Exhibit 99.1
CAREY WATERMARK INVESTORS INCORPORATED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
Our pro forma condensed consolidated balance sheet as of September 30, 2016 has been prepared as if the significant dispositions during the first quarter of 2017 (noted herein) had occurred as of September 30, 2016. Our pro forma condensed consolidated statements of operations for the nine months ended September 30, 2016 and for the year ended December 31, 2015 have been prepared based on our historical financial statements as if the significant acquisitions and related financings during both the year ended December 31, 2015 and the nine months ended September 30, 2016 and the significant dispositions during the first quarter of 2017 had occurred on January 1, 2015. Pro forma adjustments are intended to reflect what the effect would have been had we held our ownership interests as of January 1, 2015 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 nine months ended September 30, 2016 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 nine months ended September 30, 2016. The pro forma condensed consolidated financial information for the year ended December 31, 2015 should be read in conjunction with our historical consolidated financial statements and notes thereto in our Annual Report on Form 10-K for the year ended December 31, 2015. The pro forma information is not necessarily indicative of our financial condition had the significant transactions occurred on September 30, 2016, or results of operations had the significant transactions occurred on January 1, 2015, nor are they necessarily indicative of our financial position or results of operations of future periods. In addition, the provisional accounting for the dispositions is preliminary and therefore subject to change. Any such changes could have a material effect on the pro forma condensed consolidated financial information.
|
| | | | | | | | | | | | | | | | | | | | | | |
| CAREY WATERMARK INVESTORS INCORPORATED |
| | | | | | | | | | | | | |
| PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED) |
| September 30, 2016 |
| (in thousands) |
| | | | | | | | | | | | | |
| | | | | CWI Historical | | Hampton Inn Birmingham Colonnade Disposition | | Hampton Inn Frisco Legacy Park Disposition | | Hilton Garden Inn Baton Rouge Airport Disposition | | Pro Forma |
| | | | | | | | |
| Assets | | | | | | | | | |
| Investments in real estate: | | | | | | | | | |
| | Hotels, at cost | $ | 2,291,859 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 2,291,859 |
|
| | Accumulated depreciation | (168,723 | ) | | — |
| | — |
| | — |
| | (168,723 | ) |
| Net investments in hotels | 2,123,136 |
| | — |
| | — |
| | — |
| | 2,123,136 |
|
| Assets held for sale | 35,226 |
| | (8,201 | ) | A | (13,547 | ) | A | (13,478 | ) | A | — |
|
| Equity investments in real estate | 79,643 |
| | — |
| | — |
| | — |
| | 79,643 |
|
| Cash | 72,363 |
| | (930 | ) | B | 4,434 |
| B | 3,719 |
| B | 79,586 |
|
| Intangible assets, net | 80,553 |
| | — |
| | — |
| | — |
| | 80,553 |
|
| Accounts receivable | 23,230 |
| | — |
| | — |
| | — |
| | 23,230 |
|
| Restricted cash | 63,073 |
| | — |
| | — |
| | — |
| | 63,073 |
|
| Other assets | 26,827 |
| | — |
| | — |
| | — |
| | 26,827 |
|
| | Total assets | $ | 2,504,051 |
| | $ | (9,131 | ) | | $ | (9,113 | ) | | $ | (9,759 | ) | | $ | 2,476,048 |
