December 31, 2000 and the three months ended March 31,
2000 (Predecessor) are as follows (in thousands):
COMPANY PREDECESSOR
----------------- ------------------
NINE MONTHS ENDED THREE MONTHS ENDED
DECEMBER 31, 2000 MARCH 31, 2000
FEDERAL:
Current $ 3,216 $ 859
Deferred (1,292) (989)
STATE:
Current 580 56
Deferred (222) (170)
CANADA:
Current 494
Deferred 22 (23)
------- -----
$ 2,798 $(267)
======= =====
A reconciliation between the income tax expense recognized in the
Company's consolidated statement of operations and the income tax expense
computed by applying the U.S. statutory federal income tax rate to
earnings before income tax is as follows (in thousands):
COMPANY PREDECESSOR
------------------------------ ---------------------------
NINE MONTHS THREE MONTHS
ENDED ENDED
DECEMBER 31, 2000 PERCENTAGE MARCH 31, 2000 PERCENTAGE
----------------- ---------- -------------- ----------
Income tax expense at the
U.S. federal statutory rate $1,569 35.0% $ (221) 35.0%
Effect of non-deductible goodwill
and other permanent differences 902 20.1% 47 (7.4)%
State income taxes, net of federal
benefit and permanent differences 148 3.3% (10) 1.6%
Effect of higher Canadian tax rates 179 4.0% (83) 13.0%
------ ----- ------ -----
$2,798 62.4% $ (267) 42.2%
====== ===== ====== =====
8. BENEFITS
The Company offers a Profit Sharing Plan and Trust ("401(k) Plan") to
certain employees. The 401(k) Plan is designed to be a qualified trust
under Section 401 of the Internal Revenue Code. Under the 401(k) Plan,
eligible employees are allowed to defer up to 16% of their income on a
pretax basis through contributions to the 401(k) Plan; however, only the
first 6% of pretax income is subject to matching by the Company. The
Company automatically makes matching contributions of 50% of the
employees' matchable contributions and may elect to make matching
contributions of up to an additional 50% of the employees' matchable
contributions subject to certain performance
F-51
102
measures of the Company. Management of the Company decided not to
contribute matching contributions for the nine months ended December 31,
2000. The Company provided for matching contributions for the three months
ended March 31, 2000 (Predecessor) of $0.6 million.
9. COMMITMENTS AND CONTINGENCIES
Substantially all of the Company's hotel properties are operated pursuant
to franchise or license agreements ("Franchise Agreements"), primarily
with Bass or its affiliates. The Company also operates hotels under
franchise agreements with Marriott International, Inc. Hilton Hotels
Corporation (formerly Promus Hotels, Inc.), Hawthorn Suites Franchising,
Incorporated, and ITT Sheraton Corporation. The Franchise Agreements
generally require the payment of a monthly royalty fee based on gross room
revenue and various other fees associated with certain marketing or
advertising and centralized reservation services, also generally based on
gross room revenues. The Franchise Agreements have various durations
through the year 2018, and generally may not be terminated without the
payment of substantial fees. Franchise marketing and royalty fees of $3.6
million for the nine months ended December 31, 2000 and $1.1 million for
the three months ended March 31, 2000 (Predecessor), were paid.
The Franchise Agreements generally contain specific standards for, and
restrictions and limitations on, the operation and maintenance of the
hotels, which are established by the franchisors to maintain uniformity in
the system created by each such franchisor. Such standards generally
regulate the appearance of the hotel, quality and type of goods and
services offered, signage, and protection of trademarks. Compliance with
such standards may from time to time require significant expenditures for
capital improvements, which would be paid by the property owner.
The Company is currently involved in certain guest and customer claims,
employee wage claims, and other disputes arising in the ordinary course of
business. In the opinion of management, the pending litigation will not
have a materially adverse effect on the Company's financial position or
results of operations.
11. FAIR VALUE
The Company has estimated the fair value of its financial instruments at
December 31, 2000, as required by Statement of Financial Accounting
Standards No. 107, Disclosure about Fair Value of Financial Instruments.
