Attached files
| file | filename |
|---|---|
| 8-K/A - 8-K/A - Watermark Lodging Trust, Inc. | cwi22015q28-kakeybiscayne.htm |
| EX-99.2 - EXHIBIT 99.2 - Watermark Lodging Trust, Inc. | cwi220158-kaexh992.htm |
| EX-99.1 - EXHIBIT 99.1 - Watermark Lodging Trust, Inc. | cwi220158-kaexh991.htm |
Exhibit 99.3
CAREY WATERMARK INVESTORS 2 INCORPORATED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
Our pro forma condensed consolidated balance sheet as of March 31, 2015 has been prepared as if the significant transactions during the second quarter of 2015 (noted herein) had occurred as of March 31, 2015. Our pro forma condensed consolidated statements of operations for the three months ended March 31, 2015 and the year ended December 31, 2014 have been prepared based on our historical financial statements as if the significant transactions and related financings had occurred on January 1, 2014. We were formed as a Maryland corporation on May 22, 2014, and did not own any properties as of March 31, 2015. Our historical statement of operations represents the results of operations from May 22, 2014 (Inception) to December 31, 2014. Pro forma adjustments are intended to reflect what the effect would have been had we held our ownership interests as of January 1, 2014 on amounts that have been recorded in our historical consolidated statement 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 for the three months ended March 31, 2015 should be read in conjunction with our historical consolidated financial statements and notes thereto in our Quarterly Report on Form 10-Q as of and for the three months ended March 31, 2015. The pro forma condensed consolidated financial information for the year ended December 31, 2014 should be read in conjunction with our historical consolidated financial statements for the period from Inception through December 31, 2014 included in our Registration Statement on Form S-11 (File No. 333-196681) filed on January 16, 2015. The pro forma information is not necessarily indicative of our financial condition had the significant transactions occurred on January 1, 2014, or results of operations had the significant transactions occurred on January 1, 2014, 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 pro forma condensed consolidated financial information.
1 | |
CAREY WATERMARK INVESTORS 2 INCORPORATED | ||||||||||||||||||||||
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED) | ||||||||||||||||||||||
March 31, 2015 | ||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||
CWI 2 Historical | Marriott Sawgrass Golf Resort & Spa | Courtyard Nashville Downtown | Ritz-Carlton Key Biscayne Venture | Pro Forma | ||||||||||||||||||
Assets | ||||||||||||||||||||||
Hotels, at cost | $ | — | $ | 128,880 | A | 60,888 | A | $ | — | $ | 189,768 | |||||||||||
Equity investments in real estate | — | — | — | 37,559 | A | 37,559 | ||||||||||||||||
Cash | 500 | (91,464 | ) | A | (58,498 | ) | A | (141 | ) | A | 11,938 | |||||||||||
66,700 | A | 42,000 | A | |||||||||||||||||||
37,170 | A | 27,859 | A | |||||||||||||||||||
(3,220 | ) | A | (2,512 | ) | A | |||||||||||||||||
(3,411 | ) | A | (4,415 | ) | A | |||||||||||||||||
1,959 | A | (589 | ) | A | ||||||||||||||||||
Accounts receivable | — | 5,635 | A | 224 | A | — | 5,859 | |||||||||||||||
Restricted cash | — | 3,220 | A | 2,512 | A | — | 5,732 | |||||||||||||||
Other assets | 1,746 | 2,628 | A | 4 | A | — | 4,967 | |||||||||||||||
589 | A | |||||||||||||||||||||
Total assets | $ | 2,246 | $ | 148,097 | $ | 68,062 | $ | 37,418 | $ | 255,823 | ||||||||||||
Liabilities and Equity | ||||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||
Non-recourse debt | $ | — | $ | 66,700 | A | $ | 42,000 | A | $ | — | $ | 108,700 | ||||||||||
