Attached files
| file | filename |
|---|---|
| EX-99.1 - EX-99.1 - Carey Watermark Investors Inc | a14-1382_1ex99d1.htm |
| 8-K/A - 8-K/A - Carey Watermark Investors Inc | a14-1382_18ka.htm |
Exhibit 99.2
CAREY WATERMARK INVESTORS INCORPORATED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
Our pro forma condensed consolidated balance sheet as of September 30, 2013 has been prepared as if the significant transaction during the fourth quarter of 2013 (noted herein) had occurred as of September 30, 2013. Our pro forma condensed consolidated statements of operations for the year ended December 31, 2012 and nine months ended September 30, 2013 have been prepared based on our historical financial statements as if the significant investments and related financings and the significant disposition (noted herein) had occurred on January 1, 2012. Pro forma adjustments are intended to reflect what the effect would have been had we held our ownership interest as of January 1, 2012 on amounts that have been recorded in our historical condensed consolidated statements of operations. In our opinion, all adjustments necessary to reflect the effects of these investments have been made.
The pro forma condensed consolidated financial information should be read in conjunction with our historical condensed consolidated financial statements and notes thereto in our Annual Report on Form 10-K for the year ended December 31, 2012 and our Quarterly Report on Form 10-Q for the nine months ended September 30, 2013. The pro forma information is not necessarily indicative of our financial condition had the significant transactions occurred on September 30, 2013, or results of operations had the significant transactions occurred on January 1, 2012, nor are they necessarily indicative of our financial position, cash flows or results of operations of future periods. In addition, the provisional accounting is preliminary and therefore subject to change. Any such changes could have a material effect on the financial statements.
CAREY WATERMARK INVESTORS INCORPORATED
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
September 30, 2013
(in thousands)
|
|
|
CWI |
|
Hawks Cay |
|
|
| |||
|
|
|
Historical |
|
Resort |
|
Pro Forma |
| |||
|
Assets |
|
|
|
|
|
|
| |||
|
Investments in real estate: |
|
|
|
|
|
|
| |||
|
Hotels, at cost |
|
$ |
628,563 |
|
$ |
101,841 |
A |
$ |
730,404 |
|
|
Accumulated depreciation |
|
(11,519) |
|
— |
|
(11,519) |
| |||
|
Net investments in hotels |
|
617,044 |
|
101,841 |
|
718,885 |
| |||
|
Equity investments in real estate |
|
15,855 |
|
— |
|
15,855 |
| |||
|
Net investments in real estate |
|
632,899 |
|
101,841 |
|
734,740 |
| |||
|
Cash |
|
241,311 |
|
(131,301) |
A |
174,179 |
| |||
|
|
|
|
|
79,000 |
A |
|
| |||
|
|
|
|
|
(1,508) |
A |
|
| |||
|
|
|
|
|
(8,942) |
A |
|
| |||
|
|
|
|
|
(4,381) |
A |
|
| |||
|
Due from affiliates |
|
9 |
|
— |
|
9 |
| |||
|
Accounts receivable |
|
4,760 |
|
433 |
A |
5,193 |
| |||
|
Restricted cash |
|
13,988 |
|
8,942 |
A |
22,930 |
| |||
|
Other assets |
|
25,539 |
|
32,264 |
A |
59,311 |
| |||
|
|
|
|
|
1,508 |
A |
|
| |||
|
Total assets |
|
$ |
918,506 |
|
$ |
77,856 |
|
$ |
996,362 |
|
|
|
|
|
|
|
|
|
| |||
|
Liabilities and Equity |
|
|
|
|
|
|
| |||
|
Liabilities: |
|
|
|
|
|
|
| |||
|
Non-recourse debt |
|
$ |
393,747 |
|
$ |
79,000 |
A |
$ |
472,747 |
|
|
Accounts payable, accrued expenses and other liabilities |
|
21,421 |
|
3,237 |
A |
24,658 |
| |||
|
Due to affiliates |
|
2,073 |
|
— |
|
2,073 |
| |||
|
Distributions payable |
|
6,297 |
|
— |
|
6,297 |
| |||
|
Total liabilities |
|
423,538 |
|
82,237 |
|
505,775 |
| |||
|
Commitments and contingencies |
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
| |||
|
Equity: |
|
|
|
|
|
|
| |||
|
CWI stockholders’ equity: |
|
|
|
|
|
|
| |||
|
Common stock |
|
59 |
|
— |
|
59 |
| |||
|
Additional paid-in capital |
|
520,337 |
|
— |
|
520,337 |
| |||
|
Distributions in excess of accumulated losses |
|
(37,061) |
|
(4,381) |
A |
(41,442) |
| |||
|
|
|
|
|
|
|
|
| |||
|
Accumulated other comprehensive loss |
|
(584) |
|
— |
|
(584) |
| |||
|
Less: treasury stock at cost |
|
(524) |
|
— |
|
(524) |
| |||
|
Total CWI stockholders’ equity |
|
482,227 |
|
(4,381) |
|
477,846 |
| |||
|
Noncontrolling interests |
|
12,741 |
|
— |
|
12,741 |
| |||
|
|
|
|
|
|
|
|
| |||
|
Total equity |
|
494,968 |
|
(4,381) |
|
490,587 |
| |||
|
Total liabilities and equity |
|
$ |
918,506 |
|
$ |
77,856 |
|
$ |
996,362 |
|
The accompanying notes are an integral part of these pro forma condensed consolidated financial statements.