|
| | | | | | | | | | | | | |
| Liabilities and Equity | | | | | | | | | |
| Liabilities: | | | | | | | | | |
| Non-recourse debt, including debt attributable to Assets held for sale, net | $ | 1,456,714 |
| | $ | (8,806 | ) | A | $ | (8,622 | ) | A | $ | (9,188 | ) | A | $ | 1,430,098 |
|
| Senior Credit Facility | 22,785 |
| | — |
| | — |
| | — |
| | 22,785 |
|
| Accounts payable, accrued expenses and other liabilities | 116,151 |
| | — |
| | — |
| | — |
| | 116,151 |
|
| Due to related parties and affiliates | 2,832 |
| | — |
| | — |
| | — |
| | 2,832 |
|
| Other liabilities held for sale | 1,236 |
| | (326 | ) | A | (396 | ) | A | (514 | ) | A | — |
|
| Distributions payable | 19,197 |
| | — |
| | — |
| | — |
| | 19,197 |
|
| | Total liabilities | 1,618,915 |
| | (9,132 | ) | | (9,018 | ) | | (9,702 | ) | | 1,591,063 |
|
| Commitments and contingencies | | | | | | | | | |
| | | | | | | | | | | | | |
| Equity: | | | | | | | | | |
| CWI stockholders’ equity: | | | | | | | | | |
| Common stock | 135 |
| | — |
| | — |
| | — |
| | 135 |
|
| Additional paid-in capital | 1,118,477 |
| | — |
| | — |
| | — |
| | 1,118,477 |
|
| Distributions and accumulated losses | (300,589 | ) | | 1 |
| C | (95 | ) | C | (57 | ) | C | (300,740 | ) |
| Accumulated other comprehensive loss | (1,900 | ) | | — |
| | — |
| | — |
| | (1,900 | ) |
| | Total CWI stockholders’ equity | 816,123 |
| | 1 |
| | (95 | ) | | (57 | ) | | 815,972 |
|
| Noncontrolling interests | 69,013 |
| | — |
| | — |
| | — |
| | 69,013 |
|
| | Total equity | 885,136 |
| | 1 |
| | (95 | ) | | (57 | ) | | 884,985 |
|
| | Total liabilities and equity | $ | 2,504,051 |
| | $ | (9,131 | ) | | $ | (9,113 | ) | | $ | (9,759 | ) | | $ | 2,476,048 |
|
| | | | | | | | | | | | | |
| The accompanying notes are an integral part of these pro forma condensed consolidated financial statements. |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| CAREY WATERMARK INVESTORS INCORPORATED |
| | | | | | | | | | | | | | | | | |
| PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) |
| For the Nine Months Ended September 30, 2016 |
| (in thousands except share and per share amounts) |
| | | | | | | Pro Forma Adjustments
(Including Pre-Acquisition Historical Amounts) | | |
| | | | | | | | | | | | | | | | | |
| | | | | CWI Historical | | 2016 Acquisition | | Hampton Inn Birmingham Colonnade Disposition | | Hampton Inn Frisco Legacy Park Disposition | | Hilton Garden Inn Baton Rouge Airport Disposition | | Weighted Average Shares | | Pro Forma |
| | | | | | | | | | |
| Hotel Revenues | | | | | | | | | | | | | |
| | | Rooms | $ | 332,986 |
| | $ | 1,056 |
| F | $ | (2,405 | ) | D | $ | (2,718 | ) | D | $ | (3,389 | ) | D | | | $ | 325,530 |
|
| | | Food and beverage | 120,772 |
| | 397 |
| F | — |
| D | — |
| D | (447 | ) | D | | | 120,722 |
|
| | | Other operating revenue | 42,043 |
| | 394 |
| F | (42 | ) | D | (46 | ) | D | (33 | ) | D | | | 42,316 |
|
| | | | Total Hotel Revenues | 495,801 |
| | 1,847 |
| | (2,447 | ) | | (2,764 | ) | | (3,869 | ) | | | | 488,568 |
|
| Operating Expenses | | | | | | | | | | | | | |
| | Hotel Expenses | | | | | | | | | | | | | |
| | | Rooms | 70,979 |
| | 313 |
| G | (690 | ) | D | (723 | ) | D | (707 | ) | D | | | 69,172 |
|
| | | Food and beverage | 84,956 |
| | 364 |
| G | — |
| D | — |