Note payable to affiliate | — | 37,170 | A | 27,859 | A | 37,418 | A | 102,447 | ||||||||||||||
Due to related parties and affiliates | 2,041 | 1,959 | A | — | — | 4,000 | ||||||||||||||||
Accounts payable, accrued expenses and other | 241 | 11,921 | A | 2,618 | A | — | 14,780 | |||||||||||||||
Total liabilities | 2,282 | 117,750 | 72,477 | 37,418 | 229,927 | |||||||||||||||||
Commitments and contingencies | ||||||||||||||||||||||
Equity: | ||||||||||||||||||||||
CWI 2 stockholders’ equity: | ||||||||||||||||||||||
Preferred stock | — | — | — | — | — | |||||||||||||||||
Class A common stock | — | — | — | — | — | |||||||||||||||||
Class T common stock | — | — | — | — | — | |||||||||||||||||
Additional paid-in capital | 200 | — | — | — | 200 | |||||||||||||||||
Accumulated losses | (536 | ) | (3,411 | ) | A | (4,415 | ) | A | — | (8,362 | ) | |||||||||||
Total CWI 2 stockholders’ deficit | (336 | ) | (3,411 | ) | (4,415 | ) | — | (8,162 | ) | |||||||||||||
Noncontrolling interest | 300 | 33,758 | A | — | — | 34,058 | ||||||||||||||||
Total (deficit) equity | (36 | ) | 30,347 | (4,415 | ) | — | 25,896 | |||||||||||||||
Total liabilities and equity | $ | 2,246 | $ | 148,097 | $ | 68,062 | $ | 37,418 | $ | 255,823 | ||||||||||||
The accompanying notes are an integral part of these pro forma condensed consolidated financial statements. | ||||||||||||||||||||||
2 | |
CAREY WATERMARK INVESTORS 2 INCORPORATED | ||||||||||||||||||||||
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) | ||||||||||||||||||||||
For the Three Months Ended March 31, 2015 | ||||||||||||||||||||||
(in thousands, except share and per share amounts) | ||||||||||||||||||||||
Pro Forma Adjustments (Including Pre-Acquisition Historical Amounts) | ||||||||||||||||||||||
CWI 2 Historical | Marriott Sawgrass Golf Resort & Spa | Courtyard Nashville Downtown | Ritz-Carlton Key Biscayne Venture | Pro Forma | ||||||||||||||||||
Hotel Revenues | ||||||||||||||||||||||
Rooms | $ | — | $ | 5,482 | B | $ | 2,363 | B | $ | — | $ | 7,845 | ||||||||||
Food and beverage | — | 6,164 | B | 214 | B | — | 6,378 | |||||||||||||||
Other hotel income | — | 1,702 | B | 61 | B | — | 1,763 | |||||||||||||||
Total Revenues | — | 13,348 | 2,638 | — | 15,986 | |||||||||||||||||
Operating Expenses | ||||||||||||||||||||||
Hotel Expenses | ||||||||||||||||||||||
Rooms | — | 1,326 | C | 383 | C | — | 1,709 | |||||||||||||||
Food and beverage | — | 3,587 | C | 160 | C | — | 3,747 | |||||||||||||||
Other hotel operating expenses | — | 869 | C | 5 | C | — | 874 | |||||||||||||||
Sales and marketing | — | 1,152 | C | 180 | C | — | 1,332 | |||||||||||||||
General and administrative | — | 1,095 | C | 203 | C | — | 1,298 | |||||||||||||||
Repairs and maintenance | — | 621 | C | 81 | C | — | 702 | |||||||||||||||
Utilities | — | 575 | C | 98 | C | — | 673 | |||||||||||||||
Management fees | — | 343 | C | 235 | C | — | 578 | |||||||||||||||
Property taxes, insurance, rent and other | — | 557 | C | 243 | C | — | 800 | |||||||||||||||
Depreciation and amortization | — | 1,034 | C | 530 | C | — | 1,564 | |||||||||||||||
Total Hotel Expenses | — | 11,159 | 2,118 | — | 13,277 | |||||||||||||||||
Other Operating Expenses | ||||||||||||||||||||||
Corporate general and administrative expenses | 261 | — | — | — | 261 | |||||||||||||||||
Acquisition-related expenses | 168 | (15 | ) | D | (153 | ) | D | — | — | |||||||||||||
Asset management fees to affiliate and other | — | 104 | E | 92 | E | 97 | E | 293 | ||||||||||||||
Total Other Operating Expenses | 429 | 89 | (61 | ) | 97 | 554 | ||||||||||||||||
Operating (Loss) Income | (429 | ) | 2,100 | 581 | (97 | ) | 2,155 | |||||||||||||||
Other Income and (Expenses) | ||||||||||||||||||||||
Interest expense | — | (672 | ) | F | (372 | ) | F | (1,044 | ) | |||||||||||||
