UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K (Amendment No. 1)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 16, 2012
CNL Healthcare Trust, Inc.
(Exact name of registrant as specified in its charter)
Maryland | 000-54685 | 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)
Registrants 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 9.01 | Financial Statements and Exhibits. |
On February 21, 2012, CNL Healthcare Trust, Inc. (the Company) filed a Form 8-K disclosing our acquisition of five senior housing (collectively referred to as the the Communities) from an unaffiliated third party on February 16, 2012.
The Form 8-K is hereby amended to include the required financial information.
(a) | Financial Statements of Business Acquired. |
Primrose Senior Housing Communities (Five Communities)
Report of Independent Certified Public Accountants
Combined Financial Statements
Combined Balance Sheets
Combined Statements of Operations
Combined Statements of Changes in Members Deficit
Combined Statements of Cash Flows
Notes to Combined Financial Statements
(b) | Pro Forma Financial Information. |
CNL Healthcare Trust, Inc. and Subsidiaries:
Unaudited Pro Forma Consolidated Financial Statements:
Unaudited Pro Forma Consolidated Balance Sheet as of December 31, 2011
Unaudited Pro Forma Consolidated Statement of Operations for the Year Ended December 31, 2011
Notes to Unaudited Pro Forma Consolidated Financial Statements
Certain statements in this report are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements generally are characterized by the use of terms such as may, will, should, plan, anticipate, estimate, predict, believe and expect or the negative of these terms or other comparable terminology. Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, actual results could differ materially from those set forth in the forward-looking statements. Given these uncertainties, the Company cautions investors and potential investors not to place undue reliance on such statements. The Company undertakes no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect future events or circumstances or to reflect the occurrence of unanticipated events.
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.
CNL HEALTHCARE TRUST, INC. | ||||||
Date: May 1, 2012 | By: | /s/ Joseph Johnson | ||||
Name: | Joseph Johnson | |||||
Title: | Senior Vice President and Chief Financial Officer |
Page | ||||
F-3 | ||||
F-4 | ||||
F-5 | ||||
F-6 | ||||
F-7 | ||||
F-8 | ||||
Pro Forma Consolidated Financial Information: |
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F-13 | ||||
Unaudited Pro Forma Consolidated Balance Sheet as of December 31, 2011 |
F-14 | |||
Unaudited Pro Forma Consolidated Statement of Operations for the Year Ended December 31, 2011 |
F-15 | |||
Notes to Unaudited Pro Forma Consolidated Financial Statements |
F-16 |
Primrose Senior Housing Communities
(Five Communities)
December 31, 2011, 2010 and 2009
F-1
Primrose Senior Housing Communities (Five Communities)
December 31, 2011, 2010 and 2009
Page(s) | ||||
F-3 | ||||
Combined Financial Statements |
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F-4 | ||||
F-5 | ||||
F-6 | ||||
F-7 | ||||
F-8 |
F2
Report of Independent Certified Public Accountants
To the Stockholders of CNL Healthcare Trust, Inc. and Subsidiaries:
In our opinion, the accompanying combined balance sheets and the related combined statements of operations, of changes in members deficit and of cash flows present fairly, in all material respects, the financial position of Primrose Senior Housing Communities (Five Communities) at December 31, 2011 and 2010, and the results of their operations and their cash flows for the years ended December 31, 2011, 2010 and 2009 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP |
Orlando, Florida |
May 1, 2012 |
F3
Primrose Senior Housing Communities (Five Communities)
Combined Balance Sheets
December 31, 2011 and 2010
2011 | 2010 | |||||||
ASSETS | ||||||||
Current Assets |
||||||||
Cash and cash equivalents |
$ | 1,638,952 | $ | 1,844,458 | ||||
Short-term investments |
455,859 | 301,500 | ||||||
Prepaid expenses and other assets |
97,124 | 95,959 | ||||||
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|
|
|
|||||
Total current assets |
2,191,935 | 2,241,917 | ||||||
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|||||
Property and equipment, net |
36,326,388 | 38,605,820 | ||||||
Deferred financing fees, net |
141,345 | 167,335 | ||||||
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|
|||||
Total assets |
$ | 38,659,668 | $ | 41,015,072 | ||||
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LIABILITIES AND MEMBERS DEFICIT | ||||||||
Current liabilities |
||||||||
Accounts payable and accrued expenses |
$ | 1,587,539 | $ | 1,378,996 | ||||
Current portion of long-term debt |
5,532,532 | 1,327,864 | ||||||
Security deposits |
334,980 | 345,550 | ||||||
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|
|
|
|||||
Total current liabilities |
7,455,051 | 3,052,410 | ||||||
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|
|||||
Long-term debt |
39,429,068 | 45,061,763 | ||||||
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|||||
Total liabilities |
46,884,119 | 48,114,173 | ||||||
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|
|||||
Members deficit |
(8,224,451 | ) | (7,099,101 | ) | ||||
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|||||
Total liabilities and members deficit |
$ | 38,659,668 | $ | 41,015,072 | ||||
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The accompanying notes are an integral part of these combined financial statements.
