CNL Lifestyle Properties (CLLY) 8-K Completion of Acquisition or Disposition of Assets

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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): July 1, 2013

CNL LIFESTYLE PROPERTIES, INC.

(Exact Name of Registrant as Specified in Charter)

Maryland	000-51288	20-0183627
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

450 South Orange Ave.

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.

On July 1, 2013, pursuant to three purchase and sale agreements between three subsidiaries of CNL Lifestyle Properties, Inc. (the “Company”), respectively, as seller, and Health Care REIT, Inc. (“HCN”), as purchaser, the Company completed its sale to HCN of all of its interests in three joint ventures with Sunrise Senior Living Investments, Inc. (“Sunrise”) for a sales price of approximately $195.4 million, including transaction costs (the “Sunrise Joint Ventures Disposition”). The Sunrise Joint Ventures Disposition was effectuated pursuant to: (i) a Purchase and Sale Agreement between CLP SL II Holding, LLC, a subsidiary of the Company, as seller, and HCN, as purchaser, dated December 18, 2012 with respect to the CLPSUN Partners II, LLC joint venture (the “CNLSun II Venture”); (ii) a Purchase and Sale Agreement between CLP SL III Holding, LLC, a subsidiary of the Company, as seller, and HCN, as purchaser, dated December 18, 2012 with respect to the CLPSUN Partners III, LLC joint venture (the “CNLSun III Venture”); and (iii) a Purchase and Sale Agreement between CLP Senior Holding, LLC, an affiliate of the Company, as seller, and HCN, as purchaser, dated December 18, 2012 with respect to the CC3 Acquisition, LLC joint venture (the “CNLSun I Venture” and, collectively with the CNLSun II Venture and CNLSun III Venture, the “CNL Sunrise Joint Ventures”). The Company’s entrance into these purchase and sale agreements was previously reported by the Company in a Form 8-K filing with the U.S. Securities and Exchange Commission on December 21, 2012. The CNL Sunrise Joint Ventures owned an aggregate of 42 senior housing communities in the U.S.

The Sunrise Joint Ventures Disposition was a result of the intent to exercise purchase options under each of the agreements for the CNL Sunrise Joint Venture (the “CNL Sunrise Joint Venture Agreements”) and HCN’s merger with Sunrise in January 2013 and was conditioned upon the Company’s receipt of certain proceeds as set forth in each of the CNL Sunrise Joint Venture Agreements. Through and as a result of the Sunrise Joint Ventures Disposition, the Company and its subsidiaries are no longer responsible for the payment of any loans related to the CNL Sunrise Joint Ventures.

The following contains more detailed information regarding each of the CNL Sunrise Joint Ventures:

CNL Sun I Venture

On January 10, 2011, pursuant to an agreement entered into with US Assisted Living Facilities III, Inc., an affiliate of an institutional investor (the “Sunrise CC3 Seller”), and Sunrise, the Company acquired an ownership interest in 29 senior living communities (the “CNLSun I Communities”) through the formation of the CNL Sun I Venture by the Company and Sunrise. The Company acquired 60.0% of the membership interests in CNLSun I Venture for an equity contribution of approximately $134.3 million, including certain transactional and closing costs. Sunrise contributed cash and its interest in the previous joint venture with the Sunrise CC3 Seller for a 40.0% membership interest in the CNLSun I Venture.

The following are the communities held by the CNLSun I Venture, their location and number of units:

CNLSun I Communities	Location	Units
Sunrise of Alta Loma	Rancho Cucamonga, California		59
Sunrise of Basking Ridge	Basking Ridge, New Jersey		77
Sunrise of Belmont	Belmont, California		78
Sunrise of Chesterfield	Chesterfield, Missouri		74
Sunrise of Claremont	Claremont, California		54
Sunrise of Crystal Lake	Crystal Lake, Illinois		58
Sunrise of Dix Hills	Dix Hills, New York		76
Sunrise of East Meadow	East Meadow, New York		82
Sunrise of East Setauket	East Setauket, New York		82
Sunrise of Edgewater	Edgewater, New Jersey		70
Sunrise of Flossmoor	Flossmoor, Illinois		62
Sunrise of Gahanna	Gahanna, Ohio		50
Sunrise of Gurnee	Gurnee, Illinois		59
Sunrise of Holbrook	Holbrook, New York		79
Sunrise of Huntington Common	Kennebunk, Maine		180
Sunrise of Lincroft	Lincroft, New Jersey		60
Sunrise of Marlboro	Marlboro, New Jersey		63