The carrying values of cash and cash equivalents, accounts receivable,
accounts payable, and accrued expenses are reasonable estimates of the
fair values.
12. FOREIGN OPERATIONS
As discussed in Note 1, all operations of the Company are part of the
hospitality services industry and it currently reports as a single
industry segment. Foreign operations were conducted in Canada in 2000.
Revenues generated from Canadian operations were $32.1 million and $9.2
million for the nine months ended December 31, 2000 and three months ended
March 31, 2000 (Predecessor), respectively. The Company did not allocate
values for purchased operating leases to individual properties. Therefore,
an amount related to purchased operating leases has not been disclosed for
the Canadian properties.
F-52
103
13. SUBSEQUENT EVENTS
The Company sold the leases and transferred the assets of 12 hotels
maintained under operating leases to FelCor for consideration of 413,585
shares of FelCor common stock effective January 1, 2001. FelCor has
entered into short-term management contracts with Bass to manage two of
these 12 hotels. In addition, the Company has entered into an agreement
with FelCor to sell the remaining 88 leases effective July 1, 2001. In
consideration for the sale of such leases, FelCor will enter into
long-term management agreements with Bass and issue 100 shares of FelCor
common stock to Bass.
F-53
104
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
2.1 - Agreement and Plan of Merger by and between the Registrant and
Bristol Hotel Company ("Bristol") dated as of March 23, 1998
(filed as Exhibit 2.1 to the Registrant's Form 8-K dated April
23, 1998, and incorporated herein by reference).
3.1 - Articles of Amendment and Restatement dated June 22, 1995,
amending and restating the Charter of the Registrant, as
amended or supplemented by Articles of Merger dated June 23,
1995, Articles Supplementary dated April 30, 1996, Articles of
Amendment dated August 8, 1996, Articles of Amendment dated
June 16, 1997, Articles of Amendment dated October 30, 1997,
Articles Supplementary dated May 6, 1998, Articles of Merger
and Articles of Amendment dated July 27, 1998, and Certificate
of Correction dated March 11, 1999 (filed as Exhibit 3.1 to
the Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1998 (the "1998 10-K") and
incorporated herein by reference).
3.1.1 - Certificate of Correction to the Articles of Merger between
FelCor Lodging Trust Incorporated and Bristol Hotel Company,
dated August 31, 1999 (filed as Exhibit 3.1.1 to the
Registrant's Form 10-Q dated September 30, 1999 ("September
1999 10-Q") and incorporated herein by reference).
3.2 - Bylaws of the Registrant, as amended (filed as Exhibit 3.2 to
the Registrant's Registration Statement on Form S-11 (file no.
333-98332) and incorporated herein by reference).
4.1 - Form of Share Certificate for Common Stock (filed as Exhibit
4.1 to the Registrant's Form 10- Q for the quarter ended June
30, 1996, and incorporated herein by reference).
4.2 - Form of Share Certificate for $1.95 Series A Cumulative
Convertible Preferred Stock (filed as Exhibit 4.4 to the
Registrant's Form 8-K dated May 1, 1996, and incorporated
herein by reference).
4.3 - Form of Share Certificate for 9% Series B Cumulative
Redeemable Preferred Stock (filed as Exhibit 4.5 to the
Registrant's Form 8-K dated May 29, 1998, and incorporated
herein by reference).
4.4 - Deposit Agreement dated April 30, 1998, between the Registrant
and SunTrust Bank, Atlanta, as preferred share depositary
(filed as Exhibit 4.6 to the Registrant's Form 8-K dated May
29, 1998, and incorporated herein by reference).
4.5 - Form of Depositary Receipt evidencing the Depositary Shares
(filed as Exhibit 4.7 to the Registrant's Form 8-K dated May
29, 1998, and incorporated herein by reference).
4.6 - Indenture dated as of April 22, 1996 by and between the
Registrant and SunTrust Bank, Atlanta, Georgia, as Trustee
(filed as Exhibit 4.2 to the Registrant's Form 8-K dated May
1, 1996 and incorporated herein by reference).
