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 30, 2014
CNL Lifestyle Properties, Inc.
(Exact name of registrant as specified in its charter)
| Maryland | 000-51288 | 27-2876363 | ||
(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)
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 |
As previously reported on a Current Report on Form 8-K filed on June 18, 2014, on June 12, 2014, CNL Lifestyle Properties, Inc., through various operating subsidiaries (collectively, the “Company”), entered into an agreement (the “Purchase and Sale Agreement”) with CF Arcis X LLC, an unaffiliated third party (the “Buyer”), for the sale of the Company’s entire portfolio of golf assets comprised of 48 properties (the “Golf Properties”). The purchase and sale of the Golf Properties pursuant to the Purchase and Sale Agreement is hereinafter referred to as the “Sale.”
The aggregate purchase price for the Golf Properties is approximately $320.0 million (the “Purchase Price”), subject to adjustment for certain receivables and operational fees and expenses.
On September 30, 2014, the Company completed the sale of the first tranche of 46 Golf Properties to the Buyer which represents a purchase price of approximately $306.5 million. The following are the first tranche of 46 Golf Properties and their locations:
Tranche 1 Golf Property | Location | |
| Ancala Country Club | Scottsdale, AZ | |
| Arrowhead Country Club | Glendale, AZ | |
| Arrowhead Golf Club | Littleton, CO | |
| Bear Creek Golf Club | Dallas, TX | |
| Broad Bay Country Club | Virginia Beach, VA | |
| Canyon Springs Golf Club | San Antonio, TX | |
| Clear Creek Golf Club | Houston, TX | |
| Continental Golf Course | Scottsdale, AZ | |
| Cowboys Golf Club | Grapevine, TX | |
| David L. Baker Golf Course | Fountain Valley, CA | |
| Deer Creek Golf Club | Overland Park, KS | |
| Eagle Brook Country Club | Geneva, IL | |
| Fox Meadow Country Club | Medina, OH | |
| Hunt Valley Golf Club | Phoenix, MD | |
| Kiskiack Golf Club | Williamsburg, VA | |
| Kokopelli Golf Club | Gilbert, AZ | |
| Lake Park Golf Club | Lewisville, TX | |
| LakeRidge Country Club | Lubbock, TX | |
| Las Vegas Golf Club | Las Vegas, NV | |
| Legend at Arrowhead Golf Resort | Glendale, AZ | |
| London Bridge Golf Club | Lake Havasu, AZ | |
| Majestic Oaks Golf Club | Ham Lake, MN | |
| Mansfield National Golf Club | Mansfield, TX | |
| Meadowbrook Golf and Country Club | Tulsa, OK | |
| Mesa del Sol Golf Club | Yuma, AZ | |
| Micke Grove Golf Course | Lodi, CA | |
| Montgomery Country Club | Laytonsville, MD | |
| Painted Desert Golf Club | Las Vegas, NV | |
| Palmetto Hall Plantation Club | Hilton Head, SC | |
Tranche 1 Golf Property | Location | |
| Plantation Golf Club | Frisco, TX | |
| Raven Golf Club at South Mountain | Phoenix, AZ | |
| Ruffled Feathers Golf Club | Lemont, IL | |
| Shandin Hills Golf Club | San Bernardino, CA | |
| Signature Golf Course | Solon, OH | |
| Stonecreek Golf Club | Phoenix, AZ | |
| Superstition Springs Golf Club | Mesa, AZ | |
| Tallgrass Country Club | Wichita, KS | |
| Tamarack Golf Club | Naperville, IL | |
| Tatum Ranch Golf Club | Cave Creek, AZ | |
| The Crossings Golf Club | Glen Allen, VA | |
| The Golf Club at Cinco Ranch | Katy, TX | |
| The Golf Club at Fossil Creek | Fort Worth, TX | |
| The Links at Challedon | Mount Airy, MD | |
| Valencia Country Club | Santa Clarita, CA | |
| Weston Hills Country Club | Weston, FL | |
| Weymouth Country Club | Medina, OH | |
It is expected that, the Company will complete the sale of the two remaining Golf Properties, which represent a purchase price of approximately $13.5 million by the end of the year.