F4
Primrose Senior Housing Communities (Five Communities)
Combined Statements of Operations
Years Ended December 31, 2011, 2010 and 2009
2011 | 2010 | 2009 | ||||||||||
Revenues: |
||||||||||||
Rental income |
$ | 14,633,526 | $ | 14,225,129 | $ | 13,018,662 | ||||||
Other |
103,354 | 54,145 | 23,866 | |||||||||
|
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|
|
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|
|||||||
Total revenues |
14,736,880 | 14,279,274 | 13,042,528 | |||||||||
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|
|||||||
Costs and expenses: |
||||||||||||
Property operating and maintenance expenses |
7,399,474 | 6,779,527 | 6,517,065 | |||||||||
Management fees |
736,354 | 716,551 | 653,279 | |||||||||
Depreciation |
2,625,606 | 3,112,221 | 3,331,226 | |||||||||
|
|
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|
|
|
|||||||
Total costs and expenses |
10,761,434 | 10,608,299 | 10,501,570 | |||||||||
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|||||||
Interest expense and deferred financing costs amortization |
(2,768,142 | ) | (2,847,304 | ) | (2,812,724 | ) | ||||||
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|
|||||||
Net income (loss) |
$ | 1,207,304 | $ | 823,671 | $ | (271,766 | ) | |||||
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The accompanying notes are an integral part of these combined financial statements.
F5
Primrose Senior Housing Communities (Five Communities)
Combined Statements of Changes in Members Deficit
Years Ended December 31, 2011, 2010 and 2009
Balance, January 1, 2009 |
$ | (4,901,642 | ) | |
Member distributions |
(675,544 | ) | ||
Net loss |
(271,766 | ) | ||
|
|
|||
Balance, December 31, 2009 |
(5,848,952 | ) | ||
Member distributions |
(2,073,820 | ) | ||
Net income |
823,671 | |||
|
|
|||
Balance, December 31, 2010 |
(7,099,101 | ) | ||
Member distributions |
(2,332,654 | ) | ||
Net income |
1,207,304 | |||
|
|
|||
Balance, December 31, 2011 |
$ | (8,224,451 | ) | |
|
|
The accompanying notes are an integral part of these combined financial statements.
