Attached files
| file | filename |
|---|---|
| EX-10.1 - PURCHASE AND SALE AGREEMENT - CNL Growth Properties, Inc. | d16752dex101.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 29, 2015
CNL GROWTH PROPERTIES, INC.
(Exact Name of Registrant as Specified in its Charter)
| Maryland | 000-54686 | 26-3859644 | ||
| (State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
450 South Orange Avenue
Orlando, Florida 32801
(Address of Principal Executive Offices; Zip Code)
Registrant’s telephone number, including area code: (407) 650-1000
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4 (c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 2.01 | Completion of Acquisition or Disposition of Assets |
Sale of Crescent Alexander Village – Charlotte, North Carolina
As previously reported in a Current Report on Form 8-K filed with the Securities and Exchange Commission (the “Commission”) on September 14, 2015, a joint venture (the “Joint Venture”) of CNL Growth Properties, Inc. (the “Company”) and an affiliate of Crescent Communities, a real estate development group (“Crescent”) entered into an agreement on September 8, 2015 for the sale of the Joint Venture’s 320-unit Class A garden-style multifamily community located on 22.4 acres in the University Research Park section of Charlotte, North Carolina (“Alexander Village”). The sale price for Alexander Village was approximately $52.25 million.
On September 29, 2015, the Joint Venture completed the sale of Alexander Village to Alexander Village Acquisition LP, an unaffiliated third-party buyer. The net cash to the Company from the sale of Alexander Village is approximately $11.8 million after repayment of approximately $25.3 million of debt, closing costs, reserves, and distributions to Crescent in accordance with the provisions of the Joint Venture’s governing documents. The Company currently intends to use the net proceeds from the sale of Alexander Village for general corporate purposes, including a possible special distribution to stockholders.
As previously reported, three of the Company’s four joint ventures with Crescent decided to pursue the potential sale of their respective multifamily communities: Crescent Crosstown, Crescent Cool Springs and Alexander Village (collectively, the “Crescent JV Properties”). Crescent Crosstown and Crescent Cool Springs are currently under contract for sale and are scheduled to close on October 5, 2015, and by the end of 2015, respectively. There can be no assurance that the sales of Crescent Crosstown or Crescent Cool Springs will be completed within the contemplated times, or at all. Crescent Crosstown and Crescent Cool Springs are currently classified as real estate held for sale in the Company’s financial statements.
Having taken into consideration the closing of the Company’s public offering in April 2014 and the estimated time needed to complete the Company’s acquisition and development phase and achieve substantial stabilization of its assets, the Company and its advisor have begun to explore strategic liquidity alternatives for its multifamily portfolio. On August 26, 2015, the Company’s board of directors appointed a Special Committee comprised of James P. Dietz and Stephen P. Elker, its independent directors to oversee the process of exploring strategic alternatives. While the dispositions of the Crescent JV Properties are consistent with this course of action, there can be no assurances that the process will result in stockholder liquidity.
| Item 9.01 | Financial Statements and Exhibits. |
| (b) | Pro forma financial information. |
The Company’s unaudited pro forma condensed consolidated balance sheet at June 30, 2015 illustrates the estimated effects of (i) the sale of Alexander Village and (ii) the pending sales of Crescent Crosstown and Crescent Cool Springs, referred to in Item 2.01 above (the “Transactions”) as if they had occurred on such date.
The unaudited pro forma condensed consolidated statements of operations for the six months ended June 30, 2015 and for the year ended December 31, 2014 (collectively, the “Pro Forma Periods”) include certain pro forma adjustments to illustrate the estimated effect of the Transactions as if they had occurred on the first day of each of the Pro Forma Periods.