4.7 - Indenture dated as of October 1, 1997 by and among FelCor
Lodging Limited Partnership, formerly FelCor Suites Limited
Partnership (the "Partnership"), the Registrant, the
Subsidiary Guarantors named therein and SunTrust Bank,
Atlanta, Georgia, as Trustee (filed as Exhibit 4.1 to the
Registration Statement on Form S-4 (file no. 333-39595) and
the other co- registrants named therein and incorporated
herein by reference).
4.7.1 - First Amendment to Indenture dated as of February 5, 1998 by
and among the Registrant, the Partnership, the Subsidiary
Guarantors named therein and SunTrust Bank, Atlanta, Georgia,
as Trustee (filed as Exhibit 4.2 to the Registrant's
Registration Statement on Form S-4 (file no. 333-39595) and
incorporated herein by reference).
E-1
105
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
4.7.2 - Second Amendment to Indenture and First Supplemental
Indenture dated as of December 30, 1998, by and among the
Registrant, the Partnership, the Subsidiary Guarantors named
therein and SunTrust Bank, Atlanta, Georgia, as Trustee
(filed as Exhibit 4.7.2 to the 1998 10-K and incorporated
herein by reference).
4.7.3 - Third Amendment to Indenture dated as of March 30,1999 by and
among the Partnership, the Registrant, the Subsidiary
Guarantors named therein and SunTrust Bank, Atlanta (filed as
Exhibit 4.7.3 to the Registrant's Form 10-Q for the quarter
ended March 31,1999 ("March 1999 10-Q") and incorporated
herein by reference).
4.7.4 - Second Supplemental Indenture dated as of August 1, 2000, by
and among the Partnership, the Registrant, the Subsidiary
Guarantors named therein, who are signatories thereto, and
SunTrust Bank (filed as Exhibit 4.2.4 to the Partnership's
Registration Statement on Form S-4 (file no. 333- 47506) and
incorporated herein by reference).
4.8 - Indenture dated as of September 15, 2000, by and among the
Partnership, the Registrant, the Subsidiary Guarantors named
therein, and SunTrust Bank, as Trustee (filed as Exhibit 4.3
to the Partnership's Registration Statement on Form S-4 (file
no. 333-47506) and incorporated herein by reference).
10.1 - Amended and Restated Agreement of Limited Partnership of the
Partnership (filed as Exhibit 10.1 to the Registrant's Annual
Report on Form 10-K/A Amendment No. 1 for the fiscal year
ended December 31, 1994 (the "1994 10-K/A") and incorporated
herein by reference).
10.1.1 - First Amendment to Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of November 17, 1995
by and among the Registrant, Promus Hotels, Inc. and all of
the persons or entities who are or shall in the future become
of the limited partners of the Partnership (filed as Exhibit
10.1.1 to the Registrant's Annual Report on Form 10-K, as
amended, for the fiscal year ended December 31, 1995 (the
"1995 10-K") and incorporated herein by reference).
10.1.2 - Second Amendment to Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of January 9, 1996
between the Registrant and all of the persons or entities who
are or shall in the future become limited partners of the
Partnership (filed as Exhibit 10.1.2 to the Registrant's 1995
10-K and incorporated herein by reference).
10.1.3 - Third Amendment to Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of January 10, 1996
by and among the Registrant, MarRay-LexGreen, Inc. and all of
the persons and entities who are or shall in the future
become limited partners of the Partnership (filed as Exhibit
10.1.3 to the Registrant's 1995 10-K and incorporated herein
by reference).
10.1.4 - Fourth Amendment to the Amended and Restated Agreement of
Limited Partnership of the Partnership dated as of January
10, 1996 by and among the Registrant, Piscataway-Centennial
Associates Limited Partnership and all of the persons or
entities who are or shall in the future become limited
partners of the Partnership (filed as Exhibit 10.1.4 to the
Registrant's 1995 10-K and incorporated herein by reference).
10.1.5 - Fifth Amendment to Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of May 2, 1996,
between the Registrant and all of the persons or entities who
are or shall in the future become limited partners of the
Partnership, adopting Addendum No. 2 to Amended and Restated
Agreement of Limited Partnership of the Partnership dated as
of May 2, 1996 (filed as Exhibit 10.1.5 to the Registrant's
Form 10-Q for the quarter ended June 30, 1996, and
incorporated herein by reference).