F6
Primrose Senior Housing Communities (Five Communities)
Combined Statements of Cash Flows
Years Ended December 31, 2011, 2010 and 2009
2011 | 2010 | 2009 | ||||||||||
Cash flows from operating activities |
||||||||||||
Net income (loss) |
$ | 1,207,304 | $ | 823,671 | $ | (271,766 | ) | |||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities |
||||||||||||
Depreciation |
2,625,606 | 3,112,221 | 3,331,226 | |||||||||
Amortization of deferred financing costs |
25,990 | 25,990 | 68,912 | |||||||||
Changes in assets and liabilities: |
||||||||||||
Prepaid expenses and other assets |
(1,165 | ) | 19,750 | (52,014 | ) | |||||||
Accounts payable and accrued expenses |
208,543 | 245,335 | 332,976 | |||||||||
Security deposits |
(10,570 | ) | (30,695 | ) | 13,045 | |||||||
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|
|||||||
Net cash provided by operating activities |
4,055,708 | 4,196,272 | 3,422,379 | |||||||||
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|
|||||||
Cash flows from investing activities |
||||||||||||
Additions to property and equipment |
(346,174 | ) | (86,108 | ) | (130,458 | ) | ||||||
Decrease (increase) in short-term investments |
(154,359 | ) | (226,500 | ) | (75,000 | ) | ||||||
|
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Net cash used in investing activities |
(500,533 | ) | (312,608 | ) | (205,458 | ) | ||||||
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|||||||
Cash flows from financing activities |
||||||||||||
Borrowings on debt |
| | 10,838,255 | |||||||||
Payment of deferred financing costs |
| | (86,588 | ) | ||||||||
Principal payments on debt |
(1,428,027 | ) | (1,421,193 | ) | (12,479,257 | ) | ||||||
Distributions to members |
(2,332,654 | ) | (2,073,820 | ) | (675,544 | ) | ||||||
|
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|||||||
Net cash used in financing activities |
(3,760,681 | ) | (3,495,013 | ) | (2,403,134 | ) | ||||||
|
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|
|||||||
Net increase (decrease) in cash |
(205,506 | ) | 388,651 | 813,787 | ||||||||
Cash |
||||||||||||
Beginning of period |
1,844,458 | 1,455,807 | 642,020 | |||||||||
|
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|||||||
End of period |
$ | 1,638,952 | $ | 1,844,458 | $ | 1,455,807 | ||||||
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Supplemental disclosure of cash flow information |
||||||||||||
Cash paid during the period for interest |
$ | 2,743,709 | $ | 2,822,787 | $ | 2,744,621 | ||||||
|
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|
|
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The accompanying notes are an integral part of these combined financial statements.
F7
Primrose Senior Housing Communities (Five Communities)
Notes to Combined Financial Statements
Years Ended December 31, 2011, 2010 and 2009
1. | Organization |
The Primrose Senior Housing Communities (Five Communities) consist of five senior housing communities (the Communities) owned by affiliates of Primrose Retirement Communities LLC (Primrose). The Communities were developed and managed by affiliates of Primrose.
As of December 31, 2011, the Communities feature a total of 394 residential units which are rented with monthly rates that vary based on the amenities and the services provided. The services provided by the operators are generally not covered by health or other insurance and, therefore, monthly fees are generally payable by the resident, their family or another responsible party. The five communities each represent a separate limited liability company. The properties include:
| Primrose Retirement Community of Casper Casper, WY |
| Primrose Retirement Community of Grand Island Grand Island, NE |
| Sweetwater Retirement Community Billings, MT |
| Primrose Retirement Community of Marion Marion, OH |
| Primrose Retirement Community of Mansfield Mansfield, OH |
2. | Summary of Significant Accounting Policies |
A summary of significant accounting principles and practices used in the preparation of the combined financial statements follows:
Basis of Presentation
The combined financial statements have been prepared to present the combined financial position, results of operations, and cash flows of the Communities and are presented in accordance with generally accepted accounting principles in the United States of America (GAAP). The combined financial statements reflect the combined financial position and operations of the Communities. All significant intercompany transactions and balances within the Communities have been eliminated. The financial statements are being presented on a combined basis as the Primrose Senior Housing Communities are under common management and control.
Use of Estimates
The preparation of the combined financial statements in conformity with generally accepted accounting principles in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the combined financial statements, the reported amounts of revenues and expenses during the reporting periods, and the disclosures of contingent liabilities. Actual results could differ from those estimates.
F8
Primrose Senior Housing Communities (Five Communities)
Notes to Combined Financial Statements
Years Ended December 31, 2011, 2010 and 2009
2. | Summary of Significant Accounting Policies (continued) |
Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand and highly liquid investments purchased with original maturities of three months or less.
Property and Equipment, net
Property and equipment are recorded at cost. Maintenance and repairs are charged to expense as incurred. Depreciation is computed over the straight-line method using the estimated useful lives of the related assets, which range from 5 to 27.5 years. Property and equipment of the Communities are reviewed for impairment whenever events or circumstances indicate that the assets undiscounted expected cash flows are not sufficient to recover its carrying amount. The Communities measure an impairment loss by comparing the fair value of the asset to its carrying amount.