CAREY WATERMARK INVESTORS INCORPORATED
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
For the Year Ended December 31, 2012
(in thousands except share and per share amounts)
|
|
|
|
|
Pro Forma Adjustments (Including Pre-Acquisition Historical Amounts) |
|
|
| |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
| |||||||||
|
|
|
CWI |
|
2012 |
|
Other 2013 |
|
Hawks Cay |
|
Average |
|
|
| |||||||||
|
|
|
Historical |
|
Acquisitions |
|
Transactions |
|
Resort |
|
Shares |
|
Pro Forma |
| |||||||||
|
Hotel Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
Rooms |
|
$ |
8,906 |
|
$ |
18,401 |
B |
$ |
88,343 |
B |
$ |
26,384 |
B |
|
|
$ |
142,034 |
| ||||
|
Food and beverage |
|
2,671 |
|
3,295 |
B |
22,224 |
B |
10,026 |
B |
|
|
38,216 |
| |||||||||
|
Other hotel income |
|
1,395 |
|
2,245 |
B |
10,303 |
B |
8,838 |
B |
|
|
22,781 |
| |||||||||
|
Total Hotel Revenues |
|
12,972 |
|
23,941 |
|
120,870 |
|
45,248 |
|
|
|
203,031 |
| |||||||||
|
Other real estate income |
|
64 |
|
— |
|
— |
|
— |
|
|
|
64 |
| |||||||||
|
Total Revenues |
|
13,036 |
|
23,941 |
|
120,870 |
|
45,248 |
|
|
|
203,095 |
| |||||||||
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
Hotel Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
Rooms |
|
2,508 |
|
3,732 |
C |
20,239 |
C |
13,155 |
C |
|
|
39,634 |
| |||||||||
|
Food and beverage |
|
2,160 |
|
2,942 |
C |
17,741 |
C |
7,273 |
C |
|
|
30,116 |
| |||||||||
|
Other hotel operating expenses |
|
817 |
|
810 |
C |
7,574 |
C |
4,944 |
C |
|
|
14,145 |
| |||||||||
|
General and administrative |
|
1,269 |
|
2,339 |
C |
10,346 |
C |
3,841 |
C |
|
|
17,795 |
| |||||||||
|
Sales and marketing |
|
1,191 |
|
2,593 |
C |
12,146 |
C |
2,678 |
C |
|
|
18,608 |
| |||||||||
|
Repairs and maintenance |
|
679 |
|
963 |
C |
4,531 |
C |
1,807 |
C |
|
|
7,980 |
| |||||||||
|
Utilities |
|
635 |
|
807 |
C |
3,747 |
C |
1,246 |
C |
|
|
6,435 |
| |||||||||
|
Management fees |
|
199 |
|
749 |
C |
2,739 |
C |
789 |
C |
|
|
4,476 |
| |||||||||
|
Property taxes, insurance and rent |
|
676 |
|
1,038 |
C |
4,819 |
C |
2,132 |
C |
|
|
8,665 |
| |||||||||
|
Depreciation and amortization |
|
1,392 |
|
3,558 |
C |
18,037 |
C |
4,016 |
C |
|
|
27,003 |
| |||||||||
|
Total Hotel Expenses |
|
11,526 |
|
19,531 |
|
101,919 |
|
41,881 |
|
|
|
174,857 |
| |||||||||
|
Other Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
Acquisition-related expenses |
|
5,549 |
|
(5,143) |
D |
(97) |
D |
— |
|
|
|
309 |
| |||||||||
|
Management expenses |
|
689 |
|
— |
|
— |
|
— |
|
|
|
689 |
| |||||||||
|
Corporate general and administrative expenses |
|
2,475 |
|
— |
|
— |
|
— |
|
|
|
2,475 |
| |||||||||
|
Asset management fees to affiliate |
|
601 |
|
680 |
E |
2,333 |
E |
725 |
E |
|
|
4,339 |
| |||||||||
|
Total Other Operating Expenses |
|
9,314 |
|
(4,463) |
|
2,236 |
|
725 |
|
|
|
7,812 |
| |||||||||
|
Operating (Loss) Income |
|
(7,804) |
|
8,873 |
|
16,715 |
|
2,642 |
|
|
|
20,426 |
| |||||||||
|
Other Income and (Expenses) |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
Net income (loss) from equity investments in real estate |
|
1,611 |
|
(840) |
F |
(1,812) |
F |
— |
|
|
|
(1,041) |
| |||||||||
|
Other income |
|
85 |
|
— |
|
— |
|
— |
|
|
|
85 |
| |||||||||
|
Bargain purchase gain |
|
3,809 |
|
(3,809) |
G |
— |
|
— |
|
|
|
— |
| |||||||||
|
Interest expense |
|
(1,199) |
|
(3,090) |
H |
(13,957) |
H |
(5,096) |
H |
|
|
(23,342) |
| |||||||||
|
|
|
4,306 |
|
(7,739) |
|
(15,769) |
|
(5,096) |
|
|
|
(24,298) |
| |||||||||
|
(Loss) Income from Operations Before Income Taxes |
|
(3,498) |
|
1,134 |
|
946 |
|
(2,454) |
|
|
|