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CNLSun I Communities	Location	Units
Sunrise of Montgomery Village	Montgomery Village, Maryland		141
Sunrise of Naperville North	Naperville, Illinois		77
Sunrise of Plainview	Plainview, New York		51
Sunrise of Roseville	Roseville, Minnesota		77
Sunrise of Schaumburg	Schaumburg, Illinois		82
Sunrise of Silver Spring	Silver Spring, Maryland		65
Sunrise of Tustin	Santa Ana, California		48
Sunrise of University Park	Colorado Springs, Colorado		53
Sunrise of West Babylon	West Babylon, New York		79
Sunrise of West Bloomfield	West Bloomfield, Michigan		52
Sunrise of West Hills	West Hills, California		65
Sunrise of Weston	Weston, Massachusetts		29
			2,082

CNLSun II Venture

On August 2, 2011, pursuant to agreements with Metropolitan Connecticut Property Ventures, LLC, an affiliate of MetLife, Inc. (the “Sunrise II Seller”), and Sunrise, the Company acquired an ownership interest in a portfolio of six senior living properties (the “Sunrise II Communities”) through the formation by the Company and Sunrise of the CNLSun II Venture. The Company acquired 70.0% of the membership interests in the CNLSun II Venture for an equity contribution of approximately $19.0 million, excluding certain transactional and closing costs. Sunrise contributed $8.1 million, in cash, for a 30.0% membership interest in the CNLSun II Venture.

The following are the communities held by the CNLSun II Venture, their location and number of units:

CNLSun II Communities	Location	Units
Sunrise of Bloomfield Hills	Bloomfield, Michigan		220
The Stratford at Flat Irons	Broomfield, Colorado		93
Sunrise of John’s Creek	John’s Creek, Georgia		95
Sunrise of McCandless	McCandless, Pennsylvania		85
Sunrise at Wood Ranch	Simi Valley, California		97
Sunrise of Cary	Cary, North Carolina		93
			683

CNLSun III Venture

On October 12, 2011, pursuant to agreements with Master MorSun Acquisition LLC (“the Sunrise III Seller”), an affiliate of an institutional investor, and Sunrise, the Company acquired seven senior housing communities (the “Sunrise III Communities”) through the formation by the Company and Sunrise of the CNLSun III Venture. The Company acquired its 67.9% of the membership interests in CNLSun III Venture for an equity contribution of approximately $36.0 million, including certain transactional and closing costs. Sunrise acquired 32.1% of its membership interests in the CNLSun III Venture by transferring its interest in the previous joint venture with Sunrise III Seller, valued at $16.7 million.

The following are the communities held by the CNLSun III Venture, their location and number of units:

CNLSun III Communities	Location	Units
Sunrise of Plano	Plano, Texas		156
Sunrise of Golden Valley	Golden Valley, Minnesota		76
Sunrise of Minnetonka	Minnetonka, Minnesota		61
Sunrise of Shelby Township	Shelby Township, Michigan		69
Sunrise of Palo Alto	Palo Alto, California		81
Sunrise of Lenexa	Lenexa, Kansas		82
Sunrise of Dresher	Dresher, Pennsylvania		76
			601

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Item 9.01 Financial Statements and Exhibits.

(b) Pro forma financial information.

The following unaudited pro forma condensed consolidated balance sheet of the Company at March 31, 2013 illustrates the estimated effect of the disposition, described in Item 2.01 above, as if it had occurred on that date. The unaudited pro forma condensed consolidated statements of operations for the three months ended March 31, 2013 and for the year ended December 31, 2012 (the “Pro Forma Periods”), illustrate the estimated effect of the disposition, described in Item 2.01 above, as if it had occurred on the first day of each period presented.

This 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 as if the transactions reflected herein had occurred on the date or been in effect during the periods indicated. This pro forma condensed consolidated financial information should not be viewed as indicative of the Company’s financial results in the future and should be read in conjunction with the Company’s financial statements as filed on Form 10-Q for the three months ended March 31, 2013 and on Form 10-K for the years ended December 31, 2012 with the Securities and Exchange Commission.