Deferred Financing Costs, Net
Costs incurred in connection with obtaining debt have been deferred and amortized using the effective interest method.
Short-term investments
Short term investments represent cash held in certificates of deposits with a maturity of 12 months or less.
Revenue Recognition
Rental revenue consists of monthly services, which includes rent, assistance and other related services. Monthly services are provided to tenants. Other revenue consists primarily of community fees recognized as income over the average stay of the tenants. Agreements with residents are generally for an initial term of three months and are cancelable by residents with thirty days notice.
Advertising
All cost associated with advertising and promoting the Communities are expensed in the year incurred. Advertising expense was approximately $182,000, $163,000 and $262,000 for the years ended December 31, 2011, 2010 and 2009, respectively.
Income Taxes
No provision (benefit) for income taxes is provided on the net income (loss) of the Communities since it is reported by the members on their respective income tax returns. The Communities have analyzed their tax positions and determined that they have not taken any uncertain tax positions.
New Accounting Policies
Management believes there are no new accounting pronouncements for which adoption will have a material impact on the Communities combined financial statements.
F9
Primrose Senior Housing Communities (Five Communities)
Notes to Combined Financial Statements
Years Ended December 31, 2011, 2010 and 2009
3. | Debt |
Long-term debt consisted of the following at December 31:
2011 | 2010 | |||||||
5.75% note payable in monthly installments of $78,145 including interest; final payment due February 28, 2013. The note is collateralized by the real estate of one facility. (Casper) |
$ | 11,496,977 | $ | 11,756,342 | ||||
5.75% note payable in monthly installments of $72,069 including interest; final payment due February 28, 2013. The note is collateralized by the real estate of one facility. (Billings) |
10,608,518 | 10,847,302 | ||||||
Federal Home Loan Bank of Cincinnati Long Term Fixed Rate Advance Five Years plus 3.0% (6.375% at December 31, 2011) payable in monthly installments of $73,051 including interest; final payment due December 1, 2034. The note is collateralized by the real estate of one facility. (Mansfield) |
10,478,681 | 10,671,217 | ||||||
3 year treasury plus 2.5%, at a minimum of 6% (6% at December 31, 2011) payable in monthly installments of $67,755 including interest; final payment due December 3, 2025. The note is collateralized by the real estate, fixed assets, and accounts receivable of one facility. (Marion) |
7,639,303 | 7,975,124 | ||||||
5.75% note payable in monthly installments September 26, 2012. The note is collateralized by the real estate of one facility. (Grand Island) |
4,348,729 | 4,645,218 | ||||||
4.75% promissory note, payable in semi-annnual payments of $50,000 beginning June 5, 2011. Interest payments due monthly. Final payment on December 5, 2015. |
389,392 | 494,424 | ||||||
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44,961,600 | 46,389,627 | |||||||
Less: current portion |
(5,532,532 | ) | (1,327,864 | ) | ||||
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$ | 39,429,068 | $ | 45,061,763 | |||||
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The debt contains customary affirmative, negative and financial covenants including limitations on incurrence of additional indebtedness, restrictions on member distributions, debt service coverage ratio and current ratio test. As of December 31, 2011 and December 31, 2010, the Communities were in compliance with the aforementioned covenants.
F10
Primrose Senior Housing Communities (Five Communities)
Notes to Combined Financial Statements
Years Ended December 31, 2011, 2010 and 2009
3. | Debt (continued) |
Maturities of indebtedness for the next five years and thereafter, in the aggregate, are:
2012 |
$ | 5,532,532 | ||
2013 |
22,279,591 | |||
2014 |
736,901 | |||
2015 |
767,078 | |||
2016 |
718,263 | |||
Thereafter |
14,927,235 | |||
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$ | 44,961,600 | |||
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4. | Property and Equipment, net |
Property and equipment consisted of the following at December 31:
2011 | 2010 | |||||||
Land and land improvements |
$ | 5,270,610 | $ | 5,270,610 | ||||
Building and building improvements |
39,577,153 | 39,370,383 | ||||||
Equipment |
9,333,937 | 9,194,533 | ||||||
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54,181,700 | 53,835,526 | |||||||
Less: accumulated depreciation |
(17,855,312 | ) | (15,229,706 | ) | ||||
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$ | 36,326,388 | $ | 38,605,820 | |||||
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5. | Members Deficit |
Distributions to the members are made under complete discretion of the manager, an affiliate of Primrose.
