EX-99.3 6 a06-17337_1ex99d3.htm EX-99

 

Report of Independent Registered Certified Public Accounting Firm

 

To the Board of Directors and Stockholders of CNL Retirement Properties, Inc.

 

We have completed integrated audits of CNL Retirement Properties, Inc. and its subsidiaries’ (the “Company”) December 31, 2005 and 2004 consolidated financial statements and of its internal control over financial reporting as of December 31, 2005, and an audit of its December 31, 2003 consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions, based on our audits, are presented below.

 

Consolidated financial statements and financial statement schedules

 

In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of CNL Retirement Properties, Inc. and its subsidiaries at December 31, 2005 and 2004, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2005 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedules present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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 of financial statements 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.

 

Internal control over financial reporting

 

Also, in our opinion, management’s assessment, included in the acompanying Management’s Report on Internal Control Over Financial Reporting that the Company maintained effective internal control over financial reporting as of December 31, 2005 based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the COSO. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on management’s assessment and on the effectiveness of the Company’s internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

 

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made

 

2



 

only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

/s/ PricewaterhouseCoopers LLP

 

 

Orlando, Florida
March 24, 2006

 

3



 

CRP’S MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

 

CRP’s management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP.

 

CRP’s management has assessed the effectiveness of CRP’s internal control over financial reporting as of December 31, 2005, using the criteria described in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (or the COSO criteria). Based on its assessment, CRP’s management has concluded, as of December 31, 2005, CRP maintained effective internal control over financial reporting.

 

PricewaterhouseCoopers LLP, an independent registered public accounting firm, has audited CRP’s management’s assessment of the effectiveness of CRP’s internal control over financial reporting as of December 31, 2005, as stated in their report, which appears herein.

 

4



 

CNL RETIREMENT PROPERTIES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)

 

 

 

December 31,
2005

 

December 31,
2004

 

Assets

 

 

 

 

 

Real estate investment properties:

 

 

 

 

 

Accounted for using the operating method, net

 

$

2,914,817

 

$

2,580,948

 

Accounted for using the direct financing method

 

488,683

 

480,051

 

Intangible lease costs, net

 

99,611

 

98,237

 

 

 

 

 

 

 

 

 

3,503,111

 

3,159,236

 

Cash and cash equivalents

 

94,902

 

51,781

 

Restricted cash

 

21,920

 

34,430

 

Accounts and other receivables, net

 

23,486

 

20,545

 

Deferred costs, net

 

24,705

 

17,469

 

Accrued rental income

 

99,219

 

51,795

 

Other assets

 

52,935

 

11,412

 

Real estate held for sale

 

12,692

 

17,182

 

Goodwill

 

5,791

 

5,791

 

 

 

 

 

 

 

 

 

$

3,838,761

 

$

3,369,641

 

 

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

 

 

Liabilities:

 

 

 

 

 

Mortgages payable

 

$

1,220,190

 

$

937,589

 

Bonds payable

 

98,016

 

94,451

 

Construction loans payable

 

143,560

 

81,508

 

Line of credit

 

75,000

 

20,000

 

Term loan

 

 

60,000

 

Due to related parties

 

2,386

 

1,632

 

Accounts payable and other liabilities

 

31,035

 

33,937

 

Intangible lease liability, net

 

4,505

 

3,742

 

Deferred income

 

6,607

 

4,811

 

Security deposits

 

23,954

 

26,253

 

 

 

 

 

 

 

Total liabilities

 

1,605,253

 

1,263,923

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

Minority interests

 

5,701

 

2,361

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Preferred stock, without par value Authorized and unissued 3,000 shares

 

 

 

Excess shares, $.01 par value per share Authorized and unissued 103,000 shares

 

 

 

Common stock, $.01 par value per share Authorized one billion shares, issued 260,923 and 238,485 shares, respectively, outstanding 255,527 and 237,547 shares, respectively

 

2,555

 

2,376

 

Capital in excess of par value

 

2,295,307

 

2,135,498

 

Accumulated distributions in excess of net income

 

(74,894

)

(34,517

)

Accumulated other comprehensive income

 

4,839

 

 

 

 

 

 

 

 

Total stockholders’ equity

 

2,227,807

 

2,103,357

 

 

 

 

 

 

 

 

 

$

3,838,761

 

$

3,369,641

 

 

See accompanying notes to consolidated financial statements.

 

5



 

CNL RETIREMENT PROPERTIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)

 

 

 

Years Ended December 31,

 

 

 

2005

 

2004

 

2003

 

Revenues:

 

 

 

 

 

 

 

Seniors’ Housing:

 

 

 

 

 

 

 

Rental income from operating leases

 

$

237,892

 

$

172,245

 

$

59,262

 

Earned income from direct financing leases

 

61,202

 

54,873

 

31,107

 

FF&E reserve income

 

7,500

 

4,601

 

2,592

 

Contingent rent

 

3,955

 

90

 

47

 

Medical Facilities:

 

 

 

 

 

 

 

Rental income from operating leases

 

59,048

 

26,225

 

 

Tenant expense reimbursements

 

13,254

 

4,735

 

 

Property management and development fees

 

701

 

 

 

Loan interest income

 

531

 

 

 

 

 

 

 

 

 

 

 

 

 

384,083

 

262,769

 

93,008

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

Seniors’ Housing property expenses

 

1,075

 

1,639

 

136

 

Medical Facilities operating expenses

 

25,368

 

11,234

 

 

General and administrative

 

21,376

 

14,740

 

5,462

 

Asset management fees to related party

 

18,641

 

12,463

 

4,318

 

Provision for doubtful accounts

 

3,082

 

3,900

 

 

Depreciation and amortization

 

98,446

 

62,512

 

17,277

 

 

 

 

 

 

 

 

 

 

 

167,988

 

106,488

 

27,193

 

 

 

 

 

 

 

 

 

Operating income

 

216,095

 

156,281

 

65,815

 

Interest and other income

 

2,970

 

4,768

 

1,626

 

Interest and loan cost amortization expense

 

(76,171

)

(42,783

)

(9,588

)

 

 

 

 

 

 

 

 

Income before equity in earnings of unconsolidated entity, minority interests in income of consolidated subsidiaries and discontinued operations

 

142,894

 

118,266

 

57,853

 

Equity in earnings of unconsolidated entity

 

227

 

178

 

11

 

Minority interests in income of consolidated subsidiaries

 

(706

)

(93

)

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

142,415

 

118,351

 

57,864

 

Income (loss) from discontinued operations

 

(6,834

)

(433

)

596

 

 

 

 

 

 

 

 

 

Net income

 

$

135,581

 

$

117,918

 

$

58,460

 

 

 

 

 

 

 

 

 

Net income (loss) per share of common stock (basic and diluted)

 

 

 

 

 

 

 

From continuing operations

 

$

0.57

 

$

0.56

 

$

0.65

 

From discontinued operations

 

(0.02

)

 

0.01

 

 

 

 

 

 

 

 

 

 

 

$

0.55

 

$

0.56

 

$

0.66

 

 

 

 

 

 

 

 

 

Weighted-average number of shares of common stock outstanding (basic and diluted)

 

248,298

 

210,343

 

88,840

 

 

See accompanying notes to consolidated financial statements.

 

6



 

CNL RETIREMENT PROPERTIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Years Ended December 31, 2005, 2004 and 2003
(in thousands, except per share data)

 

 

 

 

 

 

 

 

 

Accumulated

 

Accumulated

 

 

 

 

 

Common stock

 

Capital in

 

distributions

 

other

 

 

 

 

 

Number

 

Par

 

excess of

 

in excess of

 

comprehensive

 

 

 

 

 

of shares

 

value

 

par value

 

net income

 

income

 

Total

 

Balance at December 31, 2002

 

44,211

 

$

442

 

$

393,308

 

$

(3,955

)

$

 

$

389,795

 

Net income

 

 

 

 

58,460

 

 

58,460

 

Subscriptions received for common stock through public offerings and reinvestment plan

 

105,998

 

1,060

 

1,058,921

 

 

 

1,059,981

 

Retirement of common stock

 

(132

)

(1

)

(1,211

)

 

 

(1,212

)

Stock issuance costs

 

 

 

(101,299

)

 

 

(101,299

)

Distributions declared ($0.7067 per share)

 

 

 

 

(59,784

)

 

(59,784

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2003

 

150,077

 

1,501

 

1,349,719

 

(5,279

)

 

1,345,941

 

Net income

 

 

 

 

117,918

 

 

117,918

 

Subscriptions received for common stock through public offerings and reinvestment plan

 

88,155

 

882

 

879,386

 

 

 

880,268

 

Retirement of common stock

 

(685

)

(7

)

(6,491

)

 

 

(6,498

)

Stock issuance costs

 

 

 

(87,116

)

 

 

(87,116

)

Distributions declared ($0.7104 per share)

 

 

 

 

(147,156

)

 

(147,156

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2004

 

237,547

 

2,376

 

2,135,498

 

(34,517

)

 

2,103,357

 

Net income

 

 

 

 

135,581

 

 

135,581

 

Change in fair value of cash flow hedges

 

 

 

 

 

4,839

 

4,839

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income

 

 

 

 

135,581

 

4,839

 

140,420

 

Subscriptions received for common stock through public offerings and reinvestment plan

 

21,884

 

218

 

215,218

 

 

 

215,436

 

Retirement of common stock

 

(3,904

)

(39

)

(37,045

)

 

 

(37,084

)

Stock issuance costs

 

 

 

(18,364

)

 

 

(18,364

)

Distributions declared ($0.7104 per share)

 

 

 

 

(175,958

)

 

(175,958

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2005

 

255,527

 

$

2,555

 

$

2,295,307

 

$

(74,894

)

$

4,839

 

$

2,227,807

 

 

See accompanying notes to consolidated financial statements.

 

7



 

CNL RETIREMENT PROPERTIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

 

(in thousands)

 

 

 

Years Ended December 31,

 

 

 

2005

 

2004

 

2003

 

Increase (decrease) in cash and cash equivalents:

 

 

 

 

 

 

 

Operating activities:

 

 

 

 

 

 

 

Net income

 

$

135,581

 

$

117,918

 

$

58,460

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

104,232

 

68,062

 

18,925

 

Minority interests in income

 

706

 

93

 

 

Impairment provisions

 

7,740

 

1,883

 

 

Net rental income from above (below) market leases

 

523

 

21

 

 

Lease incentive cost amortization

 

289

 

90

 

 

Provision for doubtful accounts

 

3,300

 

3,900

 

 

Equity in earnings of unconsolidated entity, net of cash distributions received

 

(9

)

(3

)

138

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Accounts and other receivables

 

(12,239

)

(10,171

)

(11,031

)

Accrued rental and direct financing lease income

 

(55,519

)

(49,520

)

(13,426

)

Deferred lease incentive costs

 

(893

)

(2,678

)

 

Other assets

 

(10,134

)

(4,528

)

(1,906

)

Accounts payable and other liabilities

 

10,365

 

5,209

 

6,426

 

Due to related parties

 

28

 

457

 

195

 

Security deposits and prepaid rents

 

4,339

 

8,840

 

3,026

 

 

 

 

 

 

 

 

 

Net cash provided by operating activities

 

188,309

 

139,573

 

60,807

 

 

 

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

 

 

Investment in land, buildings and equipment

 

(371,026

)

(921,698

)

(661,946

)

Investment in direct financing leases

 

(278

)

(50,230

)

(263,330

)

Investment in intangible lease costs

 

(15,044

)

(50,064

)

(23,220

)

DASCO Acquisition

 

 

(204,441

)

 

Investment in note receivable

 

(16,000

)

 

 

Proceeds from note receivable

 

 

 

2,000

 

Payment of acquisition fees and costs

 

(20,575

)

(73,124

)

(53,126

)

Payment of deferred leasing costs

 

(1,039

)

(864

)

 

Increase in restricted cash

 

6,082

 

(9,448

)

(13,127

)

 

 

 

 

 

 

 

 

Net cash used in investing activities

 

(417,880

)

(1,309,869

)

(1,012,749

)

 

 

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

 

 