(3,872) |
| |||||||||
|
(Provision for) benefit from income taxes |
|
(344) |
|
(101) |
I |
(818) |
I |
117 |
I |
|
|
(1,146) |
| |||||||||
|
Net (Loss) Income |
|
(3,842) |
|
1,033 |
|
128 |
|
(2,337) |
|
|
|
(5,018) |
| |||||||||
|
Loss (income) attributable to noncontrolling interests |
|
1,119 |
|
(259) |
J |
1,828 |
J |
— |
|
|
|
2,688 |
| |||||||||
|
Net (Loss) Income attributable to CWI Stockholders |
|
$ |
(2,723) |
|
$ |
774 |
|
$ |
1,956 |
|
$ |
(2,337) |
|
|
|
$ |
(2,330) |
| ||||
|
Basic and Diluted Net Loss Per Share |
|
$ |
(0.29) |
|
|
|
|
|
|
|
|
|
$ |
(0.06) |
| |||||||
|
Basic and Diluted Weighted Average Shares Outstanding |
|
9,323,705 |
|
|
|
|
|
|
|
28,779,149 |
K |
38,102,854 |
| |||||||||
The accompanying notes are an integral part of these pro forma condensed consolidated financial statements.
CAREY WATERMARK INVESTORS INCORPORATED
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
For the Nine Months Ended September 30, 2013
(in thousands except share and per share amounts)
|
|
|
|
|
Pro Forma Adjustments (Including Pre-Acquisition Historical Amounts) |
|
|
| ||||||||||
|
|
|
|
|
|
|
|
|
Weighted |
|
|
| ||||||
|
|
|
CWI |
|
Other 2013 |
|
Hawks Cay |
|
Average |
|
|
| ||||||
|
|
|
Historical |
|
Transactions |
|
Resort |
|
Shares |
|
Pro Forma |
| ||||||
|
Hotel Revenues |
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Rooms |
|
$ |
56,067 |
|
$ |
31,214 |
B |
$ |
22,445 |
B |
|
|
$ |
109,726 |
| ||
|
Food and beverage |
|
11,480 |
|
11,229 |
B |
8,910 |
B |
|
|
31,619 |
| ||||||
|
Other hotel income |
|
5,781 |
|
4,473 |
B |
7,634 |
B |
|
|
17,888 |
| ||||||
|
Total Revenues |
|
73,328 |
|
46,916 |
|
38,989 |
|
|
|
159,233 |
| ||||||
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Hotel Expenses |
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Rooms |
|
12,665 |
|
7,811 |
C |
11,424 |
C |
|
|
31,900 |
| ||||||
|
Food and beverage |
|
8,470 |
|
8,632 |
C |
6,041 |
C |
|
|
23,143 |
| ||||||
|
Other hotel operating expenses |
|
3,093 |
|
3,425 |
C |
3,951 |
C |
|
|
10,469 |
| ||||||
|
General and administrative |
|
5,941 |
|
4,403 |
C |
3,048 |
C |
|
|
13,392 |
| ||||||
|
Sales and marketing |
|
7,058 |
|
4,570 |
C |
1,979 |
C |
|
|
13,607 |
| ||||||
|
Repairs and maintenance |
|
2,664 |
|
1,882 |
C |
1,256 |
C |
|
|
5,802 |
| ||||||
|
Utilities |
|
2,538 |
|
1,525 |
C |
1,016 |
C |
|
|
5,079 |
| ||||||
|
Management fees |
|
1,506 |
|
869 |
C |
674 |
C |
|
|
3,049 |
| ||||||
|
Property taxes, insurance and rent |
|
3,630 |
|
2,215 |
C |
1,556 |
C |
|
|
7,401 |
| ||||||
|
Depreciation and amortization |
|
10,155 |
|
7,190 |
C |
3,012 |
C |
|
|
20,357 |
| ||||||
|
Total Hotel Expenses |
|
57,720 |
|
42,522 |
|
33,957 |
|
|
|
134,199 |
| ||||||
|
Other Operating Expenses |
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Acquisition-related expenses |
|
17,250 |
|
(16,840) |
D |
(397) |
D |
|
|
13 |
| ||||||
|
Management expenses |
|
803 |
|
— |
|
— |
|
|
|
803 |
| ||||||
|
Corporate general and administrative expenses |
|
3,186 |
|
— |
|
— |
|
|
|
3,186 |
| ||||||
|
Asset management fees to affiliate |
|
1,783 |
|
906 |
E |
544 |
E |
|
|
3,233 |
| ||||||
|
Total Other Operating Expenses |
|
23,022 |
|
(15,934) |
|
147 |
|
|
|
7,235 |
| ||||||
|
Operating (Loss) Income |
|
(7,414) |
|
20,328 |
|
4,885 |
|
|
|
17,799 |
| ||||||
|
Other (Expenses) and Income |
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Net income (loss) from equity investments in real estate |
|
599 |
|
(2,600) |
F |
— |
|
|
|
(2,001) |
| ||||||
|
Interest expense |
|
(8,190) |
|
(5,828) |
H |
(3,813) |
H |
|
|
(17,831) |