The unaudited pro forma condensed consolidated balance sheet and statements of operations are presented for informational purposes only and do not purport to be indicative of the Company’s financial results as if the Transactions reflected herein had occurred on the first date of or been in effect during the Pro Forma Periods. Further, the unaudited pro forma condensed consolidated balance sheet and statements of operations should not be viewed as indicative of the Company’s financial results in the future; and they should be read in conjunction with the Company’s financial statements as filed with the Commission on Form 10-Q for the six months and the quarterly period ended June 30, 2015 and on Form 10-K for the year ended December 31, 2014.
| (d) | Exhibits. |
| 10.1 | Purchase and Sale Agreement dated effective September 8, 2015, by and between GGT Crescent Alexander NC Venture, LLC and Alexander Village Acquisition LP. |
CNL GROWTH PROPERTIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 2015
| Historical June 30, 2015 |
Crescent Alexander Village Property Sold Pro Forma Adjustments |
Crescent Cool Springs Property Pending Pro Forma Adjustments |
Crescent Crosstown Property Pending Pro Forma Adjustments |
Pro Forma June 30, 2015 |
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| ASSETS | ||||||||||||||||||||
| Real estate assets, net: |
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| Operating real estate assets, net (including VIEs $184,302,086) |
$ | 213,813,499 | $ | — | $ | — | $ | — | $ | 213,813,499 | ||||||||||
| Construction in process, including land (including VIEs $136,845,420) |
144,670,385 | — | — | — | 144,670,385 | |||||||||||||||
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| Total real estate assets, net |
358,483,884 | — | — | — | 358,483,884 | |||||||||||||||
| Real estate held for sale (including VIEs $103,632,442) |
105,899,511 | (33,477,187 | )(a) | (38,969,958 | )(a) | (33,452,366 | )(a) | — | ||||||||||||
| Cash and cash equivalents (including VIEs $6,715,142) |
21,501,379 | 51,633,987 | (a) | 58,940,000 | (a) | 57,386,593 | (a) | |||||||||||||
| (25,341,440 | )(b) | (27,799,357 | )(b) | (30,053,438 | )(b) | 106,267,724 | ||||||||||||||
| Restricted cash (including VIEs $2,430,377) |
2,852,332 | — | — | — | 2,852,332 | |||||||||||||||
| Loan costs, net (including VIEs $2,292,716) |
2,831,053 | (29,688 | )(b) | (62,606 | )(b) | (61,817 | )(b) | 2,676,942 | ||||||||||||
| Other assets (including VIEs $1,075,569) |
1,360,401 | — | — | — | 1,360,401 | |||||||||||||||
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| Total Assets |
$ | 492,928,560 | $ | (7,214,328 | ) | $ | (7,891,921 | ) | $ | (6,181,028 | ) | $ | 471,641,283 | |||||||
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| LIABILITIES AND EQUITY | ||||||||||||||||||||
| Liabilities: |
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| Mortgages and construction notes payable (including VIEs $263,258,820) |
$ | 291,473,820 | $ | (25,284,971 | )(b) | $ | (27,737,243 | )(b) | $ | (30,000,000 | )(b) | $ | 208,451,606 | |||||||
| Accrued development costs (including VIEs $20,804,631) |
20,804,631 | — | — | — | 20,804,631 | |||||||||||||||
| Due to related parties |
1,669,045 | — | — | — | 1,669,045 | |||||||||||||||
| Accounts payable and other accrued expenses (including VIEs $3,340,062) |
4,054,177 | (56,469 | )(b) | (62,114 | )(b) | (53,438 | )(b) | 3,882,156 | ||||||||||||
| Other liabilities (including VIEs $2,098,282) |
2,169,451 | — | — | — | 2,169,451 | |||||||||||||||
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| Total Liabilities |
320,171,124 | (25,341,440 | ) | (27,799,357 | ) | (30,053,438 | ) | 236,976,889 | ||||||||||||
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| Commitments and contingencies |
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| Equity: |
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| Stockholders’ equity: |
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| Preferred stock, $.01 par value per share, authorized and unissued 200,000,000 shares |
— | — | — | — | — | |||||||||||||||
| Common stock, $0.01 par value per share, 1,120,000,000 shares authorized; 22,703,363 issued and 22,526,171 outstanding |
225,262 | — | — | — | 225,262 | |||||||||||||||
| Capital in excess of par value |
170,792,081 | — | — | — | 170,792,081 | |||||||||||||||
| Accumulated earnings (deficit) |
(2,313,756 | ) | 8,463,477 | (a) | 9,626,616 | (a) | 10,071,074 | (a) | ||||||||||||
| (13,838 | )(b) | (30,179 | )(b) | (26,011 | )(b) | 25,777,383 | ||||||||||||||