6. | Related Party Transaction |
Pursuant to various management agreements, the Communities pay management fees equal to 5% of gross revenues, as determined on a cash basis, to Primrose Management, LLC, an affiliate of Primrose. The amounts incurred for management fees were approximately $736,000, $717,000 and $653,000 for the years ended December 31, 2011, 2010 and 2009, respectively.
7. | Commitments and Contingencies |
From time to time the Communities may be exposed to litigation arising from operations of its business in the ordinary course of business. Management is not aware of any such litigation that it believes will have a material adverse impact on the Communities financial condition or results of operations.
F11
Primrose Senior Housing Communities (Five Communities)
Notes to Combined Financial Statements
Years Ended December 31, 2011, 2010 and 2009
8. | Subsequent Events |
In February 2012, Primrose sold the Communities to CNL Healthcare Trust, Inc. for approximately $84.1 million, exclusive of closing costs. The Communities will continue to be operated by Primrose under triple-net leases, each having an initial term of ten years, and, at Primroses discretion, two five-year renewal options.
The accompanying audited combined financial statements were authorized for issue on May 1, 2012. Subsequent events are evaluated through that date.
F12
CNL HEALTHCARE TRUST, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The accompanying Unaudited Pro Forma Consolidated Balance Sheet of the Company is presented as if the acquisition described in Note 2 had occurred as of December 31, 2011.
The accompanying Unaudited Pro Forma Consolidated Statement of Operations of CNL Healthcare Trust, Inc. and its subsidiaries (collectively, the "Company") are for the year ended December 31, 2011 (the Pro Forma Period), and include certain pro forma adjustments to illustrate the estimated effect of the Companys acquisition described in Note 2 as if it had occurred as of January 1, 2011.
This pro forma consolidated financial information is presented for informational purposes only and does not purport to be indicative of the Companys financial results if the transaction reflected herein had occurred on the date or been in effect during the periods indicated. This pro forma consolidated financial information should not be viewed as indicative of the Companys financial results in the future.
F13
CNL HEALTHCARE TRUST, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
December 31, 2011 | ||||||||||||
Pro Forma | ||||||||||||
Historical | Adjustments | Pro Forma | ||||||||||
ASSETS |
||||||||||||
Real estate investment properties, net |
$ | | $ | 82,359,700 | (2) | $ | 82,359,700 | |||||
Cash and cash equivalents |
10,001,872 | 5,128,072 | (1) | | ||||||||
(12,250,000 | ) (2) | |||||||||||
(1,989,995 | ) (4) | |||||||||||
(889,949 | ) (3) | |||||||||||
Intangibles, net |
| 1,690,300 | (2) | 1,690,300 | ||||||||
Loan costs, net |
| 989,949 | (3) | 989,949 | ||||||||
Deposits on real estate |
400,000 | (400,000 | ) (2) | | ||||||||
Prepaid and other assets |
161,390 | (100,000 | ) (3) | 61,390 | ||||||||
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Total assets |
$ | 10,563,262 | $ | 74,538,077 | $ | 85,101,339 | ||||||
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LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||||||
Mortgage notes payable |
$ | | $ | 71,400,000 | (2) | $ | 71,400,000 | |||||
Due to related parties |
192,755 | | 192,755 | |||||||||
Accounts payable and accrued expenses |
668,120 | 50,000 | (4) | 696,925 | ||||||||
(21,195 | ) (4) | |||||||||||
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Total liabilities |
860,875 | 71,428,805 | 72,289,680 | |||||||||
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Commitments and contingencies |
||||||||||||
Stockholders equity: |
||||||||||||
Preferred stock, $0.01 par value per share, authorized and unissued 200,000,000 shares |
| | | |||||||||
Common stock, $0.01 par value per share, 1,120,000,000 shares authorized; 1,357,572 shares issued and outstanding; 1,960,875 shares issued and outstanding, as adjusted |
13,576 | 6,033 | (1) | 19,609 | ||||||||
Capital in excess of par value |
11,504,283 | 5,122,039 | (1) | 16,626,322 | ||||||||
Accumulated distributions |
(55,892 | ) | (55,892 | ) | ||||||||
Accumulated deficit |
(1,759,580 | ) | (2,018,800 | ) (4) | (3,778,380 | ) | ||||||
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|||||||
Total stockholders equity |
9,702,387 | 3,109,272 | 12,811,659 | |||||||||
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|
|||||||
Total liabilities and stockholders equity |
$ | 10,563,262 | $ | 74,538,077 | $ | 85,101,339 | ||||||
|
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|
|
See accompanying notes to unaudited pro forma consolidated financial statements.