Proceeds from borrowings on mortgages payable

 

305,485

 

315,045

 

170,800

 

Principal payments on mortgages payable

 

(66,219

)

(28,964

)

(13,832

)

Proceeds from construction loans payable

 

63,367

 

73,618

 

7,402

 

Repayments of construction loans payable

 

(1,315

)

 

 

Proceeds from borrowings on line of credit

 

115,000

 

 

71,370

 

Repayments on line of credit

 

(60,000

)

 

(51,370

)

Proceeds from term loan

 

 

60,000

 

 

Repayment of term loan

 

(60,000

)

 

 

 

 

Proceeds from issuance of bonds payable

 

12,622

 

12,063

 

8,203

 

Retirement of bonds payable

 

$

(9,057

)

$

(7,736

)

$

(6,589

)

Payment of loan costs

 

(11,707

)

(10,149

)

(7,523

)

Contributions from minority interests

 

3,093

 

997

 

 

Distributions to minority interest

 

(459

)

(45

)

 

Subscriptions received from stockholders

 

215,397

 

880,268

 

1,059,981

 

Distributions to stockholders

 

(175,958

)

(147,138

)

(59,784

)

Retirement of common stock

 

(40,303

)

(3,933

)

(1,117

)

Payment of stock issuance costs

 

(17,254

)

(89,039

)

(99,309

)

 

 

 

 

 

 

 

 

Net cash provided by financing activities

 

272,692

 

1,054,987

 

1,078,232

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

43,121

 

(115,309

)

126,290

 

Cash and cash equivalents at beginning of year

 

51,781

 

167,090

 

40,800

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at end of year

 

$

94,902

 

$

51,781

 

$

167,090

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

Cash paid during the year for interest, net of capitalized interest

 

$

75,654

 

$

39,028

 

$

7,534

 

 

 

 

 

 

 

 

 

Amounts incurred by us and paid by related parties on our behalf were as follows:

 

 

 

 

 

 

 

Acquisition costs

 

$

210

 

$

331

 

$

403

 

Stock issuance costs

 

4,250

 

18,987

 

17,246

 

 

 

 

 

 

 

 

 

 

 

$

4,460

 

$

19,318

 

$

17,649

 

 

 

 

 

 

 

 

 

Supplemental schedule of non-cash investing and financing activities:

 

 

 

 

 

 

 

DASCO Acquisition

 

 

 

 

 

 

 

Purchase accounting:

 

 

 

 

 

 

 

Assets acquired:

 

 

 

 

 

 

 

Real estate properties accounted for using the operating method

 

$

 

$

189,111

 

$

 

Intangible lease costs

 

 

 

25,623

 

 

 

Cash and cash equivalents

 

 

 

470

 

 

 

Restricted cash

 

 

633

 

 

Deferred costs

 

 

124

 

 

Other assets

 

 

1,088

 

 

Goodwill

 

 

5,487

 

 

 

 

 

 

 

 

 

 

Total

 

$

 

$

222,536

 

$

 

 

 

 

 

 

 

 

 

Liabilities assumed:

 

 

 

 

 

 

 

Mortgages payable

 

$

 

$

10,562

 

$

 

Construction loans payable

 

 

 

487

 

 

 

Accounts payable and other liabilities

 

 

3,379

 

 

Intangible lease liability

 

 

2,304

 

 

Security deposits

 

 

893

 

 

 

 

 

 

 

 

 

 

Total

 

$

 

$

17,625

 

$

 

 

 

 

 

 

 

 

 

Net assets acquired

 

$

 

$

204,911

 

$

 

 

 

 

 

 

 

 

 

Net assets acquired, net of cash

 

$

 

$

204,441

 

$

 

 

 

 

 

 

 

 

 

Mortgage loans assumed on properties acquired

 

$

43,076

 

$

365,166

 

$

72,762

 

 

 

 

 

 

 

 

 

Bonds assumed on properties acquired

 

$

 

$

 

$

88,511

 

 

See accompanying notes to consolidated financial statements.

 

8



 

CNL RETIREMENT PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Years Ended December 31, 2005, 2004 and 2003

 

1. Organizational and Basis of Presentation:

 

Organization—CNL Retirement Properties, Inc., a Maryland corporation, was organized in December 1997 to operate as a real estate investment trust (a “REIT”) for federal income tax purposes. Throughout this document, CNL Retirement Properties, Inc. and each of its subsidiaries and several consolidated partnerships and joint ventures are referred to as “we”, “us” and “our.” Various other wholly owned or majority owned subsidiaries are expected to be formed in the future for the purpose of acquiring or developing additional real estate properties and holding other permitted investments.

 

We acquire primarily real estate properties related to seniors’ housing and health care facilities (the “Properties”) located primarily across the United States. The Properties may include independent living, assisted living and skilled nursing facilities, continuing care retirement communities (“CCRC”) and life care communities (collectively “Seniors’ Housing”), medical office buildings, specialty and walk-in clinics, free standing ambulatory surgery centers, specialty or general hospitals and other types of health care-related facilities (collectively “Medical Facilities”). Seniors’ Housing facilities are generally leased on a long-term, triple-net basis and Medical Facilities are generally leased on a shorter-term, gross or triple-net basis. We may provide mortgage financing loans (“Mortgage Loans”), furniture, fixture and equipment financing (“Secured Equipment Leases”) and other loans to operators or developers of Seniors’ Housing. In addition, we may invest up to a maximum of 5% of total assets in equity interests in businesses, including those that provide services to or are otherwise ancillary to the retirement and health care industries. We operate in one business segment, which is the ownership, development, management and leasing of health care-related real estate. At December 31, 2005, we owned 184 Seniors’ Housing facilities, 73 Medical Facilities, including a specialty hospital, 2 walk-in clinics, and 4 Seniors’ Housing facilities and a parcel of land that we hold for sale.

 

In August 2004, we acquired a 55% controlling interest in The DASCO Companies, LLC (“DASCO”), a development and property management company that managed forty-eight of our Medical Facilities, including two of our walk-in clinics and was developing five of our Medical Facilities at December 31, 2005. DASCO also provides development and property management services to unrelated third parties.

 

We retained CNL Retirement Corp. (the “Advisor”) as our advisor to provide management, acquisition, advisory and administrative services relating to our Properties, Mortgage Loans, Secured Equipment Lease program, other loans and other permitted investments pursuant to an advisory agreement that was renewed pursuant to a Renewal Agreement effective May 3, 2005 for a one-year term and was amended by an amendment to the Renewal Agreement on July 13, 2005 (the “Advisory Agreement”).

 

Basis of Presentation—The accompanying consolidated financial statements include the accounts of our wholly owned subsidiaries, DASCO and other entities in which we own a majority and controlling interest. Interests of unaffiliated third parties in less than 100% owned and majority controlled entities are reflected as minority interests. All significant inter-company balances and transactions have been eliminated in consolidation.

 

2. Summary of Significant Accounting Policies:

 

Use of Estimates—The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

 

Cash equivalents, accounts and other receivables, and accounts payable and other liabilities are carried at amounts which approximate their fair values because of the short-term nature of these instruments.

 

9



 

Investment Properties and Lease Accounting—Seniors’ Housing Properties are leased on a long-term (generally 15 years), triple-net basis whereby the tenants are responsible for all operating expenses relating to the Property, including property taxes, maintenance, repairs, utilities and insurance, as well as capital expenditures that may be reasonably necessary to maintain the leasehold in a manner that allows operation for its intended purpose. Seniors’ Housing leases generally provide for minimum and contingent rent and contain renewal options from 5 to 20 successive years subject to the same terms and conditions as the initial term. Medical Facilities are leased on either a triple-net or gross basis, generally have initial lease terms of 5 to 15 years and are generally subject to renewal options. In addition, Medical Facilities gross leases provide for the recovery of a portion of the properties’ operating expenses from the tenants. Substantially all Seniors’ Housing and Medical Facilities leases require minimum annual rents to increase at predetermined intervals during the lease terms. For the years ended December 31, 2005, 2004 and 2003, our tenants paid $32.3 million, $21.5 million and $8.1 million, respectively, in property taxes on our behalf. The leases are accounted for using either the operating or direct financing method.

 

Operating method—For leases accounted for as operating leases, Properties are recorded at cost. Minimum rent payments contractually due under the leases are recognized as revenue on a straight-line basis over the initial lease terms so as to produce constant periodic rent recognition over the lease terms. The excess of rents recognized over amounts contractually due are included in accrued rental income in the accompanying financial statements. Buildings, land improvements and equipment are depreciated on the straight-line method over their estimated useful lives of 39 to 40 years, 15 years and 3 to 7 years, respectively. Tenant improvements are depreciated over the initial lease term. Expenditures for ordinary maintenance and repairs are charged to operations as incurred, while significant renovations and enhancements that improve and/or extend the useful life of an asset are capitalized and depreciated over the estimated useful life.

 

Direct financing method—For leases accounted for as direct financing leases, future minimum lease payments are recorded as a receivable. The difference between the rents receivable and the estimated residual values less the cost of the Properties is recorded as unearned income. Unearned income is deferred and amortized to income over the lease terms to provide a constant rate of return. Investments in direct financing leases are presented net of unamortized unearned income. Direct financing leases have initial terms that range from 10 to 35 years and provide for minimum annual rent. Certain leases contain provisions that allow the tenants to elect to purchase the Properties during or at the end of the lease terms for our aggregate initial investment amount plus adjustments, if any, as defined in the lease agreements. Certain leases also permit us to require the tenants to purchase the Properties at the end of the lease terms for the same amount.

 

Impairment of Long-Lived Assets—We evaluate our Properties and other long-lived assets on a quarterly basis, or upon the occurrence of significant changes in operations, to assess whether any impairment indications are present that affect the recovery of the carrying amount of an individual asset. We compare the sum of expected undiscounted cash flows from the asset over its anticipated holding period, including the asset’s estimated residual value, to the carrying value. If impairment is indicated, a loss is provided to reduce the carrying value of the property to the lower of its cost or its estimated fair value.

 

Real estate held for sale—Based on the ongoing evaluation of our Properties, we have determined to hold certain Properties for sale (see Note 10). Statement of Financial Accounting Standards No. 144, “Accounting for Impairment or Disposal of Long-Lived Assets,” (“SFAS 144”) requires that long-lived assets to be disposed of be reported at the lower of their carrying amount or their fair value less costs to dispose. SFAS 144 also requires us to stop depreciating these assets at the time the assets are classified as discontinued operations. In accordance with SFAS 144 we have reclassified the assets and operating results from certain Seniors’ Housing Properties as discontinued operations, restating previously reported results to reflect the reclassification on a comparable basis. These reclassifications had no effect on reported equity or net income.

 

When a Property is sold, the related costs and accumulated depreciation, plus any accrued rental income, are removed from the accounts and any gain or loss from sale is reflected in income.

 

10



 

Intangible Lease Costs—In accordance with Statement of Financial Accounting Standards No. 141, “Business Combinations” (“SFAS 141”), we allocate the purchase price of acquired Properties to tangible and identified intangible assets based on their respective fair values. The allocation to tangible assets (building and land) is based upon management’s determination of the value of the Property as if it were vacant using discounted cash flow models similar to those used by independent appraisers. The allocation to intangible assets is based upon factors considered by management including an estimate of carrying costs during the expected lease-up periods considering current market conditions and costs to execute similar leases. Additionally, the purchase price is allocated to the above- or below-market value of in-place leases and the value of customer relationships. The value allocable to the above- or below-market component of the acquired in-place lease is determined based upon the present value (using a discount rate which reflects the risks associated with the acquired leases) of the difference between (i) the contractual amounts to be paid pursuant to the lease over its remaining term, and (ii) management’s estimate of the amounts that would be paid using fair market rates over the remaining term of the lease. The amounts allocated to above-market leases are included in intangible lease costs and are amortized to rental income over the remaining terms of the leases acquired with each Property. The amounts allocated to below-market lease values are included in an intangible lease liability and amortized to rental income over the remaining term of the associated lease, including below-market lease extension, if any.