Equity in earnings of equity method investment in real estate | — | — | — | 855 | G | 855 | ||||||||||||||||
— | (672 | ) | (372 | ) | 855 | (189 | ) | |||||||||||||||
(Loss) Income from Operations Before Income Taxes | (429 | ) | 1,428 | 209 | 758 | 1,966 | ||||||||||||||||
Provision for income taxes | — | (171 | ) | H | (35 | ) | H | — | (206 | ) | ||||||||||||
Net (Loss) Income | (429 | ) | 1,257 | 174 | 758 | 1,760 | ||||||||||||||||
Income attributable to noncontrolling interest | — | (673 | ) | I | — | — | (673 | ) | ||||||||||||||
Net (Loss) Income Attributable to CWI 2 Stockholders | $ | (429 | ) | $ | 584 | $ | 174 | $ | 758 | $ | 1,087 | |||||||||||
Basic and Diluted Net (Loss) Income Per Share | $ | (19.28 | ) | $ | 48.92 | |||||||||||||||||
Basic and Diluted Weighted-Average Shares Outstanding | 22,222 | 22,222 | ||||||||||||||||||||
The accompanying notes are an integral part of these pro forma condensed consolidated financial statements. | ||||||||||||||||||||||
3 | |
CAREY WATERMARK INVESTORS 2 INCORPORATED | ||||||||||||||||||||||
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) | ||||||||||||||||||||||
For the Year Ended December 31, 2014 | ||||||||||||||||||||||
(in thousands, except share and per share amounts) | ||||||||||||||||||||||
Pro Forma Adjustments (Including Pre-Acquisition Historical Amounts) | ||||||||||||||||||||||
CWI 2 Historical May 22, 2014 (Inception) through December 31, 2014 | Marriott Sawgrass Golf Resort & Spa | Courtyard Nashville Downtown | Ritz-Carlton Key Biscayne Venture | Pro Forma | ||||||||||||||||||
Hotel Revenues | ||||||||||||||||||||||
Rooms | $ | — | $ | 19,695 | B | $ | 12,288 | B | $ | — | $ | 31,983 | ||||||||||
Food and beverage | — | 20,032 | B | 897 | B | — | 20,929 | |||||||||||||||
Other hotel income | — | 5,688 | B | 372 | B | — | 6,060 | |||||||||||||||
Total Revenues | — | 45,415 | 13,557 | — | 58,972 | |||||||||||||||||
Operating Expenses | ||||||||||||||||||||||
Hotel Expenses | ||||||||||||||||||||||
Rooms | — | 5,108 | C | 1,683 | C | — | 6,791 | |||||||||||||||
Food and beverage | — | 12,100 | C | 638 | C | — | 12,738 | |||||||||||||||
Other hotel operating expenses | — | 3,319 | C | 29 | C | — | 3,348 | |||||||||||||||
Sales and marketing | — | 3,681 | C | 760 | C | — | 4,441 | |||||||||||||||
General and administrative | — | 4,585 | C | 893 | C | — | 5,478 | |||||||||||||||
Repairs and maintenance | — | 2,399 | C | 276 | C | — | 2,675 | |||||||||||||||
Utilities | — | 2,250 | C | 347 | C | — | 2,597 | |||||||||||||||
Management fees | — | 1,160 | C | 1,149 | C | — | 2,309 | |||||||||||||||
Property taxes, insurance, rent and other | — | 2,347 | C | 986 | C | — | 3,333 | |||||||||||||||
Depreciation and amortization | — | 4,137 | C | 2,118 | C | — | 6,255 | |||||||||||||||
Total Hotel Expenses | — | 41,086 | 8,879 | — | 49,965 | |||||||||||||||||
Other Operating Expenses | ||||||||||||||||||||||
Corporate general and administrative expenses | 108 | — | — | — | 108 | |||||||||||||||||
Asset management fees to affiliate and other | — | 427 | E | 374 | E | 396 | E | 1,197 | ||||||||||||||
Total Other Operating Expenses | 108 | 427 | 374 | 396 | 1,305 | |||||||||||||||||
Operating (Loss) Income | (108 | ) | 3,902 | 4,304 | (396 | ) | 7,702 | |||||||||||||||
Other Income and (Expenses) | ||||||||||||||||||||||
Interest expense | — | (3,201 | ) | F | (1,743 | ) | F | (319 | ) | A | (5,263 | ) | ||||||||||
Equity in earnings of equity method investment in real estate | — | — | — | 3,359 | G | 3,359 | ||||||||||||||||
— | (3,201 | ) | (1,743 | ) | 3,040 | (1,904 | ) | |||||||||||||||
(Loss) Income from Operations Before Income Taxes | (108 | ) | 701 | 2,561 | 2,644 | 5,798 | ||||||||||||||||
Provision for income taxes | — | (581 | ) | H | (182 | ) | H | — | (763 | ) | ||||||||||||
Net (Loss) Income | (108 | ) | 120 | 2,379 | 2,644 | 5,035 | ||||||||||||||||