E-2
106
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
10.1.6 - Sixth Amendment to Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of September 16, 1996,
by and among the Registrant, John B. Urbahns, II and all of
the persons or entities who are or shall in the future become
limited partners of the Partnership (filed as Exhibit 10.1.6
to the Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1996, and incorporated herein by
reference).
10.1.7 - Seventh Amendment to Amended and Restated Agreement of
Limited Partnership of the Partnership dated as of May 16,
1997, by and among the Registrant, PMB Associates, Ltd. and
all of the persons or entities who are or shall in the future
become limited partners of the Partnership (filed as Exhibit
10.1.7 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997, and incorporated herein
by reference).
10.1.8 - Eighth Amendment to Amended and Restated Agreement of
Limited Partnership of the Partnership dated as of February 6,
1998, by and among the Registrant, Columbus/Front Ltd. and all
of the persons or entities who are or shall in the future
become limited partners of the Partnership (filed as Exhibit
10.1.8 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997, and incorporated herein
by reference).
10.1.9 - Ninth Amendment to Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of May 1, 1998,
between the Registrant and all of the persons or entities who
are or shall in the future become limited partners of the
Partnership, adopting Addendum No. 3 to Amended and Restated
Agreement of Limited Partnership dated as of May 1, 1998
(filed as Exhibit 10.1.9 to the Registrant's Form 8-K dated
May 29, 1998, and incorporated herein by reference).
10.1.10 - Tenth Amendment to Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of June 22, 1998, by
and among the Registrant, Schenley Hotel Associates, and all
of the persons or entities who are or shall in the future
become limited partners of the Partnership (filed as Exhibit
10.1.10 to the Registrant's Form 10-Q for the quarter ended
October 30, 1998, and incorporated herein by reference).
10.1.11 - Eleventh Amendment to Amended and Restated Agreement of
Limited Partnership of the Partnership dated as of July 28,
1998, between the Registrant and all of the persons or
entities who are or shall in the future become limited
partners of the Partnership, changing the name of the
Partnership to "FelCor Lodging Limited Partnership" (filed as
Exhibit 10.1.11 to the Registrant's Form 10-Q for the quarter
ended October 30, 1998, and incorporated herein by reference).
10.1.12 - Twelfth Amendment to Amended and Restated Agreement of
Limited Partnership of the Partnership dated as of December
29, 1998, between the Registrant and all of the persons or
entities who are or shall in the future become limited
partners of the Partnership, amending certain provisions of
the Partnership Agreement (filed as Exhibit 10.1.12 to the
Registrant's 1998 10-K and incorporated herein by reference).
10.1.13 - Thirteenth Amendment to Amended and Restated Agreement of
Limited Partnership of the Partnership dated as of December
31, 1998, by and between the Registrant, FelCor Nevada
Holdings, L.L.C. and all of the persons or entities who are or
shall in the future become limited partners of the Partnership
(filed as Exhibit 10.1.13 to the Registrant's 1998 10-K and
incorporated herein by reference).
10.1.14 - Fourteenth Amendment to Amended and Restated Agreement of
Limited Partnership of the Partnership dated as of March 1,
1999, by and among the Registrant, Huie Properties, Ltd., and
all of the persons or entities who are or shall in the future
become limited partners of the Partnership (filed as Exhibit
10.1.14 to the Registrant's 1998 10-K and incorporated herein
by reference).
E-3
107
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
10.1.15 - Fifteenth Amendment to Amended and Restated Agreement of
Limited Partnership of the Partnership dated as of October
15, 1999, by and among the Registrant, SRS Properties Limited
Partnership, and all of the persons and entities who are or
shall in the future become limited partners of the
Partnership. (filed as Exhibit 10.1.15 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended December
31, 1999 (the "1999 10-K") and incorporated herein by
reference).
10.1.16 - Sixteenth Amendment to Amended and Restated Agreement of
Limited Partnership of the Partnership dated as of February
27, 2000, by and among the Registrant, Bass America, Inc.,
and all of the persons and entities who are or shall in the
future become limited partners of the Partnership. (filed as
Exhibit 10.1.16 to the Registrant's 1999 10-K and
incorporated herein by reference).
