Exhibit 99.2
UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL INFORMATION OF
SUMMIT HOTEL PROPERTIES, INC.
Summit Hotel Properties, Inc. (the “Company”) is a self-managed hotel investment company that was organized on June 30, 2010 as a Maryland corporation. The Company holds both general and limited partnership interests in Summit Hotel OP, LP (the “Operating Partnership”), a Delaware limited partnership also organized on June 30, 2010. Unless stated otherwise or the context otherwise requires, references in this report to “we”, “our”, “us”, “our company” or “the company” mean Summit Hotel Properties, Inc. and its consolidated subsidiaries.
On November 3, 2021, the Operating Partnership and Summit Hospitality JV, LP, the Company’s joint venture with GIC, Singapore’s sovereign wealth fund (the “Joint Venture”), entered into a Contribution and Purchase Agreement (the “Contribution and Purchase Agreement”) with NewcrestImage Holdings, LLC, a Delaware limited liability company, and NewcrestImage Holdings II, LLC, a Delaware limited liability company (together, “NewcrestImage”), to purchase from NewcrestImage a portfolio of 27 hotel properties, containing an aggregate of 3,709 guestrooms, and two parking structures, containing 1,002 spaces, and various financial incentives (such hotels, parking structures and financial incentives, the “Portfolio”), for an aggregate purchase price of $822.0 million (the “NCI Transaction”).
On January 13, 2022, we completed the acquisition of the Portfolio except for one hotel property, the 176-guestroom Canopy New Orleans, which is still under construction, for an aggregate purchase price of $766.0 million. We expect to acquire the Canopy New Orleans upon completion of its construction, which is expected to occur during the first quarter of 2022, for a purchase price of $56.0 million.
The unaudited pro forma consolidated balance sheet as of September 30, 2021 is presented as if the acquisition of the Portfolio had been completed on September 30, 2021. The unaudited pro forma consolidated statements of operations for the nine months ended September 30, 2021 and the year ended December 31, 2020 are presented as if the acquisition of Portfolio had been completed on January 1, 2020.
The unaudited pro forma consolidated financial information is not necessarily indicative of what our consolidated financial position and results of operations would have been assuming the acquisition of the Portfolio had been completed at the beginning of the periods presented, nor is it indicative of the consolidated financial position or consolidated results of operations for future periods. In management’s opinion, all adjustments necessary to reflect the effects of the acquisition of the Portfolio have been made. The unaudited pro forma consolidated financial statements should be read in conjunction with the historical consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 and Quarterly Report on Form 10-Q for the quarter ended September 30, 2021.
1
Summit Hotel Properties, Inc.
Pro Forma Consolidated Balance Sheet
September 30, 2021
(Unaudited)
(in thousands)
Summit Hotel | Pro Forma | Pro Forma | Pro Forma | |||||||||||||||||
Properties, Inc. | Portfolio | Adjustments | Adjustment Note | Combined | ||||||||||||||||
ASSETS | ||||||||||||||||||||
Investment in hotel properties, net | $ | 2,078,014 | $ | 565,371 | $ | 260,276 | (1) | $ | 2,903,661 | |||||||||||
Undeveloped land | 1,500 | - | - | 1,500 | ||||||||||||||||
Assets held for sale, net | 425 | - | - | 425 | ||||||||||||||||
Cash and cash equivalents | 59,650 | 29,486 | (33,518 | ) | (1), (2), (5) | 55,618 | ||||||||||||||