Income attributable to noncontrolling interest | — | (511 | ) | I | — | — | (511 | ) | ||||||||||||||
Net (Loss) Income Attributable to CWI 2 Stockholders | $ | (108 | ) | $ | (391 | ) | $ | 2,379 | $ | 2,644 | $ | 4,524 | ||||||||||
Basic and Diluted Net (Loss) Income Per Share | $ | (4.86 | ) | $ | 203.58 | |||||||||||||||||
Basic and Diluted Weighted-Average Shares Outstanding | 22,222 | 22,222 | ||||||||||||||||||||
The accompanying notes are an integral part of these pro forma condensed consolidated financial statements. | ||||||||||||||||||||||
4 | |
CAREY WATERMARK INVESTORS 2 INCORPORATED
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1. Basis of Presentation
The pro forma condensed consolidated balance sheet as of March 31, 2015 and the pro forma condensed consolidated statement of operations for the three months ended March 31, 2015 were derived from our historical consolidated financial statements included in our Quarterly Report on Form 10-Q as of and for the three months ended March 31, 2015. The pro forma condensed consolidated statement of operations for the year ended December 31, 2014 was derived from our historical consolidated financial statements included in our Registration Statement on Form S-11 (File No. 333-196681) filed on January 16, 2015.
Note 2. Pro Forma Adjustments
A. Investments
Marriott Sawgrass Golf Resort & Spa
On April 1, 2015, we acquired a 50% controlling interest in a joint venture owning the Marriott Sawgrass Golf Resort & Spa from our affiliate, Carey Watermark Investors Incorporated, or CWI 1, which acquired 100% of the property in October 2014. The joint venture acquired real estate and other hotel assets, net of assumed liabilities, assumed debt and contributions from noncontrolling interests totaling $24.8 million, as detailed in the table that follows. The 511-room resort is located in Ponte Vedra Beach, Florida. The hotel will continue to be managed by Marriott International, Inc., an unaffiliated third party.
Our investment was financed, in part, by a loan of $37.2 million from a subsidiary of W. P. Carey Inc., or W. P. Carey, which is the ultimate parent of our advisor, at a rate of London Interbank Offered Rate, or LIBOR, plus 1.1% and a maturity date of March 31, 2016.
CWI 1 obtained $78.0 million in non-recourse debt financing at the time of the initial acquisition in October 2014, of which $66.7 million had been drawn at the acquisition date, at a rate of LIBOR plus 3.85% and a maturity date of November 2019.
The effect of an increase or decrease in interest rates of 1/8% on pro forma interest expense is less than $0.1 million for the three months ended March 31, 2015, and $0.1 million and less than $0.1 million for the Predecessor and Successor, respectively, for the year ended December 31, 2014.
In connection with this acquisition, we expensed acquisition costs of $3.4 million, including acquisition fees of $2.0 million paid to our advisor, which represent 50% of acquisition costs incurred by CWI 1 on its acquisition of the hotel in October 2014. These costs are reflected as a charge to Accumulated losses in the pro forma condensed consolidated balance sheet as of March 31, 2015. We placed $2.7 million into lender-held escrow accounts in connection with general repair and maintenance of the hotel. Additionally, as required by our lender, we placed $0.5 million into lender-held escrow accounts for property taxes and insurance.
Distributions of $2.0 million that will be paid to CWI 1 primarily representing the income earned from the joint venture owning the Marriott Sawgrass Golf Resort & Spa prior to our acquisition date has been reflected in Due to related parties and affiliates in the pro forma condensed consolidated balance sheet as of March 31, 2015.