| Accumulated cash distributions |
(29,284,024 | ) | — | — | — | (29,284,024 | ) | |||||||||||||
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| Total Stockholders’ Equity |
139,419,563 | 8,449,639 | 9,596,437 | 10,045,063 | 167,510,702 | |||||||||||||||
| Noncontrolling interest |
33,337,873 | 9,693,323 | (a) | 10,343,426 | (a) | 13,863,153 | (a) | |||||||||||||
| — | (15,850 | )(b) | (32,427 | )(b) | (35,806 | )(b) | 67,153,692 | |||||||||||||
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| Total Equity |
172,757,436 | 18,127,112 | 19,907,436 | 23,872,410 | 234,664,394 | |||||||||||||||
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| Total Liabilities and Equity |
$ | 492,928,560 | $ | (7,214,328 | ) | $ | (7,891,921 | ) | $ | (6,181,028 | ) | $ | 471,641,283 | |||||||
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The abbreviation VIEs above means Variable Interest Entities.
See accompanying notes to unaudited pro forma condensed consolidated financial statements.
2
CNL GROWTH PROPERTIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2015
| Historical June 30, 2015 |
Crescent Alexander Village Property Sold Pro Forma Adjustments (a) |
Crescent Cool Springs Property Pending Pro Forma Adjustments (a) |
Crescent Crosstown Property Pending Pro Forma Adjustments (a) |
Pro Forma June 30, 2015 |
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| Revenues: |
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| Rental income from operating leases |
$ | 13,157,312 | $ | (963,474 | ) | $ | (978,326 | ) | $ | (2,341,688 | ) | $ | 8,873,824 | |||||||
| Other property revenue |
1,084,816 | (50,481 | ) | (77,870 | ) | (149,811 | ) | 806,654 | ||||||||||||
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| Total revenues |
14,242,128 | (1,013,955 | ) | (1,056,196 | ) | (2,491,499 | ) | 9,680,478 | ||||||||||||
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| Expenses: |
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| Property operating expenses |
6,998,721 | (503,245 | ) | (733,644 | ) | (906,065 | ) | 4,855,767 | ||||||||||||
| General and administrative |
1,769,150 | (3,836 | ) | (146,596 | ) | (63,052 | ) | 1,555,666 | ||||||||||||
| Asset management fees, net of amounts capitalized |
1,052,529 | (76,865 | )(b) | (116,363 | )(b) | (104,877 | )(b) | 754,424 | ||||||||||||
| Property management fees |
567,425 | (40,800 | ) | (45,000 | ) | (63,753 | ) | 417,872 | ||||||||||||
| Acquisition fees and expenses, net of amounts capitalized |
16,462 | — | — | — | 16,462 | |||||||||||||||
| Depreciation |
5,330,934 | (482,131 | ) | (603,442 | ) | (623,303 | ) | 3,622,058 | ||||||||||||
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| Total expenses |
15,735,221 | (1,106,877 | ) | (1,645,045 | ) | (1,761,050 | ) | 11,222,249 | ||||||||||||
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| Operating loss |
(1,493,093 | ) | 92,922 | 588,849 | (730,449 | ) | (1,541,771 | ) | ||||||||||||
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| Other income (expense): |
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| Interest and other income |
(716 | ) | — | — | — | (716 | ) | |||||||||||||
| Interest expense and loan cost amortization, net of amounts capitalized |
(2,280,531 | ) | 215,127 | (c) | 288,754 | (c) | 269,257 | (c) | (1,507,393 | ) | ||||||||||
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| Total other income (expense) |
(2,281,247 | ) | 215,127 | 288,754 | 269,257 | (1,508,109 | ) | |||||||||||||
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| Loss from continuing operations |
(3,774,340 | ) | 308,049 | 877,603 | (461,192 | ) | (3,049,880 | ) | ||||||||||||
| Net (income) loss from continuing operations attributable to noncontrolling interest |
258,407 | (123,194 | ) | (342,120 | ) | 188,153 | (18,754 | ) | ||||||||||||
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| Net loss from continuing operations attributable to common stockholders |
$ | (3,515,933 | ) | $ | 184,855 | $ | 535,483 | $ | (273,039 | ) | $ | (3,068,634 | ) | |||||||
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| Net loss per share of common stock (basic and diluted): from continuing operations |
$ | (0.16 | ) | $ | (0.14 | ) | ||||||||||||||
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| Weighted average number of shares of common stock outstanding (basic and diluted) |
22,526,171 | 22,526,171 | ||||||||||||||||||
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See accompanying notes to unaudited pro forma condensed consolidated financial statements.
