Exhibit 99.1
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On December 7, 2017, FelCor/CMB Marlborough Hotel, L.L.C. and DJONT/CMB FCOAM, L.L.C., subsidiaries of FelCor Lodging Limited Partnership (“FelCor LP”), entered into a Purchase and Sale Agreement to sell the Embassy Suites Boston Marlborough hotel to RBH Acquisition L.L.C., a third party unrelated to FelCor LP, for $23.7 million (the “Transaction”). Right, title and interest to the Embassy Suites Boston Marlborough hotel was transferred on February 21, 2018. The Embassy Suites Boston Marlborough hotel’s operations constituted a significant amount of income from continuing operations of FelCor LP.
Previously, on August 31, 2017 (the “Acquisition Date”), RLJ Lodging Trust (“RLJ”), RLJ Lodging Trust, L.P. (“RLJ LP”), Rangers Sub I, LLC, a wholly owned subsidiary of RLJ LP (“Rangers”), and Rangers Sub II, LP, a wholly owned subsidiary of RLJ LP (“Partnership Merger Sub”) consummated the transactions contemplated by the definitive Agreement and Plan of Merger (the “Merger Agreement”) dated as of April 23, 2017 with FelCor Lodging Trust Incorporated (“FelCor”) and FelCor LP, pursuant to which Partnership Merger Sub merged with and into FelCor LP, with FelCor LP surviving as a wholly owned subsidiary of RLJ LP (the “Partnership Merger”), and, immediately thereafter, FelCor merged with and into Rangers, with Rangers surviving as a wholly owned subsidiary of RLJ LP (the “REIT Merger” and, together with the Partnership Merger, the “Mergers”).
RLJ accounted for the Mergers under the acquisition method of accounting in ASC 805, Business Combinations. In accordance with the guidance, RLJ elected to apply pushdown accounting to FelCor LP’s consolidated financial statements in order to reflect the new basis of accounting established by RLJ for the individual assets acquired and the liabilities assumed in the Mergers. Accordingly, FelCor LP’s consolidated financial statements for the periods before and after the Acquisition Date reflect different bases of accounting, and the financial positions and the results of operations for those periods are not comparable. As a result, the consolidated financial statements are separated into two distinct periods; the periods prior to the Acquisition Date are identified as “Predecessor,” and the period after the Acquisition Date is identified as “Successor.”
The following unaudited pro forma condensed consolidated financial statements are presented to illustrate the effects of the Transaction. The unaudited pro forma condensed consolidated balance sheet illustrates the estimated effects of the Transaction as if it occurred on September 30, 2017. The unaudited pro forma condensed consolidated statements of operations and comprehensive income (loss) set forth the estimated effects of the Transaction as if it occurred on January 1, 2016.
The unaudited pro forma condensed consolidated financial statements presented herein are for informational purposes only and do not purport to present what FelCor LP’s actual results would have been had the transaction occurred on the dates assumed, or to project FelCor LP’s results of operations or financial position for any future period. The unaudited pro forma condensed consolidated financial statements include assumptions that are believed to be reasonable and represent all material information that is necessary to fairly present pro forma financial statements.
The unaudited pro forma condensed consolidated financial statements, including the notes thereto, should be read in conjunction with FelCor LP’s audited consolidated financial statements and the notes in FelCor LP’s Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the SEC on February 24, 2017, and in conjunction with FelCor LP’s unaudited consolidated financial statements and the notes in FelCor LP’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, as filed with the SEC on November 14, 2017.