| D | (416 | ) | D | | | 84,904 |
|
| | | Other hotel operating expenses | 22,585 |
| | 234 |
| G | (12 | ) | D | (26 | ) | D | (32 | ) | D | | | 22,749 |
|
| | | Sales and marketing | 46,672 |
| | 153 |
| G | (395 | ) | D | (471 | ) | D | (707 | ) | D | | | 45,252 |
|
| | | General and administrative | 40,981 |
| | 254 |
| G | (263 | ) | D | (252 | ) | D | (350 | ) | D | | | 40,370 |
|
| | | Property taxes, insurance, rent and other | 49,851 |
| | 125 |
| G | (183 | ) | D | (177 | ) | D | (121 | ) | D | | | 49,495 |
|
| | | Repairs and maintenance | 15,741 |
| | 93 |
| G | (94 | ) | D | (147 | ) | D | (199 | ) | D | | | 15,394 |
|
| | | Utilities | 12,376 |
| | 132 |
| G | (170 | ) | D | (86 | ) | D | (119 | ) | D | | | 12,133 |
|
| | | Management fees | 13,824 |
| | 55 |
| G | (55 | ) | D | (83 | ) | D | (97 | ) | D | | | 13,644 |
|
| | | Depreciation and amortization | 60,272 |
| | 299 |
| G | (254 | ) | D | (502 | ) | D | (453 | ) | D | | | 59,362 |
|
| | | | Total Hotel Expenses | 418,237 |
| | 2,022 |
| | (2,116 | ) | | (2,467 | ) | | (3,201 | ) | | | | 412,475 |
|
| | Other Operating Expenses | | | | | | | | | | | | | |
| | | Asset management fees to affiliate and other expenses | 11,740 |
| | 54 |
| H | (30 | ) | D | (70 | ) | D | (51 | ) | D | | | 11,643 |
|
| | | Corporate general and administrative expenses | 8,978 |
| | — |
|
| — |
|
| — |
|
| — |
|
| | | 8,978 |
|
| | | Impairment charges | 4,112 |
| | — |
|
| (582 | ) | D | (2,635 | ) | D | (895 | ) | D | | | — |
|
| | | Acquisition-related expenses | 3,727 |
| | (3,727 | ) | I | — |
|
| — |
|
| — |
|
| | | — |
|
| | | | Total Other Operating Expenses | 28,557 |
| | (3,673 | ) | | (612 | ) | | (2,705 | ) | | (946 | ) | | | | 20,621 |
|
| Operating Income | 49,007 |
| | 3,498 |
| | 281 |
| | 2,408 |
| | 278 |
| | | | 55,472 |
|
| Other Income and (Expenses) | | | | | | | | | | | | | |
| | Interest expense | (48,542 | ) | | (282 | ) | J | 304 |
| D | 295 |
| D | 313 |
| D | | | (47,912 | ) |
| | Equity in earnings of equity method investments in real estate | 4,976 |
| | — |
|
| — |
|
| — |
|
| — |
|
| | | 4,976 |
|
| | Net loss on extinguishment of debt | (2,268 | ) | | — |
|
| — |
|
| — |
|
| — |
|
| | | (2,268 | ) |
| | Other income | 22 |
| | — |
|
| — |
|
| — |
|
| — |
|
| | | 22 |
|
| | | | Total Other Income and (Expenses) | (45,812 | ) | | (282 | ) | | 304 |
| | 295 |
| | 313 |
| | | | (45,182 | ) |
| Income from Operations Before Income Taxes | 3,195 |
| | 3,216 |
| | 585 |
| | 2,703 |
| | 591 |
| | | | 10,290 |
|
| | Provision for income taxes | (3,041 | ) | | (26 | ) | K | — |
|
| (24 | ) | D | — |
|
| | | (3,091 | ) |
| Net Income | 154 |
| | 3,190 |
| | 585 |
| | 2,679 |
| | 591 |
| | | | 7,199 |
|
| | Income attributable to noncontrolling interests | (2,039 | ) | | — |
|
| — |
|
| — |
|
| — |
|
| | | (2,039 | ) |
| Net (Loss) Income Attributable to CWI Stockholders | $ | (1,885 | ) | | $ | 3,190 |
| | $ | 585 |
| | $ | 2,679 |
| | $ | 591 |
| | | | $ | 5,160 |
|
| Basic and Diluted (Loss) Income Per Share | $ | (0.01 | ) | | | | | | | | | | | | $ | 0.03 |
|
| Basic and Diluted Weighted-Average Shares Outstanding | 134,329,382 |
| | | | | | | | | | 16,067,766 |
| L | 150,397,148 |
|
| | | | | | | | | | | | | | | | | |
The accompanying notes are an integral part of these pro forma condensed consolidated financial statements.