10.1.17* - Seventeenth Amendment to Amended and Restated Agreement of
Limited Partnership of the Partnership dated as of November
1, 2000, by and among the Registrant, Bass America, Inc., and
all of the persons and entities who are or shall in the
future become limited partners of the Partnership.
10.2 - Form of Lease Agreement between the Partnership as Lessor and
DJONT Operations, L.L.C. or its subsidiaries ("DJONT") as
Lessee (filed as Exhibit 10.2.1 to the Registrant's 1995 10-K
and incorporated herein by reference).
10.2.1 - Omnibus Lease Amendment Agreement dated as of June 30, 1998
among the Registrant, the Partnership and DJONT to clarify
the meaning of Article III of the lease as represented by the
actual course of dealing between lessors and lessees under
such leases (filed as Exhibit 10.19 to the Registrant's Form
10-Q for the quarter ended June 30, 1998, and incorporated
herein by reference).
10.3 - Form of Lease Agreement between the Partnership as Lessor and
a subsidiary of Bristol Hotels & Resorts ("BHR") as Lessee
(the "Bristol Lease Agreement") (filed as Exhibit 10.3 to the
Registrant's 1998 10-K and incorporated herein by reference).
10.3.1 - Amended and Restated Master Hotel Agreement dated as of July
27, 1998 among the Registrant, the Partnership, BHR and the
lessors and lessees named therein (filed as Exhibit 10.17 to
the Registrant's Form 8-K dated August 10, 1998, and
incorporated herein by reference).
10.4 - Employment Agreement dated as of July 28, 1994 between the
Registrant and Thomas J. Corcoran, Jr. (filed as Exhibit 10.8
to the Registrant's 1994 10-K/A and incorporated herein by
reference).
10.5 - Restricted Stock and Stock Option Plan of the Registrant
(filed as Exhibit 10.9 to the Registrant's 1994 10- K/A and
incorporated herein by reference).
10.6 - Savings and Investment Plan of the Registrant (filed as
Exhibit 10.10 to the Registrant's 1994 10- K/A and
incorporated herein by reference).
10.7 - 1995 Restricted Stock and Stock Option Plan of the Registrant
(filed as Exhibit 10.9.2 to the Registrant's 1995 10- K and
incorporated herein by reference).
10.8 - Non-Qualified Deferred Compensation Plan, as amended and
restated July 1999 (filed as exhibit 10.9 to the Registrant's
Form 10-Q for the quarter ended September 30,1999 ("September
1999 10-Q") and incorporated herein by reference).
E-4
108
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
10.9 - 1998 Restricted Stock and Stock Option Plan (filed as Exhibit
4.2 to the Registrant's Registration Statement on Form S-8
(file no. 333-66041) and incorporated herein by reference).
10.10 - Second Amended and Restated 1995 Equity Incentive Plan (filed
as Exhibit 99.1 to the Registrant's Post-Effective Amendment
on Form S-3 to Form S-4 Registration Statement (file no.
333-50509) and incorporated herein by reference).
10.11 - Amended and Restated Stock Option Plan for Non-Employee
Directors (filed as Exhibit 99.2 to the Registrant's
Post-Effective Amendment on Form S-3 to Form S-4 Registration
Statement (file no. 333-50509) and incorporated herein by
reference).
10.12 - Form of Severance Agreement for executive officers and certain
key employees of the Registrant (filed as Exhibit 10.13 to the
Registrant's 1998 10-K and incorporated herein by reference).
10.13 - Agreement dated as of April 15, 1995 among the Registrant, the
Partnership, FelCor, Inc., Thomas J. Corcoran, Jr. and Hervey
A. Feldman relating to purchase of securities (filed as
Exhibit 10.15 to the Registrant's Registration Statement on
Form S-11 (file no. 333-91870) and incorporated herein by
reference).
10.14 - Voting and Cooperation Agreement dated as of March 23, 1998
among the Registrant, Bristol, Bass America Inc., Holiday
Corporation and United/Harvey Holdings, L.P. (filed as Exhibit
99.7 to the Registrant's Registration Statement on Form S-4
(file no. 333-50509) and incorporated herein by reference).