FelCor Lodging Limited Partnership
Unaudited Pro Forma Condensed Consolidated Balance Sheet
(in thousands)
| | | | Embassy Suites | | |
| | Historical | | Boston Marlborough | | Pro Forma |
| | Successor | | Successor | | Successor |
| | September 30, 2017 | | September 30, 2017 | | September 30, 2017 |
| | (Unaudited) | | (Unaudited) | | (Unaudited) |
| | | | | | |
Assets | | | | | | |
Investment in hotel properties, net | | $ | 2,672,728 | | $ | (24,753) | (a) | $ | 2,647,975 |
Investment in unconsolidated joint ventures | | 17,117 | | - | | 17,117 |
Cash and cash equivalents | | 10,503 | | - | | 10,503 |
Restricted cash reserves | | 6,671 | | - | | 6,671 |
Related party rent receivable | | 12,582 | | (489) | (a) | 12,093 |
Intangible assets, net | | 129,703 | | - | | 129,703 |
Prepaid expense and other assets | | 11,058 | | (36) | (a) | 11,022 |
Total assets | | $ | 2,860,362 | | $ | (25,278) | | $ | 2,835,084 |
| | | | | | |
Liabilities and Partners’ Capital | | | | | | |
Debt, net | | $ | 1,303,907 | | $ | - | | $ | 1,303,907 |
Accounts payable and other liabilities | | 72,451 | | (44) | (a) | 72,407 |
Accrued interest | | 12,049 | | - | | 12,049 |
Distributions payable | | 4,308 | | - | | 4,308 |
Total liabilities | | 1,392,715 | | (44) | | 1,392,671 |
| | | | | | |
Commitments and Contingencies | | | | | | |
| | | | | | |
Partners’ Capital | | | | | | |
Partners’ capital: | | | | | | |
Partners’ capital | | 1,413,565 | | (24,871) | (b) | 1,388,694 |
Retained earnings | | 4,366 | | (363) | (b) | 4,003 |
Total partners’ capital | | 1,417,931 | | (25,234) | | 1,392,697 |
Noncontrolling interest in consolidated joint ventures | | 5,286 | | - | | 5,286 |
Preferred capital in a consolidated joint venture, liquidation value of $45,401 at September 30, 2017 | | 44,430 | | - | | 44,430 |
Total partners’ capital | | 1,467,647 | | (25,234) | | 1,442,413 |
Total liabilities and partners’ capital | | $ | 2,860,362 | | $ | (25,278) | | $ | 2,835,084 |
See the accompanying notes to the unaudited pro forma condensed consolidated financial statements
FelCor Lodging Limited Partnership
Unaudited Pro Forma Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
(in thousands, except per unit data)
| | Embassy Suites | | | | Embassy Suites |
| | Boston Marlborough | | | | Boston Marlborough |
| | | | Pro Forma | | | | | | | | Pro Forma | | |
| | Historical | | Adjustment | | Pro Forma | | | | Historical | | Adjustment | | Pro Forma |
| | Successor | | | | Predecessor |
| | September 1 | | September 1 | | September 1 | | | | January 1 | | January 1 | | January 1 |
| | through | | through | | through | | | | through | | through | | through |
| | September 30, | | September 30, | | September 30, | | | | August 31, | | August 31, | | August 31, |
| | 2017 | | 2017 | | 2017 | | | | 2017 | | 2017 | | 2017 |
| | (Unaudited) | | (Unaudited) | | (Unaudited) | | | | (Unaudited) | | (Unaudited) | | (Unaudited) |
| | | | | | | | | | | | | | |
Revenue | | | | | | | | | | | | | | |
Operating revenue | | | | | | | | | | | | | | |
Room revenue | | $ | - | | $ | - | | $ | - | | | | $ | 425,682 | | $ | (6,285) | (c) | $ | 419,397 |
Food and beverage revenue | | - | | - | | - | | | | 90,572 | | (731) | (c) | 89,841 |
Related party lease revenue | | 20,854 | | (489) | (c) | 20,365 | | | | - | | - | | - |
Other revenue | | - | | - | | - | | | | 35,261 | | (89) | (c) | 35,172 |
Total revenue | | 20,854 | | (489) | | 20,365 | | | | 551,515 | | (7,105) | | 544,410 |
| | | | | | | | | | | | | | |
Expense | | | | | | | | | | | | | | |
Operating expense | | | | | | | | | | | | | | |