The proceeds from the Sale have been or will be used to (i) retire debt; and/or (ii) make strategic capital expenditures to enhance certain of the company’s existing properties. The net cash to the Company from the Sale of the Golf Properties is approximately $198.9 million after repayment of approximately $94.2 million of debt, including associated prepayment penalties.
It is believed the effect of the Sale of the Golf Properties will be a marginal reduction to the Company’s estimated net asset value per-share, cash flows from operations and modified funds from operations (MFFO) as the net proceeds from the sale are used to retire the debt on the golf portfolio and are reinvested.
In March 2014, the Company engaged Jefferies LLC, a global investment banking and advisory firm, to assist the Company in actively evaluating strategic alternatives to provide liquidity to the stockholders.
| 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 June 30, 2014 illustrates the estimated effect of the Sale, 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 six months ended June 30, 2014 and for the years ended December 31, 2013, 2012, and 2011 (the “Pro Forma Periods”) and include certain pro forma adjustments to illustrate the estimated effect of the Sale described in Item 2.01 above, as if it had occurred on the first day of each period presented.
2
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 as if the transactions reflected herein had occurred on the date or been in effect during the periods indicated. This unaudited 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 six months ended June 30, 2014 and on Form 10-K for the years ended December 31, 2013, 2012, and 2011 with the Securities and Exchange Commission.
Cautionary Note Regarding Forward-Looking Statements
Statements above that are not statements of historical or current fact may constitute “forward-looking statements” within the meaning of the Federal Private Securities Litigation Reform Act of 1995. The Company intends that such forward-looking statements be subject to the safe harbor created by Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are statements that do not relate strictly to historical or current facts, but reflect management’s current understandings, intentions, beliefs, plans, expectations, assumptions and/or predictions regarding the future of the Company’s business and its performance, the economy, and other future conditions and forecasts of future events, and circumstances. Forward-looking statements are typically identified by words such as “believes,” “expects,” “anticipates,” “intends,” “estimates,” “plans,” “continues,” “pro forma,” “may,” “will,” “seeks,” “should” and “could,” and words and terms of similar substance in connection with discussions of future operating or financial performance, business strategy and portfolios, projected growth prospects, cash flows, costs and financing needs, legal proceedings, amount and timing of anticipated future distributions, estimated per share net asset value of the Company’s common stock, and/or other matters. The Company’s forward-looking statements are not guarantees of future performance. While the Company’s management believes its forward-looking statements are reasonable, such statements are inherently susceptible to uncertainty and changes in circumstances. As with any projection or forecast, forward-looking statements are necessarily dependent on assumptions, data and/or methods that may be incorrect or imprecise, and may not be realized. The Company’s forward-looking statements are based on management’s current expectations and a variety of risks, uncertainties and other factors, many of which are beyond the Company’s ability to control or accurately predict. Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, the Company’s actual results could differ materially from those set forth in the forward-looking statements due to a variety of risks, uncertainties and other factors. Given these uncertainties, the Company cautions you not to place undue reliance on such statements.
Important factors that could cause the Company’s actual results to vary materially from those expressed or implied in its forward-looking statements include, but are not limited to, government regulation, economic, strategic, political and social conditions, and the following: risks associated with the Company’s investment strategy; a worsening economic environment in the U.S. or globally, including financial market fluctuations; risks associated with real estate markets, including declining real estate values; risks of doing business internationally, including currency risks; the Company’s failure to obtain, renew or extend necessary financing or to access the debt or equity markets; the use of debt to finance the Company’s business activities, including refinancing and interest rate risk and the Company’s failure to comply with debt covenants; failure to successfully manage growth or integrate acquired properties and operations; the Company’s inability to make necessary improvements to properties on a timely or cost-efficient basis; risks related to property expansions and renovations; competition for properties and/or tenants; defaults on or non-renewal of leases by tenants; failure to lease properties on favorable terms or at all; the impact of current and future environmental, zoning and other governmental regulations affecting the Company’s properties; the impact of changes in accounting rules; the impact of regulations requiring periodic valuation of the Company
3
on a net asset per share basis; inaccuracies of the Company’s accounting estimates; unknown liabilities of acquired properties or liabilities caused by property managers or operators; material adverse actions or omissions by any joint venture partners; increases in operating costs and other expenses; uninsured losses or losses in excess of the Company’s insurance coverage; the impact of outstanding and/or potential litigation; risks associated with the Company’s tax structuring; failure to maintain the Company’s REIT qualification; and the Company’s inability to protect its intellectual property and the value of its brand. Given these uncertainties, the Company cautions you not to place undue reliance on such statements.