|
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| CAREY WATERMARK INVESTORS INCORPORATED |
| | | | | | | | | | | | | | | | | | | |
| PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) |
| For the Year Ended December 31, 2015 |
| (in thousands except share and per share amounts) |
| | | | | | | Pro Forma Adjustments
(Including Pre-Acquisition Historical Amounts) | | |
| | | | | CWI Historical | | 2015 Acquisitions | | 2016 Acquisition | | Hampton Inn Birmingham Colonnade Disposition | | Hampton Inn Frisco Legacy Park Disposition | | Hilton Garden Inn Baton Rouge Airport Disposition | | Weighted Average Shares | | Pro Forma |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Hotel Revenues | | | | | | | | | | | | | | | |
| | | Rooms | $ | 379,150 |
| | $ | 15,141 |
| F | $ | 10,974 |
| F | $ | (3,188 | ) | E | $ | (3,581 | ) | E | $ | (3,987 | ) | E | | | $ | 394,509 |
|
| | | Food and beverage | 118,817 |
| | 4,705 |
| F | 6,546 |
| F | — |
| E | — |
| E | (637 | ) | E | | | 129,431 |
|
| | | Other operating revenue | 44,136 |
| | 469 |
| F | 4,020 |
| F | (55 | ) | E | (60 | ) | E | (46 | ) | E | | | 48,464 |
|
| | | | Total Hotel Revenues | 542,103 |
| | 20,315 |
| | 21,540 |
| | (3,243 | ) | | (3,641 | ) | | (4,670 | ) | | | | 572,404 |
|
| Operating Expenses | | | | | | | | | | | | | | | |
| | Hotel Expenses | | | | | | | | | | | | | | | |
| | | Rooms | 82,822 |
| | 2,548 |
| G | 2,791 |
| G | (943 | ) | E | (966 | ) | E | (953 | ) | E | | | 85,299 |
|
| | | Food and beverage | 86,694 |
| | 3,188 |
| G | 4,210 |
| G | — |
| E | — |
| E | (607 | ) | E | | | 93,485 |
|
| | | Other hotel operating expenses | 24,818 |
| | 120 |
| G | 2,034 |
| G | (15 | ) | E | (39 | ) | E | (46 | ) | E | | | 26,872 |
|
| | | Sales and marketing | 54,012 |
| | 2,273 |
| G | 1,431 |
| G | (559 | ) | E | (596 | ) | E | (793 | ) | E | | | 55,768 |
|
| | | General and administrative | 47,298 |
| | 1,714 |
| G | 1,710 |
| G | (325 | ) | E | (297 | ) | E | (439 | ) | E | | | 49,661 |
|
| | | Property taxes, insurance, rent and other | 54,600 |
| | 1,156 |
| G | 857 |
| G | (216 | ) | E | (211 | ) | E | (201 | ) | E | | | 55,985 |
|
| | | Repairs and maintenance | 19,335 |
| | 680 |
| G | 910 |
| G | (139 | ) | E | (172 | ) | E | (254 | ) | E | | | 20,360 |
|
| | | Utilities | 14,875 |
| | 514 |
| G | 882 |
| G | (214 | ) | E | (128 | ) | E | (154 | ) | E | | | 15,775 |
|
| | | Management fees | 13,682 |
| | 609 |
| G | 646 |
| G | (65 | ) | E | (109 | ) | E | (140 | ) | E | | | 14,623 |
|
| | | Depreciation and amortization | 69,530 |
| | 2,834 |
| G | 2,313 |
| G | (499 | ) | E | (686 | ) | E | (614 | ) | E | | | 72,878 |
|
| | | | Total Hotel Expenses | 467,666 |
| | 15,636 |
| | 17,784 |
| | (2,975 | ) | | (3,204 | ) | | (4,201 | ) | | | | 490,706 |
|
| | Other Operating Expenses | | | | | | | | | | | | | | | |
| | | Asset management fees to affiliate and other expenses | 12,583 |
| | 515 |
| H | 421 |
| H | (40 | ) | E | (69 | ) | E | (68 | ) | E | | | 13,342 |
|
| | | Corporate general and administrative expenses | 11,906 |
| | — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| | | 11,906 |
|
| | | Impairment charge | 6,143 |