| ||||||
|
|
|
(7,591) |
|
(8,428) |
|
(3,813) |
|
|
|
(19,832) |
| ||||||
|
(Loss) Income from Operations Before Incomes Taxes |
|
(15,005) |
|
11,900 |
|
1,072 |
|
|
|
(2,033) |
| ||||||
|
(Provision for) benefit from income taxes |
|
(939) |
|
307 |
I |
(89) |
I |
|
|
(721) |
| ||||||
|
Net (Loss) Income |
|
(15,944) |
|
12,207 |
|
983 |
|
|
|
(2,754) |
| ||||||
|
Loss attributable to noncontrolling interests |
|
529 |
|
1,205 |
J |
— |
|
|
|
1,734 |
| ||||||
|
Net (Loss) Income attributable to CWI Stockholders |
|
$ |
(15,415) |
|
$ |
13,412 |
|
$ |
983 |
|
|
|
$ |
(1,020) |
| ||
|
Basic and Diluted Net Loss Per Share |
|
$ |
(0.46) |
|
|
|
|
|
|
|
$ |
(0.02) |
| ||||
|
Basic and Diluted Weighted Average Shares Outstanding |
|
33,793,892 |
|
|
|
|
|
13,777,352 |
K |
47,571,244 |
| ||||||
The accompanying notes are an integral part of these pro forma condensed consolidated financial statements.
CAREY WATERMARK INVESTORS INCORPORATED
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1. Basis of Presentation
The condensed consolidated statement of operations for the year ended December 31, 2012 was derived from our historical audited consolidated financial statements as of and for the year ended December 31, 2012, included in our Annual Report on Form 10-K for the year ended December 31, 2012. The pro forma condensed consolidated balance sheet as of September 30, 2013 and the pro forma condensed consolidated statement of operations for the nine months ended September 30, 2013 were derived from the unaudited consolidated financial statements included in our Quarterly Report on Form 10-Q for the nine months ended September 30, 2013.
Note 2. Historical Acquisitions
2012 Acquisitions
On May 31, 2012, June 8, 2012, July 9, 2012 and December 6, 2012, we acquired controlling interests in four hotels: Hampton Inn Boston Braintree, Hilton Garden Inn New Orleans French Quarter/CBD, Lake Arrowhead Resort and Spa, and Courtyard San Diego Mission Valley, respectively. Additionally, on October 3, 2012, we entered into the Westin Atlanta Venture, which we account for under the equity method of accounting (collectively, our “2012 Acquisitions”).
Our 2012 Acquisitions are reflected in our historical condensed consolidated statement of operations for the duration of the nine months ended September 30, 2013 and for a portion of the year ended December 31, 2012, reflecting their results of operations from their respective dates of acquisition through the end of each period presented. We made pro forma adjustments (Note 3, adjustments B through K) to reflect the impact on our results of operations had these acquisitions been made on January 1, 2012.
Other 2013 Transactions
On February 14, 2013, March 12, 2013, May 29, 2013, June 6, 2013, July 10, 2013 and August 13, 2013, we acquired controlling interests in the Hilton Southeast Portfolio (which is comprised of five select-service hotels), the Courtyard Pittsburgh Shadyside, the Hutton Hotel Nashville, the Holiday Inn Manhattan 6th Avenue Chelsea, the Fairmont Sonoma Mission Inn & Spa and the Marriott Raleigh City Center, respectively (collectively, our “Other 2013 Acquisitions”). On July 17, 2013, we sold our 49% joint venture interest in the Long Beach Venture, comprising our share of all the assets and liabilities of the venture, to Ensemble Hotel Partners, LLC, our joint venture partner, for $22.6 million (collectively, with the acquisitions described above, the “Other 2013 Transactions”). The venture owned two hotels: the Hotel Maya, a DoubleTree by Hilton; and the Residence Inn Long Beach Downtown.