For further information regarding risks and uncertainties associated with the Company’s business, and important factors that could cause the Company’s actual results to vary materially from those expressed or implied in its forward-looking statements, please refer to the factors listed and described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the “Risk Factors” sections of the Company’s documents filed from time to time with the U.S. Securities and Exchange Commission, including, but not limited to, the Company’s quarterly reports on Form 10-Q, and the Company’s annual report on Form 10-K, copies of which may be obtained from the Company’s website at http://www.cnllifestylereit.com.
All written and oral forward-looking statements attributable to the Company or persons acting on its behalf are qualified in their entirety by this cautionary note. Forward-looking statements speak only as of the date on which they are made, and the Company undertakes no obligation to, and expressly disclaims any obligation to, publicly release the results of any revisions to its forward-looking statements to reflect new information, changed assumptions, the occurrence of unanticipated subsequent events or circumstances, or changes to future operating results over time, except as otherwise required by law.
4
CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 2014
(in thousands except per share data)
| Historical June 30, 2014 | 46 Properties Sold Pro Forma Adjustments (a) | 2 Properties Pending Pro Forma Adjustments (a) | Pro Forma June 30, 2014 | |||||||||||||
| ASSETS | ||||||||||||||||
Real estate investment properties, net (including $180,196 related to consolidated variable interest entities) | $ | 1,804,898 | $ | — | $ | — | $ | 1,804,898 | ||||||||
Assets held for sale, net | 328,277 | (303,991 | )(b) | (13,438 | )(b) | 10,848 | ||||||||||
Investments in unconsolidated entities | 130,099 | — | — | 130,099 | ||||||||||||
Mortgages and other notes receivable, net | 104,572 | — | — | 104,572 | ||||||||||||
Cash | 121,301 | 293,142 | (c) | 12,835 | (c) | 333,048 | ||||||||||
| (94,230 | )(c) | — | ||||||||||||||
Deferred rent and lease incentives | 60,715 | (1,545 | ) | — | 59,170 | |||||||||||
Other assets | 52,976 | (2,710 | ) | (117 | ) | 50,149 | ||||||||||
Restricted cash | 55,740 | (3,026 | ) | (257 | ) | 52,457 | ||||||||||
Intangibles, net | 25,937 | — | — | 25,937 | ||||||||||||
Accounts and other receivables, net | 25,054 | — | — | 25,054 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Assets | $ | 2,709,569 | $ | (112,360 | ) | $ | (977 | ) | $ | 2,596,232 | ||||||
|
|
|
|
|
|
|
| |||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||
Mortgages and other notes payable (including $68,369 related tonon-recourse debt of consolidated variable interest entities) | $ | 708,029 | $ | (88,551 | )(c) | $ | — | $ | 619,478 | |||||||
Senior notes, net of discount | 394,587 | — | — | 394,587 | ||||||||||||
Line of credit | 152,500 | — | — | 152,500 | ||||||||||||
Other liabilities | 94,359 | (14,714 | ) | (258 | ) | 79,387 | ||||||||||
Accounts payable and accrued expenses | 63,390 | (6,382 | )(c) | (256 | ) | 56,752 | ||||||||||
Due to affiliates | 567 | — | — | 567 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Liabilities | 1,413,432 | (109,647 | ) | (514 | ) | 1,303,271 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
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, $.01 par value per share | ||||||||||||||||
One billion shares authorized; 349,084 shares issued and 325,713 shares outstanding as of June 30, 2014 | 3,257 | — | — | 3,257 | ||||||||||||
Capital in excess of par value | 2,867,433 | — | — | 2,867,433 | ||||||||||||
Accumulated deficit | (430,843 | ) | (2,713 | )(d) | (463 | )(d) | (434,019 | ) | ||||||||
Accumulated distributions | (1,142,142 | ) | — | — | (1,142,142 | ) | ||||||||||
Accumulated other comprehensive loss | (1,568 | ) | — | — | (1,568 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Stockholders’ Equity | 1,296,137 | (2,713 | ) | (463 | ) | 1,292,961 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Liabilities and Stockholders’ Equity | $ | 2,709,569 | $ | (112,360 | ) | $ | (977 | ) | $ | 2,596,232 | ||||||
|
|
|
|
|
|
|
| |||||||||
See accompanying notes to unaudited pro forma condensed consolidated financial statements.