| | — |
|
| — |
|
| (6,143 | ) | E | — |
|
| — |
|
| | | — |
|
| | | Acquisition-related expenses | 19,868 |
| | (8,649 | ) | I | (223 | ) | I | — |
|
| — |
|
| — |
|
| | | 10,996 |
|
| | | | Total Other Operating Expenses | 50,500 |
| | (8,134 | ) | | 198 |
| | (6,183 | ) | | (69 | ) | | (68 | ) | | | | 36,244 |
|
| Operating Income | 23,937 |
| | 12,813 |
| | 3,558 |
| | 5,915 |
| | (368 | ) | | (401 | ) | | | | 45,454 |
|
| Other Income and (Expenses) | | | | | | | | | | | | | | | |
| | Interest expense | (54,514 | ) | | (2,609 | ) | J | (2,180 | ) | J | 413 |
| E | 402 |
| E | 425 |
| E | | | (58,063 | ) |
| | Equity in earnings of equity method investments in real estate | 2,418 |
| | — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| | | 2,418 |
|
| | Net gain on extinguishment of debt | 1,840 |
| | — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| | | 1,840 |
|
| | Other income | 2,446 |
| | — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| | | 2,446 |
|
| | | | (47,810 | ) | | (2,609 | ) | | (2,180 | ) | | 413 |
| | 402 |
| | 425 |
| | | | (51,359 | ) |
| (Loss) Income from Operations Before Income Taxes | (23,873 | ) | | 10,204 |
| | 1,378 |
| | 6,328 |
| | 34 |
| | 24 |
| | | | (5,905 | ) |
| | (Provision for) benefit from income taxes | (6,767 | ) | | (262 | ) | K | (299 | ) | K | — |
|
| 29 |
| E | — |
|
| | | (7,299 | ) |
| Net (Loss) Income | (30,640 | ) | | 9,942 |
| | 1,079 |
| | 6,328 |
| | 63 |
| | 24 |
| | | | (13,204 | ) |
| | Loss attributable to noncontrolling interests | 4,915 |
| | — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| | | 4,915 |
|
| Net (Loss) Income Attributable to CWI Stockholders | $ | (25,725 | ) | | $ | 9,942 |
| | $ | 1,079 |
| | $ | 6,328 |
| | $ | 63 |
| | $ | 24 |
| | | | $ | (8,289 | ) |
| Basic and Diluted Loss Per Share | $ | (0.20 | ) | | | | | | | | | | | | | | $ | (0.06 | ) |
| Basic and Diluted Weighted-Average Shares Outstanding | 131,296,033 |
| | | | | | | | | | | | 16,067,766 |
| L | 147,363,799 |
|
| | | | | | | | | | | | | | | | | | | |
The accompanying notes are an integral part of these pro forma condensed consolidated financial statements.
|
CAREY WATERMARK INVESTORS INCORPORATED
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1. Basis of Presentation
The pro forma condensed consolidated balance sheet as of September 30, 2016 and the pro forma condensed consolidated statement of operations for the nine months ended September 30, 2016 were derived from our historical consolidated financial statements included in our Quarterly Report on Form 10-Q as of and for the nine months ended September 30, 2016. The pro forma condensed consolidated statement of operations for the year ended December 31, 2015 was derived from our historical consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2015.
Note 2. Pro Forma Adjustments for Dispositions
On February 1, 2017, CWI sold its 100% ownership interests in the Hampton Inn Birmingham Colonnade, the Hampton Inn Frisco Legacy Park and the Hilton Garden Inn Baton Rouge Airport to an unaffiliated third party for a contractual sales price of $33.0 million and net proceeds of approximately $7.7 million.