3
CNL GROWTH PROPERTIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2014
| Historical December 31, 2014 |
Crescent Alexander Village Property Sold Pro Forma Adjustments (a) |
Crescent Cool Springs Property Pending Pro Forma Adjustments (a) |
Crescent Crosstown Property Pending Pro Forma Adjustments (a) |
Pro Forma December 31, 2014 |
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| Revenues: |
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| Rental income from operating leases |
$ | 15,309,618 | $ | (410,025 | ) | $ | (175,863 | ) | $ | (4,188,292 | ) | $ | 10,535,438 | |||||||
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| Total revenues |
15,309,618 | (410,025 | ) | (175,863 | ) | (4,188,292 | ) | 10,535,438 | ||||||||||||
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| Expenses: |
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| Property operating expenses |
8,488,871 | (540,321 | ) | (530,751 | ) | (1,662,323 | ) | 5,755,476 | ||||||||||||
| General and administrative |
2,893,328 | (9,016 | ) | (36,748 | ) | (6,962 | ) | 2,840,602 | ||||||||||||
| Asset management fees, net of amounts capitalized |
1,070,864 | (26,663 | )(b) | (21,639 | )(b) | (212,628 | )(b) | 809,934 | ||||||||||||
| Property management fees |
763,681 | (47,600 | ) | (60,000 | ) | (103,841 | ) | 552,240 | ||||||||||||
| Acquisition fees and expenses, net of amounts capitalized |
76,046 | — | — | — | 76,046 | |||||||||||||||
| Depreciation |
5,946,416 | (312,457 | ) | (254,145 | ) | (1,503,867 | ) | 3,875,947 | ||||||||||||
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| Total expenses |
19,239,206 | (936,057 | ) | (903,283 | ) | (3,489,621 | ) | 13,910,245 | ||||||||||||
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| Operating loss |
(3,929,588 | ) | 526,032 | 727,420 | (698,671 | ) | (3,374,807 | ) | ||||||||||||
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| Other income (expense): |
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| Interest and other income |
55,165 | — | — | — | 55,165 | |||||||||||||||
| Interest expense and loan cost amortization, net of amounts capitalized |
(1,545,485 | ) | 46,820 | (c) | 53,727 | (c) | 369,240 | (c) | (1,075,698 | ) | ||||||||||
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| Total other income (expense) |
(1,490,320 | ) | 46,820 | 53,727 | 369,240 | (1,020,533 | ) | |||||||||||||
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| Loss from continuing operations |
(5,419,908 | ) | 572,852 | 781,147 | (329,431 | ) | (4,395,340 | ) | ||||||||||||
| Net (income) loss from continuing operations attributable to noncontrolling interests |
897,670 | (228,354 | ) | (314,055 | ) | 34,550 | 389,811 | |||||||||||||
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| Net loss from continuing operations attributable to common stockholders |
$ | (4,522,238 | ) | $ | 344,498 | $ | 467,092 | $ | (294,881 | ) | $ | (4,005,529 | ) | |||||||
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| Net loss per share of common stock (basic and diluted) from continuing operations |
$ | (0.21 | ) | $ | (0.19 | ) | ||||||||||||||
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| Weighted average number of shares of common stock outstanding (basic and diluted) |
21,361,725 | 21,361,725 | ||||||||||||||||||
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See accompanying notes to unaudited pro forma condensed consolidated financial statements.