5
CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2014
(in thousands except per share data)
| Historical June 30, 2014 | 46 Properties Sold Pro Forma Adjustments | 2 Properties Pending Pro Forma Adjustments | Pro Forma June 30, 2014 | |||||||||||||
Revenues: | ||||||||||||||||
Rental income from operating leases | $ | 77,378 | $ | — | $ | — | $ | 77,378 | ||||||||
Property operating revenues | 138,976 | — | — | 138,976 | ||||||||||||
Interest income on mortgages and other notes receivable | 6,079 | — | — | 6,079 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total revenues | 222,433 | — | — | 222,433 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Expenses: | ||||||||||||||||
Property operating expenses | 121,100 | — | — | 121,100 | ||||||||||||
Asset management fees to advisor | 16,078 | (2,614 | )(b) | (147 | )(b) | 13,317 | ||||||||||
General and administrative | 9,117 | — | — | 9,117 | ||||||||||||
Ground lease and permit fees | 6,623 | — | — | 6,623 | ||||||||||||
Acquisition fees and costs | 2,003 | — | — | 2,003 | ||||||||||||
Other operating expenses | 1,791 | — | — | 1,791 | ||||||||||||
Bad debt expense | 997 | — | — | 997 | ||||||||||||
Recovery on lease terminations | (741 | ) | — | — | (741 | ) | ||||||||||
Loan loss provision | 2,520 | — | — | 2,520 | ||||||||||||
Depreciation and amortization | 63,032 | — | — | 63,032 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total expenses | 222,520 | (2,614 | ) | (147 | ) | 219,759 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Operating income (loss) | (87 | ) | 2,614 | 147 | 2,674 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Other income (expense): | ||||||||||||||||
Interest and other income | 91 | — | — | 91 | ||||||||||||
Interest expense and loan cost amortization (includes $404 loss on termination of cash flow hedge for the six months ended June 30, 2014) | (38,767 | ) | — | — | (38,767 | ) | ||||||||||
Loss on extinguishment of debt | (196 | ) | — | — | (196 | ) | ||||||||||
Equity in earnings of unconsolidated entities | 3,773 | — | — | 3,773 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total other expense | (35,099 | ) | — | — | (35,099 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Net income (loss) from continuing operations | $ | (35,186 | ) | $ | 2,614 | $ | 147 | $ | (32,425 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Loss per share of common stock (basic and diluted) from continuing operations | $ | (0.11 | ) | $ | (0.10 | ) | ||||||||||
|
|
|
| |||||||||||||
Weighted average number of shares of common stock outstanding (basic and diluted) | 323,424 | 323,424 | ||||||||||||||
|
|
|
| |||||||||||||
See accompanying notes to unaudited pro forma condensed consolidated financial statements.
6
CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2013
(in thousands except per share data)
| Historical December 31, 2013 | 46 Properties Sold Pro Forma Adjustments (a) | 2 Properties Pending Pro Forma Adjustments (a) | Pro Forma December 31, 2013 | |||||||||||||
Revenues: | ||||||||||||||||
Rental income from operating leases | $ | 163,242 | $ | (27,827 | ) | $ | (1,175 | ) | $ | 134,240 | ||||||
Property operating revenues | 336,439 | (28,495 | ) | (4,690 | ) | 303,254 | ||||||||||
Interest income on mortgages and other notes receivable | 13,120 | — | — | 13,120 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total revenues | 512,801 | (56,322 | ) | (5,865 | ) | 450,614 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Expenses: | ||||||||||||||||
Property operating expenses | 262,062 | (24,124 | ) | (2,813 | ) | 235,125 | ||||||||||
Asset management fees to advisor | 34,683 | (5,500 | )(b) | (309 | )(b) | 28,874 | ||||||||||
General and administrative | 18,591 | (616 | ) | (11 | ) | 17,964 | ||||||||||
Ground lease and permit fees | 15,356 | (2,216 | ) | (1,273 | ) | 11,867 | ||||||||||
Acquisition fees and costs | 3,141 | — | — | 3,141 | ||||||||||||
Other operating expenses | 6,791 | (1,086 | ) | (17 | ) | 5,688 | ||||||||||
Bad debt expense | 6,331 | (78 | ) | (1 | ) | 6,252 | ||||||||||
Impairment provision | 248,268 | (180,921 | ) | (9,264 | ) | 58,083 | ||||||||||
Gain on lease terminations | (2,705 | ) | — | — | (2,705 | ) | ||||||||||
Loan loss provision | 3,104 | — | — | 3,104 | ||||||||||||