All of the transactions noted above are reflected in our historical condensed consolidated balance sheet at September 30, 2013 and, therefore, no pro forma adjustments to our historical condensed consolidated balance sheet as of September 30, 2013 were required. In addition, the transactions noted above are reflected in our historical condensed consolidated statement of operations for the nine months ended September 30, 2013 reflecting their results of operations from their respective dates of acquisition through September 30, 2013. We made pro forma adjustments (Note 3, adjustments B through K) to reflect the impact on our results of operations had these acquisitions been made on January 1, 2012.
Notes to Pro Forma Condensed Consolidated Financial Statements
Note 3. Pro Forma Adjustments
A. Investment
Hawks Cay Resort
On October 23, 2013, we acquired the Hawks Cay Resort from BH/NV Hawks Cay Property Holdings, LLC, an unaffiliated third party and acquired real estate assets totaling $131.3 million. The resort includes 177 resort guest rooms and a resort residential management program that includes over 250 two-, three- and four-bedroom villas and is located on Duck Key in the Florida Keys. The hotel and the resort residential program will be managed by Pyramid Hotel Group, an unaffiliated third party. In connection with this acquisition, we expensed acquisition costs of $4.4 million, which are reflected as a charge to distributions in excess of accumulated losses in the pro forma condensed consolidated balance sheet as of September 30, 2013. We placed $8.9 million into lender-held escrow accounts in connection with planned renovations.
We acquired the Hawks Cay Resort through a wholly-owned subsidiary and obtained a non-recourse mortgage loan of $79.0 million. The stated interest rate of one-month LIBOR plus 4.9% has effectively been fixed at approximately 5.7% through an interest rate swap agreement, maturing on November 4, 2016, which is the maturity date of the loan. We capitalized $1.5 million of deferred financing costs related to this loan.
The following table presents a summary of assets acquired and liabilities assumed in this business combination, at the date of acquisition (Dollars in thousands):
|
|
|
Hawks Cay
|
| |
|
|
|
Resort |
| |
|
Acquisition consideration |
|
|
| |
|
CWI Cash consideration |
|
$ |
131,301 |
|
|
Assets acquired at fair value: |
|
|
| |
|
Land |
|
$ |
25,800 |
|
|
Building |
|
73,150 |
| |
|
Furniture, fixtures and equipment |
|
2,891 |
| |
|
Accounts receivable |
|
433 |
| |
|
Other assets(a) |
|
32,264 |
| |
|
Liabilities assumed at fair value: |
|
|
| |
|
Accounts payable, accrued expenses, and other liabilities |
|
(3,237 |
) | |
|
Net assets acquired at fair value |
|
$ |
131,301 |
|
(a) Other assets includes $31.7 million related to an in-place rental management program recorded as an intangible asset, which is being amortized over 45 years.
Notes to Pro Forma Condensed Consolidated Financial Statements
B. Hotel Revenue
The pro forma adjustments related to our 2012 Acquisitions for the year ended December 31, 2012 represent the historical incremental revenues recognized by each property prior to our acquisition from January 1, 2012 to their respective acquisition dates. The pro forma adjustments related to our Other 2013 Acquisitions for the nine months ended September 30, 2013 represent the historical incremental revenues recognized by each property prior to our acquisition from January 1, 2013 to their respective acquisition dates.
(Dollars in thousands)
|
|
|
Pre-Acquisition Historical
|
| |||||||
|
|
|
Year Ended December 31, 2012
|
| |||||||
|
|
|
|
|
|
|
|
| |||
|
|
|
2012 |
|
Other 2013 |
|
Hawks Cay |
| |||
|
|
|
|
|
|
|
|
| |||
|
|
|
Acquisitions
|
|
Acquisitions
|
|
Resort
|
| |||
|
Rooms |
|
$ |
18,401 |
|
$ |
88,343 |
|
$ |
26,384 |
|
|
Food and beverage |
|
3,295 |
|
22,224 |
|
10,026 |
| |||
|
Other hotel income |
|
2,245 |
|
10,303 |
|
8,838 |
| |||
|
|
|
$ |
23,941 |
|
$ |
120,870 |
|
$ |
45,248 |
|
(Dollars in thousands)
|
|
|
|
|
Pre-Acquisition Historical
|
| ||||
|
|
|
|
|
Nine Months Ended September 30, 2013
|
| ||||
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
Other 2013 |
|
Hawks Cay |
| ||
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
Acquisitions
|
|
Resort
|
| ||
|
Rooms |
|
|
|
$ |
31,214 |
|
$ |
22,445 |
|
|
Food and beverage |
|
|
|
11,229 |
|
8,910 |
| ||
|
Other hotel income |
|
|
|
4,473 |
|
7,634 |
| ||
|
|
|
|
|
$ |
46,916 |
|
$ |
38,989 |
|
C. Hotel Expenses
Pre-Acquisition Historical Hotel Expenses
Pro forma adjustments for hotel expenses are derived from the historical financial statements of each of our investments except for those related to depreciation and amortization, sales and marketing, and management fees as illustrated below. The pro forma adjustments related to our 2012 Acquisitions for the year ended December 31, 2012 represent the pre-acquisition historical incremental expenses recognized by each property prior to our acquisition from January 1, 2012 to their respective acquisition dates. The pro forma adjustments related to our Other 2013 Acquisitions for the nine months ended September 30, 2013 represent the pre-acquisition historical incremental expenses recognized by each property prior to our acquisition from January 1, 2013 to their respective acquisition dates.