Restricted cash | 25,521 | 2,129 | (2,129 | ) | (1) | 25,521 | ||||||||||||||
Investment in real estate loans, net | 26,369 | - | - | 26,369 | ||||||||||||||||
Right-of-use assets, net | 27,290 | 2,091 | - | 29,381 | ||||||||||||||||
Trade receivables, net | 14,209 | 3,283 | (3,283 | ) | (1) | 14,209 | ||||||||||||||
Prepaid expenses and other | 7,308 | 2,306 | (2,406 | ) | (1) | 7,208 | ||||||||||||||
Deferred charges, net | 4,249 | - | 3,721 | (1) | 7,970 | |||||||||||||||
Other assets | 3,785 | 1,147 | (1,147 | ) | (1) | 3,785 | ||||||||||||||
Total assets | $ | 2,248,320 | $ | 605,813 | $ | 221,514 | $ | 3,075,647 | ||||||||||||
LIABILITIES AND EQUITY | ||||||||||||||||||||
Liabilities: | ||||||||||||||||||||
Debt, net of debt issuance costs | $ | 1,056,667 | $ | 492,887 | $ | (81,608 | ) | (1), (3), (4) | $ | 1,467,946 | ||||||||||
Lease liabilities, net | 17,527 | 2,091 | - | 19,618 | ||||||||||||||||
Accounts payable | 4,330 | 2,676 | (2,676 | ) | (1) | 4,330 | ||||||||||||||
Accrued expenses and other | 70,289 | 22,568 | (22,143 | ) | (1) | 70,714 | ||||||||||||||
Total liabilities | 1,148,813 | 520,222 | (106,427 | ) | 1,562,608 | |||||||||||||||
Redeemable non-controlling interests | - | - | 50,000 | (6) | 50,000 | |||||||||||||||
Equity: | ||||||||||||||||||||
Stockholders'/Members' Equity | 1,222,594 | 85,591 | (70,434 | ) | (1), (8) | 1,237,751 | ||||||||||||||
Accumulated other comprehensive loss | (20,925 | ) | - | - | (20,925 | ) | ||||||||||||||
Accumulated deficit and distributions in excess of retained earnings | (247,364 | ) | - | (2,204 | ) | (9) | (249,568 | ) | ||||||||||||
Total stockholders’ equity | 954,305 | 85,591 | (72,638 | ) | 967,258 | |||||||||||||||
Non-controlling interests in operating partnership | 828 | - | 144,843 | (7), (8) | 145,671 | |||||||||||||||
Non-controlling interests in joint venture | 144,374 | - | 205,736 | (5) | 350,110 | |||||||||||||||
Total equity | 1,099,507 | 85,591 | 277,941 | 1,463,039 | ||||||||||||||||
Total liabilities and equity | $ | 2,248,320 | $ | 605,813 | $ | 221,514 | $ | 3,075,647 |
See Accompanying Notes to Unaudited Pro Forma Consolidated Financial Statements
2
Summit Hotel Properties, Inc.
Pro Forma Consolidated Statement of Operations
For the Nine Months Ended September 30, 2021
(Unaudited)
(in thousands, except per share amounts)
Summit Hotel Properties, Inc. | Portfolio | Pro forma Adjustments | Pro Forma Adjustment Note | Pro Forma Combined | ||||||||||||||||
Revenues: | ||||||||||||||||||||
Room | $ | 235,761 | $ | 69,885 | $ | - | $ | 305,646 | ||||||||||||
Food and beverage | 4,656 | 5,689 | - | 10,345 | ||||||||||||||||
Other | 14,647 | 5,390 | - | 20,037 | ||||||||||||||||
Total revenues | 255,064 | 80,964 | - | 336,028 | ||||||||||||||||
Expenses: | ||||||||||||||||||||
Room | 52,320 | 16,654 | - | 68,974 | ||||||||||||||||
Food and beverage | 3,000 | 4,150 | - | 7,150 | ||||||||||||||||
Other hotel operating expenses | 88,672 | 23,246 | - | 111,918 | ||||||||||||||||
Property taxes, insurance and other | 32,573 | 7,602 | - | 40,175 | ||||||||||||||||
Management fees | 6,757 | 3,156 | (1,475 | ) | (1) | 8,438 | ||||||||||||||
Depreciation and amortization | 79,776 | 17,783 | 11,651 | (2), (3), (4) | 109,210 | |||||||||||||||
Corporate general and administrative | 18,283 | - | - | 18,283 | ||||||||||||||||
Transaction costs | 3,849 | - | - | 3,849 | ||||||||||||||||
provision for credit losses | (2,632 | ) | - | - | (2,632 | ) | ||||||||||||||
Loss on impairment and write-off of assets | 4,361 | - | - | 4,361 | ||||||||||||||||
Total expenses | 286,959 | 72,591 | 10,176 | 369,726 | ||||||||||||||||
