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 Specific Complaints Detailed in Class Action Lawsuit
Filed Against CNL Hospitality Properties, Inc. 

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BALA CYNWYD, Pa., Sept. 8, 2004 - The following statement was issued today by the law firm of Schiffrin & Barroway, LLP:

Notice is hereby given that a class action lawsuit was filed in the United States District Court for the Middle District of Florida on behalf of: (a) a class of all person who were entitled to vote on the proxy statement filed with the SEC by CNL Hospitality Properties, Inc. ("CNL" or the "Company") dated May 7, 2004, who suffered harm as a result of the actions complained of herein; and (b) a class of all persons who purchased or otherwise acquired CNL securities pursuant to the CNL's Prospectuses and Registration Statements, between August 16, 2001 and August 16, 2004, inclusive (the "Class Period").

The complaint charges CNL and its officers and directors with violations of Sections 11, 12(a) and 15 of the Securities Act of 1933 and Sections 14(a) and 20(a) of the Securities Exchange Act of 1934. The complaint alleges that CNL was organized pursuant to the laws of the State of Maryland on June 12, 1996. The Company was formed primarily to acquire properties (the "Properties") located across the United States to be leased for generally five to 20 years, plus renewal options generally for up to an additional 20 years on a "triple-net" basis, which means that the tenants generally are responsible for repairs, maintenance, property taxes, utilities and insurance. Third party tenants are operators of selected national and regional limited service, extended stay and full service hotel chains (the "Hotel Chains"). In 2001, the Company began operating Properties using independent third party managers, as permitted by the REIT Modernization Act of 1999. It was expected that the Company would move from triple-net lease activities to owning and operating Properties using third parties to manage the Properties' day-to-day operations. In a Form S-3 filed with the SEC on April 30, 2004, CNL announced that it was going to engage in a firm commitment underwritten offering of additional common shares and preferred shares (the "Underwritten Offering") and to list those common shares and preferred share together with the existing outstanding common shares, on the New York Stock Exchange ("NYSE") ("Listing"). In connection with the possible Listing and Underwritten Offering, CNL sought shareholder approval, via a Proxy filed with the SEC on May 7, 2004, to become a self-advised REIT through the merge of CNL Hospitality Corp. (the "Advisor") into a wholly owned subsidiary of CNL ("Merger").

The complaint further alleges that the Company failed to disclose and misrepresented the following material adverse facts which were known to defendants or recklessly disregarded by them: (1) that the Company's reported earnings and cash were materially inflated and in violation of Generally Accepted Accounting Principles; (2) that as a result of this, the Company's offering price of $10 per share, was materially inflated and unsupportable by the Company's financial results; (3) that since 2001, cash from CNL's operations had represented a decreasing percentage of the funds used to pay dividends to its shareholders; and (4) that as result of this, the Company's Underwritten Offering was overpriced and unsupportable by CNL's projections.

On July 30, 2004, GreenStreet Advisors, Inc. ("GreenStreet") issued a report that stated: "It is no wonder that these entities [such as CNL] seek out retail investors, as most institutional investors would more thoroughly scrutinize the value of the shares." Shortly after the GreenStreet report, CNL, on August 3, 2004, cancelled the Underwritten Offering. This decision also postponed the Merger for which it had received shareholder approval on July 30, 2004, and the Listing.

Plaintiff seeks to recover damages on behalf of class members and is represented by the law firm of Schiffrin & Barroway, which prosecutes class actions in both state and federal courts throughout the country. 


 
Contact:

Schiffrin & Barroway, LLP
Marc A. Topaz, Esq.
Darren J. Check, Esq.
Three Bala Plaza East, Suite 400
Bala Cynwyd, PA 19004
1-888-299-7706 (toll free) or 1-610-667-7706
info@sbclasslaw.com

Also See: Postponement of the IPO by REIT CNL Hotels a Big Surprise / Aug 2004
CNL Hospitality Properties Deal for 6 KSL Resorts Valued at Over $2.1 billion / February 2004


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