Prior to our acquisition of the hotel, a subsidiary of CWI 1, or the Successor, acquired the Marriott Sawgrass Golf Resort & Spa from MLQ SGR Holdco III, L.L.C., or the Predecessor, on October 3, 2014.
Courtyard Nashville Downtown
On May 1, 2015, we acquired the Courtyard Nashville Downtown hotel from Worthington Hyde Partners, an unaffiliated third party and acquired real estate and other hotel assets, net of assumed liabilities totaling $58.5 million, as detailed in the table that follows. The 192-room hotel is located in Nashville, Tennessee. The hotel will continue to be managed by Marriott International, Inc., an unaffiliated third party.
We acquired the Courtyard Nashville Downtown through a wholly-owned subsidiary and obtained a non-recourse mortgage loan of $42.0 million, with a floating interest rate of LIBOR plus 3.0%, which is subject to an interest rate cap. The loan is interest-only for 24 months and has a maturity date of May 2019. We capitalized $0.6 million of deferred financing costs related to this loan.
5 | |
Notes to Pro Forma Condensed Consolidated Financial Statements
In addition, our investment was financed, in part, by a loan of $27.9 million from a subsidiary of W. P. Carey at a rate of LIBOR plus 1.1% and a maturity date of December 30, 2015.
The effect of an increase or decrease in interest rates of 1/8% on pro forma interest expense is less than $0.1 million for both the three months ended March 31, 2015 and the year ended December 31, 2014.
In connection with this acquisition, we expensed acquisition costs of $4.4 million, including acquisition fees of $1.7 million paid to our advisor, which are reflected as a charge to Accumulated losses in the pro forma condensed consolidated balance sheet as of March 31, 2015. We placed $2.5 million into lender-held escrow accounts in connection with general repair and maintenance of the hotel.
The following table presents a preliminary summary of assets acquired and liabilities assumed in these business combinations, at the dates of acquisition (in thousands):
Marriott Sawgrass Golf Resort & Spa | Courtyard Nashville Downtown | ||||||||||
Acquisition consideration | |||||||||||
Cash consideration | $ | 24,764 | $ | 58,498 | |||||||
Assets acquired at fair value: | |||||||||||
Buildings | $ | 93,551 | $ | 47,443 | |||||||
Land | 26,400 | 8,500 | |||||||||
Furniture, fixtures and equipment | 8,132 | 4,945 | |||||||||
Building and site improvements | 27 | — | |||||||||
Construction in progress | 770 | — | |||||||||
Accounts receivable | 5,635 | 224 | |||||||||
Other assets | 2,628 | 4 | |||||||||
Liabilities assumed at fair value: | |||||||||||
Non-recourse mortgage | (66,700 | ) | — | ||||||||
Accounts payable, accrued expenses and other | (11,921 | ) | (2,618 | ) | |||||||
Contributions from noncontrolling interests at fair value | (33,758 | ) | — | ||||||||
Net assets acquired at fair value | $ | 24,764 | $ | 58,498 | |||||||
Ritz-Carlton Key Biscayne Venture
On May 29, 2015, we acquired a 19.33% interest in a joint venture owning the Ritz-Carlton Key Biscayne hotel from GB Key Biscayne Holdings, LLC, or the Key Biscayne Venture, an unaffiliated third party. Our affiliate, CWI 1, acquired a 47.34% interest in the Key Biscayne Venture on the same date. The remaining 33.33% interest is retained by the original owners. The property includes 302 resort guestrooms and 188 condo-hotel units (174 of which participated in the resort rental program as of the acquisition date) and is located in Key Biscayne, Florida.
We contributed capital of $37.6 million to acquire our ownership interest, which was financed, primarily, by a $37.4 million loan from a subsidiary of W. P. Carey at a rate of LIBOR plus 1.1% with a maturity date of December 30, 2015. The interest expense that would have been incurred on this loan was $0.3 million for the year ended December 31, 2014. Our investment in the Key Biscayne Venture was made through a joint venture with CWI 1, or the CWI REITs Venture, and also in the form of a preferred equity interest. CWI 1 is the managing member of the CWI REITs Venture.
The Key Biscayne Venture assumed a $164.0 million non-recourse mortgage loan on the hotel with an annual interest rate of 6.09% and a maturity date of June 2017.