Room expense | | - | | - | | - | | | | 112,813 | | (1,554) | (c) | 111,259 |
Food and beverage expense | | - | | - | | - | | | | 71,828 | | (572) | (c) | 71,256 |
Management and franchise fee expense | | - | | - | | - | | | | 19,901 | | (337) | (c) | 19,564 |
Other operating expense | | - | | - | | - | | | | 147,827 | | (2,263) | (c) | 145,564 |
Total property operating expense | | - | | - | | - | | | | 352,369 | | (4,726) | | 347,643 |
Depreciation and amortization | | 5,974 | | (77) | (c) | 5,897 | | | | 73,065 | | (745) | (c) | 72,320 |
Impairment loss | | - | | - | | - | | | | 35,109 | | - | | 35,109 |
Property tax, insurance and other | | 4,449 | | (45) | (c) | 4,404 | | | | 44,278 | | (322) | (c) | 43,956 |
General and administrative | | 192 | | - | | 192 | | | | 16,006 | | (64) | (c) | 15,942 |
Transaction costs | | 1,039 | | (4) | (c) | 1,035 | | | | 68,248 | | - | | 68,248 |
Total operating expense | | 11,654 | | (126) | | 11,528 | | | | 589,075 | | (5,857) | | 583,218 |
Operating income (loss) | | 9,200 | | (363) | | 8,837 | | | | (37,560) | | (1,248) | | (38,808) |
Other income | | - | | - | | - | | | | 100 | | - | | 100 |
Interest income | | 3 | | - | | 3 | | | | 126 | | - | | 126 |
Interest expense | | (4,779) | | - | | (4,779) | | | | (51,690) | | - | | (51,690) |
Loss on debt extinguishment | | - | | - | | - | | | | (3,278) | | - | | (3,278) |
Income (loss) before equity in income from unconsolidated joint ventures | | 4,424 | | (363) | | 4,061 | | | | (92,302) | | (1,248) | | (93,550) |
Equity in income from unconsolidated joint ventures | | 115 | | - | | 115 | | | | 1,074 | | - | | 1,074 |
Income (loss) before income tax expense | | 4,539 | | (363) | | 4,176 | | | | (91,228) | | (1,248) | | (92,476) |
Income tax expense | | - | | - | | - | | | | (499) | | - | | (499) |
Income (loss) from continuing operations | | 4,539 | | (363) | | 4,176 | | | | (91,727) | | (1,248) | | (92,975) |
Loss from discontinued operations | | - | | - | | - | | | | (3,415) | | - | | (3,415) |
Income before gain (loss) on sale of hotel properties | | 4,539 | | (363) | | 4,176 | | | | (95,142) | | (1,248) | | (96,390) |
Loss on sale of hotel properties | | - | | - | | - | | | | (1,764) | | - | (c) | (1,764) |
Net income (loss) and comprehensive income (loss) | | 4,539 | | (363) | | 4,176 | | | | (96,906) | | (1,248) | | (98,154) |
Net (income) loss attributable to noncontrolling interests: | | | | | | | | | | | | | | |
Noncontrolling interest in consolidated joint ventures | | (51) | | - | | (51) | | | | 545 | | - | | 545 |
Preferred distributions - consolidated joint venture | | (122) | | - | | (122) | | | | (979) | | - | | (979) |
Net income (loss) and comprehensive income (loss) attributable to FelCor LP | | 4,366 | | (363) | | 4,003 | | | | (97,340) | | (1,248) | | (98,588) |
Preferred distributions | | - | | - | | - | | | | (16,744) | | - | | (16,744) |
Net income (loss) and comprehensive income (loss) attributable to FelCor LP partners and common unitholders | | $ | 4,366 | | $ | (363) | | $ | 4,003 | | | | $ | (114,084) | | $ | (1,248) | | $ | (115,332) |
| | | | | | | | | | | | | | |
Basic and diluted per common unit data: | | | | | | | | | | | | | | |
Loss from continuing operations per unit attributable to common unitholders (e) | | | | | | | | | | $ | (0.80) | | $ | (0.01) | | $ | (0.81) |
Net loss per unit attributable to common unitholders | | | | | | | | | | $ | (0.83) | | $ | (0.01) | | $ | (0.84) |
Weighted-average common units outstanding | | | | | | | | | | 137,942 | | 137,942 | | 137,942 |