Gain on disposal of assets, net | 81 | - | - | 81 | ||||||||||||||||
Operating loss | (31,814 | ) | 8,373 | (10,176 | ) | (33,617 | ) | |||||||||||||
Other income (expense): | ||||||||||||||||||||
Gain on interest rate swap | - | 3,134 | (3,134 | ) | (5) | - | ||||||||||||||
Interest expense | (32,567 | ) | (15,837 | ) | 5,616 | (6), (7) | (42,788 | ) | ||||||||||||
Other income, net | 7,777 | 5,321 | - | 13,098 | ||||||||||||||||
Total other income (expense) | (24,790 | ) | (7,382 | ) | 2,482 | (29,690 | ) | |||||||||||||
Loss from continuing operations before income taxes | (56,604 | ) | 991 | (7,694 | ) | (63,307 | ) | |||||||||||||
Less - Loss attributable to non-controlling interests: | ||||||||||||||||||||
Operating Partnership | 97 | - | 9,420 | (8) | 9,517 | |||||||||||||||
Joint venture | 2,800 | - | 3,285 | (8) | 6,085 | |||||||||||||||
Loss from continuing operations before income taxes attributable to the Company | $ | (53,707 | ) | $ | 991 | $ | 5,011 | $ | (47,705 | ) | ||||||||||
Loss per share from continuing operations before income taxes attributable to the Company: | ||||||||||||||||||||
Basic and diluted | $ | (0.65 | ) | $ | (0.61 | ) | ||||||||||||||
Weighted average common shares outstanding: | ||||||||||||||||||||
Basic and diluted | 104,441 | 104,441 |
See Accompanying Notes to Unaudited Pro Forma Consolidated Financial Statements
3
Summit Hotel Properties, Inc.
Pro Forma Consolidated Statement of Operations
For the Year Ended December 31, 2020
(Unaudited)
(in thousands, except per share amounts)
Summit Hotel Properties, Inc. | Portfolio | Pro forma Adjustments | Pro Forma Adjustment Note | Pro Forma Combined | ||||||||||||||||
Revenues: | ||||||||||||||||||||
Room | $ | 215,506 | $ | 59,633 | $ | - | $ | 275,139 | ||||||||||||
Food and beverage | 6,444 | 5,037 | - | 11,481 | ||||||||||||||||
Other | 12,513 | 5,616 | - | 18,129 | ||||||||||||||||
Total revenues | 234,463 | 70,286 | - | 304,749 | ||||||||||||||||
Expenses: | ||||||||||||||||||||
Room | 53,784 | 15,313 | - | 69,097 | ||||||||||||||||
Food and beverage | 5,416 | 3,951 | - | 9,367 | ||||||||||||||||
Other hotel operating expenses | 96,506 | 23,265 | - | 119,771 | ||||||||||||||||
Property taxes, insurance and other | 44,691 | 8,376 | - | 53,067 | ||||||||||||||||
Management fees | 6,276 | 2,936 | (1,452 | ) | (1) | 7,760 | ||||||||||||||
Depreciation and amortization | 109,619 | 23,477 | 15,768 | (2), (3), (4) | 148,864 | |||||||||||||||
Corporate general and administrative | 20,985 | - | - | 20,985 | ||||||||||||||||
Transaction costs | - | - | - | - | ||||||||||||||||
provision for credit losses | 4,821 | - | - | 4,821 | ||||||||||||||||
Loss on impairment and write-off of assets | 1,759 | - | - | 1,759 | ||||||||||||||||
Total expenses | 343,857 | 77,318 | 14,316 | 435,491 | ||||||||||||||||
Loss on disposal of assets, net | (16 | ) | - | - | (16 | ) | ||||||||||||||
Operating loss | (109,410 | ) | (7,032 | ) | (14,316 | ) | (130,758 | ) | ||||||||||||
Other income (expense): | ||||||||||||||||||||
Loss on interest rate swaps | - | (4,813 | ) | 4,813 | (5) | - | ||||||||||||||
Interest expense | (43,300 | ) | (19,467 | ) | 5,839 | (6), (7) | (56,928 | ) | ||||||||||||
Other income, net | 4,841 | 8,798 | (2,206 | ) | (8) | 11,433 | ||||||||||||||
Total other income (expense) | (38,459 | ) | (15,482 | ) | 8,446 | (45,495 | ) | |||||||||||||
Loss from continuing operations before income taxes | (147,869 | ) | (22,514 | ) | (5,870 | ) | (176,253 | ) | ||||||||||||
Less - Loss attributable to non-controlling interests: | ||||||||||||||||||||
Operating Partnership | 269 | - | 22,612 | (9) | 22,881 | |||||||||||||||