6 | |
Notes to Pro Forma Condensed Consolidated Financial Statements
B. Hotel Revenue
Pro forma adjustments for hotel revenue are derived from the historical financial statements of our investments. The following pro forma adjustments for the three months ended March 31, 2015 and the year ended December 31, 2014 represent the incremental hotel revenues that would have been incurred in addition to those presented in our historical financial statements (in thousands):
Pre-Acquisition Historical | |||||||||||
Three Months Ended March 31, 2015 | |||||||||||
Marriott Sawgrass Golf Resort & Spa | Courtyard Nashville Downtown | ||||||||||
Rooms | $ | 5,482 | $ | 2,363 | |||||||
Food and beverage | 6,164 | 214 | |||||||||
Other hotel income | 1,702 | 61 | |||||||||
$ | 13,348 | $ | 2,638 | ||||||||
Pre-Acquisition Historical | |||||||||||||||||||
Year Ended December 31, 2014 | |||||||||||||||||||
Marriott Sawgrass Golf Resort & Spa | Courtyard Nashville Downtown | ||||||||||||||||||
Predecessor | Successor | Total | |||||||||||||||||
Rooms | $ | 15,478 | $ | 4,217 | $ | 19,695 | $ | 12,288 | |||||||||||
Food and beverage | 15,741 | 4,291 | 20,032 | 897 | |||||||||||||||
Other hotel income | 4,127 | 1,561 | 5,688 | 372 | |||||||||||||||
$ | 35,346 | $ | 10,069 | $ | 45,415 | $ | 13,557 | ||||||||||||
C. Hotel Expenses
Pro forma adjustments for hotel expenses are derived from the historical financial statements of our investments except for those related to sales and marketing, management fees, property tax, insurance, rent and other, and depreciation and amortization, as illustrated below. The following pro forma adjustments for the three months ended March 31, 2015 and the year ended December 31, 2014 represent the incremental hotel expenses that would have been incurred in addition to those presented in our historical financial statements (in thousands):
Pre-Acquisition Historical | |||||||||||
Three Months Ended March 31, 2015 | |||||||||||
Marriott Sawgrass Golf Resort & Spa | Courtyard Nashville Downtown | ||||||||||
Rooms | $ | 1,326 | $ | 383 | |||||||
Food and beverage | 3,587 | 160 | |||||||||
Other hotel operating expenses | 869 | 5 | |||||||||
General and administrative | 1,095 | 203 | |||||||||
Repairs and maintenance | 621 | 81 | |||||||||
Utilities | 575 | 98 | |||||||||
$ | 8,073 | $ | 930 | ||||||||
7 | |
Notes to Pro Forma Condensed Consolidated Financial Statements
Pre-Acquisition Historical | |||||||||||||||||||
Year Ended December 31, 2014 | |||||||||||||||||||
Marriott Sawgrass Golf Resort & Spa | Courtyard Nashville Downtown | ||||||||||||||||||
Predecessor | Successor | Total | |||||||||||||||||
Rooms | $ | 3,920 | $ | 1,188 | $ | 5,108 | $ | 1,683 | |||||||||||
Food and beverage | 9,285 | 2,815 | 12,100 | 638 | |||||||||||||||
Other hotel operating expenses | 2,596 | 723 | 3,319 | 29 | |||||||||||||||
General and administrative | 3,590 | 995 | 4,585 | 893 | |||||||||||||||
Repairs and maintenance | 1,804 | 595 | 2,399 | 276 | |||||||||||||||
Utilities | 1,795 | 455 | 2,250 | 347 | |||||||||||||||
$ | 22,990 | $ | 6,771 | $ | 29,761 | $ | 3,866 | ||||||||||||
Adjusted Hotel Expenses
Pro forma adjustments for sales and marketing and management fees reflect expenses resulting from franchise and management agreements, respectively, entered into upon acquisition, when applicable. Pro forma adjustments for property taxes, insurance, rent and other are derived from the historical financial statements of our investments, with the addition of amortization related to certain intangible assets/liabilities, when applicable. Pro forma adjustments for depreciation and amortization reflect depreciation and amortization of the acquired assets at fair value on a straight-line basis using the estimated useful lives of the properties (limited to 40 years for buildings and ranging generally from four years up to the remaining life of the building at the time of addition for building improvements), site improvements (generally four to 15 years) and furniture, fixtures and equipment (generally one to 12 years). The following pro forma adjustments for the three months ended March 31, 2015 and the year ended December 31, 2014 represent the incremental hotel expenses that would have been incurred in addition to those presented in our historical financial statements (in thousands):