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CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

(In thousands, except per share data)

	March 31, 2013 Historical			Pro Forma Adjustments			March 31, 2013 Pro Forma
ASSETS
Real estate investment properties, net (including $204,730 related to consolidated variable interest entities)	$	2,156,013		$	—		$	2,156,013
Investments in unconsolidated entities		274,877			(143,312	)(a)		131,565
Mortgages and other notes receivable, net		125,126			—			125,126
Deferred rent and lease incentives		108,259			—			108,259
Cash		105,014			195,446	(a)		300,460
Other assets		57,954			—			57,954
Restricted cash		49,753			—			49,753
Intangibles, net		33,572			—			33,572
Accounts and other receivables, net		18,298			—			18,298
Assets held for sale		10,525			—			10,525
Total Assets	$	2,939,391		$	52,134		$	2,991,525
LIABILITIES AND STOCKHOLDERS’ EQUITY
Mortgages and other notes payable (including $79,498 related to non-recourse debt of consolidated variable interest entities)	$	672,727		$	—		$	672,727
Senior notes, net of discount		394,177			—			394,177
Line of credit		95,000			—			95,000
Accounts payable and accrued expense		43,430			—			43,430
Other liabilities		67,085			—			67,085
Due to affiliates		1,323			—			1,323
Total Liabilities		1,273,742			—			1,273,742
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $.01 par value per share 200 million shares authorized and unissued		—			—			—
Excess shares, $.01 par value per share 120 million shares authorized and unissued		—			—			—
Common stock, $0.01 par value per share One billion shares authorized at March 31, 2013 339,184 shares issued and 317,942 shares outstanding		3,179			—			3,179
Capital in excess of par value		2,814,126			—			2,814,126
Accumulated deficit		(172,745	)		52,134	(a)		(120,611	)
Accumulated distributions		(971,583	)		—			(971,583	)
Accumulated other comprehensive loss		(7,328	)		—			(7,328	)
Total Stockholders Equity		1,665,649			52,134			1,717,783
Total Liabilities and Stockholders’ Equity	$	2,939,391		$	52,134		$	2,991,525

See accompanying notes to unaudited pro forma condensed consolidated financial statements.

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CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(In thousands, except per share data)

	Three  Months Ended March 31, 2013 Historical			Pro Forma Adjustments			Three  Months Ended March 31, 2013 Pro Forma
Revenues:
Rental income from operating leases	$	47,465		$	—		$	47,465
Property operating revenues		55,552			—			55,552
Interest income on mortgages and other notes receivable		3,419			—			3,419
Total revenues		106,436			—			106,436
Expenses:
Property operating expenses		53,981			—			53,981
Asset management fees to advisor		9,213			(1,462	)(a)		7,751
General and administrative		4,316			—			4,316
Ground lease and permit fees		4,780			—			4,780
Acquisition fees and costs		367			—			367
Other operating expenses		1,682			—			1,682
Bad debt expense		108			—			108
Depreciation and amortization		36,126			—			36,126
Total expenses		110,573			(1,462	)		109,111
Operating loss		(4,137	)		1,462			(2,675	)
Other income (expense):
Interest and other income		440			—			440
Interest expense and loan cost amortization		(18,332	)		—			(18,332	)
Equity in earnings (loss) of unconsolidated entities		(1,123	)		5,095	(b)		3,972
Total other income (expense)		(19,015	)		5,095			(13,920	)
Income (loss) from continuing operations	$	(23,152	)	$	6,557		$	(16,595	)
Loss per share of common stock (basic and diluted)
Continuing operations	$	(0.07	)				$	(0.06	)
Weighted average number of shares of common stock outstanding (basic and diluted)		316,382						316,382

See accompanying notes to unaudited pro forma condensed consolidated financial statements.