Depreciation and amortization | 147,022 | (25,145 | ) | (2,084 | ) | 119,793 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total expenses | 742,644 | (239,686 | ) | (15,772 | ) | 487,186 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Operating income (loss) | (229,843 | ) | 183,364 | 9,907 | (36,572 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Other income (expense): | ||||||||||||||||
Interest and other income (expense) | 327 | (131 | ) | (2 | ) | 194 | ||||||||||
Interest expense and loan cost amortization | (70,762 | ) | 6,327 | (c) | — | (64,435 | ) | |||||||||
Bargain purchase gain | 2,653 | — | — | 2,653 | ||||||||||||
Gain from sale of unconsolidated entities | 55,394 | — | — | 55,394 | ||||||||||||
Equity in earnings of unconsolidated entities | 11,701 | — | — | 11,701 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total other income (expense) | (687 | ) | 6,196 | (2 | ) | 5,507 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Net income (loss) from continuing operations | $ | (230,530 | ) | $ | 189,560 | $ | 9,905 | $ | (31,065 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Loss per share of common stock (basic and diluted) from continuing operations | $ | (0.72 | ) | $ | (0.10 | ) | ||||||||||
|
|
|
| |||||||||||||
Weighted average number of shares of common stock outstanding (basic and diluted) | 318,742 | 318,742 | ||||||||||||||
|
|
|
| |||||||||||||
See accompanying notes to unaudited pro forma condensed consolidated financial statements.
7
CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2012
(in thousands except per share data)
| Historical December 31, 2012 | 46 Properties Sold Pro Forma Adjustments (a) | 2 Properties Pending Pro Forma Adjustments (a) | Pro Forma December 31, 2012 | |||||||||||||
Revenues: | ||||||||||||||||
Rental income from operating leases | $ | 159,682 | $ | (29,832 | ) | $ | (1,177 | ) | $ | 128,673 | ||||||
Property operating revenues | 299,863 | (19,614 | ) | (4,248 | ) | 276,001 | ||||||||||
Interest income on mortgages and other notes receivable | 12,997 | — | — | 12,997 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total revenues | 472,542 | (49,446 | ) | (5,425 | ) | 417,671 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Expenses: | ||||||||||||||||
Property operating expenses | 238,978 | (18,902 | ) | (2,555 | ) | 217,521 | ||||||||||
Asset management fees to advisor | 35,725 | (5,436 | )(b) | (308 | )(b) | 29,981 | ||||||||||
General and administrative | 18,668 | (760 | ) | (8 | ) | 17,900 | ||||||||||
Ground lease and permit fees | 14,482 | (1,860 | ) | (1,294 | ) | 11,328 | ||||||||||
Acquisition fees and costs | 4,450 | — | — | 4,450 | ||||||||||||
Other operating expenses | 8,684 | (1,250 | ) | (154 | ) | 7,280 | ||||||||||
Bad debt expense | 5,510 | (2,868 | ) | (153 | ) | 2,489 | ||||||||||
Impairment provision | 10 | — | — | 10 | ||||||||||||
Loss on lease terminations | 25,177 | (3,027 | ) | (204 | ) | 21,946 | ||||||||||
Loan loss provision | 1,699 | — | — | 1,699 | ||||||||||||
Depreciation and amortization | 132,206 | (22,753 | ) | (2,003 | ) | 107,450 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total expenses | 485,589 | (56,856 | ) | (6,679 | ) | 422,054 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Operating income (loss) | (13,047 | ) | 7,410 | 1,254 | (4,383 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Other income (expense): | ||||||||||||||||
Interest and other income (expense) | 1,198 | (475 | ) | — | 723 | |||||||||||
Interest expense and loan cost amortization | (66,825 | ) | 6,121 | (c) | — | (60,704 | ) | |||||||||
Loss on extinguishment of debt | (4 | ) | — | — | (4 | ) | ||||||||||
Equity in earnings of unconsolidated entities | 5,521 | — | — | 5,521 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total other income (expense) | (60,110 | ) | 5,646 | — | (54,464 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Net income (loss) from continuing operations | $ | (73,157 | ) | $ | 13,056 | $ | 1,254 | $ | (58,847 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Loss per share of common stock (basic and diluted) from continuing operations | $ | (0.23 | ) | $ | (0.19 | ) | ||||||||||
|
|
|
| |||||||||||||
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.