Three Months Ended March 31, 2015 | |||||||||||
Marriott Sawgrass Golf Resort & Spa | Courtyard Nashville Downtown | ||||||||||
Sales and marketing - pre-acquisition historical | $ | 1,152 | $ | 180 | |||||||
Sales and marketing - pro forma adjustments | — | — | |||||||||
Sales and marketing - pro forma results | $ | 1,152 | $ | 180 | |||||||
Management fees - pre-acquisition historical | $ | 351 | $ | 331 | |||||||
Management fees - pro forma adjustments | (8 | ) | (96 | ) | |||||||
Management fees - pro forma results | $ | 343 | $ | 235 | |||||||
Property taxes, insurance, rent and other - pre-acquisition historical (a) | $ | 557 | $ | 274 | |||||||
Property taxes, insurance, rent and other - pro forma adjustments | — | (31 | ) | ||||||||
Property taxes, insurance, rent and other - pro forma results | $ | 557 | $ | 243 | |||||||
Depreciation and amortization - pre-acquisition historical | $ | 551 | $ | 227 | |||||||
Depreciation and amortization - pro forma adjustments | 483 | 303 | |||||||||
Depreciation and amortization - pro forma results | $ | 1,034 | $ | 530 | |||||||
___________
(a) | For Courtyard Nashville Downtown, the pre-acquisition historical balance is comprised of Property taxes and other, Rent expense, Insurance and State franchise and excise tax. |
8 | |
Notes to Pro Forma Condensed Consolidated Financial Statements
Year Ended December 31, 2014 | |||||||||||||||||||
Marriott Sawgrass Golf Resort & Spa | Courtyard Nashville Downtown | ||||||||||||||||||
Predecessor | Successor | Total | |||||||||||||||||
Sales and marketing - pre-acquisition historical | $ | 3,935 | $ | 1,046 | $ | 4,981 | $ | 760 | |||||||||||
Sales and marketing - pro forma adjustments | (1,300 | ) | — | (1,300 | ) | — | |||||||||||||
Sales and marketing - pro forma results | $ | 2,635 | $ | 1,046 | $ | 3,681 | $ | 760 | |||||||||||
Management fees - pre-acquisition historical | $ | 951 | $ | 276 | $ | 1,227 | $ | 2,254 | |||||||||||
Management fees - pro forma adjustments | (35 | ) | (32 | ) | (67 | ) | (1,105 | ) | |||||||||||
Management fees - pro forma results | $ | 916 | $ | 244 | $ | 1,160 | $ | 1,149 | |||||||||||
Property taxes, insurance, rent and other - pre-acquisition historical (a) | $ | 1,983 | $ | 364 | $ | 2,347 | 1,109 | ||||||||||||
Property taxes, insurance, rent and other - pro forma adjustments | — | — | — | (123 | ) | ||||||||||||||
Property taxes, insurance, rent and other - pro forma results | $ | 1,983 | $ | 364 | $ | 2,347 | $ | 986 | |||||||||||
Depreciation and amortization - pre-acquisition historical | $ | 4,133 | $ | 1,243 | $ | 5,376 | $ | 927 | |||||||||||
Depreciation and amortization - pro forma adjustments | (1,008 | ) | (231 | ) | (1,239 | ) | 1,191 | ||||||||||||
Depreciation and amortization - pro forma results | $ | 3,125 | $ | 1,012 | $ | 4,137 | $ | 2,118 | |||||||||||
___________
(a) | For Courtyard Nashville Downtown, the pre-acquisition historical balance is comprised of Property taxes and other, Rent expense, Insurance and State franchise and excise tax. |
D. Acquisition-Related Expenses
Acquisition costs of less than $0.1 million and $0.2 million related to the Marriott Sawgrass Golf Resort & Spa and Courtyard Nashville Downtown transactions, respectively, which are non-recurring in nature, are reflected in our historical condensed consolidated statement of operations for the three months ended March 31, 2015. We have reflected pro forma adjustments 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 0.55% 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 acquisition of investments occurred on January 1, 2014. The following pro forma adjustments for the three months ended March 31, 2015 and year ended December 31, 2014 represent incremental asset management fees that would have been incurred in addition to asset management fees presented in our historical financial statements (in thousands):
Three Months Ended | Year Ended | ||||||||||
March 31, 2015 | December 31, 2014 | ||||||||||
Marriott Sawgrass Golf Resort & Spa | $ | 104 | $ | 427 | |||||||
Courtyard Nashville Downtown | 92 | 374 | |||||||||
Ritz-Carlton Key Biscayne Venture | 97 | 396 | |||||||||
$ | 293 | $ | 1,197 | ||||||||
