SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported) November 30, 2001
Fairfield Inn by Marriott Limited Partnership
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(Exact Name of Registrant as Specified in Its Charter)
Delaware
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(State or Other Jurisdiction of Incorporation)
0-16728 52-1638296
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(Commission File Number) (I.R.S. Employer Identification No.)
7 Bulfinch Place, Suite 500, P.O. Box 9507, Boston, Massachusetts 02114
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(Address of Principal Executive Offices) (Zip Code)
(617) 570-4600
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(Registrant's Telephone Number, Including Area Code)
n/a
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(Former Name or Former Address, if Changed Since Last Report)
Item 1. Other Matters
On November 30, 2001, the Partnership (i) replaced Marriott
International ("Marriott") as the property manager at the Partnership's
properties with Sage Management Resources III, LLC ("Sage"), an affiliate of
Sage Hospitality Resources, LLC, (ii) entered into new Franchise Agreements with
Marriott, (iii) entered into Ground Lease modifications which provide for
substantially reduced rent for the year 2002, and an extension of the term to
December 31, 2098, and (iv) agreed to complete the property improvement plans
("PIPs") required by Marriott at the Properties by no later than November 30,
2003.
Pursuant to the terms of the management agreement with Sage, which
agreement has a term of five years subject to early termination, the Partnership
is required to pay Sage a management fee equal to 3% of adjusted gross revenues
at the Partnership's properties. In addition, Sage is entitled to an annual
incentive management fee equal to 10% of the excess earnings before interest,
taxes, depreciation and amortization of the Partnership in excess of $25 million
during the first three years and thereafter, the greater of (i) $25 million or
(ii) 107.5% of the prior year's earnings before interest, taxes, depreciation
and amortization. If the Partnership's earnings before interest, taxes,
depreciation and amortization is not at least $25 million for the 2004 calendar
year (subject to certain exceptions), the Partnership has the right to terminate
Sage.
Sage is a leading hotel management company that, including the
Partnership's properties, owns, manages and/or operates 96 hotels located in 29
states. 81 of these hotels carry a Marriott flag including 70 Fairfield Inns.
The Franchise Agreements are substantially identical to the then
existing Franchise Agreements except that it is an event of default under the
Ground Lease if the PIPs are not completed by November 30, 2003. If the
Partnership were to default on the Franchise Agreement, it would also constitute
a default under the Ground Lease and the Loan encumbering the Partnership's
properties.
If prior to November 30, 2003 the Partnership provides evidence to
Marriott that not less than $23,000,000 has been set aside to complete the PIPs,
that the Partnership is diligently pursuing completion of the PIPs, and certain
other conditions are satisfied, the Ground Leases will be further modified to
provide, among other things, for further substantial reductions in rent through
December 31, 2004, for an additional option to purchase the fee interesting the
properties on terms more favorable than those contained in the existing options,
provided certain option payments are made, and for the shortening of the terms
of the Ground Leases to December 31, 2052 with a Partnership right to extend the
term for three successive periods of twelve years each.
Finally, management of the Partnership has elected to cease making
distributions given the negative impact on the hospitality industry caused by
the events of September 11 and the Partnership's need for the funds required to
make the PIPs.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized this 18th day of December, 2001.
FAIRFIELD INN BY MARRIOTT LIMITED PARTNERSHIP
By: AP-FAIRFIELD GP, LLC
Its General Partner
By: /s/ Michael L. Ashner
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Michael L. Ashner
President