Joint venture | 5,560 | - | 13,908 | (9) | 19,468 | |||||||||||||||
Loss from continuing operations before income taxes attributable to the Company | $ | (142,040 | ) | $ | (22,514 | ) | $ | 30,650 | $ | (133,904 | ) | |||||||||
Loss per share from continuing operations before income taxes attributable to the Company: | ||||||||||||||||||||
Basic and diluted | $ | (1.51 | ) | $ | (1.45 | ) | ||||||||||||||
Weighted average common shares outstanding: | ||||||||||||||||||||
Basic and diluted | 104,141 | 104,141 |
See Accompanying Notes to Unaudited Pro Forma Consolidated Financial Statements
4
Summit Hotel Properties, Inc.
Notes to Unaudited Pro Forma Consolidated Financial Statements
(dollars in thousands)
1. | The pro forma information at September 30, 2021 assumes the acquisition of the Portfolio occurred on September 30, 2021 for a purchase price of $822.0 million. The pro forma information for the nine months ended September 30, 2021 and the year ended December 31, 2020 assumes the acquisition of the Portfolio occurred on January 1, 2020. |
2. | We have performed a valuation analysis of the fair market value of the Portfolio and a preliminary allocation of the purchase price to the assets acquired and liabilities assumed. Using the total consideration for the acquisition, we have estimated the allocations to such assets and liabilities. The following table summarizes the allocation of the preliminary purchase price as of the transaction’s closing date of January 13, 2022: |
Assets and Liabilities Acquired | ||||
Land | $ | 52,653 | ||
Hotel buildings and improvements | 677,177 | |||
Furniture, fixtures and equipment | 75,899 | |||
Incentives and other intangibles | 19,918 | |||
Other assets | 3,721 | |||
Total assets acquired | 829,368 | |||
Net debt | (411,279 | ) | ||
Other liabilities | (425 | ) | ||
Net assets acquired (1) | $ | 417,664 |
Net Cash Disbursed | ||||
Purchase price | $ | 822,000 | ||
Acquisition costs | 3,647 | |||
Deferred financing fees | 5,200 | |||
Debt transaction costs (1) | 2,204 | |||
Net working capital | 3,296 | |||
$ | 836,347 | |||
Cash | $ | 209,868 | ||
Preferred Operating Partnership Units | 50,000 | |||
Common Units | 160,000 | |||
Debt | 416,479 | |||
$ | 836,347 |
(1) | Certain debt transaction costs will not be capitalized as part of the recorded amount of net assets acquired as these debt costs related to debt that was assumed and immediately repaid at closing. As such, these debt transaction costs were expensed on the closing date. |
The purchase price paid to complete the NCI Transaction has not been allocated to the net assets acquired as we are in the process of determining the relative values of the assets acquired and liabilities assumed to perform the final purchase price allocation. The final purchase price allocation for the NCI Transaction is expected to be completed during the first quarter of 2022. This preliminary purchase price allocation has been used to prepare the transaction accounting adjustments in the pro forma consolidated balance sheet and pro forma consolidated statements of operations. The final purchase price allocation will be determined when we have completed the detailed valuations and necessary calculations as described in more detail in the notes below. The final allocation is expected to be completed in connection with our report on Form 10-Q for the quarter ending March 31, 2022 and could differ materially from the preliminary allocation used in the pro forma adjustments. The final allocation may include (1) changes in fair values of Investments in real estate, net; (2) changes in allocations to intangible assets; and (3) other changes to assets and liabilities.