 

The total amount of other intangible assets acquired is further allocated to in-place lease origination costs and customer relationship values based on management’s evaluation of the specific characteristics of each tenant’s lease and our overall relationship with that respective tenant. Characteristics considered by management in allocating these values include the nature and extent of the credit quality and expectations of lease renewals, among other factors.

 

Cash and Cash Equivalents—All highly liquid investments with an original maturity of three months or less when purchased are considered cash equivalents. Cash and cash equivalents consist of demand deposits at commercial banks and money market funds (some of which are backed by government securities). Cash equivalents are stated at cost plus accrued interest, which approximates market value.

 

Cash accounts maintained in demand deposits at commercial banks and money market funds may exceed federally insured levels; however, we have not experienced any losses in such accounts. We believe we are not exposed to any significant credit risk on cash and cash equivalents.

 

Accounts and Other Receivables—Accounts and other receivables consist primarily of lease payments contractually due from tenants. On a monthly basis, we review the contractual payments versus the actual cash received. When we identify delinquencies, an estimate is made as to the amount of provision for loss related to doubtful accounts, if any, that may be needed based on our review of Property specific circumstances, including the analysis of the Property’s operations and operating trends, current economic conditions and tenant payment history. At December 31, 2005 and 2004, we had reserves for doubtful accounts and other receivables of $7.2 million and $3.9 million, respectively. The total amount of the reserves, which represent the cumulative provisions less write-offs of uncollectible rent, if any, are recorded against accounts and other receivables in our consolidated balance sheets.

 

Deferred Loan Costs—Loan costs are capitalized and are amortized as interest over the terms of the respective loan agreements on a basis which approximates the effective interest method. Unamortized deferred loan costs are expensed when the associated debt is retired before maturity.

 

Goodwill—In connection with the acquisition of DASCO, we allocated $5.8 million to goodwill, which represented the excess of the purchase price plus closing costs paid over the fair market value of the tangible assets acquired in the business acquisition (see Note 19). In accordance with SFAS 141, and Statement of Financial Accounting Standards No. 142 “Goodwill and Other Intangible Assets,” goodwill is not amortized but is tested quarterly for impairment. If quoted market prices are not available for the impairment analysis, we use other valuation techniques that involve measurement based on projected net earnings of the underlying reporting unit.

 

11



 

Investment in Unconsolidated Entity—We own a 9.90% interest in CNL Plaza, Ltd., a limited partnership that owns an office building located in Orlando, Florida, in which the Advisor and its affiliates lease office space. Our investment in the partnership is accounted for using the equity method because we have significant influence.

 

Development Costs—Development costs, including interest, real estate taxes, insurance and other costs incurred in developing new Properties, are capitalized during construction. Upon completion of construction, development costs are depreciated on a straight-line basis over the useful lives of the respective assets.

 

Capitalized Interest—Interest, including loan costs for borrowings used to fund development and construction, is capitalized as construction in progress and allocated to the respective assets. For the years ended December 31, 2005 and 2004, interest of $4.8 million and $0.7 million, respectively, was capitalized to construction in progress.

 

Deferred Income—Rental income contractually due under leases from Properties that are under development are recorded as deferred income. Upon completion of construction, deferred income is amortized to revenue on a straight-line basis over the remaining lease term.

 

Bonds Payable—Our two CCRCs hold non-interest bearing life care bonds payable to certain residents of the CCRCs. Generally, the bonds are refundable to the resident or to the resident’s estate upon termination or cancellation of the CCRC agreement. One of our other Seniors’ Housing facilities requires that certain residents of the facility post non-interest bearing occupancy fee deposits that are refundable to the resident or the resident’s estate the earlier of the re-letting of the unit or after two years of vacancy. Proceeds from the issuance of new bonds are used to retire existing bonds. As the maturity of these obligations is not determinable, no interest is imputed.

 

Minority Interests—Minority interests in consolidated real estate partnerships represents the minority partners’ share of the underlying net assets of the consolidated real estate partnerships. Net income or net losses, contributions and distributions for each partnership are allocated to the minority partner in accordance with the partnership agreement.

 

FF&E Reserve Income—A furniture, fixture and equipment (“FF&E”) cash reserve has been established with substantially all of the Seniors’ Housing lease agreements. In accordance with the agreements, the tenants deposit funds into restricted FF&E cash reserve accounts and periodically use these funds to cover the cost of the replacement, renewal and additions to FF&E. In the event that the FF&E reserve is not sufficient to maintain the Property in good working condition and repair, we may make fixed asset expenditures, in which case annual rent would be increased.

 

All funds in the FF&E reserve accounts held by us, including the interest earned on the funds and all property purchased with the funds from the FF&E reserve are our assets; therefore, we recognize the FF&E reserve payments as income. FF&E purchased with FF&E reserve funds that improve or extend the useful lives of the respective Properties are capitalized. All other FF&E costs are recorded as property operating expenses in the accompanying consolidated financial statements. For a number of our leases, FF&E reserve accounts are held by each tenant until the end of the lease term at which time all property purchased with funds from the FF&E reserve accounts become our assets.

 

With respect to 13 Properties subject to direct financing leases, FF&E reserve accounts are held by each tenant and all property purchased with funds from the FF&E accounts will remain the property of the tenants. Accordingly, we do not recognize FF&E reserve income relating to these direct financing leases.

 

Derivative Instruments and Hedging Activities—Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”), as amended and interpreted, establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. As required by SFAS 133, we record all derivatives on the balance sheet at fair value. We do not invest in derivatives for trading purposes. Our objective in using derivatives is to limit exposure to changes in interest rates on our debt obligations. To accomplish this objective, we use interest rate swaps to hedge the variable cash flows associated with existing variable-rate debt. These interest rate swaps,

 

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designated as cash flow hedges, involve the receipt of variable-rate amounts in exchange for fixed-rate payments over the life of the agreements without exchange of the underlying principal amount.

 

For derivatives designated as cash flow hedges, the effective portion of changes in the fair value of the derivative is initially reported in other comprehensive income and subsequently reclassified to earnings when the hedged transaction affects earnings, and the ineffective portion of changes in the fair value of the derivative is recognized directly in earnings. We assess the effectiveness of each hedging relationship by comparing the changes in fair value or cash flows of the derivative hedging instrument with the changes in fair value or cash flows of the designated hedged item or transaction. (See Note 12.)

 

Income Taxes—We are taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended, and related regulations. As a REIT, we generally will not be subject to federal corporate income taxes on amounts distributed to stockholders, providing we distribute at least 90% of our REIT taxable income and meet certain other requirements for qualifying as a REIT. At December 31, 2005, 2004 and 2003, we were in compliance with all REIT requirements and were not subject to federal income taxes. State and local taxing authorities apply their own rules and regulations that adjust the federal taxable income of REITs to arrive at state taxable income. For the year ended December 31, 2005, we determined that the REIT would be subject to state and local income taxes of approximately $40,000.

 

We hold five wholly owned taxable REIT subsidiaries which enable us to engage in non-REIT activities. Taxable REIT subsidiaries are subject to federal, state, and local income taxes. For the year ended December 31, 2005, we determined that the taxable REIT subsidiaries collectively would be subject to federal income taxes and applicable state income taxes of approximately $0.4 million. We recorded a tax provision on each of the taxable REIT subsidiaries for their respective share of the estimated federal, state, and local income taxes. This provision is included in general and administrative expenses in the accompanying consolidated statements of income.

 

Income Per Share—Basic income per common share is calculated based upon net income (income available to common stockholders) divided by the weighted-average number of shares of common stock outstanding during the period. As of December 31, 2005, 2004 and 2003, we did not have any potentially dilutive common shares.

 

Reclassifications—Certain items in the prior periods’ financial statements have been reclassified to conform to the 2005 presentation, including those related to our real estate held for sale (see Note 10). These reclassifications had no effect on reported equity or net income.

 

Recently Issued Accounting Pronouncements—In May 2005, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 154, “Accounting Changes and Error Corrections—A Replacement of APB Opinion No. 20 and SFAS No. 3” (“SFAS 154”). SFAS 154 changes the requirements for the accounting and reporting of a change in accounting principle by requiring that a voluntary change in accounting principle be applied retrospectively with all prior periods’ financial statements presented on the new accounting principle, unless it is impracticable to do so. SFAS 154 also requires that a change in depreciation or amortization for long-lived, non-financial assets be accounted for as a change in accounting estimate effected by a change in accounting principle and corrections of errors in previously issued financial statements should be termed a “restatement.” SFAS 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. We believe that the adoption of SFAS 154 will not have a material effect on our consolidated financial statements.

 

In March 2005, the FASB issued Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations,” (“FIN 47”) an interpretation of Statement of Financial Accounting Standards No. 143, “Accounting for Asset Retirement Obligations”(“SFAS 143”). FIN 47, which is effective for fiscal years ended after December 15, 2005, clarifies that the term “conditional asset retirement obligation,” as used in SFAS 143 refers to a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of the entity. The obligation to perform the asset retirement activity is unconditional even though uncertainty exists about the timing and/or method of settlement. FIN 47 requires a company to recognize the liability for the fair value of the conditional asset retirement obligation if the

 

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fair value of the liability can be reasonably estimated. Any liability accrued is offset by an increase in the value of the asset. Adoption of FIN 47 did not have a material impact on our financial statements.

 

3. Public Offerings:

 

Upon formation in December 1997, we received an initial capital contribution of $200,000 for 20,000 shares of common stock from the Advisor. From our inception through December 31, 2005, we have made five public offerings and received subscriptions as follows (in thousands):

 

 

 

Date

 

Offering

 

Subscriptions

 

Offering

 

Completed

 

Shares(b)

 

Amount

 

Shares(c)

 

Amount

 

Initial Offering

 

September 2000

 

15,500

 

$

155,000

 

972

 

$

9,719

 

2000 Offering

 

May 2002

 

15,500

 

155,000

 

15,500

 

155,000

 

2002 Offering

 

April 2003

 

45,000

 

450,000

 

45,000

 

450,000

 

2003 Offering

 

April 2004

 

175,000

 

1,750,000

 

156,793

 

1,567,925

 

2004 Offering

 

Open(a)

 

400,000

 

4,000,000

 

41,548

 

415,485

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

651,000

 

$

6,510,000

 

259,813

 

$

2,598,129

 

 


(a)                                  2004 Offering will close on or before March 26, 2006.

 

(b)                                 Includes reinvestment plan shares of 500 in each of the Initial and 2000 Offerings, 5,000 in the 2002 Offering, 25,000 in the 2003 Offering and 15,000 in the 2004 Offering.

 

(c)                                  Includes reinvestment plan shares of 5 in the Initial Offering, 42 in the 2000 Offering, 129 in the 2002 Offering, 1,728 in the 2003 Offering and 8,749 in the 2004 Offering.

 

The price per share of all of the equity offerings of our common stock has been $10.00 per share, with the exception of (i) shares purchased pursuant to volume or other discounts and (ii) shares purchased through our reinvestment plan, which are currently priced at $9.50 per share.

 

In July 2004, the stockholders approved a resolution to amend our Amended and Restated Articles of Incorporation to increase the number of authorized shares of common stock from 450 million to one billion.

 

We incurred offering expenses, including selling commissions, marketing support fees, due diligence expense reimbursements, filing fees, legal, accounting, printing and escrow fees, which have been deducted from the gross proceeds of the offerings. Offering expenses together with selling commissions, marketing support fees and due diligence expense reimbursements will not exceed 13% of the proceeds raised in connection with our public offerings. Under our first four public offerings (“Prior Offerings”), the Advisor and its affiliates were entitled to selling commissions of 7.5%, a marketing support fee of 0.5% and an acquisition fee of 4.5% of gross offering and debt proceeds. Under the 2004 Offering, the Advisor and its affiliates are entitled to selling commissions of 6.5%, a marketing support fee of 2.0% and acquisition fees equal to 3.0% of gross offering and loan proceeds from permanent financing for the period from May 3, 2005 through December 31, 2005 (4.0% of gross proceeds and loan proceeds for the period from May 14, 2004 through May 2, 2005).