Notes to Pro Forma Condensed Consolidated Financial Statements
(Dollars in thousands)
|
|
|
Pre-Acquisition Historical |
| |||||||
|
|
|
Year Ended December 31, 2012 |
| |||||||
|
|
|
2012 |
|
Other 2013 |
|
Hawks Cay |
| |||
|
|
|
|
|
|
|
|
| |||
|
|
|
Acquisitions |
|
Acquisitions |
|
Resort |
| |||
|
Rooms |
|
$ |
3,732 |
|
$ |
20,239 |
|
$ |
13,155 |
|
|
Food and beverage |
|
2,942 |
|
17,741 |
|
7,273 |
| |||
|
Other hotel operating expenses |
|
810 |
|
7,574 |
|
4,944 |
| |||
|
General and administrative |
|
2,339 |
|
10,346 |
|
3,841 |
| |||
|
Repairs and maintenance |
|
963 |
|
4,531 |
|
1,807 |
| |||
|
Utilities |
|
807 |
|
3,747 |
|
1,246 |
| |||
|
Property taxes, insurance and rent |
|
1,038 |
|
4,819 |
|
2,132 |
| |||
|
|
|
$ |
12,631 |
|
$ |
68,997 |
|
$ |
34,398 |
|
(Dollars in thousands)
|
|
|
Pre-Acquisition Historical |
| ||||
|
|
|
Nine Months Ended September 30, 2013 |
| ||||
|
|
|
Other 2013 |
|
Hawks Cay |
| ||
|
|
|
|
|
|
| ||
|
|
|
Acquisitions |
|
Resort |
| ||
|
Rooms |
|
$ |
7,811 |
|
$ |
11,424 |
|
|
Food and beverage |
|
8,632 |
|
6,041 |
| ||
|
Other hotel operating expenses |
|
3,425 |
|
3,951 |
| ||
|
General and administrative |
|
4,403 |
|
3,048 |
| ||
|
Repairs and maintenance |
|
1,882 |
|
1,256 |
| ||
|
Utilities |
|
1,525 |
|
1,016 |
| ||
|
Property taxes, insurance and rent |
|
2,215 |
|
1,556 |
| ||
|
|
|
$ |
29,893 |
|
$ |
28,292 |
|
Adjusted Hotel Expenses
Pro forma adjustments reflect depreciation and amortization of the acquired assets at fair value on a straight-line basis using an estimated useful life not to exceed 40 years for building and building improvements, one to 11 years for furniture, fixtures and equipment and one to 93 years for intangible assets. Pro forma adjustments for sales and marketing and management fees reflect expenses resulting from franchise and management agreements entered into upon acquisition. The following pro forma adjustments for the year ended December 31, 2012 and the nine months ended September 30, 2013 represent the incremental hotel expenses that would have been incurred in addition to those presented in our historical financial statements.