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Notes to Pro Forma Condensed Consolidated Financial Statements
F. Interest Expense
The following pro forma adjustments for the three months ended March 31, 2015 and year ended December 31, 2014 represent the incremental interest expense that would have been incurred in addition to the amounts presented in our historical financial statements (in thousands):
Three Months Ended March 31, 2015 | |||||||||||
Marriott Sawgrass Golf Resort & Spa | Courtyard Nashville Downtown | ||||||||||
Interest expense - pre-acquisition historical | $ | 716 | $ | 224 | |||||||
Interest expense - pro forma adjustments | (44 | ) | 148 | ||||||||
Interest expense - pro forma results | $ | 672 | $ | 372 | |||||||
Year Ended December 31, 2014 | |||||||||||||||||||
Marriott Sawgrass Golf Resort & Spa | Courtyard Nashville Downtown | ||||||||||||||||||
Predecessor | Successor | Total | |||||||||||||||||
Interest expense - pre-acquisition historical | $ | — | $ | 710 | $ | 710 | $ | 909 | |||||||||||
Interest expense - pro forma adjustments | 2,412 | 79 | 2,491 | 834 | |||||||||||||||
Interest expense - pro forma results | $ | 2,412 | $ | 789 | $ | 3,201 | $ | 1,743 | |||||||||||
G. Equity in Losses of Equity Method Investment in Real Estate
Under the conventional approach of accounting for equity method 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 inappropriate to use if the venture’s capital structure gives different rights and priorities to its investors. We have a priority return on our equity method investment. Therefore, we follow the hypothetical liquidation at book value method in determining our share of the venture’s earnings or losses for the reporting period as this method better reflects our claim on the venture’s book value at the end of each reporting period. Earnings for our equity method investment are recognized in accordance with the investment agreement and, where applicable, based upon the allocation of the investment’s net assets at book value as if the investment was hypothetically liquidated at the end of each reporting period.
Based upon the hypothetical liquidation at book value method, our pro forma equity in earnings would have been $0.9 million and $3.4 million for the three months ended March 31, 2015 and the year ended December 31, 2014, respectively.
H. Provision for Income Taxes
We have reflected pro forma adjustments related to our investments based upon an estimated effective tax rate, which takes into account the fact that certain activities are taxable and other activities are pass-through items for income tax purposes. The following pro forma adjustments for the three months ended March 31, 2015 and year ended December 31, 2014 reflect the incremental income tax provisions that would have been incurred, based on the new entity structure, in addition to the amounts presented in the historical financial statements, if any (in thousands):
Three Months Ended March 31, 2015 | |||||||||||
Marriott Sawgrass Golf Resort & Spa | Courtyard Nashville Downtown | ||||||||||
Provision for income taxes - pre-acquisition historical | $ | — | $ | — | |||||||
Provision for income taxes - pro forma adjustments | 171 | 35 | |||||||||
Provision for income taxes - pro forma results | $ | 171 | $ | 35 | |||||||
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Notes to Pro Forma Condensed Consolidated Financial Statements
Year Ended December 31, 2014 | |||||||||||||||||||
Marriott Sawgrass Golf Resort & Spa | Courtyard Nashville Downtown | ||||||||||||||||||
Predecessor | Successor | Total | |||||||||||||||||
Benefit for income taxes - pre-acquisition historical | $ | — | $ | (433 | ) | $ | (433 | ) | $ | — | |||||||||
Provision for income taxes - pro forma adjustments | 452 | 562 | 1,014 | 182 | |||||||||||||||
Provision for income taxes - pro forma results | $ | 452 | $ | 129 | $ | 581 | $ | 182 | |||||||||||
I. Income Attributable to Noncontrolling Interest
The pro forma adjustment to income attributable to noncontrolling interest related to CWI 1's ownership interest in the Marriott Sawgrass Golf Resort & Spa was $0.7 million and $0.5 million for the three months ended March 31, 2015 and year ended December 31, 2014, respectively.
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