 

During the years ended December 31, 2005, 2004 and 2003, we incurred $18.4 million, $87.1 million and $101.3 million, respectively, in offering costs, including $14.1 million, $68.8 million and $85.1 million,

 

14



 

respectively, in selling commissions and marketing support fees. These amounts are treated as stock issuance costs and charged to stockholders’ equity.

 

4. Investment Properties:

 

Accounted for Using the Operating Method—Properties subject to operating leases consisted of the following at December 31 (dollars in thousands):

 

 

 

2005

 

2004

 

Land and land improvements

 

$

345,936

 

$

311,198

 

Buildings and building improvements

 

2,523,724

 

2,118,086

 

Tenant improvements

 

96,084

 

62,641

 

Equipment

 

75,700

 

65,936

 

 

 

 

 

 

 

 

 

3,041,444

 

2,557,861

 

Less accumulated depreciation

 

(157,746

)

(73,716

)

 

 

 

 

 

 

 

 

2,883,698

 

2,484,145

 

Construction in progress

 

31,119

 

96,803

 

 

 

 

 

 

 

 

 

$

2,914,817

 

$

2,580,948

 

 

 

 

 

 

 

Number of Properties(1)(2):

 

 

 

 

 

Seniors’ Housing:

 

 

 

 

 

Operating

 

150

 

130

 

Under construction

 

1

 

3

 

 

 

 

 

 

 

 

 

151

 

133

 

Medical Facilities:

 

 

 

 

 

Operating

 

68

 

49

 

Under construction

 

5

 

3

 

 

 

 

 

 

 

 

 

73

 

52

 

 

 

 

 

 

 

 

 

224

 

185

 

 


(1)                                  At December 31, 2005, excludes four Seniors’ Housing facilities and a parcel of land held for sale. At December 31, 2004, excludes four Seniors’ Housing facilities held for sale.

 

(2)                                  At December 31, 2005, includes 26 Medical Facilities and one Seniors’ Housing facility subject to long-term ground lease agreements. At December 31, 2004, includes 20 Medical Facilities subject to long-term ground lease agreements.

 

For the years ended December 31, 2005, 2004 and 2003, we recognized $46.7 million, $40.4 million and $13.2 million, respectively, of revenue from the straight-lining of lease revenues over current contractually due amounts. These amounts are included in rental income from operating leases in the accompanying consolidated statements of income.

 

 

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Future minimum lease payments contractually due under the noncancellable operating leases at December 31, 2005, exclusive of renewal option periods and contingent rents, were as follows (in thousands):

 

2006

 

$

269,257

 

2007

 

272,121

 

2008

 

274,547

 

2009

 

275,613

 

2010

 

274,695

 

Thereafter

 

2,475,678

 

 

 

 

 

 

 

$

3,841,911

 

 

Accounted for Using the Direct Financing Method—The components of net investment in direct financing leases consisted of the following at December 31 (dollars in thousands):

 

 

 

2005

 

2004

 

Minimum lease payments receivable

 

$

1,477,576

 

$

1,529,171

 

Estimated residual values

 

449,099

 

449,099

 

Less unearned income

 

(1,437,992

)

(1,498,219

)

 

 

 

 

 

 

Net investment in direct financing leases

 

$

488,683

 

$

480,051

 

 

 

 

 

 

 

Properties subject to direct financing leases

 

33

 

33

 

 

Lease payments due to us relating to six land-only direct financing leases with a carrying value of $131.9 million are subordinate to first mortgage construction loans with third parties entered into by the tenants to fund development costs related to the Properties.

 

Future minimum lease payments contractually due on direct financing leases at December 31, 2005, were as follows (in thousands):

 

2006

 

$

54,235

 

2007

 

55,224

 

2008

 

56,314

 

2009

 

58,126

 

2010

 

60,155

 

Thereafter

 

1,193,522

 

 

 

 

 

 

 

$

1,477,576

 

 

5. Intangible Lease Costs:

 

Intangible lease costs included the following at December 31 (in thousands):

 

 

 

2005

 

2004

 

Intangible lease origination costs:

 

 

 

 

 

In-place lease costs

 

$

103,736

 

$

88,740

 

Customer relationship values

 

12,152

 

11,698

 

 

 

 

 

 

 

 

 

115,888

 

100,438

 

Less accumulated amortization

 

(23,643

)

(9,934

)

 

 

 

 

 

 

 

 

92,245

 

90,504

 

 

 

 

 

 

 

Above-market lease values

 

9,744

 

8,475

 

Less accumulated amortization

 

(2,378

)

(742

)

 

 

 

 

 

 

 

 

7,366

 

7,733

 

 

 

 

 

 

 

 

 

$

99,611

 

$

98,237

 

 

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Above-market lease values are amortized to rental income over the remaining terms of the leases acquired in connection with each applicable Property acquisition. Above-market lease amortization charged against rental income from operating leases in the accompanying consolidated statements of income was $1.7 million, $0.7 million and $0, respectively, for the years ended December 31, 2005, 2004 and 2003.

 

The estimated amortization expense for in-place lease costs and customer relationship values, and the estimated rental income amortization for above-market lease values at December 31, 2005, were as follows (in thousands):

 

 

 

In-place
lease costs

 

Customer
relationship
values

 

Above-market
lease values

 

2006

 

$

10,712

 

$

1,902

 

$

1,523

 

2007

 

8,849

 

1,294

 

1,225

 

2008

 

7,873

 

1,161

 

1,051

 

2009

 

7,147

 

984

 

934

 

2010

 

6,389

 

776

 

655

 

Thereafter

 

42,770

 

2,388

 

1,978

 

 

 

 

 

 

 

 

 

 

 

$

83,740

 

$

8,505

 

$

7,366

 

 

6. Restricted Cash:

 

Restricted cash included the following at December 31 (in thousands):

 

 

 

2005

 

2004

 

Transfer agent escrows

 

$

4,980

 

$

13,214

 

Horizon Bay tenant rent deposit

 

3,109

 

9,537

 

FF&E reserves

 

4,509

 

4,894

 

Lender escrow reserves

 

6,908

 

3,808

 

Property acquisition deposits

 

 

1,950

 

Other

 

2,414

 

1,027

 

 

 

 

 

 

 

 

 

$

21,920

 

$

34,430

 

 

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7. Accounts and Other Receivables:

 

Accounts and other receivables included the following at December 31 (in thousands):

 

 

 

2005

 

2004

 

Rental revenues receivable

 

$

27,301

 

$

21,790

 

Other receivables

 

3,385

 

2,655

 

 

 

 

 

 

 

 

 

30,686

 

24,445

 

Allowance for doubtful accounts

 

(7,200

)

(3,900

)

 

 

 

 

 

 

 

 

$

23,486

 

$

20,545

 

 

At December 31, 2005 and 2004, past due rents aggregated $14.8 million and $10.7 million, respectively. The provision for doubtful accounts for the years ended December 31, 2005, 2004 and 2003, was $3.4 million, $3.9 million and $0, respectively, which included $3.1 million, $3.9 million and $0, respectively, from continuing operations and $0.3 million, $0 and $0, respectively, from discontinued operations. Additionally, during 2005, accounts receivable of $0.1 million related to certain Medical Facilities tenants were written off.

 

8. Deferred Costs:

 

Deferred costs included the following at December 31 (in thousands):

 

 

 

2005

 

2004

 

Financing costs

 

$

26,679

 

$

17,989

 

Leasing commissions

 

989

 

523

 

Other lease costs

 

767

 

341

 

 

 

 

 

 

 

 

 

28,435

 

18,853

 

Less accumulated amortization

 

(8,503

)

(5,408

)

 

 

 

 

 

 

 

 

19,932

 

13,445

 

 

 

 

 

 

 

Lease incentives

 

5,153

 

4,114

 

Less accumulated amortization

 

(380

)

(90

)

 

 

 

 

 

 

 

 

4,773

 

4,024

 

 

 

 

 

 

 

 

 

$

24,705

 

$

17,469

 

 

Lease incentive costs are amortized to rental income over the terms of the leases. Lease incentive cost amortization charged against rental income was $0.3 million, $0.1 million and $0, for the years ended December 31, 2005, 2004 and 2003, respectively.

 

18



 

9. Other Assets:

 

Other assets included the following at December 31 (in thousands):

 

 

 

2005

 

2004

 

 

 

 

 

 

 

Senior Secured Term Loan(1)

 

$

16,000

 

$

 

Property acquisition deposits

 

10,601

 

 

Acquisition costs

 

7,633

 

2,972

 

Deferred receivables(2)

 

6,638

 

942

 

Prepaid expenses

 

4,950

 

6,400

 

Fair value of cash flow hedges

 

4,839

 

 

Other

 

2,274

 

1,098

 

 

 

 

 

 

 

 

 

$

52,935

 

$

11,412

 

 


(1)                                  In August 2005, we entered into an agreement to provide an affiliate of the Cirrus Group, LLC (“Cirrus”) with an interest only, five-year, senior secured term loan under which up to $85.0 million (plus capitalized interest) may be borrowed to finance the acquisition, development, syndication and operation of new and existing surgical partnerships (“Senior Secured Term Loan”). Certain of these surgical partnerships are tenants in the Medical Facilities acquired from Cirrus. During the first 48 months of the term, interest at a rate of 14.0%, will accrue, of which 9.5% will be payable monthly and the balance of 4.5% will be capitalized; thereafter, interest at the greater of 14.0% or LIBOR plus 9.0% will be payable monthly. The loan is subject to equity contribution requirements and borrower financial covenants that will dictate the draw down availability, is collateralized by all of the assets of the borrower (comprised primarily of interest in partnerships operating surgical facilities in premises leased from a Cirrus affiliate) and is guaranteed up to $50.0 million through a combination of (i) a personal guarantee of up to $13.0 million by a principal of Cirrus and (ii) a guarantee of the balance by other principals of Cirrus under arrangements for recourse limited only to their interests in certain entities owning real estate. The carrying value of the loan at December 31, 2005, approximated its fair value.

 

In connection with the Senior Secured Term Loan, we received stock warrants which are exercisable into a 10% to 15% ownership interest of the borrower. The stock warrants are exercisable at the earlier of an event of default or the full repayment of the Senior Secured Term Loan and expire in September 2015.

 

(2)                                  Represents rental revenue receivable reclassified from accounts receivable to other assets in accordance with certain lease provisions.

 

10. Real Estate Held For Sale:

 

As of December 31, 2005, real estate held for sale included four Seniors’ Housing facilities with an aggregate net carrying value of $9.4 million and a 10.4 acre parcel of land that was acquired in 2005 for $3.2 million as part of a portfolio of Seniors’ Housing Properties. We determined to hold these Properties for sale during late 2004 and 2005 and recognized aggregate impairment charges of approximately $9.6 million to reduce the Properties’ carrying value to their estimated fair value less the estimated costs to dispose. In July 2005, we entered into an agreement with a buyer to sell two of the Properties for an expected aggregate sales price of approximately $6.0 million. In January 2006, we entered into an agreement to sell one additional Property for an expected sales price of approximately $2.1 million.

 

In accordance with SFAS 144, we have reclassified the assets and operating results from the Seniors’ Housing Properties as discontinued operations, restating previously reported results to reflect the reclassification on a comparable basis. These reclassifications had no effect on reported equity or net income.