5
Summit Hotel Properties, Inc.
Notes to Unaudited Pro Forma Consolidated Financial Statements
(dollars in thousands)
3. | The pro forma adjustments to the unaudited Pro Forma Consolidated Balance Sheet at September 30, 2021 are as follows: |
Pro Forma Adjustments | Investment in hotel properties, net | Cash and cash equivalents | Restricted cash | Trade receivables, net | Prepaid expenses and other | Deferred charges, net | Other assets | Debt, net of debt issuance costs | Accounts payable | Accrued expenses and other | Redeemable Non- controlling Interest | Stockholders'/ Members' equity | Accumulated deficit and distributions in excess of retained earnings | Non- controlliong interest in Operating Partnership | Non- controlliong interest in joint venture | |||||||||||||||||||||||||||||||||
(1) | Adjustment to record net assets acquired at the Company's basis based on the total purchase price. | $ | 260,276 | $ | (29,386 | ) | $ | (2,129 | ) | $ | (3,283 | ) | $ | (2,406 | ) | $ | 3,721 | $ | (1,147 | ) | $ | (492,887 | ) | $ | (2,676 | ) | $ | (22,143 | ) | $ | - | $ | (85,591 | ) | $ | - | $ | - | $ | - | ||||||||
(2) | Adjustment to reflect cash payment to seller to complete the acquisition. | (209,868 | ) | |||||||||||||||||||||||||||||||||||||||||||||
(3) | Adjustment to reflect net debt financing to complete the transaction. | 416,479 | ||||||||||||||||||||||||||||||||||||||||||||||
(4) | Adjustment to reflect financing costs incurred to obtain debt to complete the transaction. | (5,200 | ) | |||||||||||||||||||||||||||||||||||||||||||||
(5) | Adjustment to reflect cash equity contribution by the Company's joint venture partner to complete the transaction. | 205,736 | 205,736 | |||||||||||||||||||||||||||||||||||||||||||||
(6) | Adjustment to reflect the issuance of Operating Partnership redeemable preferred units to complete the transaction. | 50,000 | ||||||||||||||||||||||||||||||||||||||||||||||
(7) | Adjustment to reflect issuance of Operating Partnership common units to complete the transaction. | 160,000 | ||||||||||||||||||||||||||||||||||||||||||||||
(8) | Adjustment to reflect change in non-controlling interest in SOP due to changes in SOP equity structure. | 15,157 | (15,157 | ) | ||||||||||||||||||||||||||||||||||||||||||||
(9) | Adjustment to reflect expensed debt transaction costs related interest rate swap settlements at closing. | (2,204 | ) | |||||||||||||||||||||||||||||||||||||||||||||
$ | 260,276 | $ | (33,518 | ) | $ | (2,129 | ) | $ | (3,283 | ) | $ | (2,406 | ) | $ | 3,721 | $ | (1,147 | ) | $ | (81,608 | ) | $ | (2,676 | ) | $ | (22,143 | ) | $ | 50,000 | $ | (70,434 | ) | $ | (2,204 | ) | $ | 144,843 | $ | 205,736 |
6
Summit Hotel Properties, Inc.