See the accompanying notes to the unaudited pro forma condensed consolidated financial statements
FelCor Lodging Limited Partnership
Unaudited Pro Forma Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
(in thousands, except per unit data)
| | | | Embassy Suites | | |
| | | | Boston Marlborough | | |
| | Historical | | Pro Forma Adjustment | | Pro Forma |
| | Predecessor | | Predecessor | | Predecessor |
| | Year Ended | | Year Ended | | Year Ended |
| | December 31, 2016 | | December 31, 2016 | | December 31, 2016 |
| | (Unaudited) | | (Unaudited) | | (Unaudited) |
| | | | | | |
Revenue | | | | | | |
Operating revenue | | | | | | |
Room revenue | | $ | 661,640 | | $ | (9,874) | (c) | $ | 651,766 |
Food and beverage revenue | | 155,227 | | (1,164) | (c) | 154,063 |
Other revenue | | 50,087 | | (144) | (c) | 49,943 |
Total revenue | | 866,954 | | (11,182) | | 855,772 |
| | | | | | |
Expense | | | | | | |
Operating expense | | | | | | |
Room expense | | 171,883 | | (2,220) | (c) | 169,663 |
Food and beverage expense | | 119,047 | | (900) | (c) | 118,147 |
Management and franchise fee expense | | 32,935 | | (586) | (c) | 32,349 |
Other operating expense | | 227,300 | | (3,610) | (c) | 223,690 |
Total property operating expense | | 551,165 | | (7,316) | | 543,849 |
Depreciation and amortization | | 114,054 | | (1,177) | (c) | 112,877 |
Impairment loss | | 26,459 | | - | | 26,459 |
Property tax, insurance and other | | 70,057 | | (483) | (c) | 69,574 |
General and administrative | | 27,037 | | (104) | (c) | 26,933 |
Transaction costs | | - | | - | | - |
Total operating expense | | 788,772 | | (9,080) | | 779,692 |
Operating income | | 78,182 | | (2,102) | | 76,080 |
Other income | | 342 | | - | | 342 |
Interest income | | 62 | | - | | 62 |
Interest expense | | (78,244) | | - | | (78,244) |
Income before equity in income from unconsolidated joint ventures | | 342 | | (2,102) | | (1,760) |
Equity in income from unconsolidated joint ventures | | 1,533 | | - | | 1,533 |
Income before income tax expense | | 1,875 | | (2,102) | | (227) |
Income tax expense | | (873) | | - | | (873) |
Income from continuing operations | | 1,002 | | (2,102) | | (1,100) |
Loss from discontinued operations | | (3,131) | | - | | (3,131) |
Loss before gain on sale of hotel properties | | (2,129) | | (2,102) | | (4,231) |
Gain on sale of hotel properties | | 6,322 | | - | | 6,322 |
Net income and comprehensive income | | 4,193 | | (2,102) | | 2,091 |
Net (income) loss attributable to noncontrolling interests: | | | | | | |
Noncontrolling interest in consolidated joint ventures | | 673 | | - | | 673 |
Preferred distributions - consolidated joint venture | | (1,461) | | - | | (1,461) |
Net income and comprehensive income attributable to FelCor LP | | 3,405 | | (2,102) | | 1,303 |
Preferred distributions | | (25,115) | | - | | (25,115) |
Net loss and comprehensive loss attributable to FelCor LP partners | | $ | (21,710) | | $ | (2,102) | | $ | (23,812) |
| | | | | | |
Basic and diluted per common unit data: | | | | | | |
Loss from continuing operations per unit attributable to common unitholders | | $ | (0.13) | | $ | (0.02) | | $ | (0.15) |
Net Loss per unit attributable to common unitholders (e) | | $ | (0.16) | | $ | (0.02) | | $ | (0.17) |
Basic weighted-average common units outstanding | | 138,739 | | 138,739 | | 138,739 |
Diluted weighted-average common units outstanding | | 138,739 | | 138,739 | | 138,739 |
See the accompanying notes to the unaudited pro forma condensed consolidated financial statements
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Overview