F14
CNL HEALTHCARE TRUST, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended December 31, 2011 | ||||||||||||
Pro Forma | ||||||||||||
Historical | Adjustments | Pro Forma | ||||||||||
Revenues: |
||||||||||||
Rental income from operating leases |
$ | | $ | 7,692,372 | (a) | $ | 7,692,372 | |||||
Expenses: |
||||||||||||
General and administrative |
869,091 | | 869,091 | |||||||||
Acquisition fees and costs |
892,313 | (21,195 | ) (e) | 871,118 | ||||||||
Asset management fees to related party |
| 840,500 | (c) | 840,500 | ||||||||
Property management fees to related party |
| 132,548 | (d) | 132,548 | ||||||||
Depreciation and amortization |
| 2,522,344 | (b) | 2,522,344 | ||||||||
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|
|||||||
Total expenses |
1,761,404 | 3,474,197 | 5,235,601 | |||||||||
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|
|||||||
Operating loss |
(1,761,404 | ) | 4,218,175 | 2,456,771 | ||||||||
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|
|||||||
Other income (expense): |
||||||||||||
Interest income |
1,824 | | 1,824 | |||||||||
Interest expense and loan cost amortization |
| (5,514,428 | ) (f) | (5,514,428 | ) | |||||||
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|
|||||||
Total other income (expense) |
1,824 | (5,514,428 | ) | (5,512,604 | ) | |||||||
|
|
|
|
|
|
|||||||
Net loss |
$ | (1,759,580 | ) | $ | (1,296,253 | ) | $ | (3,055,833 | ) | |||
|
|
|
|
|
|
|||||||
Net loss per share of common stock (basic and diluted) |
$ | (2.09 | ) | $ | (1.56 | ) | ||||||
|
|
|
|
|||||||||
Weighted average number of shares of common stock outstanding (basic and diluted) (Note 5(g)) |
843,497 | 1,960,875 | ||||||||||
|
|
|
|
See accompanying notes to unaudited pro forma consolidated financial statements.
F15
CNL HEALTHCARE TRUST, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
1. | Basis of Presentation |
The accompanying Unaudited Pro Forma Consolidated Statement of Operations of CNL Healthcare Trust, Inc. and its subsidiaries (collectively, the Company) are presented for the year ended December 31, 2011 (the Pro Forma Period), and include certain pro forma adjustments to illustrate the estimated effect of the Companys acquisition of the Primrose Senior Housing Communities (Five Communities) (the Primrose Communities), described in Note 2, as if it had occurred as of January 1, 2011. The amounts included in the historical columns represent the Companys historical operating results for the respective Pro Forma Period presented.
The accompanying unaudited pro forma 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 managements actions were carried out in previous reporting periods.
This pro forma consolidated financial information is presented for informational purposes only and does not purport to be indicative of the Companys financial results if the transaction reflected herein had occurred on the date or been in effect during the periods indicated. This pro forma consolidated financial information should not be viewed as indicative of the Companys financial results or conditions in the future.