Notes to Unaudited Pro Forma Consolidated Financial Statements
(dollars in thousands)
4. | The pro forma adjustments to the unaudited Pro Forma Consolidated Statement of Operations for the nine months ended September 30, 2021 are as follows: |
Pro Forma Adjustments | Management fees | Depreciation and amortization | Loss on interest rate swaps | Interest expense | Loss attributable to Operating Partnership | Loss attributable to joint venture | |||||||||||||||||||
(1) | The pro forma adjustment represents the difference between the management fees previously paid by NewcrestImage prior to the acquisition and the fees that we are contractually obligated to pay. | $ | (1,475 | ) | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||
(2) | The pro forma adjustment represents the difference between the depreciation recorded by NewcrestImage prior to the acquisition and the amount of depreciation that we expect to record based on our basis in the net assets acquired using the straight-line method of depreciation. | 10,106 | |||||||||||||||||||||||
(3) | The pro forma adjustment represents the difference between the franchise application fee amortization recorded by NewcrestImage prior to the acquisition and the amount of amortization that we expect to record. | 156 | |||||||||||||||||||||||
(4) | The pro forma adjustment represents the amortization of acquired intangible assets. | 1,389 | |||||||||||||||||||||||
(5) | The pro forma adjustment represents the elimination of NewcrestImage's gain on the interest rate swaps as they were settled at closing by NewcrestImage. | (3,134 | ) | �� | |||||||||||||||||||||
(6) | The pro forma adjustment represents the difference between the deferred finance cost amortization recorded by NewcrestImage prior to the acquisition and the amount of amortization that we expect to record. | (975 | ) | ||||||||||||||||||||||
(7) | The pro forma adjustment represents the difference between the interest expense paid by NewcrestImage prior to the acquisition based on NewcrestImage's debt structure and the interest expense that we expect to incur as a result of the debt that we put in place to complete the transaction. | 6,591 | |||||||||||||||||||||||
(8) | The pro forma adjustment represents the allocation of the pro forma net income to the non-controlling interests of the Company | 9,420 | 3,285 | ||||||||||||||||||||||
$ | (1,475 | ) | $ | 11,651 | $ | (3,134 | ) | $ | 5,616 | $ | 9,420 | $ | 3,285 |
7
Summit Hotel Properties, Inc.
Notes to Unaudited Pro Forma Consolidated Financial Statements
(dollars in thousands)
5. | The pro forma adjustments to the unaudited Pro Forma Consolidated Statement of Operations for the year ended December 31, 2020 are as follows: |
Pro Forma Adjustments | Management fees | Depreciation and amortization | Loss on interest rate swaps | Interest expense | Other income, net | Loss attributable to Operating Partnership | Loss attributable to joint venture | ||||||||||||||||||||||
(1) | The pro forma adjustment represents the difference between the management fees previously paid by NewcrestImage prior to the acquisition and the fees that we are contractually obligated to pay. | $ | (1,452 | ) | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||||
(2) | The pro forma adjustment represents the difference between the depreciation recorded by NewcrestImage prior to the acquisition and the amount of depreciation that we expect to record based on our basis in the net assets acquired using the straight-line method of depreciation. | 13,708 | |||||||||||||||||||||||||||
(3) | The pro forma adjustment represents the difference between the franchise application fee amortization recorded by NewcrestImage prior to the acquisition and the amount of amortization that we expect to record. | 208 | |||||||||||||||||||||||||||
(4) | The pro forma adjustment represents the amortization of acquired intangible assets. | 1,852 | |||||||||||||||||||||||||||
(5) | The pro forma adjustment represents the elimination of NewcrestImage's gain on the interest rate swaps as they were settled at closing by NewcrestImage. | 4,813 | |||||||||||||||||||||||||||
(6) | The pro forma adjustment represents the difference between the deferred finance cost amortization recorded by NewcrestImage prior to the acquisition and the amount of amortization that we expect to record. | (1,300 | ) | ||||||||||||||||||||||||||
(7) | The pro forma adjustment represents the difference between the interest expense paid by NewcrestImage prior to the acquisition based on NewcrestImage's debt structure and the interest expense that we expect to incur as a result of the debt that we put in place to complete the transaction. | 7,139 | |||||||||||||||||||||||||||
(8) | The pro forma adjustment represents interest rate swap breakage fees paid at closing. | (2,206 | ) | ||||||||||||||||||||||||||
(9) | The pro forma adjustment represents the allocation of the pro forma net income to the non-controlling interests of the Company | 22,612 | 13,908 | ||||||||||||||||||||||||||
$ | (1,452 | ) | $ | 15,768 | $ | 4,813 | $ | 5,839 | $ | (2,206 | ) | $ | 22,612 | $ | 13,908 |
8