Balance Sheet Adjustments
A. These adjustments represent the elimination of the assets and liabilities of the three properties sold, which were recorded as assets and liabilities held for sale at September 30, 2016.
B. The pro forma adjustment to cash was calculated as follows:
|
| | | | | | | | | | | |
| | Hampton Inn Birmingham Colonnade Disposition | | Hampton Inn Frisco Legacy Park Disposition | | Hilton Garden Inn Baton Rouge Airport Disposition |
Gross proceeds from purchaser, net of closing costs (inclusive of closing prorations) | $ | 7,936 |
| | $ | 13,153 |
| | $ | 13,098 |
|
| Less: Debt assumed by purchaser | (8,771 | ) | | (8,585 | ) | | (9,145 | ) |
| Net proceeds from purchaser, net of closing costs | (835 | ) | | 4,568 |
| | 3,953 |
|
| Changes in working capital | (95 | ) | | (134 | ) | | (234 | ) |
| Net pro forma cash proceeds from purchaser, net of closing costs | $ | (930 | ) | | $ | 4,434 |
| | $ | 3,719 |
|
C. The adjustments to distributions and accumulated losses are not reflected in the pro forma condensed consolidated statements of operations as the effect of the transaction is nonrecurring.
Statements of Operations Adjustments
D. These adjustments represent the elimination of the revenue and expenses of the three properties sold that were recorded during the nine months ended September 30, 2016.
E. These adjustments represent the elimination of the revenue and expenses of the three properties sold that were recorded during the year ended December 31, 2015.
Note 3. Pro Forma Adjustments for Acquisitions
2015 Acquisitions
On February 12, 2015, March 19, 2015 and November 20, 2015, we acquired controlling interests in three hotels: Westin Minneapolis, Westin Pasadena and Le Méridien Dallas, The Stoneleigh, respectively, from HEI Hotels & Resorts, an unaffiliated third party (collectively, our "2015 Acquisitions").
All of the transactions noted above are reflected in our historical consolidated balance sheet at September 30, 2016 and, therefore, no pro forma adjustments to our historical consolidated balance sheet as of September 30, 2016 were required. In addition, all of the transactions noted above are reflected in our historical consolidated statement of operations for the year ended December 31, 2015 from their respective dates of acquisition through December 31, 2015 and fully reflected in our historical consolidated statement
Notes to Pro Forma Condensed Consolidated Financial Statements
of operations for the nine months ended September 30, 2016. We made pro forma adjustments F through L below to reflect the impact on our results of operations had these acquisitions been made on January 1, 2015.
2016 Acquisition
On February 17, 2016, we acquired a 100% interest in Equinox, A Luxury Collection Golf Resort & Spa, or Equinox, from HEI Hotels & Resorts, an unaffiliated third party (our "2016 Acquisition").
The transaction noted above is reflected in our historical consolidated balance sheet at September 30, 2016 and, therefore, no pro forma adjustments to our historical consolidated balance sheet as of September 30, 2016 were required. In addition, the transaction noted above is reflected in our historical consolidated statement of operations for the nine months ended September 30, 2016 from the respective date of acquisition through September 30, 2016. We made pro forma adjustments F through L below to reflect the impact on our results of operations had this acquisition been made on January 1, 2015.