2. | Pro Forma Transaction |
On February 16, 2012, the Company acquired five senior housing communities from affiliates of Primrose Retirement Communities, LLC, for a purchase price of approximately $84.1 million, excluding closing costs. The properties include: Primrose Retirement Community of Casper Casper, WY, Primrose Retirement Community of Grand Island Grand Island, NE, Sweetwater Retirement Community Billings, MT, Primrose Retirement Community of Marion Marion, OH, and Primrose Retirement Community of Mansfield Mansfield, OH.
The senior housing communities feature a total of 394 residential units and will continue to be operated by Primrose under triple-net leases, each having an initial term of ten years, and, at the tenants discretion, two five-year renewal options. All of the leases are cross-defaulted among themselves. Annual base rent escalates each year and is calculated based on the Primrose Communities lease basis multiplied by lease rates and is payable on a monthly basis. Annual capital reserve income is allocated based on $300 per unit. The leases are accounted for as operating leases; therefore, revenue is recognized as rentals are earned and expenses (including depreciation) are charged to operations as incurred. Scheduled rental payments are recognized on a straight-line basis over the lease term so as to produce constant periodic rent in accordance with GAAP.
In addition, the Company incurred acquisition fees and costs totaling approximately $1.9 million, including closing costs and approximately $1.6 million in investment services fees to the Companys advisor described below, in connection with the acquisition of the Communities. The Company funded $71.4 million of the purchase price from the proceeds of a mortgage loan, as described below, and paid the balance of the purchase price, closing costs, loan costs and other expenses from proceeds of its public offering of shares of common stock (the Offering).
F16
CNL HEALTHCARE TRUST, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
2. | Pro Forma Transaction (continued) |
The following summarizes the allocation of the purchase price for the Communities and the estimated fair values of the assets acquired and liabilities assumed:
Land |
$ | 4,220,700 | ||
Land improvements |
1,525,400 | |||
Building |
75,680,300 | |||
Equipment |
933,300 | |||
In-place lease |
1,690,300 | |||
|
|
|||
Net assets acquired |
$ | 84,050,000 | ||
|
|
In connection with the acquisition of the Primrose Communities, the Company entered into a loan agreement with a lender, providing for a one-year senior facility in the original aggregate principal amount of $71,400,000 (the Loan). The Loan matures on February 16, 2013. Interest and principal on the loan are payable monthly. Each monthly principal installment is equal to 50% of the Companys net offering proceeds from its current stock offering. Additionally, on or before the six month anniversary of the Loan, the Company is required to pay lender an amount sufficient to reduce the aggregate outstanding principal balance under the Loan to an amount that would (i) cause the lesser of the (a) ratio of the outstanding principal Loan amount to the leased fee value of the Primrose Communities (as determined by appraisals received in connection with the Loan closing) and (b) the ratio of the outstanding principal Loan amount to the aggregate costs for the Primrose Communities (as determined as of the Loan closing) to be less than or equal to 65%, and (ii) result in a debt service coverage of not less than 1.40 to 1.0 as determined by lender in its sole but reasonable discretion (the date such paydown is achieved being the Performance Date). From loan closing until the date that the Loan has been reduced to approximately $54,000,000, the Loan will bear interest at a rate equal to LIBOR plus 6%. From the Performance Date through maturity, the Loan shall bear interest at a rate equal to LIBOR plus 3.25%.
The Borrowers may prepay the Loan at any time, without prepayment penalty.
3. | Related Party Transactions |
The Companys external advisor is CNL Healthcare Corp. (the Advisor). The Advisor is responsible for managing the Companys affairs on a day-to-day basis and for identifying and making acquisitions and investments on behalf of the Company pursuant to an advisory agreement. The Advisor and certain affiliates are entitled to receive fees and compensation in connection with the acquisition and management of the Companys assets.
Pursuant to the advisory agreement, the Advisor receives investment services fees equal to 1.85% of the purchase price of properties for services rendered in connection with the selection, evaluation, structure and purchase of assets. In connection with the acquisition of the Communities, the Company incurred approximately $1.6 in investment services fees payable to the Advisor. In addition, the Advisor is entitled to receive a monthly asset management fee of 0.08334% of the real estate asset value (as defined in the agreement) of the Companys properties as of the end of the preceding month.
