CNL Dips Into Development With Five New Construction Hotels

ORLANDO— So far this year, CNL Hospitality has bulked up its portfolio with six newly acquired hotels and two recently opened new construction Florida properties— marking the first new developments for the $2 billion hotel ownership company. CNL’s third new construction project in Florida is slated to break ground in Tampa in early 2003, complementing the additional two new construction hotels currently under development in Phoenix and Seattle. “Developments give you more control over your pipeline,” said Charlie Muller, COO/CNL Hospitality. Muller explained that with new construction projects, “you know exactly how much capital you need… It gives you a better handle on your cash flow.” However, he was quick to note that the company’s foray into new construction is not indicative of a change in CNL’s corporate strategy. “We anticipate continuing to be a top acquirer of hotel assets,” he said, noting that CNL is never “going to build as many hotels as we can invest in.” In 1998, CNL acquired two properties. A year later, that number jumped to nine acquired hotels. In 2000, the company bought 15 properties; in 2001 it acquired 13 hotels; and already this year, CNL has closed six hotel acquisitions. That pace far exceeds the company’s development goal of three to four new construction starts per year— a goal CNL has already achieved this year. In all, CNL has five new construction hotels either open or under development. The first two projects— a 350-suite Residence Inn SeaWorld International Center in Orlando and the 174-room Courtyard by Marriott in Weston, FL— both opened in May. They’re owned by CNL and operated by Marriott International. In addition, CNL is set to break ground on its third new construction hotel in Florida, a 300-room Renaissance Hotel at Tampa’s International Plaza shopping mall adjacent to the Tampa International Airport. It marks the first Renaissance flag for CNL— but definitely not its first Marriott. In fact, according to CNL’s website, only 16.9% of its assets fly a flag other than Marriott. Yet,Muller explained that CNL’s expansion plans are not limited to Marriott brands. “We look at all opportunities. We follow the lodging industry and how brand perform. Marriott’s brands consistently out-perform in the industry… But we’re a street corner investor. We look at what the right brand for that market and that segment,” he added. While CNL owns a few Hiltons and Wyndhams, much of its upcoming pipeline is still heavily concentrated on Marriott hotels, including two additional new construction projects. The first is a 950-room JW Marriott Desert Ridge Resort & Spa in Phoenix, which is being co-developed with Marriott and is scheduled to open at the end of this year. CNL will jointly own the property with Marriott, and Marriott will manage the hotel. The second development under construction is the 358-room Marriott Waterfront Seattle, slated to open in the third quarter of 2003. The hotel will be wholly owned by CNL, and again managed by Marriott. Despite the recent boost of developments, CNL’s bread and butter will continue to be acquired assets. In fact, the company just inked a $143 million deal with Marriott to purchase two existing hotels located in San Francisco and the Bridgewater, NJ. “It’s easier to do a business transaction with people we’ve done business with before,” stated Muller. “Marriott tends to be a consistent seller of assets and a great resource for acquisitions because Marriott’s focus is to be a hotel operating company.”