F. Hotel Revenue
Pro forma adjustments for hotel revenue are derived from the historical financial statements of each of our investments. The following pro forma adjustments for the nine months ended September 30, 2016 and the year ended December 31, 2015 represent the hotel revenues that would have been incurred in addition to those presented in our historical consolidated financial statements, when applicable (in thousands): |
| | | |
| | Pre-Acquisition Historical |
| | Nine Months Ended September 30, 2016 |
| | 2016 Acquisition |
| Rooms | $ | 1,056 |
|
| Food and beverage | 397 |
|
| Other operating revenue | 394 |
|
| | $ | 1,847 |
|
|
| | | | | | | |
| | Pre-Acquisition Historical |
| | Year Ended December 31, 2015 |
| | 2015 Acquisitions | | 2016 Acquisition |
| Rooms | $ | 15,141 |
| | $ | 10,974 |
|
| Food and beverage | 4,705 |
| | 6,546 |
|
| Other operating revenue | 469 |
| | 4,020 |
|
| | $ | 20,315 |
| | $ | 21,540 |
|
Notes to Pro Forma Condensed Consolidated Financial Statements
G. Hotel Expenses
Pro forma adjustments for hotel expenses are derived from the historical financial statements of our investments except for those related to depreciation and amortization, sales and marketing, and management fees, as illustrated below. The following pro forma adjustments for the nine months ended September 30, 2016 and the year ended December 31, 2015 represent the incremental hotel expenses that would have been incurred in addition to those presented in our historical consolidated financial statements, when applicable (in thousands): |
| | | |
| | Pre-Acquisition Historical |
| | Nine Months Ended September 30, 2016 |
| | 2016 Acquisition |
| Rooms | $ | 313 |
|
| Food and beverage | 364 |
|
| Other hotel operating expenses | 234 |
|
| General and administrative | 254 |
|
| Property taxes, insurance, rent and other | 125 |
|
| Repairs and maintenance | 93 |
|
| Utilities | 132 |
|
| | $ | 1,515 |
|
|
| | | | | | | |
| | Pre-Acquisition Historical |
| | Year Ended December 31, 2015 |
| | 2015 Acquisitions | | 2016 Acquisition |
| Rooms | $ | 2,548 |
| | $ | 2,791 |
|
| Food and beverage | 3,188 |
| | 4,210 |
|
| Other hotel operating expenses | 120 |
| | 2,034 |
|
| General and administrative | 1,714 |
| | 1,710 |
|
| Property taxes, insurance, rent and other | 1,156 |
| | 857 |
|
| Repairs and maintenance | 680 |
| | 910 |
|
| Utilities | 514 |
| | 882 |
|
| | $ | 9,920 |
| | $ | 13,394 |
|
Notes to Pro Forma Condensed Consolidated Financial Statements
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 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 nine months ended September 30, 2016 and the year ended December 31, 2015 represent the hotel expenses that would have been incurred in addition to those presented in our historical consolidated financial statements, when applicable (in thousands):
|
| | | | | | | |
| | | | | | Nine Months Ended September 30, 2016 |
| | | | | | 2016 Acquisition |
| Sales and marketing - pre-acquisition historical | $ | 159 |
|
| Sales and marketing - pro forma adjustments | (6 | ) |
| Sales and marketing - pro forma results | $ | 153 |
|
| | |
| Management fees - pre-acquisition historical | $ | 55 |
|
| Management fees - pro forma adjustments | — |
|
| Management fees - pro forma results | $ | 55 |
|
| | | | | | |
| Depreciation and amortization - pre-acquisition historical | $ | 471 |
|
| Depreciation and amortization - pro forma adjustments | (172 | ) |
| Depreciation and amortization - pro forma results | $ | 299 |
|
|
| | | | | | | | | | | |
| | | | | | Year Ended December 31, 2015 |
| | | | | | 2015 Acquisitions | | 2016 Acquisition |
| Sales and marketing - pre-acquisition historical | $ | 2,143 |
| | 1,482 |
|
| Sales and marketing - pro forma adjustments | 130 |
| | (51 | ) |
| Sales and marketing - pro forma results | $ | 2,273 |
| | $ | 1,431 |
|
| | | | |
| Management fees - pre-acquisition historical | $ | 626 |
| | $ | 646 |
|
| Management fees - pro forma adjustments | (17 | ) | | — |
|
| Management fees - pro forma results | $ | 609 |
| | $ | 646 |
|
| | | | | | | | |
| Depreciation and amortization - pre-acquisition historical | $ | 2,560 |
| | $ | 3,639 |
|