4
CNL GROWTH PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| 1. | Basis of Presentation |
The accompanying unaudited pro forma condensed consolidated balance sheet of the Company is presented as if the disposition of the completed sale of the Crescent Alexander Village Property and the pending dispositions of the Crescent Cool Springs and Crescent Crosstown Properties described in Note 2. “Pro Forma Transactions” had occurred as of June 30, 2015. The accompanying unaudited pro forma condensed consolidated statements of operations of the Company are presented for the six months ended June 30, 2015 and for the year ended December 31, 2014 (the “Pro Forma Periods”), and include certain pro forma adjustments to illustrate the estimated effect of the Company’s dispositions, described in Note 2. “Pro Forma Transactions”, as if they had occurred as of the first day of the period presented. The amounts included in the historical columns represent the Company’s historical balance sheet and operating results for the respective Pro Forma Periods presented.
The accompanying unaudited pro forma condensed consolidated financial statements have been prepared in accordance with Article 11 of Regulation S-X and do not include all of the information and note disclosures required by generally accepted accounting principles of the United States (“GAAP”). Pro forma financial information is intended to provide information about the continuing impact of a transaction by showing how a specific transaction or group of transactions might have affected historical financial statements. Pro forma financial information illustrates only the isolated and objectively measurable (based on historically determined amounts) effects of a particular transaction, and excludes effects based on judgmental estimates of how historical management practices and operating decisions may or may not have changed as a result of the transaction. Therefore, pro forma financial information does not include information about the possible or expected impact of current actions taken by management in response to the pro forma transaction, as if management’s actions were carried out in previous reporting periods.
This unaudited pro forma condensed consolidated financial information is presented for informational purposes only and does not purport to be indicative of the Company’s financial results or financial position as if the transactions reflected herein had occurred, or been in effect during the Pro Forma Periods. In addition, this unaudited pro forma condensed consolidated financial information should not be viewed as indicative of the Company’s expected financial results for future periods.
| 2. | Pro Forma Transactions |
On September 8, 2015, the Alexander Village Joint Venture entered into a purchase and sale agreement with Alexander Village Acquisition LP, an unaffiliated third party, for the sale of the Crescent Alexander Village Property. The purchase price for the Crescent Alexander Village Property is approximately $52.25 million excluding transaction costs.
On September 29, 2015, the Alexander Village Joint Venture completed the sale of the Crescent Alexander Village Property.
On September 8, 2015, the Crescent Crosstown Joint Venture entered into a purchase and sale agreement with Centennial Holding Company, LLC, an unaffiliated third party, for the sale of the Crescent Crosstown Property. The purchase price for the Crescent Crosstown Property is approximately $58.3 million excluding transaction costs. The Crescent Crosstown Joint Venture anticipates the consummation of the sale to occur in October 2015.
On September 21, 2015, the Cool Springs Joint Venture entered into a purchase and sale agreement with SHLP Acquisition, LLC, an unaffiliated third party, for the sale of the Crescent Cool Springs Property. The purchase price for the Crescent Cool Springs Property is approximately $60.0 million excluding transaction costs. The Cool Springs Joint Venture anticipates the consummation of the sale to occur by the end of 2015.
There can be no assurance that the conditions to the sale of the Crescent Crosstown or Crescent Cool Springs Properties will be satisfied or waived on terms satisfactory to the parties or that the sale of these properties will ultimately be completed.