 

 

 

19



 

The assets of the real estate held for sale were presented separately in the accompanying consolidated balance sheets and consisted of the following at December 31 (in thousands):

 

 

 

2005

 

2004

 

Real estate investment properties accounted for using the operating method, net

 

$

12,066

 

$

16,599

 

Accrued rental income

 

626

 

583

 

 

 

 

 

 

 

 

 

$

12,692

 

$

17,182

 

 

The operational results associated with the Properties were presented as income (loss) from discontinued operations in the accompanying consolidated statements of income. Summarized financial information was as follows (in thousands):

 

 

 

2005

 

2004

 

2003

 

Rental income from operating leases

 

$

1,716

 

$

2,196

 

$

960

 

Provision for doubtful accounts

 

(350

)

 

 

Impairment provisions

 

(7,740

)

(1,883

)

 

Income (loss) from discontinued operations

 

(6,834

)

(433

)

596

 

 

11. Indebtedness:

 

Mortgage Notes Payable—Mortgage notes payable and the Net Book Value (“NBV”) of the associated collateral as of December 31, 2005, consisted of the following at December 31 (in thousands):

 

 

 

2005

 

2004

 

NBV

 

Mortgage payable with both variable-rate and fixed-rate components. Fixed rate at 5.63% and variable rate based on the 3 to 9 month Fannie Mae Discount MBS rate plus 0.95% (5.39% combined weighted-average interest rate at December 31, 2005), maturing October 2013

 

$

241,871

(1)

$

192,680

 

$

445,925

 

Various mortgages payable, interest only payments at variable rates ranging from LIBOR plus 1.0% to 3.0% (5.70% weighted-average interest rate at December 31, 2005), maturing from November 2006 to March 2010

 

284,105

(2)

193,931

 

497,514

 

Two mortgages payable, interest only payments at a 30-day commercial paper rate plus 1.82% or 2.15% (6.36% weighted-average interest rate at December 31, 2005), maturing March 2007 and May 2007

 

43,920

 

43,920

 

98,103

 

Various fixed-rate mortgages payable, interest only payments, bearing interest at rates ranging from 4.85% to 6.06%, (5.71% weighted-average interest rate at December 31, 2005), maturing September 2010 through November 2015

 

263,810

 

167,145

 

517,757

 

Various fixed-rate mortgages payable, principal and interest payments, including net premiums of $1.0 million and $0.7 million at December 31, 2005 and 2004, respectively, bearing interest at rates ranging from 4.91% to 8.42% (6.25% weighted-average interest rate at December 31, 2005), maturing July 2007 through November 2038

 

386,484

(3)

339,913

 

629,632

 

 

 

 

 

 

 

 

 

 

 

$

1,220,190

 

$

937,589

 

$

2,188,931

 

 

20



 


(1)                                  On October 3, 2005, we (i) exercised an extension option available under the $140.4 million mortgage notes that were to mature in October 2005, (ii) negotiated the inclusion of an $82.2 million variable-rate mortgage loan due to mature in April 2008 and (iii) drew an additional $19.4 million under the facility, all with a new maturity date of October 2013. The facility contains provisions that will allow us to draw an additional $58.0 million upon providing additional collateral. Of the new $242.0 million mortgage note payable, $121.0 million bears fixed-rate interest at 5.63% requiring principal and interest payments through maturity and $121.0 million bears variable-rate interest based on the 3 to 9 month Fannie Mae Discount MBS rate plus 0.95% (5.16% at December 31, 2005) requiring interest only payments through maturity. We also have the option to convert the variable-rate debt component to fixed-rate debt.

 

(2)                                  We entered into interest rate swap agreements tied to debt with an aggregate notional amount of $233.8 million to hedge against unfavorable fluctuations in LIBOR rates (see Note 12).

 

(3)                                  Certain fixed-rate loans contain substantial prepayment penalties and/or defeasance provisions that could preclude the repayment of the loans prior to their maturity dates.

 

Maturities for all mortgage notes payable, excluding loan premiums of $1.0 million, at December 31, 2005 were as follows (in thousands):

 

2006

 

$

55,776

 

2007

 

66,989

 

2008

 

61,479

 

2009

 

143,453

 

2010

 

374,433

 

Thereafter

 

517,076

 

 

 

 

 

 

 

$

1,219,206

 

 

Bonds Payable—At December 31, 2005 and 2004, we had $98.0 million and $94.5 million, respectively, of non-interest bearing life care bonds at our two CCRCs and non-interest bearing occupancy fee deposits at a Seniors’ Housing facility, all of which were payable to certain residents of the facilities (collectively “Bonds Payable”). During 2005, the tenants of the facilities issued new Bonds Payable to new residents of the facilities totaling $12.6 million and used the proceeds from the Bonds issued in the current period and prior periods to retire $9.1 million of Bonds on our behalf. At December 31, 2005, $68.7 million of the Bonds were refundable to the residents upon the resident moving out or to a resident’s estate upon the resident’s death and $29.4 million of the Bonds were refundable after the unit has been successfully remarketed to a new resident.

 

 

 

21



 

Construction Loans Payable—Construction loans payable consisted of the following at December 31 (in thousands):

 

 

 

Total Facility

 

2005

 

2004

 

Five construction loans payable, each bearing interest at 30-day LIBOR plus 2.25% (6.62% at December 31, 2005), with monthly interest only payments, maturing November 2006

 

$

83,100

 

$

75,499

 

$

47,148

 

Construction loan payable bearing interest at the lender’s base rate, as defined, less 0.75% with a minimum rate of 6.50% (6.50% at December 31, 2005), with monthly interest only payments, maturing December 2007

 

48,000

 

44,696

 

32,339

 

Construction loan payable bearing interest at 30-day LIBOR plus 1.75% (6.12% at December 31, 2005), with monthly interest only payments, maturing July 2009

 

14,287

 

11,750

 

2,021

 

Two construction loans payable bearing interest at 30-day LIBOR plus 1.60% (6.31% at December 31, 2005), with monthly interest only payments, maturing December 2009

 

19,148

 

405

 

 

Construction loan payable bearing interest at 30-day LIBOR plus 1.70% (5.99% at December 31, 2005), with monthly interest only payments, maturing April 2012

 

11,280

 

6,096

 

 

Construction loan payable bearing interest at 30-day LIBOR plus 1.80% (6.09% at December 31, 2005), with monthly interest only payments, maturing December 2013

 

6,600

 

5,114

 

 

 

 

 

 

 

 

 

 

 

 

$

182,415

 

$

143,560

 

$

81,508

 

 

Line of Credit—On August 23, 2005, we amended and restated our $85.0 million credit agreement and closed on a $320.0 million amended and restated senior secured revolving line of credit, which permits us to expand the borrowing capacity up to $400.0 million and extended the initial maturity date to August 23, 2007 (the “Revolving LOC”). The amount available for use under the Revolving LOC is subject to certain limitations based on the pledged collateral. The Revolving LOC is collateralized by 36 Properties with a carrying value of approximately $390.4 million at December 31, 2005, that in the aggregate, currently allows us to draw up to $283.0 million. The Revolving LOC contains two one-year extension options and may be used to fund the acquisition and development of Properties, purchase other permitted investments and for general corporate purposes. The Revolving LOC requires interest only payments at LIBOR plus a percentage that fluctuates depending on our aggregate amount of debt outstanding in relation to our total assets (6.20% all-in rate at December 31, 2005, which represents a pricing of LIBOR plus 170 basis points). At December 31, 2005, $75.0 million was outstanding under the Revolving LOC.

 

Term Loan.—On January 13, 2005, we repaid and terminated a $60.0 million 14-day term loan used for the acquisition of Properties for which permanent financing was obtained in January 2005.

 

Interest and loan cost amortization expense was $76.2 million, $42.8 million and $9.6 million for the years ended December 31, 2005, 2004 and 2003, respectively, including $0.4 million, $1.1 million and $0 of loan costs written off related to the early termination of debt for the years ended December 31, 2005, 2004 and 2003, respectively. For the years ended December 31, 2005, 2004 and 2003, interest of $4.8 million, $0.7 million and $0, respectively, was capitalized to construction in progress.

 

The fair market value of our outstanding mortgage notes and construction loans payable was $1.4 billion at December 31, 2005.

 

We were in compliance with all of our financial covenants as of December 31, 2005.

 

22



 

12. Financial Instruments: Derivatives and Hedging:

 

In May 2005, we entered into two interest rate swap agreements effective June 1, 2005, and one interest rate swap agreement effective July 1, 2005, for an aggregate notional amount of $233.8 million to hedge against unfavorable fluctuations in interest rates on our variable interest rate mortgage notes payable. At December 31, 2005, derivatives with a fair value of $4.8 million were included in other assets in the accompanying consolidated balance sheets. The change in net unrealized gain of $4.8 million as of December 31, 2005, for derivatives designated as cash flow hedges is disclosed separately in the accompanying consolidated statements of stockholders’ equity as the change in fair value of cash flow hedges.

 

Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on our variable-rate debt. The change in net unrealized income on cash flow hedges reflects a reclassification of $0.6 million of net unrealized gain from accumulated other comprehensive income to interest expense during the year ended December 31, 2005. During the next twelve months, we expect to reclassify approximately $1.2 million of the current balance held in accumulated other comprehensive income related to the interest rate swaps to earnings as a reduction of interest expense.

 

Cash flow hedges at December 31, 2005 consisted of the following:

 

Hedge Type

 

Notional Amount

 

Rate

 

Maturity

 

Fair Value

 

 

 

(in thousands)

 

 

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

Swap, Cash Flow

 

$

100,000

 

4.1840

%

January 12, 2010

 

$

2,062

 

Swap, Cash Flow

 

83,750

 

4.1764

%

January 1, 2010

 

1,738

 

Swap, Cash Flow

 

50,000

 

4.2085

%

March 31, 2010

 

1,039

 

 

 

 

 

 

 

 

 

 

 

 

 

$

233,750

 

 

 

 

 

$

4,839

 

 

13. Intangible Lease Liability:

 

Intangible lease liability at December 31, 2005 and 2004, was $4.5 million and $3.7 million, respectively, consisting of the unamortized carrying value of below-market-rate leases associated with Properties acquired. Intangible lease liability is amortized over the remaining term of the associated lease, including below-market lease extension, if any. Intangible lease liability accreted to rental income from operating leases in the accompanying consolidated statements of income was $1.1 million, $0.7 million and $0, for the years ended December 31, 2005, 2004 and 2003, respectively.

 

14. Commitments and Contingencies:

 

Commitments—Commitments, contingencies and guarantees by expiration period as of December 31, 2005 (in thousands):

 

 

 

Less than
1 Year

 

2 - 3 Years

 

4 - 5 Years

 

Thereafter

 

Total

 

Pending investments(1)

 

$

157,100

 

$

 

$

 

$

 

$

157,100

 

Unfunded Senior Secured Term Loan(2)

 

69,000

 

 

 

 

69,000

 

Capital improvements to Properties

 

62,620

 

 

 

 

62,620

 

Earnout provisions(3)

 

25,979

 

 

 

 

25,979

 

Guarantee of uncollateralized promissory note of CNL Plaza, Ltd.(4)

 

 

 

2,313

 

 

2,313

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

314,699

 

$

 

$

2,313

 

$

 

$

317,012

 

 

23



 


(1)                                  As of December 31, 2005, we had initial commitments to acquire 12 Medical Facilities for which we had posted a non-refundable $10.6 million deposit. In January 2006, we completed the acquisition of seven Medical Facilities for $84.5 million, including the application of $6.0 million of the non-refundable deposit that we had posted as of December 31, 2005. The remaining Properties are expected to be acquired in the first quarter of 2006. The acquisition of each of these Properties is subject to the fulfillment of certain conditions. There can be no assurance that any or all of the conditions will be satisfied or, if satisfied, that we will acquire one or more of these investments.

 

(2)                                  Represents the unfunded portion under the $85.0 million Senior Secured Term Loan.

 

(3)                                  In connection with the acquisition of 41 Properties, we may be required to make additional payments to the seller if certain earnout provisions are achieved by the earnout date for each Property. The calculation generally considers the net operating income for the Property, our initial investment in the Property and the fair value of the Property. In the event an amount is due, the applicable lease will be amended and annual minimum rent will increase accordingly. Amounts presented represent maximum exposure to additional payments. Earnout amounts related to six additional Properties are subject to future values and events which are not quantifiable at December 31, 2005, and are not included in the table above.

 

(4)                                  In connection with the ownership of a 9.90% limited partnership interest in CNL Plaza, Ltd., we severally guaranteed 16.67%, or $2.3 million, of a $14.0 million uncollateralized promissory note of the general partner of the limited partnership that matures December 31, 2010. As of December 31, 2005, the uncollateralized promissory note had an outstanding balance of $13.9 million.