Notes to Pro Forma Condensed Consolidated Financial Statements
(Dollars in thousands)
|
|
|
Year Ended December 31, 2012 |
| |||||||||
|
|
|
2012 |
|
|
Other 2013 |
|
|
Hawks Cay |
| |||
|
|
|
|
|
|
|
|
|
|
| |||
|
|
|
Acquisitions |
|
|
Acquisitions |
|
|
Resort |
| |||
|
Sales and marketing - pre-acquisition historical |
|
$ |
2,573 |
|
|
$ |
11,269 |
|
|
$ |
2,678 |
|
|
Sales and marketing - pro forma adjustments |
|
20 |
|
|
877 |
|
|
— |
| |||
|
Sales and marketing - pro forma results |
|
$ |
2,593 |
|
|
$ |
12,146 |
|
|
$ |
2,678 |
|
|
|
|
|
|
|
|
|
|
|
| |||
|
Management fees - pre-acquisition historical |
|
$ |
740 |
|
|
$ |
3,740 |
|
|
$ |
1,137 |
|
|
Management fees - pro forma adjustments |
|
9 |
|
|
(1,001 |
) |
|
(348 |
) | |||
|
Management fees - pro forma results |
|
$ |
749 |
|
|
$ |
2,739 |
|
|
$ |
789 |
|
|
|
|
|
|
|
|
|
|
|
| |||
|
Depreciation and amortization - pre-acquisition historical |
|
$ |
2,702 |
|
|
$ |
13,483 |
|
|
$ |
4,546 |
|
|
Depreciation and amortization - pro forma adjustments |
|
856 |
|
|
4,554 |
|
|
(530 |
) | |||
|
Depreciation and amortization - pro forma results |
|
$ |
3,558 |
|
|
$ |
18,037 |
|
|
$ |
4,016 |
|
(Dollars in thousands)
|
|
|
Nine Months Ended September 30, 2013 | ||||||
|
|
|
Other 2013 |
|
|
Hawks Cay |
| ||
|
|
|
|
|
|
|
| ||
|
|
|
Acquisitions |
|
|
Resort |
| ||
|
Sales and marketing - pre-acquisition historical |
|
$ |
4,592 |
|
|
$ |
1,979 |
|
|
Sales and marketing - pro forma adjustments |
|
(22 |
) |
|
— |
| ||
|
Sales and marketing - pro forma results |
|
$ |
4,570 |
|
|
$ |
1,979 |
|
|
|
|
|
|
|
|
| ||
|
Management fees - pre-acquisition historical |
|
$ |
1,419 |
|
|
$ |
977 |
|
|
Management fees - pro forma adjustments |
|
(550 |
) |
|
(303 |
) | ||
|
Management fees - pro forma results |
|
$ |
869 |
|
|
$ |
674 |
|
|
|
|
|
|
|
|
| ||
|
Depreciation and amortization - pre-acquisition historical |
|
$ |
5,051 |
|
|
$ |
3,524 |
|
|
Depreciation and amortization - pro forma adjustments |
|
2,139 |
|
|
(512 |
) | ||
|
Depreciation and amortization - pro forma results |
|
$ |
7,190 |
|
|
$ |
3,012 |
|
D. Acquisition-Related Expenses
Acquisition costs directly attributable to our 2012 Acquisitions, which are non-recurring in nature and total $5.1 million, are reflected in our historical condensed consolidated statement of operations for the year ended December 31, 2012. We have reflected a pro forma adjustment to exclude these non-recurring charges from our pro forma condensed consolidated statement of operations.
Acquisition costs directly attributable to our Other 2013 Acquisitions, which are non-recurring in nature and total $0.1 million and $16.8 million, are reflected in our historical condensed consolidated statement of operations for the year ended December 31, 2012 and nine months ended September 30, 2013, respectively. We have reflected a pro forma adjustment to exclude these non-recurring charges from our pro forma condensed consolidated statement of operations.
Notes to Pro Forma Condensed Consolidated Financial Statements
Acquisition costs of $0.4 million related to the Hawks Cay Resort transaction, which are non-recurring in nature, are reflected in our historical condensed consolidated statement of operations for the nine months ended September 30, 2013. We have reflected a pro forma adjustment to exclude these non-recurring charges from our pro forma condensed consolidated statement of operations.
E. Asset Management Fees
We pay our advisor an annual asset management fee equal to 0.50% of the aggregate average monthly market value of our investments. Pro forma adjustments for such fees are reflected in the accompanying pro forma condensed consolidated statement of operations in order to reflect what the fee would have been had the investments been made on January 1, 2012. The following pro forma adjustments for the year ended December 31, 2012 and the nine months ended September 30, 2013 represent incremental asset management fees that would have been incurred in addition to asset management fees presented in our historical financial statements (in thousands):
|
|
|
Year Ended |
|
Nine Months Ended |
| ||
|
|
|
|
|
|
| ||
|
|
|
December 31, 2012 |
|
September 30, 2013 |
| ||
|
|
|
|
|
|
| ||
|
2012 Acquisitions |
|
$ |
680 |
|
$ |
— |
|
|
Other 2013 Acquisitions |
|
2,333 |
|
906 |
| ||
|
Hawks Cay Resort |
|
725 |
|
544 |
| ||
|
|
|
$ |
3,738 |
|
$ |
1,450 |
|
F. Net Income (Loss) from Equity Investments in Real Estate
Earnings for our equity method investments are recognized in accordance with each respective investment agreement and are based upon the allocation of the investment’s net assets at book value as if the investment were hypothetically liquidated at the end of each reporting period. Under the conventional approach to accounting for equity investments, an investor applies its percentage ownership interest to the venture’s net income to determine the investor’s share of the earnings or losses of the venture. This approach is not applicable if the venture’s capital structure gives different rights and priorities to its investors as it is difficult to describe an investor’s interest in a venture simply as a specified percentage. As we have priority return on our investments, we follow the hypothetical liquidation at book value method in determining our share of the ventures’ earnings or losses for the reporting period as this method better reflects our claim on the ventures’ book value at the end of each reporting period. Due to our preferred interests, we are not responsible for and will not reflect losses to the extent our partners continue to have equity in the investments.