5
| 3. | Adjustments to Unaudited Pro Forma Condensed Consolidated Balance Sheet |
The adjustments to the Unaudited Pro Forma Condensed Consolidated Balance Sheet represent adjustments needed to the Company’s historical balance sheet as if the completed disposition of the Crescent Alexander Village Property and the pending sale of the Crescent Cool Springs and Crescent Crosstown Properties occurred as of June 30, 2015.
| (a) | These adjustments reflect the net sales proceeds received from the completed disposition of the Crescent Alexander Village Property and the pending disposition of the Crescent Cool Springs and Crescent Crosstown Properties and the elimination of the related account balances as if the sales were consummated as of June 30, 2015. Accumulated deficit has been increased to reflect the receipt of net cash proceeds and removal of assets and liabilities related to the sales, as follows: |
| Crescent Alexander Village Sold |
Crescent Cool Springs Pending |
Crescent Crosstown Pending |
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| Sales Price |
$ | 52,250,000 | $ | 60,000,000 | $ | 58,300,000 | ||||||
| Closing and transaction costs |
(616,013 | ) | (1,060,000 | ) | (913,407 | ) | ||||||
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| Net sales proceeds |
51,633,987 | 58,940,000 | 57,386,593 | |||||||||
| Net book value |
(33,477,187 | ) | (38,969,958 | ) | (33,452,366 | ) | ||||||
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| Gains on sale |
$ | 18,156,800 | $ | 19,970,042 | $ | 23,934,227 | ||||||
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| (b) | These adjustments reflect the use of a portion of the net cash proceeds received from the completed sale of the Crescent Alexander Village Property and the pending sales of the Crescent Cool Springs and Crescent Crosstown Properties to pay down existing indebtedness, including accrued interest, and to eliminate loan costs and other assets related to the existing indebtedness. |
| 4. | Adjustments to Unaudited Pro Forma Condensed Consolidated Statement of Operations |
The adjustments to the unaudited pro forma condensed consolidated statement of operations represent adjustments needed to the Company’s historical results to remove the historical operating results of the completed sale of the Crescent Alexander Village Property and the pending sales of the Crescent Cool Springs and Crescent Crosstown Properties as if they had occurred on the first day of the Pro Forma Period Presented.
| (a) | Except as described in (b) and (c) below, these amounts represent the elimination of the operations of the completed sale of the Crescent Alexander Village Property and the pending sales of the Crescent Cool Springs and Crescent Crosstown Properties from the historical amounts for the six months ended June 30, 2015 and for the year ended December 31, 2014, to give effect to the completed sale of the Crescent Alexander Village Property and the pending sale of the Crescent Cool Springs and Crescent Crosstown Properties as if the sales occurred on the first day of the Pro Forma Period Presented. The Crescent Alexander Village, Crescent Cool Springs and Crescent Crosstown Properties were classified in continuing operations because the proposed dispositions of these three properties would neither cause a strategic shift in the Company, nor are they considered to have a major impact on the Company’s business. Therefore, they do not qualify as discontinued operations under ASU 2014-08. |
| (b) | Amount includes the elimination of asset management fee expenses, calculated at 0.08334% monthly on the invested assets value of the Crescent Alexander Village, Crescent Cool Springs and Crescent Crosstown Properties for the six months ended June 30, 2015 and for the year ended December 31, 2014. These fees were historically paid by the Company to its advisor and would not have been incurred subsequent to the disposition of these assets. |
| (c) | Represents the elimination of interest expense and loan cost amortization to reflect the use of net cash proceeds from the completed sale of the Crescent Alexander Village, and the pending sales of Crescent Cool Springs and Crescent Crosstown Properties, to retire indebtedness that was collateralized by the Crescent Alexander Village, Crescent Cool Springs and Crescent Crosstown Properties as if the sales occurred on the first day of the Pro Forma Period presented. |
6
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: October 5, 2015 | CNL GROWTH PROPERTIES, INC. | |||||
| a Maryland corporation | ||||||
| By: | /s/ Scott C. Hall | |||||
| Scott C. Hall | ||||||
| Senior Vice President of Operations | ||||||