 

Ground Leases—Twenty-seven of our Properties are subject to ground leases. These ground leases have predetermined rent increases based on the CPI index or a defined percentage and termination dates ranging from 2038 to 2084. Twenty-one of the ground leases contain renewal options for terms of 30 to 50 years. During the years ended December 31, 2005, 2004 and 2003, we recognized ground lease expense of $0.5 million, $0.2 million and $0, respectively, including $0.2 million, $13,000 and $0, respectively, from the straight-lining of ground lease expense, which is included in Seniors’ Housing property expenses and Medical Facilities operating expenses in the accompanying consolidated statements of income.

 

Future minimum lease payments due under ground leases at December 31, 2005, exclusive of renewal option periods, were as follows (in thousands):

 

2006

 

$

372

 

2007

 

490

 

2008

 

491

 

2009

 

493

 

2010

 

495

 

Thereafter

 

23,750

 

 

 

 

 

 

 

$

26,091

 

 

24



 

Operating Leases—At December 31, 2005, future minimum lease payments due under an operating lease for DASCO’s administrative offices which terminates in 2011 were $0.2 million for each of the next six years.

 

Legal Matters—From time to time, we are exposed to litigation arising from an unidentified pre-acquisition contingency or from the operation of our business. We do not believe that resolution of these matters will have a material adverse effect on our financial condition or results of operations.

 

15. Redemption of Shares:

 

We have a redemption plan under which we may elect to redeem shares, subject to certain conditions and limitations. Under the redemption plan, prior to such time, if any, as listing of our common stock on a national securities exchange or over-the-counter market occurs, any stockholder who has held shares for at least one year may present to us all or any portion equal to at least 25% of their shares for redemption in accordance with the procedures outlined in the redemption plan. Upon presentation, we may, at our option, redeem the shares, subject to certain conditions and limitations. However, at no time during a 12-month period may the number of shares we redeem exceed 5% of the number of shares of our outstanding common stock at the beginning of the 12-month period. During the years ended December 31, 2005, 2004 and 2003, 3,904,039 shares, 685,396 shares and 131,781 shares of common stock were redeemed and retired for $37.1 million, $6.5 million and $1.2 million, respectively. In the second quarter of 2004, we amended our redemption plan to change the redemption price from $9.20 per share to $9.50 per share.

 

16. Distributions:

 

For the years ended December 31, 2005, 2004 and 2003, approximately 67%, 60% and 71%, respectively, of the distributions paid to stockholders were considered ordinary income and approximately 33%, 40% and 29%, respectively, were considered a return of capital to stockholders for federal income tax purposes. For the years ended December 31, 2005, 2004 and 2003, no amounts distributed to the stockholders are required to be or have been treated by us as a return of capital for purposes of calculating the stockholders’ 8% return, which is equal to an 8% cumulative, non-compounded annual return on the amount calculated by multiplying the total number of shares of common stock purchased by stockholders by the issue price, without deduction for volume or other discounts, reduced by the portion of any distribution that is attributable to net sales proceeds and by any amount we have paid to repurchase shares under our redemption plan.

 

17. Related Party Arrangements:

 

Certain of our directors and officers hold similar positions with the Advisor, the parent company of the Advisor and the managing dealer of our public offerings, CNL Securities Corp. Our chairman of the board indirectly owns a controlling interest in the parent company of the Advisor. These affiliates receive fees and compensation for services provided in connection with the common stock offerings, permanent financing and the acquisition, management and sale of our assets.

 

Pursuant to the Advisory Agreement, as amended and renewed, the Advisor and its affiliates earn certain fees and are entitled to receive reimbursement of certain expenses. During the years ended December 31, 2005, 2004 and 2003, the Advisor and its affiliates earned fees and incurred reimbursable expenses as follows (in thousands):

 

 

 

Years ended December 31,

 

 

 

2005

 

2004

 

2003

 

Acquisition fees(1):

 

 

 

 

 

 

 

From offering proceeds

 

$

5,874

 

$

38,286

 

$

47,644

 

From debt proceeds

 

13,789

 

29,952

 

11,277

 

 

 

 

 

 

 

 

 

 

 

19,663

 

68,238

 

58,921

 

 

 

 

 

 

 

 

 

Asset management fees(2)

 

19,217

 

13,047

 

4,372

 

 

 

 

 

 

 

 

 

Reimbursable expenses(3):

 

 

 

 

 

 

 

Acquisition expenses

 

210

 

331

 

403

 

General and administrative expenses

 

5,989

 

4,313

 

2,255

 

 

 

 

 

 

 

 

 

 

 

6,199

 

4,644

 

2,658

 

 

 

 

 

 

 

 

 

 

 

$

45,079

 

$

85,929

 

$

65,951

 

 

25



 


(1)                                  For the period from May 3, 2005 through December 31, 2005, acquisition fees for, among other things, identifying Properties and structuring the terms of the leases were equal to 3.0% of gross offering proceeds and loan proceeds from permanent financing under the 2004 Offering (4.0% of gross offering and loan proceeds for the period from May 14, 2004 through May 2, 2005 and 4.5% of gross offering and loan proceeds under the Prior Offerings). These fees are included in other assets in the accompanying consolidated balance sheets prior to being allocated to individual Properties or intangible lease costs.

 

If we list our common stock on a national securities exchange or over-the-counter market (“List” or “Listing”), the Advisor will receive an acquisition fee equal to 3.0% of amounts outstanding on the line of credit, if any, at the time of Listing. Certain fees payable to the Advisor upon Listing, the orderly liquidation or other sales of Properties are subordinate to the return of 100% of the stockholders’ invested capital plus the achievement of a cumulative, noncompounded annual 8% return on stockholders’ invested capital.

 

(2)                                  Monthly asset management fee of 0.05% of our real estate asset value, as defined in the Advisory Agreement, and the outstanding principal balance of any Mortgage Loans as of the end of the preceding month.

 

(3)                                  Reimbursement for administrative services, including, but not limited to, accounting; financial, tax, insurance administration and regulatory compliance reporting; stockholder distributions and reporting; due diligence and marketing; and investor relations.

 

Pursuant to the advisory agreement, the Advisor is required to reimburse us the amount by which the total operating expenses we pay or incur exceeds in any four consecutive fiscal quarters (the “Expense Year”) the greater of 2% of average invested assets or 25% of net income (the “Expense Cap”). Operating expenses for the Expense Years ended December 31, 2005, 2004 and 2003, did not exceed the Expense Cap.

 

Of these amounts, approximately $1.1 million and $1.4 million were included in due to related parties in the accompanying consolidated balance sheets at December 31, 2005 and 2004, respectively.

 

CNL Securities Corp. received fees based on the amounts raised from our offerings equal to: (i) selling commissions of 6.5% of gross proceeds under the 2004 Offering and 7.5% under the Prior Offerings, (ii) a marketing support fee of 2.0% of gross proceeds under the 2004 Offering and 0.5% under the Prior Offerings and (iii) beginning on December 31, 2003, an annual soliciting dealer servicing fee equal to 0.2% of the aggregate proceeds raised in a prior offering. Affiliates of the Advisor are reimbursed for certain offering expenses incurred on our behalf. Offering expenses incurred by the Advisor and its affiliates on our behalf, together with selling commissions, the marketing support fee and due diligence expense reimbursements will not exceed 13% of the proceeds raised in connection with the offerings.

 

26



 

During the years ended December 31, 2005 and 2004, we incurred the following fees and costs (in thousands):

 

 

 

Years ended December 31,

 

 

 

2005

 

2004

 

Selling commissions

 

$

10,801

 

$

61,830

 

Marketing support fee

 

3,313

 

6,648

 

Offering and due diligence costs

 

4,250

 

18,328

 

Soliciting dealer servicing fee

 

 

310

 

 

 

 

 

 

 

 

 

$

18,364

 

$

87,116

 

 

Of these amounts, approximately $1.3 million and $0.2 million were included in due to related parties in the accompanying consolidated balance sheets at December 31, 2005 and 2004, respectively.

 

We own a 9.90% interest in CNL Plaza, Ltd. (the “Owner”), a limited partnership that owns an office building located in Orlando, Florida, in which the Advisor and certain affiliates of CNL Financial Group (“CFG”) lease office space. CFG owns a controlling interest in the parent company of the Advisor and is indirectly wholly owned by James M. Seneff, Jr., our chairman of the board, and his wife. Robert A. Bourne, our vice-chairman of the board and treasurer, is an officer of CFG. The remaining interests in the Owner are held by several entities with present or former affiliations with CFG, including: CNL Plaza Venture, Ltd., which has a 1% interest as general partner of the Owner and whose general partner is indirectly wholly owned by Mr. Seneff and his wife; CNL Corporate Investors, Ltd., which is indirectly wholly owned by Messrs. Seneff and Bourne, and which has a 49.50% interest, as a limited partner, in the Owner; CNL Hotels & Resorts, Inc. which has a 9.90% interest, as a limited partner, in the Owner; Commercial Net Lease Realty, Inc., which has a 24.75% interest, as a limited partner, in the Owner; and CNL APF Partners, LP, which has a 4.95% interest, as a limited partner, in the Owner. We also own a 9.90% interest in CNL Plaza Venture, Ltd. (the “Borrower”), a Florida limited partnership, which is the general partner of the Owner. The remaining interests in the Borrower are held by the same entities in the same proportion described above with respect to the Owner.

 

In 2004, the Owner conveyed a small portion of the premises underlying the parking structure adjacent to its office building, valued by the parties at approximately $0.6 million, to CNL Plaza II, Ltd., a limited partnership in which Messrs. Seneff and Bourne own a 60% interest and 40% interest, respectively, as part of the development of the premises surrounding the building. The purpose of the conveyance was to adjust the percentage fee simple ownership under the parking structure so as to allow joint parking privileges for a new office building that was developed in 2005 and is owned by CNL Plaza II, Ltd. In connection with this transaction, the Owner received an ownership interest in a cross-bridge that was constructed and an anticipated benefit from a reduction in the allocation of its operating expenses for the garage. In addition, the Owner may be entitled to additional consideration pursuant to a purchase price adjustment.

 

On September 30, 2005, we executed a pro rata, several guarantee limited to 16.67%, or $2.3 million, of a $14.0 million uncollateralized promissory note of the Borrower that matures December 31, 2010. During each of the years ended December 31, 2005 and 2004, we received approximately $0.2 million, respectively, in distributions from the Owner.

 

We maintain bank accounts in a bank in which certain of our officers and directors serve as directors and are principal stockholders. The amounts deposited with this bank were $3.1 million and $22.9 million at December 31, 2005 and 2004, respectively.

 

On September 1, 2004, a company which is owned by our chairman of the board sold its 30% voting membership interest in a limited liability company which is affiliated with ten of our tenants (the “HRA Tenants”) to

 

27



 

the remaining members of the limited liability company. The HRA Tenants contributed 30% and 35% of our total revenues for the years ended December 31, 2004 and 2003, respectively.

 

Century Capital Markets, LLC (“CCM”), an entity in which an affiliate of the Advisor was formerly a non-voting Class C member, made the arrangements for two commercial paper loans totaling $43.9 million. The monthly interest payments due under these commercial paper loans include an annual margin of either 30 or 40 basis points, payable to CCM for the monthly services it provides related to the administration of the commercial paper loans. Effective September 30, 2005, a non-affiliated third party assumed the administration of these commercial paper loans. Therefore, we now pay the monthly services fee directly to the non-affiliated third party. During the years ended December 31, 2005, 2004 and 2003, $0.1 million, $0.1 million and $0.2 million, respectively, was paid to CCM related to these services. During the year ended December 31, 2003, we also paid CCM a $0.2 million finder’s fee related to the acquisition of two Properties.

 

Our chairman of the board is a director in a hospital that leases office space in seven of the Medical Facilities that we acquired in August 2004. Additionally, one of our independent directors is a director in a health system that leases office space in one of the Medical Facilities that we acquired in April 2004. During the years ended December 31, 2005 and 2004, these hospitals contributed less than 1% of our total revenues.