| Depreciation and amortization - pro forma adjustments | 274 |
| | (1,326 | ) |
| Depreciation and amortization - pro forma results | $ | 2,834 |
| | $ | 2,313 |
|
Notes to Pro Forma Condensed Consolidated Financial Statements
H. Asset Management Fees
We pay our advisor an annual asset management fee equal to 0.50% of the aggregate average 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, 2015. The following pro forma adjustments for the nine months ended September 30, 2016 and year ended December 31, 2015 represent incremental asset management fees that would have been incurred in addition to asset management fees presented in our historical consolidated financial statements (in thousands):
|
| | | | | | | | |
| | | | | | | Nine Months Ended September 30, 2016 |
| | | | | | | 2016 Acquisition |
| Asset management fee expense - pre-acquisition historical | | $ | — |
|
| Asset management fee expense - pro forma adjustments | | 54 |
|
| Asset management fee expense - pro forma results | | $ | 54 |
|
|
| | | | | | | | | | | | |
| | | | | | | Year Ended December 31, 2015 |
| | | | | | | 2015 Acquisitions | | 2016 Acquisition |
| Asset management fee expense - pre-acquisition historical | | $ | 60 |
| | $ | — |
|
| Asset management fee expense - pro forma adjustments | | 455 |
| | 421 |
|
| Asset management fee expense - pro forma results | | $ | 515 |
| | $ | 421 |
|
I. Acquisition-Related Expenses
Acquisition costs of $3.7 million related to our 2016 Acquisition, which are non-recurring in nature, are reflected in our historical consolidated statement of operations for the nine months ended September 30, 2016. For the year ended December 31, 2015, $8.6 million and $0.2 million of acquisition costs related to our 2015 Acquisitions and 2016 Acquisition, respectively, are reflected in our historical consolidated statement of operations. We have reflected a pro forma adjustment to exclude these non-recurring charges from our pro forma condensed consolidated statement of operations.
J. Interest Expense
The following pro forma adjustments for the nine months ended September 30, 2016 and year ended December 31, 2015 represent the incremental interest expense that would have been incurred in addition to the amount presented in our historical consolidated financial statements (in thousands):
|
| | | | | | | | |
| | | | | | | Nine Months Ended September 30, 2016 |
| | | | | | | 2016 Acquisition |
| Interest expense - pre-acquisition historical | | $ | 136 |
|
| Interest expense - pro forma adjustments | | 146 |
|
| Interest expense - pro forma results | | $ | 282 |
|
|
| | | | | | | | | | | | |
| | | | | | | Year Ended December 31, 2015 |
| | | | | | | 2015 Acquisitions | | 2016 Acquisition |
| Interest expense - pre-acquisition historical | | $ | 1,699 |
| | $ | 1,055 |
|
| Interest expense - pro forma adjustments | | 910 |
| | 1,125 |
|
| Interest expense - pro forma results | | $ | 2,609 |
| | $ | 2,180 |
|
Notes to Pro Forma Condensed Consolidated Financial Statements
K. 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 nine months ended September 30, 2016 and year ended December 31, 2015 reflect the incremental income tax provisions that would have been incurred, based on the new entity structure, in addition to the amounts presented in our historical consolidated financial statements, if any (in thousands):
|
| | | |
| | Nine Months Ended September 30, 2016 |
| | 2016 Acquisition |
| Provision for income taxes - pre-acquisition historical | $ | — |
|
| Provision for income taxes - pro forma adjustments | 26 |
|
| Provision for income taxes - pro forma results | $ | 26 |
|
|
| | | | | | | |
| | Year Ended December 31, 2015 |
| | 2015 Acquisitions | | 2016 Acquisition |
| Provision for income taxes - pre-acquisition historical | $ | — |
| | $ | — |
|
| Provision for income taxes - pro forma adjustments | 262 |
| | 299 |
|
| Provision for income taxes - pro forma results | $ | 262 |
| | $ | 299 |
|
L. Weighted-Average Shares
The pro forma weighted-average shares outstanding were determined as if the number of shares required to raise the funds used for each acquisition included in these pro forma condensed consolidated financial statements were issued on January 1, 2015.