10.15 - Spin-Off Agreement dated as of March 23, 1998 among Bristol,
Bristol Hotel Management Corporation and Bristol Hotel and
Resorts, Inc., as agreed to by the Registrant (filed as
Exhibit 99.8 to the Registrant's Registration Statement on
Form S-4 (file no. 333-50509) and incorporated herein by
reference).
10.16 - Stockholders' and Registration Rights Agreement dated as of
July 27, 1998 by and among the Registrant, Bass America, Inc.,
Holiday Corporation, Bass plc, United/Harvey Investors I,
L.P., United/Harvey Investors II, L.P., United/Harvey
Investors III, L.P., United/Harvey Investors IV, L.P., and
United/Harvey Investors V, L.P. (filed as Exhibit 10.18 to the
Registrant's Form 8-K dated August 10, 1998, and incorporated
herein by reference).
10.17* - Sixth Amended and Restated Credit Agreement dated as of
December 18, 2000, among the Registrant, the Partnership and
FelCor Canada Co., as Borrowers, the Lenders party thereto,
The Chase Manhattan Bank and The Chase Manhattan Bank of
Canada, as Administrative Agents, Chase Securities, Inc., as
Joint Lead Arranger, Joint Book Manager and Syndication Agent,
Bankers Trust Company, as Joint Lead Arranger, Joint Book
Manager and Documentation Agent, Bank of America, N.A. and
Wells Fargo Bank, National Association, as Documentation
Agents.
10.18 - Loan Agreement dated as of October 10, 1997 among Bristol
Lodging Company, Bristol Lodging Holding Company, Nomura Asset
Capital Corporation as administrative agent and collateral
agent for Lenders and Bankers Trust Company as co-agent for
Lenders (filed as Exhibit 10.10 to the Bristol Hotel Company
Annual Report on Form 10-K for the year ended December 31,
1997 and incorporated herein by reference).
10.18.1 - First Amendment to Loan Agreement and Ancillary Loan Documents
made as of May 28, 1999, among FelCor Lodging Company, L.L.C.,
FelCor Lodging Holding Company, L.L.C. and LaSalle National
Bank, as Trustee for Nomura Asset Securities Corporation
Commercial Pass-Through Certificates Series 1998-D6, as
administrative agent and collateral agent (filed as Exhibit
10.19.1 to the Registrant's 1999 10-K and incorporated herein
by reference).
E-5
109
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
10.19 - Deed of Trust, Security Agreement, Assignment of Leases and
Rents, Fixture Filing and Financing Statement, Dated March 1,
1999, by FelCor Hotel Company II, Ltd., as Grantor, to Howard
E. Schreiber, Trustee, in trust for the benefit of Banker
Trust Company, as Beneficiary (filed as Exhibit 10.21 to the
Registrant's March 1999 10-Q and incorporated herein by
reference).
10.20 - Loan Agreement, dated April 1, 1999, among the Registrant and
the Partnership, as Borrower, The Lenders Party Thereto and
The Chase Manhattan Bank, as Administrative Agent and
Collateral Agent (filed as Exhibit 10.22.1 to the Registrant's
March 1999 10-Q and incorporated herein by reference).
10.20.1 - Guaranty, dated April 1, 1999, made by each of the named
Guarantors therein, who are signatories thereto (filed as
Exhibit 10.22.2 to the Registrant's March 1999 10-Q and
incorporated herein by reference).
10.20.2 - Pledge and Security Agreement, dated April 1, 1999, made by
each of the named Pledgors therein, who are signatories
thereto, in favor of The Chase Manhattan Bank, as Collateral
Agent (filed as Exhibit 10.22.3 to the Registrant's March 1999
10-Q and incorporated herein by reference).
10.20.3 - Second Amendment to Loan Agreement dated as of August 20,1999,
among the Registrant and the Partnership, as Borrower, the
financial institutions party thereto, and The Chase Manhattan
Bank, as Administrative Agent (filed as Exhibit 10.22.4 to the
Registrant's September 1999 10-Q and incorporated herein by
reference).