 

18. Concentration of Credit Risk:

 

At December 31, 2005, we leased our Seniors’ Housing facilities to 22 tenants. Two tenants affiliated with Horizon Bay Management, LLC (“Horizon Bay”) contributed 21% of total revenues for each of the years ended December 31, 2005 and 2004. The HRA Tenants contributed 22%, 30% and 35% of total revenues for the years ended December 31, 2005, 2004 and 2003, respectively. No other Seniors’ Housing tenant contributed more than 10% of total revenues for the three years ended December 31, 2005. Several of our tenants, including the HRA Tenants, are thinly capitalized corporations that rely on the net operating income generated from the Seniors’ Housing facilities to fund rent obligations under their leases. At December 31, 2005, $5.8 million of the $7.2 million allowance for doubtful accounts pertained to HRA Tenants. At December 31, 2005, our Medical Facilities were leased to more than 700 tenants.

 

At December 31, 2005, 107 of the 188 Seniors’ Housing facilities were operated by Sunrise Senior Living Services, Inc. (“Sunrise”), a wholly owned subsidiary of Sunrise Senior Living, Inc. Additionally, as of December 31, 2005, a Seniors’ Housing Property was being developed by Sunrise Development, Inc., a wholly owned subsidiary of Sunrise Senior Living, Inc. Upon completion of the development, the facility will be operated by Sunrise. Horizon Bay operates 27 Seniors’ Housing facilities and six additional operators manage the remaining 53 Seniors’ Housing facilities. At December 31, 2005, DASCO managed or was developing 53 of our 73 Medical Facilities, Cirrus managed 10 of our Medical Facilities and the remaining 10 Medical Facilities were managed by four third-party property managers. Sunrise, Horizon Bay, DASCO and ARC operated Property portfolios that, for each in the aggregate as operator, contributed 10% or more of total rental and earned income from leases. Sunrise contributed 42%, 45% and 76%, for the years ended December 31, 2005, 2004 and 2003, respectively; Horizon Bay contributed 22%, 24%, for the years ended December 31, 2005 and 2004, respectively; DASCO contributed 10% for the year ended December 31, 2005 and ARC contributed 13% for the year ended December 31, 2003. No other operator contributed more than 10% of total rental and earned income from leases.

 

To mitigate credit risk, certain Seniors’ Housing leases are combined into portfolios that contain cross-default terms, so that if a tenant of any of the Properties in a portfolio defaults on its obligations under its lease, we may pursue remedies under the lease with respect to any of the Properties in the portfolio (“Cross-Default”). Certain portfolios also contain terms whereby the net operating profits of the Properties are combined for the purpose of funding rental payments due under each lease (“Pooling” or “Pooled”). In addition, as of December 31, 2005, we held $24.0 million in security deposits and rental support related to certain Properties.

 

 

 

28



 

We had the following remaining rental support and limited guarantees from certain tenants and operators at December 31, 2005 (dollars in thousands):

 

 

 

 

 

 

 

Guarantee

 

Guarantor

 

Number of
Properties

 

Maximum

 

Used Since
Acquired

 

Remaining
Balance

 

Horizon Bay

 

21

 

$

17,500

 

$

14,391

 

$

3,109

 

Aureus

 

11

 

10,000

 

2,255

 

7,745

 

ARC

 

8

 

 

(1)

9,416

 

 

(1)

Eby

 

6

 

 

(1)

329

 

 

(1)

Encore

 

17

 

 

(1)

791

 

 

(1)

Greenwalt

 

5

 

 

(1)

2,493

 

 

(1)

Sunrise

 

2

 

 

(1)

 

 

(1)

Sunrise

 

17

 

 

(2)

6,281

 

 

(2)

Sunrise

 

3

 

 

(3)

2,809

 

 

(3)

 


(1)                                  Unconditional guarantees

 

(2)                                  Sunrise guaranteed the tenants’ obligations to pay minimum rent and the FF&E reserve funds under the 17 leases until the later of (i) March 2006 or (ii) 18 months after the final development date of certain Properties, as defined in the lease agreement. The final development Property commenced operations in January 2006; accordingly, the Sunrise guarantee will terminate in July 2007.

 

(3)                                  Sunrise guaranteed the tenants’ rent obligations for these Seniors’ Housing facilities that were acquired in 2004 and which commenced operations in 2004, until the later of (i) September 2006 or (ii) the Properties achieving predetermined rent coverage thresholds, which are not determinable at this time.

 

Although we acquire Properties located in various states and regions and screen our tenants in order to reduce risks of default, failure of certain lessees, their guarantors, or the Sunrise or Horizon Bay brands would significantly impact our results of operations.

 

19. Medical Facilities Acquisitions:

 

In April 2004, we acquired 22 Medical Facilities for an aggregate purchase price of $272.0 million, including closing costs (the “MOP Acquisition”).

 

In August 2004, we acquired ownership interests in entities that own 28 Medical Facilities and a 55% interest in DASCO for $212.6 million, including closing costs. In November 2004, we acquired two additional Medical Facilities for $19.4 million, including closing costs (collectively, the “DASCO Acquisition”). Included in the DASCO Acquisition were certain limited partnerships with finite lives. Therefore, the minority interests in these partnerships meet the definition of mandatorily redeemable noncontrolling interests as specified in Statement of Financial Accounting Standards No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” We estimate that the settlement value of these mandatorily redeemable noncontrolling interests at December 31, 2005 was $13.7 million, based on the sale or disposition of all or substantially all of the assets of the partnerships and the repayments of outstanding liabilities as of that date.

 

In addition, certain partnerships that own Medical Facilities provide non-equity participation to various lessees or affiliates of lessees. Certain lessees in the Medical Facilities are entitled to receive a percentage of the pro rata net cash flow, as defined, for the term of their lease, calculated as the percentage of each lease with respect to the total leasable square footage. Such amounts are paid periodically, such as monthly or quarterly. Certain lessees are also entitled to a percentage of their pro rata share of net capital proceeds, as defined, upon the occurrence of a capital transaction (including, but not limited to, the sale or refinancing of the property). Such pro rata share is calculated as the percentage of each lease with respect to the total leasable square footage.

 

29



 

The fair value of assets acquired and liabilities assumed at the date of the MOP and DASCO Acquisitions were based on independent appraisals and valuation studies from independent third-party consultants. The aggregate value of the assets acquired, including closing costs, and liabilities assumed were as follows (in thousands):

 

Assets:

 

 

 

Real estate investment properties:

 

 

 

Accounted for using the operating method

 

$

455,194

 

Intangible lease costs

 

47,372

 

 

 

 

 

 

 

502,566

 

 

 

 

 

Cash and cash equivalents

 

530

 

Restricted cash

 

2,485

 

Deferred costs, net

 

1,018

 

Other assets

 

1,698

 

Goodwill

 

5,791

 

 

 

 

 

Total assets acquired

 

514,088

 

 

 

 

 

Liabilities:

 

 

 

Mortgages payable

 

94,808

 

Construction loan payable

 

487

 

Accounts payable and other liabilities

 

8,117

 

Intangible lease liability

 

4,463

 

Security deposits

 

2,011

 

 

 

 

 

Total liabilities assumed

 

109,886

 

 

 

 

 

Minority interests

 

1,967

 

 

 

 

 

Net assets acquired

 

$

402,235

 

 

The amortization periods of the intangible lease costs acquired range from less than one year to 15 years.

 

The following condensed pro forma (unaudited) information assumes that the MOP and DASCO Acquisitions had occurred on January 1, 2003.

 

 

 

Years Ended December 31,

 

 

 

2004

 

2003

 

Revenues

 

$

298,164

 

$

145,322

 

Expenses

 

178,495

 

92,623

 

Net income

 

118,396

 

51,903

 

 

 

 

 

 

 

Basic and diluted income per share

 

$

0.56

 

$

0.52

 

 

 

 

 

 

 

Weighted-average number of common shares outstanding (basic and diluted)

 

210,343

 

99,815

 

 

30



 

20. Subsequent Events:

 

In January 2006, we acquired seven Medical Facilities from Cirrus for $84.5 million which we funded, in part, with proceeds from a new $56.3, million ten-year mortgage loan that bears fixed-rate interest at 5.59%. Four of the acquired Properties are located in Texas, two are in Arizona and one is in Missouri, and in aggregate they contain approximately 255,000 square feet. Cirrus will manage the Properties.

 

In February 2006, we entered into a $7.7 million construction loan for the development of a Medical Facility that we acquired in November 2005. The construction loan will mature in 2010 and bears interest at a rate of LIBOR plus 160 basis points.

 

In February 2006, we entered into a $33.0 million mortgage loan and used the proceeds and cash on hand to pre-pay a $48.0 million construction loan facility that had $44.7 million outstanding at December 31, 2005. The new interest only, five-year loan bears interest at a rate equal to LIBOR plus 150 basis points.

 

In March 2006, we sold two Properties that were held for sale at December 31, 2005. The Properties were sold to an unrelated third party for $6.0 million and we took back a purchase money mortgage with a three-year term secured by the Properties in the amount of $4.8 million. Interest is payable annually at a rate of 6.0% and principle is due at maturity. We realized a net loss on the sale of the Properties of $0.2 million in March 2006.

 

During the period January 1, 2006, through March 15, 2006, we received subscription proceeds for an additional 2.6 million shares ($26.1 million) of common stock.

 

On January 1, February 1 and March 1, 2006, our Board of Directors declared distributions to stockholders of record on those dates, totaling $45.5 million, or the aggregate of $0.1776 per share of common stock, payable by March 31, 2006.

 

21. Selected Quarterly Financial Data (unaudited):

 

        The following table presents selected unaudited quarterly financial data for each full quarter during the years ended December 31, 2005 and 2004 (in thousands, except per share amounts):

 

2005 Quarter

 

First

 

Second

 

Third

 

Fourth

 

Revenues(1)

 

$

91,329

 

$

96,584

 

$

97,540

 

$

98,630

 

Income from continuing operations(1)

 

38,461

 

39,130

 

34,074

 

30,750

 

Income (loss) from discontinued operations(1)

 

(5,826

)

(1,173

)

(264

)

429

 

Net income

 

32,635

 

37,957

 

33,810

 

31,179

 

Income per share, basic and diluted:

 

 

 

 

 

 

 

 

 

Continuing operations(1)

 

0.16

 

0.16

 

0.14

 

0.12

 

Discontinued operations(1)

 

(0.02

)

(0.01

)

 

 

Net income

 

0.14

 

0.15

 

0.14

 

0.12

 

 


(1)                                  The revenue, income from continuing operations and income (loss) from discontinued operations data in the table above has been restated from previously reported amounts to reflect the reclassification of the operating results from our real estate held for sale to discontinued operations (see Note 10).

 

31



 

2004 Quarter

 

First

 

Second

 

Third

 

Fourth

 

Revenues(1)

 

$

50,259

 

$

62,850

 

$

70,318

 

$

79,342

 

Income from continuing operations(1)

 

27,415

 

29,340

 

30,428

 

31,168

 

Income (loss) from discontinued operations(1)

 

386

 

351

 

(1,514

)

344

 

Net income

 

27,801

 

29,691

 

28,914

 

31,512

 

Income per share, basic and diluted:

 

 

 

 

 

 

 

 

 

Continuing operations(1)

 

0.16

 

0.14

 

0.14

 

0.13

 

Discontinued operations(1)

 

 

 

(0.01

)

 

Net income

 

0.16

 

0.14

 

0.13

 

0.13

 

 


(1)                                  The revenue, income from continuing operations and income (loss) from discontinued operations data in the table above has been restated from previously reported amounts to reflect the reclassification of the operating results from our real estate held for sale to discontinued operations (see Note 10).

 

32



 

CNL RETIRMENT PROPERTIES, INC.

 

Schedule II—Valuation and Qualifying Accounts

 

Years Ended December 31, 2005, 2004, and 2003

 

(dollars in thousands)

 

 

 

 

 

 

 

Additions

 

Deductions

 

 

 

Year

 

Description

 

Balance at
Beginning
of Year

 

Charged to
Costs and
Expenses

 

Charged to
Other
Accounts

 

Deemed
Uncollectible

 

Collected or
Determined to
be Collectible

 

Balance
at End
of Year

 

2003

 

Allowance for doubtful
accounts(a)

 

$

 

$

 

$

 

$

 

$

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2004

 

Allowance for doubtful
accounts(a)

 

$

 

$

3,900

 

$

 

$

 

$

 

$

3,900

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2005

 

Allowance for doubtful
accounts(a)

 

$

3,900

 

$

4,544

 

$

 

$

161

 

$

1,083

 

$

7,200

 

 


(a)                                  Deducted from receivables on the balance sheet.