2012 Acquisitions
Based on the hypothetical liquidation at book value method, our pro forma equity in the loss of the Westin Atlanta Venture would have been approximately $0.8 million for the period from January 1, 2012 through the date of acquisition.
Other 2013 Transactions
Income from the Long Beach Venture totaling $1.8 million and $2.6 million is reflected in our historical consolidated statement of operations for the year ended December 31, 2012 and the nine months ended September 30, 2013, respectively. We have reflected pro forma adjustments to exclude these earnings from our respective pro forma condensed consolidated statements of operations.
G. Bargain Purchase Gain
A bargain purchase gain of $3.8 million is included in our historical statement of operations for the year ended December 31, 2012 related to our acquisition of Lake Arrowhead Resort and Spa. We have reflected a pro forma adjustment to exclude this transaction-related gain in our pro forma condensed consolidated statement of operations, as this is not expected to have a recurring impact on us.
Notes to Pro Forma Condensed Consolidated Financial Statements
H. Interest Expense
The following pro forma adjustments for the year ended December 31, 2012 and the nine months ended September 30, 2013 represent the incremental interest expense that would have been incurred in addition to the amount presented in our historical financial statements.
(Dollars in thousands)
|
|
|
Year Ended December 31, 2012 |
| |||||||
|
|
|
|
|
|
|
|
| |||
|
|
|
2012 |
|
Other 2013 |
|
Hawks Cay |
| |||
|
|
|
|
|
|
|
|
| |||
|
|
|
Acquisitions |
|
Acquisitions |
|
Resort |
| |||
|
|
|
|
|
|
|
|
| |||
|
Interest expense - pre-acquisition historical |
|
$ |
3,708 |
|
$ |
14,265 |
|
$ |
2,682 |
|
|
Interest expense - pro forma adjustments |
|
(618) |
|
(308) |
|
2,414 |
| |||
|
Interest expense - pro forma results |
|
$ |
3,090 |
|
$ |
13,957 |
|
$ |
5,096 |
|
(Dollars in thousands)
|
|
|
Nine Months Ended September 30, 2013 |
| ||||
|
|
|
|
|
|
| ||
|
|
|
Other 2013 |
|
Hawks Cay |
| ||
|
|
|
|
|
|
| ||
|
|
|
Acquisitions |
|
Resort |
| ||
|
|
|
|
|
|
| ||
|
Interest expense - pre-acquisition historical |
|
$ |
5,127 |
|
$ |
1,954 |
|
|
Interest expense - pro forma adjustments |
|
701 |
|
1,859 |
| ||
|
Interest expense - pro forma results |
|
$ |
5,828 |
|
$ |
3,813 |
|
I. (Provision for) Benefit from Income Taxes
We have reflected pro forma adjustments related to each of our investments based upon estimated effective tax rates for each investment which take into account the fact that certain activities are taxable and other activities are pass-through items for income tax purposes. These pro forma adjustments reflect what the income tax provisions would have been had the investments been made on January 1, 2012. The following pro forma adjustments for the year ended December 31, 2012 and the nine months ended September 30, 2013 represent the (expense) benefit that would have been incurred based on the new entity structure, as applicable (in thousands):
|
|
|
Year Ended |
|
Nine Months Ended |
| ||
|
|
|
|
|
|
| ||
|
|
|
December 31, 2012 |
|
September 30, 2013 |
| ||
|
|
|
|
|
|
| ||
|
2012 Acquisitions |
|
$ |
(101) |
|
$ |
— |
|
|
Other 2013 Acquisitions |
|
(818) |
|
307 |
| ||
|
Hawks Cay Resort |
|
117 |
|
(89) |
| ||
|
|
|
$ |
(802) |
|
$ |
218 |
|
J. Loss (Income) Attributable to Noncontrolling Interests
The combined pro forma adjustment to loss (income) attributable to noncontrolling interest related to our 2012 Acquisitions was $(0.3) million for the year ended December 31, 2012.
The pro forma adjustment to loss (income) attributable to noncontrolling interest related to our Other 2013 Acquisitions was $1.8 million and $1.2 million for the year ended December 31, 2012 and the nine months ended September 30, 2013, respectively.
K. Weighted Average Shares
The pro forma weighted average shares outstanding were determined as if the number of shares required to raise the funds used for each acquisition included in these pro forma condensed consolidated financial statements, if we did not have sufficient cash
Notes to Pro Forma Condensed Consolidated Financial Statements
on hand to acquire and commence operations of the hotel for pro forma purposes, were issued on January 1, 2012. In addition, historical weighted average share amounts have been adjusted to treat a stock distribution paid on December 19, 2013 as if it were outstanding as of the beginning of the periods presented.