10.20.4 - Third Amendment to Loan Agreement dated as of December 1,1999,
among the Registrant and the Partnership, as Borrower, the
financial institutions party thereto, and The Chase Manhattan
Bank, as Administrative Agent (filed as Exhibit 10.21.4 to the
Registrant's 1999 10-K and incorporated herein by reference).
10.20.5 - Fourth Amendment to Loan Agreement dated as of August 7, 2000,
among the Registrant and the Partnership, as Borrower, the
financial institutions party thereto, and The Chase Manhattan
Bank, as Administrative Agent (filed as Exhibit 10.21.6 to the
Partnership's Registration Statement on Form S-4 (file no.
333-47506) and incorporated herein by reference).
10.21 - Form of Mortgage, Security Agreement and Fixture Filing by and
between FelCor/CSS Holdings, L.P. as Mortgagor and The
Prudential Insurance Company of America, as Mortgagee (filed
as Exhibit 10.23 to the Registrant's March 1999 10-Q and
incorporated herein by reference).
10.21.1 - Promissory Note dated April 1, 1999, in the original principal
amount of $100,000,000 made by FelCor/CSS Holdings, Ltd.,
payable to the order of The Prudential Insurance Company of
America (filed as Exhibit 10.23.1 to the Registrant's Form
10-Q for the quarter ended June 30,1999 ("June 1999 10-Q") and
incorporated herein by reference).
10.22 - Form of Deed of Trust, Security Agreement and Fixture Filing,
each dated as of May 12, 1999, from FelCor/MM Holdings, L.P.,
as Borrower, in favor of Fidelity National Title Insurance
Company, as Trustee, and Massachusetts Mutual Life Insurance
Company, as Beneficiary, each covering a separate hotel and
securing one of the separate Promissory Notes described in
Exhibit 10.23.1, also executed by FelCor/CSS Holdings, L.P.
with respect to the Embassy Suites-Anaheim and Embassy
Suites-Deerfield Beach, and by the Partnership with respect to
the Embassy Suites- Palm Desert (filed as Exhibit 10.24.2 to
the Registrant's June 1999 10-Q and incorporated herein by
reference).
10.22.1 - Form of six separate Promissory Notes each dated May 12, 1999,
made by FelCor/MM Holdings, L.P. payable to the order of
Massachusetts Mutual Life Insurance Company in the respective
original principal amounts of $12,500,000 (Embassy
Suites-Dallas Market Center), $14,000,000
E-6
110
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
(Embassy Suites-Dallas Love Field), $12,450,000 (Embassy
Suites-Tempe), $11,550,000 (Embassy Suites-Anaheim),
$8,900,000 (Embassy Suites-Palm Desert), $15,600,000 (Embassy
Suites-Deerfield Beach) (filed as Exhibit 10.24.1 to the
Registrant's June 1999 10-Q and incorporated herein by
reference).
10.23 - Form Deed of Trust and Security Agreement and Fixture Filing
with Assignment of Leases and Rents, each dated as of April
20, 2000, from FelCor/MM S-7 Holdings, L.P., as Mortgagor, in
favor of Massachusetts Mutual Life Insurance Company and
Teachers Insurance and Annuity Association of America, as
Mortgagee, each covering a separate hotel and securing one of
the separate Promissory Notes described in Exhibit 10.24.2
(filed as Exhibit 10.24 to the Registrant's Form 10-Q for the
quarter ended June 30, 2000 (the "June 2000 10-Q") and
incorporated herein by reference).
10.23.1 - Form of Accommodation Cross-Collateralization Mortgage and
Security Agreement, each dated as of April 20, 2000, executed
by FelCor/MM S-7 Holdings, L.P., in favor of Massachusetts
Mutual Life Insurance Company and Teachers Insurance and
Annuity Association of America (filed as Exhibit 10.24.1 to
the Registrant's June 2000 10-Q and incorporated herein by
reference).