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CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(In thousands, except per share data)

	Year Ended December 31, 2012 Historical			Pro Forma Adjustments			Year Ended December 31, 2012 Pro Forma
Revenues:
Rental income from operating leases	$	165,889		$	—		$	165,889
Property operating revenues		302,393			—			302,393
Interest income on mortgages and other notes receivable		12,997			—			12,997
Total revenues		481,279			—			481,279
						��
Expenses:
Property operating expenses		241,381			—			241,381
Asset management fees to advisor		35,725			(5,850	)(a)		29,875
General and administrative		18,718			—			18,718
Ground lease and permit fees		14,482			—			14,482
Acquisition fees and costs		4,450			—			4,450
Other operating expenses		11,660			—			11,660
Bad debt expense		5,510			—			5,510
Loan loss provision		1,699			—			1,699
Loss on lease terminations		25,177			—			25,177
Depreciation and amortization		135,272			—			135,272
Total expenses		494,074			(5,850	)		488,224
Operating income (loss)		(12,795	)		5,850			(6,945	)
Other income (expense):
Interest and other income		1,200			—			1,200
Interest expense and loan cost amortization		(68,595	)		—			(68,595	)
Loss on extinguishment of debt		(4	)		—			(4	)
Equity in earnings (loss) of unconsolidated entities		5,521			(797	)(b)		4,724
Total other expense		(61,878	)		(797	)		(62,675	)
Income (loss) from continuing operations	$	(74,673	)	$	5,053		$	(69,620	)
Loss per share of common stock (basic and diluted)
Continuing operations	$	(0.24	)				$	(0.22	)
Weighted average number of shares of common stock outstanding (basic and diluted)		312,309						312,309

See accompanying notes to unaudited pro forma condensed consolidated financial statements.

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CNL LIFESTYLE 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 CNL Lifestyle Properties, Inc. and its Subsidiaries (collectively, the “Company”) is presented as if the disposition, described in Note 2, had occurred as of the date presented. The accompanying Unaudited Pro Forma Condensed Consolidated Statements of Operations of the Company are presented for the three months ended March 31, 2013 and for the year ended December 31, 2012, (“the Pro Forma Periods”), and include certain pro forma adjustments to illustrate the estimated effect of the disposition as described in Note 2 as if it had occurred as of the first day for each 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 if the transactions reflected herein had occurred or been in effect during the Pro Forma Periods. In addition, this 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 Transaction

In December 2012, in connection with existing purchase options held by Sunrise, the Company’s venture partner in the CNL Sunrise Joint Ventures, the Company entered into three agreements with HCN, as a result of a potential merger by HCN with Sunrise. Under the agreements, HCN and Sunrise agreed to purchase the Company’s interests in the aforementioned ventures, which own 42 properties in total, for an aggregate purchase price of approximately $195.9 million, subject to adjustment based on the closing date and actual cash flow distribution (the “Sunrise Joint Ventures Dispositions”). The Sunrise Joint Ventures Dispositions were conditioned upon the merger of HCN with Sunrise, which was completed in January 2013. On July 1, 2013, the Company completed the Sunrise Joint Ventures Dispositions.

3. Adjustments to Pro Forma Condensed Consolidated Balance Sheet

The adjustments to the pro forma condensed consolidated balance sheet represent adjustments to the Company’s historical results to illustrate as if the disposition of the CNL Sunrise Joint Ventures occurred as of March 31, 2013.

(a) Represents the proceeds from the sale of the CNL Sunrise Joint Ventures and the related gain, as described in Note 2 above and the elimination of the carrying value of the investments of the CNL Sunrise Joint Ventures.

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CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

4. Adjustments to Pro Forma Condensed Consolidated Statements of Operations

The adjustments to the pro forma condensed consolidated statements of operations represent adjustments to the Company’s historical results to eliminate the historical operating results of the CNL Sunrise Joint Ventures assuming the dispositions occurred on the first day of each of the Pro Forma Periods presented.

(a) Represents the elimination of asset management fees, which is 0.08334% of the real estate asset value (as defined in the agreement), paid to the Company’s advisor which was included in the Company’s historical results of operations.

(b) Represents the elimination of equity in earnings (loss) of unconsolidated entities recorded in the Company’s historical results of operations to reflect the impact of the Sunrise Joint Ventures Dispositions as aforementioned above.

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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: July 8, 2013		CNL LIFESTYLE PROPERTIES, INC.
		a Maryland Corporation
	By:	/s/ Joseph T. Johnson
		Joseph T. Johnson
		Chief Financial Officer, Senior Vice President and Treasurer

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