8
CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2011
(in thousands except per share data)
| Historical December 31, 2011 | 46 Properties Sold Pro Forma Adjustments (a) | 2 Properties Pending Pro Forma Adjustments (a) | Pro Forma December 31, 2011 | |||||||||||||
Revenues: | ||||||||||||||||
Rental income from operating leases | $ | 164,590 | $ | (38,008 | ) | $ | (3,186 | ) | $ | 123,396 | ||||||
Property operating revenues | 232,192 | (10,639 | ) | — | 221,553 | |||||||||||
Interest income on mortgages and other notes receivable | 12,963 | — | — | 12,963 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total revenues | 409,745 | (48,647 | ) | (3,186 | ) | 357,912 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Expenses: | ||||||||||||||||
Property operating expenses | 193,716 | (9,942 | ) | — | 183,774 | |||||||||||
Asset management fees to advisor | 31,802 | (5,359 | )(b) | (306 | )(b) | 26,137 | ||||||||||
General and administrative | 16,151 | (273 | ) | (1 | ) | 15,877 | ||||||||||
Ground lease and permit fees | 14,575 | (2,567 | ) | (1,475 | ) | 10,533 | ||||||||||
Acquisition fees and costs | 11,168 | — | — | 11,168 | ||||||||||||
Other operating expenses | 6,551 | (1,118 | ) | (7 | ) | 5,426 | ||||||||||
Bad debt expense | 773 | (178 | ) | (61 | ) | 534 | ||||||||||
Impairment provision | 3,199 | (3,199 | ) | — | — | |||||||||||
(Gain) loss on lease terminations | 7,193 | (6,143 | ) | (1,378 | ) | (328 | ) | |||||||||
Depreciation and amortization | 119,215 | (23,877 | ) | (2,027 | ) | 93,311 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total expenses | 404,343 | (52,656 | ) | (5,255 | ) | 346,432 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Operating income (loss) | 5,402 | 4,009 | 2,069 | 11,480 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Other income (expense): | ||||||||||||||||
Interest and other income (expense) | (216 | ) | 159 | — | (57 | ) | ||||||||||
Interest expense and loan cost amortization | (58,469 | ) | 9,731 | (c) | — | (48,738 | ) | |||||||||
Loss on extinguishment of debt | (227 | ) | — | — | (227 | ) | ||||||||||
Equity in earnings of unconsolidated entities | 1,022 | — | — | 1,022 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total other income (expense) | (57,890 | ) | 9,890 | — | (48,000 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Net income (loss) from continuing operations | $ | (52,488 | ) | $ | 13,899 | $ | 2,069 | $ | (36,520 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Loss per share of common stock (basic and diluted) from continuing operations | $ | (0.17 | ) | $ | (0.12 | ) | ||||||||||
|
|
|
| |||||||||||||
Weighted average number of shares of common stock outstanding (basic and diluted) | 302,250 | 302,250 | ||||||||||||||
|
|
|
| |||||||||||||
See accompanying notes to unaudited pro forma condensed consolidated financial statements.
9
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 the Company is presented as if the disposition of 48 golf properties described in Note 2. “Pro Forma Transaction” had occurred as of June 30, 2014. The accompanying unaudited pro forma condensed consolidated statement of operations of the Company are presented for the six months ended June 30, 2014 and for the years ended December 31, 2013, 2012 and 2011 (the “Pro Forma Periods”), and include certain pro forma adjustments to illustrate the estimated effect of the Company’s disposition, described in Note 2. “Pro Forma Transaction”, as if they had occurred as of the first day of 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 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 Transaction |
On June 12, 2014, the Company entered into a purchase and sale agreement with CF Arcis X LLC, an unaffiliated third party, for the sale of the Company’s entire golf portfolio comprised of 48 properties. The purchase price for the golf portfolio is $320.0 million excluding transaction costs. The purchase and sale agreement provided for the consummation of the sale 30 days after the execution of the purchase and sale agreement, however the purchase and sale agreement allowed for an extension of the sale date until certain third party consents are received and the conditions precedent to the sale are satisfied. As a result, the sale of the properties may occur in one or more closings, when closing may be extended for the receipt of certain third party consents and the satisfaction of certain conditions precedent.
