EXHIBIT 10.1
XXXX LIMITED PARTNERSHIP
0000 Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx Xxxxxxxx 00000
November 17, 1997
CapStar Management Company, L.P.
0000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attention: Xx. Xxxx X. Xxxxxxxx
CapStar Winston Company, L.L.C.
0000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attention: Xx. Xxxx X. Xxxxxxxx
Re: Additional Hotel Lease Agreements and
Agreement Relating to Planned Hotels
Gentlemen:
In connection with the Agreement dated as of the 29th day of
October, 1997, by and among CapStar Management Company, L.P.
("CapStar"), CapStar Hotel Company ("CapStar Corp."), Winston
Hospitality, Inc. ("Winston") and Xxxxxx X. Xxxxxxx, III and Xxxx
X. Xxxxxx, Xx., (collectively, the "Shareholders"), this letter
sets forth the terms upon which XXXX Limited Partnership (the
"Partnership"), Winston Hotels, Inc. (the "REIT") and CapStar
Winston Company, L.L.C. (the "Subsidiary") agree to enter into
hotel leases pursuant to which Subsidiary shall lease from the
Partnership certain hotels currently under construction and an
agreement to enter into hotel leases with respect to the leasing
of hotels planned for development, provided that neither the REIT
nor the Partnership has given notice of any event of default
which remains in effect under any of the existing hotel leases
between the Subsidiary and the REIT or the Partnership.
1. Additional Hotel Lease Agreements. The Partnership
agrees to lease to the Subsidiary the following three (3) hotel
properties: (i) Richmond, Virginia, Homewood Suites Hotel (123
rooms); (ii) Alpharetta, Georgia, Homewood Suites Hotel (112
rooms); and (iii) Raleigh, North Carolina, Homewood Suites Hotel
(136 rooms) (the "Additional Hotels"). The Additional Hotels
will be leased pursuant to a form of lease agreement
substantially in the form of the existing leases between the
Partnership and Winston modified by a Master Lease Amendment in
the form attached hereto as Appendix 1 with the economic terms of
such leases structured to
CapStar Management Company, L.P.
CapStar Winston Company, L.L.C.
November 17, 1997
Page 2
generate the desired FFO yield to the REIT and a lessee gross
operating profit (defined as total revenue less all lease
payments due the Partnership and all property operating costs
except property taxes, except fire and casualty insurance, and
except furniture, fixtures and equipment reserve) for the
Subsidiary as lessee of not less than (i) 2.9% of gross room
revenue for the Richmond, Virginia, Homewood Suites Hotel;
(ii) 5.1% of the gross room revenue of the Alpharetta, Georgia,
Homewood Suites Hotel; and (iii) 4.8% of the gross room revenue
for the Raleigh, North Carolina, Homewood Suites Hotel, based
upon the REIT's operating projections for the respective
Additional Hotels for the first year of operations as previously
provided to CapStar, a copy of which is attached hereto as
Appendix 2.
2. Agreement Relating to Planned Hotels. The Partnership
agrees to lease the following five hotel properties to the
Subsidiary: (i) Lake Mary, Florida, Homewood Suites Hotel (112
rooms); (ii) Durham, North Carolina, Homewood Suites Hotel (96
rooms); (iii) Winston-Salem, North Carolina, Marriott Courtyard
(122 rooms); (iv) the proposed Ponte Vedra, Florida, Hampton Inn
(estimated 120 rooms); and (v) the proposed Chapel Hill, North
Carolina, Hilton Garden Inn (estimated 150 rooms) (the "Planned
Hotels"). The Planned Hotels will be leased pursuant to a form
of lease which is substantially the same as the existing lease
between the Partnership and Winston modified by a Master Lease
Amendment attached hereto as Appendix 1. The agreement to lease
the Ponte Vedra, Florida, Hampton Inn and the Chapel Hill, North
Carolina, Hilton Garden Inn is subject to the development of such
hotels being undertaken and completed.
The lease payments for the Planned Hotels would be
established in terms of revenue break points and rent percentages
to leave the Subsidiary as lessee with a lessee gross operating
profit (defined as total revenue less all lease payments due the
Partnership and all property operating costs, except property
taxes, except fire and casualty insurance, and except furniture,
fixtures and equipment reserve) of approximately 4.0% of total
revenues and the REIT with its desired FFO yield, all of which
will be based upon the pro-forma operating budget as agreed upon
by the REIT and CapStar coupled with the REIT's estimated costs
of the respective development projects. If CapStar and the REIT
cannot agree as to the rent structure then prior to entering into
a lease for one or more of the Planned Hotels with a third party,
the REIT will give notice of the third party lease terms to
CapStar. CapStar will have a right of first refusal for five
days after receipt of such notice to accept such terms and enter
into such lease.
3. This letter agreement shall be construed and enforced
in accordance with and governed by the laws of the State of North
Carolina.
CapStar Management Company, L.P.
CapStar Winston Company, L.L.C.
November 17, 1997
Page 3
Please indicate your acceptance to the terms of this letter
agreement by signing and returning the enclosed duplicate copy to
XXXX Limited Partnership, marked to the attention of Xx. Xxxxxx
X. Xxxxxxx, III.
Very truly yours,
XXXX LIMITED PARTNERSHIP
By: WINSTON HOTELS, INC.,
General Partner
By: /s/ Xxxxxx X. Xxxxxxx, III
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Name: Xxxxxx X. Xxxxxxx, III
------------------------
Title: President
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ACCEPTED AND AGREED
CAPSTAR MANAGEMENT COMPANY, L.P.
By: CAPSTAR HOTEL COMPANY
as General Partner of CapStar Management Company, L.P.
By: /s/ Xxxxxxx Xxxxxxxx
--------------------------
Name: Xxxxxxx Xxxxxxxx
---------------------
Title: Vice President
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CAPSTAR WINSTON COMPANY, L.L.C.,
a Delaware limited liability company
By: CAPSTAR MANAGEMENT COMPANY, L.P.
as Managing Member of CapStar Winston Company, L.L.C.
By: CAPSTAR HOTEL COMPANY
as General Partner of CapStar Management Company, L.P.
By: /s/ Xxxxxxx Xxxxxxxx
--------------------------
Name: Xxxxxxx Xxxxxxxx
---------------------
Title: Vice President
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