On December 7, 2017, FelCor/CMB Marlborough Hotel, L.L.C. and DJONT/CMB FCOAM, L.L.C., subsidiaries of FelCor Lodging Limited Partnership (“FelCor LP”), entered into a Purchase and Sale Agreement to sell the Embassy Suites Boston Marlborough hotel to RBH Acquisition, L.L.C., a third party unrelated to FelCor LP, for $23.7 million (the “Transaction”). Right, title and interest to the Embassy Suites Boston Marlborough hotel was transferred on February 21, 2018. The Embassy Suites Boston Marlborough hotel’s operations constituted a significant amount of income from continuing operations of FelCor LP.
On August 31, 2017 (the “Acquisition Date”), RLJ Lodging Trust (“RLJ”), RLJ Lodging Trust, L.P. (“RLJ LP”), Rangers Sub I, LLC, a wholly owned subsidiary of RLJ LP (“Rangers”), and Rangers Sub II, LP, a wholly owned subsidiary of RLJ LP (“Partnership Merger Sub”) consummated the transactions contemplated by the definitive Agreement and Plan of Merger (the “Merger Agreement”) dated as of April 23, 2017 with FelCor Lodging Trust Incorporated (“FelCor”) and FelCor LP, pursuant to which Partnership Merger Sub merged with and into FelCor LP, with FelCor LP surviving as a wholly owned subsidiary of RLJ LP (the “Partnership Merger”), and, immediately thereafter, FelCor merged with and into Rangers, with Rangers surviving as a wholly owned subsidiary of RLJ LP (the “REIT Merger” and, together with the Partnership Merger, the “Mergers”).
RLJ accounted for the Mergers under the acquisition method of accounting in ASC 805, Business Combinations. In accordance with the guidance, RLJ elected to apply pushdown accounting to FelCor LP’s consolidated financial statements in order to reflect the new basis of accounting established by RLJ for the individual assets acquired and the liabilities assumed in the Mergers. Accordingly, FelCor LP’s consolidated financial statements for the periods before and after the Acquisition Date reflect different bases of accounting, and the financial positions and the results of operations for those periods are not comparable. As a result, the consolidated financial statements are separated into two distinct periods; the periods prior to the Acquisition Date are identified as “Predecessor,” and the period after the Acquisition Date is identified as “Successor.”
Reclassifications
As a result of the merger with RLJ, certain prior period amounts in the Predecessor consolidated statements of operations and comprehensive income (loss) have been reclassified to conform to the financial statement presentation of the company’s parent company, RLJ.
Adjustments to the Unaudited Pro Forma Condensed Consolidated Financial Statements
The unaudited pro forma condensed consolidated financial statements are presented to illustrate the effects of the Transaction. The unaudited pro forma condensed consolidated balance sheet illustrates the estimated effects of the Transaction as if it occurred on September 30, 2017. The unaudited pro forma condensed consolidated statements of operations and comprehensive income (loss) set forth the estimated effects of the Transaction as if it occurred on January 1, 2016.
Noted below are the explanations for the adjustments included in the unaudited pro forma condensed consolidated financial statements:
a) The pro forma adjustment relates to the removal of the assets and liabilities of the sold hotel property.
b) The pro forma adjustment relates to the removal of partners’ capital of the sold hotel property.
c) The pro forma adjustment relates to the removal of the revenues and expenses associated with the sold hotel property.