Pursuant to a master property management agreement, CNL Healthcare Manager Corp. (the Property Manager) receives property management fees of 2% of gross revenues for management of the Companys single tenant properties.
F17
CNL HEALTHCARE TRUST, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
4. | Adjustments to Pro Forma Consolidated Balance Sheet |
The adjustments to the pro forma consolidated balance sheet represent adjustments needed to the Companys historical results to present operating results as if the Primrose Communities were acquired as of December 31, 2011.
(1) | Represents the receipt of approximately $6.0 million in additional gross offering proceeds for the sale of 603,303 shares and the payment of selling commissions of $422,312 (7% of gross proceeds), marketing support fees of $180,991 (3% of gross proceeds), and other offering expenses of $301,651 (5% of gross proceeds), all of which have been netted against stockholders equity. The additional offering proceeds included in the pro forma adjustments have been limited to the proceeds necessary to acquire the Companys investment as described in Note (2) above. |
(2) | Represents cash and borrowings under the Loan used to acquire the Primrose Communities. |
(3) | Represents additional loan costs incurred in connection with the Loan as described in Note (2) above. |
(4) | Represents acquisition fees and expenses, as well as other expenses paid at closing, and incurred subsequent to December 31, 2012, including the investment services fee payable to the Companys Advisor in connection with the closing of the Primrose Communities. |
5. | Adjustments to Pro Forma Consolidated Statement of Operations |
The adjustments to the pro forma consolidated statement of operations represent adjustments needed to the Companys historical results to present operating results as if the Primrose Communities were owned for the full Pro Forma Period.
(a) | Represents rental income on a straight-line basis generated from the Primrose Communities for the Pro Forma Period. |
(b) | Represents depreciation and amortization expense computed using the straight-line method over the estimated useful lives of the related assets for the Pro Forma Period as follows: |
Pro Forma Adjustments | ||||||
Estimated Useful Life |
Year
Ended December 31, 2011 |
|||||
Land |
Not applicable | $ | | |||
Land improvements |
15 years | 101,693 | ||||
Building |
39 years | 1,940,521 | ||||
Equipment |
3 years | 311,100 | ||||
In-place lease |
10 years | 169,030 | ||||
|
|
|||||
$ | 2,522,344 | |||||
|
|
F18
CNL HEALTHCARE TRUST, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
5. | Adjustments to Pro Forma Consolidated Statements of Operations (continued) |
(c) | Represents asset management fees for the Pro Forma Period due to the Advisor in connection with the ownership of the Primrose Communities as described in Note 3. |
(d) | Represents property management fees due to the property manager in connection with the management of the Primrose Communities as described in Note 3 for the Pro Forma Period. |
(e) | Represents the reversal of historical acquisition fees and expenses incurred and accrued during the year ended December 31, 2011 related to the acquisition of the Primrose Communities that are nonrecurring charges directly related to the pro forma transaction. |
(f) | Represents interest expense and amortization of loan costs relating to the Loan as if the loans had been in place for the Pro Forma Period. |
(g) | Historical earnings per share for the year ended December 31, 2011 was calculated based on the number of shares of common stock outstanding during the portion of 2011 the Company was operational (October 5, 2011 through December 31, 2011). For purposes of determining the weighted average number of shares of common stock outstanding, stock distributions are treated as if they were issued at the beginning of the periods presented. |
As a result of the Primrose Communities being treated in the Pro Forma Consolidated Statement of Operations as operational since January 1, 2011, the Company assumed approximately 603,303 shares of common stock were sold in its Offering, and the net proceeds were available for the purchase of the Primrose Communities as of January 1, 2011. Consequently, the weighted average number of shares outstanding for the Pro Forma Periods was adjusted to reflect this amount of shares being issued on January 1, 2011 instead of the actual dates issued, and were treated as outstanding for the full Pro Forma Period. Pro forma earnings per share were calculated based on the weighted average number of shares of common stock outstanding, as adjusted.
F19