On September 30, 2014, the Company completed the sale of 46 golf properties and expects to close the remaining two properties by the end of the year. There can be no assurance that the conditions to the sale will be satisfied or waived on terms satisfactory to the parties or that the sale of the four properties will ultimately be completed in whole or in part.
| 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 disposition of the 48 golf properties occurred as of June 30, 2014.
| (a) | These adjustments reflect the elimination of certain account balances relating to the 48 golf properties as if the sale was consummated as of June 30, 2014. Other adjustments, as described in (b) and (c), reflect the elimination of the net carrying value, receipt of the net cash proceeds on the completed sale of the 46 golf properties and the estimated net cash proceeds on the pending sale of the two golf properties, and the use of those proceeds to pay down certain indebtedness. |
10
CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| 3. | Adjustments to Unaudited Pro Forma Condensed Consolidated Balance Sheet (continued) |
| (b) | This amount reflects the elimination of the net book value, including the related intangible assets, net and accounts and other receivable, on the 48 golf properties. |
| (c) | Cash has been increased to reflect the net and estimated cash proceeds received by the Company on the completed sale of 46 golf properties and the pending sale of the remaining two golf properties, respectively (the sale price of $320.0 million less actual closing costs on the 46 golf properties sold and estimated closing costs on the pending sale of the two golf properties). |
Cash has been decreased to reflect the use of a portion of the net cash proceeds received by the Company at closing to pay down existing indebtedness including related accrued interest and prepayment penalties. Mortgages and other notes payable have been reduced to reflect the principal reduction in debt due to the repayment. Accounts payable and accrued expenses have been reduced to reflect the pay down of accrued interest expense related to the repaid debt.
| (d) | Accumulated deficit has been reduced to reflect the receipt of net cash proceeds and removal of assets and liabilities related to the sale, as follows (in thousands): |
Net sales proceeds | $ | 305,977 | ||
Less: | ||||
Net book value of golf properties sold | (317,429 | ) | ||
Retired indebtedness & accrued interest | (94,230 | ) | ||
Removal of assets and liabilities | 102,506 | |||
|
| |||
| $ | (3,176 | ) | ||
|
|
| 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 included in continuing operations of the 48 golf properties, both completed and pending, as if the properties have been sold prior to January 1, 2011.
| (a) | Except as described in (b) and (c) below, these amounts represent the elimination of the operations on the 48 golf properties, both completed and pending, from the historical amounts included in continuing operations for the six months ended June 30, 2014 and for the years ended December 31, 2013, 2012 and 2011, to give effect to the sale of the 48 golf properties as if the sale occurred on the first day of each Pro Forma Period presented. The 48 golf properties were classified as held for sale in March 2014, as a result, the operations of these properties were included as part of income or loss from discontinued operations for the six months ended June 30, 2014 and are not shown in the accompanying unaudited pro forma condensed consolidated statement of operations. |
11
CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| 4. | Adjustments to Unaudited Pro Forma Condensed Consolidated Statement of Operations (continued) |
| (b) | Amount includes the elimination of asset management fee expenses, calculated at 0.08334% monthly prior to April 1, 2014 and 0.075% from April 1, 2014 through June 30, 2014, on the invested assets value of the 48 golf properties for the six months ended June 30, 2014 and for the years ended December 31, 2013, 2012 and 2011. 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 sale of 48 golf properties to retire indebtedness that was collateralized by certain of the 48 golf properties as if it occurred on the first day of each Pro Forma Period presented. |
12
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 2, 2014 | CNL LIFESTYLE PROPERTIES, INC. | |||||
| a Maryland Corporation | ||||||
| By: | /s/ Joseph T. Johnson | |||||
| Chief Financial Officer, Senior Vice President and Treasurer | ||||||