10.23.2 - Form of fourteen separate Promissory Notes each dated April
20, 2000, each made by FelCor/MM S-7 Holdings, L.P., each
separately payable to the order of Massachusetts Mutual Life
Insurance Company and Teachers Insurance and Annuity
Association of America, respectively, in the respective
original principal amounts of $13,500,000 (Phoenix (Crescent),
Arizona), $13,500,000 (Phoenix (Crescent), Arizona),
$6,500,000 (Cypress Creek/Ft. Lauderdale, Florida), $6,500,000
(Cypress Creek/Ft. Lauderdale, Florida), $9,000,000 (Atlanta
Galleria, Georgia), $9,000,000 (Atlanta Galleria, Georgia),
$12,500,000 (Chicago O'Hare Airport, Illinois), $12,500,000
(Chicago O'Hare Airport, Illinois), $3,500,000 (Lexington,
Kentucky), $3,500,000 (Lexington, Kentucky), $17,000,000
(Philadelphia Society Hill, Philadelphia), $17,000,000
(Philadelphia Society Hill, Philadelphia), $10,500,000 (South
Burlington, Vermont), and, $10,500,000 (South Burlington,
Vermont) (filed as Exhibit 10.24.2 to the Registrant's June
2000 10-Q and incorporated herein by reference).
10.24 - Form Deed of Trust and Security Agreement, each dated as of
May 2, 2000, from each of FelCor/CMB Buckhead Hotel, L.L.C.,
FelCor/CMB Marlborough Hotel, L.L.C., FelCor/CMB Deerfield
Hotel, L.L.C., FelCor/CMB Corpus Holdings, L.P., FelCor/CMB
Orsouth Holdings, L.P., FelCor/CMB New Orleans Hotel, L.L.C.,
FelCor/CMB Piscataway Hotel, L.L.C., and FelCor/CMB SSF
Holdings, L.P., each as Borrower, in favor of The Chase
Manhattan Bank, as Beneficiary, each covering a separate hotel
and securing one of the separate Promissory Notes described in
Exhibit 10.25.1 (filed as Exhibit 10.25 to the Registrant's
June 2000 10-Q and incorporated herein by reference).
10.24.1 - Form of eight separate Promissory Notes each dated May 2,
2000, made by FelCor/CMB Buckhead Hotel, L.L.C., FelCor/CMB
Marlborough Hotel, L.L.C., FelCor/CMB Deerfield Hotel, L.L.C.,
FelCor/CMB Corpus Holdings, L.P., FelCor/CMB Orsouth Holdings,
L.P., FelCor/CMB New Orleans Hotel, L.L.C., FelCor/CMB
Piscataway Hotel, L.L.C., and FelCor/CMB SSF Holdings, L.P.,
each separately payable to the order of The Chase Manhattan
Bank in the respective original principal amounts of
$38,250,000 (Atlanta Buckhead, Georgia), $20,500,000 (Boston
Marlborough, Massachusetts), $16,575,000 (Chicago Deerfield,
Illinois), $5,338,000 (Corpus Christi, Texas), $25,583,000
(Orlando South, Florida), $32,650,000 (New Orleans,
Louisiana), $20,728,000 (Piscataway, New Jersey), and
$26,268,000 (South San Francisco, California) (filed as
Exhibit 10.25.1 to the Registrant's June 2000 10-Q and
incorporated herein by reference).
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EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
10.25 - Registration Rights Agreement dated as of September 8, 2000
among the Registrant, the Partnership, Deutsche Banc
Securities Inc., Chase Securities Inc., Morgan Stanley & Co.
Incorporated, Banc of America Securities LLC, Banc One Capital
Markets, Inc., Credit Lyonnais Securities (USA) Inc., and
Scotia Capital (USA) Inc. (filed as Exhibit 10.26 to the
Partnership's Registration Statement on Form S-4 (file no.
333-47506) and incorporated herein by reference).
10.26* - Registration Rights Agreement dated as of January 11, 2001
among the Registrant, the Partnership and Deutsche Bank
Securities Inc.
21* - List of Subsidiaries of the Registrant.
23.1* - Consent of PricewaterhouseCoopers LLP.
23.2* - Consent of Deloitte & Touche LLP.
- ----------
* Filed herewith.
E-8