 

33



 

CNL Retirement Properties, Inc.
Schedule III—Real Estate and Accumulated Depreciation
December 31, 2005
(dollars in thousands)

 

 

 

 

 

Initial Cost to
Company(2)

 

Costs
Capitalized
Subsequent to
Acquisition

 

Gross Amount at Which
Carried at Close of Period

 

 

 

 

 

 

 

 

 

Encumbrances(1)

 

Land

 

Building,
Fixtures
and
Equipment

 

Land

 

Building,
Fixtures
and
Equipment

 

Land

 

Building,
Fixtures
and
Equipment

 

Total

 

Accumulated
Depreciation(a)

 

Date
Constructed

 

Date
Acquired

 

Brighton Gardens of Orland Park, IL

 

$

 

$

2,162

 

$

12,577

 

$

 

$

73

 

$

2,162

 

$

12,650

 

$

14,812

 

$

2,505

 

1999

 

Apr-00

 

Broadway Plaza at Pecan Park, TX

 

3,600

 

1,344

 

9,425

 

 

 

1,344

 

9,425

 

10,769

 

1,266

 

2000

 

Nov-01

 

Homewood Residence at Boca Raton, FL

 

4,400

 

1,144

 

8,734

 

 

 

1,144

 

8,734

 

9,878

 

1,171

 

2000

 

Nov-01

 

Holley Court Terrace, IL

 

 

2,144

 

16,850

 

 

 

2,144

 

16,850

 

18,994

 

1,839

 

1992

 

Feb-02

 

Homewood Residence at Coconut Creek, FL

 

2,602

 

1,683

 

8,193

 

 

 

1,683

 

8,193

 

9,876

 

1,050

 

2000

 

Feb-02

 

Heritage Club at Greenwood Village, CO

 

 

1,965

 

18,025

 

 

180

 

1,965

 

18,205

 

20,170

 

2,128

 

1999

 

Mar-02

 

Mapleridge of Dartmouth, MA

 

4,403

 

920

 

8,799

 

 

68

 

920

 

8,867

 

9,787

 

896

 

1999

 

May-02

 

Mapleridge of Laguna Creek, CA

 

3,738

 

812

 

7,407

 

 

 

812

 

7,407

 

8,219

 

764

 

1999

 

May-02

 

Brighton Gardens of Towson, MD

 

6,706

 

990

 

14,109

 

(22

)

163

 

968

 

14,272

 

15,240

 

1,462

 

1999

 

May-02

 

Brighton Gardens of Camarillo, CA

 

8,673

 

2,487

 

16,676

 

(1

)

110

 

2,486

 

16,786

 

19,272

 

1,761

 

1999

 

May-02

 

Vero Beach, FL

 

46,027

 

1,786

 

44,821

 

 

 

1,786

 

44,821

 

46,607

 

400

 

2005

 

Aug-02

 

Homewood Residence at Brookmont Terr., TN

 

1,931

 

464

 

8,652

 

 

 

464

 

8,652

 

9,116

 

908

 

2000

 

Nov-02

 

Mapleridge of Hemet, CA

 

3,110

 

1,176

 

3,087

 

 

44

 

1,176

 

3,131

 

4,307

 

376

 

1998

 

Dec-02

 

Brighton Gardens of Tulsa, OK

 

3,544

 

1,538

 

3,310

 

21

 

77

 

1,559

 

3,387

 

4,946

 

450

 

1999

 

Dec-02

 

Pleasant Hills, AR

 

8,050

 

523

 

10,427

 

241

 

281

 

764

 

10,708

 

11,472

 

969

 

1984

 

Dec-02

 

Brighton Gardens of Hoffman Estates, IL

 

5,708

 

1,724

 

6,064

 

 

74

 

1,724

 

6,138

 

7,862

 

656

 

1999

 

Dec-02

 

Mapleridge of Willoughby, OH

 

3,731

 

1,091

 

4,032

 

84

 

60

 

1,175

 

4,092

 

5,267

 

447

 

1998

 

Dec-02

 

Mapleridge of Plymouth, MA

 

3,466

 

1,090

 

3,667

 

8

 

73

 

1,098

 

3,740

 

4,838

 

428

 

2000

 

Dec-02

 

Hearthside of Lynwood, WA

 

3,196

 

1,530

 

5,068

 

10

 

247

 

1,540

 

5,315

 

6,855

 

451

 

1989

 

Dec-02

 

Hearthside of Snohomish, WA

 

4,362

 

645

 

8,364

 

3

 

71

 

648

 

8,435

 

9,083

 

683

 

1993

 

Dec-02

 

Brighton Gardens of Vinings, GA

 

3,741

 

1,773

 

5,830

 

8

 

112

 

1,781

 

5,942

 

7,723

 

614

 

1999

 

Dec-02

 

Brighton Gardens of Oklahoma City, OK

 

1,850

 

784

 

3,000

 

10

 

80

 

794

 

3,080

 

3,874

 

404

 

1999

 

Dec-02

 

Brighton Gardens of Bellevue, WA

 

5,175

 

2,165

 

8,506

 

 

69

 

2,165

 

8,575

 

10,740

 

835

 

1999

 

Dec-02

 

Brighton Gardens of Santa Rosa, CA

 

8,496

 

2,161

 

15,044

 

989

 

(2,530

)

3,150

 

12,514

 

15,664

 

1,245

 

2000

 

Dec-02

 

Brighton Gardens of Denver, CO

 

10,936

 

1,084

 

17,245

 

 

 

1,084

 

17,245

 

18,329

 

1,341

 

1996

 

Mar-03

 

 

34



 

Brighton Gardens of Colorado Springs, CO

 

10,085

 

1,073

 

15,829

 

 

 

1,073

 

15,829

 

16,902

 

1,210

 

1999

 

Mar-03

 

Brighton Gardens of Lakewood, CO

 

11,512

 

1,073

 

18,221

 

 

 

1,073

 

18,221

 

19,294

 

1,385

 

1999

 

Mar-03

 

Brighton Gardens of Rancho Mirage, CA

 

7,017

 

1,716

 

12,482

 

5

 

120

 

1,721

 

12,602

 

14,323

 

1,192

 

2000

 

Mar-03

 

The Fairfax, VA

 

43,894

 

17,641

 

60,643

 

 

9,795

 

17,641

 

70,438

 

88,079

 

4,991

 

1989/2005

 

Mar-03

 

The Quadrangle, PA

 

52,792

 

23,148

 

90,769

 

(37

)

1,522

 

23,111

 

92,291

 

115,402

 

7,326

 

1987

 

Mar-03

 

Brighton Gardens of Yorba Linda, CA

 

10,203

 

2,397

 

11,410

 

 

86

 

2,397

 

11,496

 

13,893

 

954

 

2000

 

Mar-03

 

Brighton Gardens of Salt Lake City, UT

 

11,372

 

392

 

15,013

 

5

 

89

 

397

 

15,102

 

15,499

 

1,296

 

1999

 

Mar-03

 

Brighton Gardens of Northridge, CA

 

7,475

 

3,485

 

11,634

 

(1

)

70

 

3,484

 

11,704

 

15,188

 

1,147

 

2001

 

Mar-03

 

Mapleridge of Palm Springs, CA

 

1,346

 

884

 

1,873

 

 

48

 

884

 

1,921

 

2,805

 

252

 

1999

 

Mar-03

 

Brighton Gardens of Edgewood, KY

 

1,347

 

886

 

1,876

 

6

 

36

 

892

 

1,912

 

2,804

 

299

 

2000

 

Mar-03

 

Brighton Gardens of Greenville, SC

 

2,097

 

352

 

3,938

 

4

 

75

 

356

 

4,013

 

4,369

 

498

 

1998

 

Mar-03

 

Brighton Gardens of Saddle River, NJ

 

7,867

 

2,155

 

10,968

 

 

 

2,155

 

10,968

 

13,123

 

934

 

1998

 

Mar-03

 

Balmoral of Palm Harbor, FL

 

 

1,002

 

11,493

 

2

 

333

 

1,004

 

11,826

 

12,830

 

901

 

1996

 

Jul-03

 

Somerby at University Park, AL

 

37,322

 

2,633

 

49,166

 

 

3,603

 

2,633

 

52,769

 

55,402

 

3,489

 

1999

 

Aug-03

 

Somerby at Jones Farm, AL

 

20,361

 

719

 

23,136

 

 

6,136

 

719

 

29,272

 

29,991

 

1,833

 

1999

 

Nov-03

 

Brighton Gardens of Tampa, FL

 

 

1,670

 

 

4

 

117

 

1,674

 

117

 

1,791

 

12

 

1998

 

Aug-03

 

Greentree at Ft. Benjamin Harrison, IL

 

 

469

 

4,761

 

 

 

469

 

4,761

 

5,230

 

296

 

1999

 

Sep-03

 

Greentree at Mt. Vernon, IL

 

 

225

 

7,244

 

 

1,830

 

225

 

9,074

 

9,299

 

531

 

2000

 

Sep-03

 

Greentree at Post, IN

 

 

287

 

4,934

 

 

 

287

 

4,934

 

5,221

 

290

 

1999

 

Sep-03

 

Greentree at West Lafayette, IN

 

 

319

 

5,264

 

 

1,883

 

319

 

7,147

 

7,466

 

385

 

1999

 

Sep-03

 

Sunrise of Arlington, VA

 

3,543

 

765

 

6,463

 

19

 

228

 

784

 

6,691

 

7,475

 

499

 

1988

 

Sep-03

 

Sunrise of Bluemont Park, VA

 

14,021

 

2,359

 

26,196

 

37

 

307

 

2,396

 

26,503

 

28,899

 

1,824

 

1989

 

Sep-03

 

Sunrise of Countryside, VA

 

7,335

 

2,288

 

12,583

 

7

 

291

 

2,295

 

12,874

 

15,169

 

948

 

1945/88

 

Sep-03

 

Sunrise of Falls Church, VA

 

4,341

 

1,221

 

7,631

 

3

 

73

 

1,224

 

7,704

 

8,928

 

600

 

1993

 

Sep-03

 

Sunrise of Farmington Hills, MI

 

4,690

 

1,212

 

8,414

 

18

 

56

 

1,230

 

8,470

 

9,700

 

695

 

1999

 

Sep-03

 

 

35



 

Sunrise of Frederrick, MD

 

3,443

 

118

 

6,971

 

3

 

110

 

121

 

7,081

 

7,202

 

483

 

1991

 

Sep-03

 

Sunrise of Leesburg, VA

 

1,048

 

399

 

1,701

 

 

25

 

399

 

1,726

 

2,125

 

144

 

1850/1989

 

Sep-03

 

Sunrise of Mercer Island, WA

 

3,892

 

744

 

7,225

 

28

 

223

 

772

 

7,448

 

8,220

 

520

 

1990

 

Sep-03

 

Sunrise of Mills Basin, NY

 

12,075

 

2,596

 

22,134

 

25

 

63

 

2,621

 

22,197

 

24,818

 

1,623

 

2002

 

Sep-03

 

Sunrise of Poland, OH

 

4,291

 

742

 

8,044

 

21

 

33

 

763

 

8,077

 

8,840

 

544

 

1998

 

Sep-03

 

Sunrise of Raleigh, NC

 

3,143

 

457

 

5,935

 

3

 

109

 

460

 

6,044

 

6,504

 

503

 

1996

 

Sep-03

 

Sunrise of Sheepshead Bay, NY

 

12,823

 

3,856

 

22,395

 

24

 

24

 

3,880

 

22,419

 

26,299

 

1,512

 

2000

 

Sep-03

 

Sunrise of Beverly Hills, CA

 

19,806

 

3,950

 

24,230

 

 

 

3,950

 

24,230

 

28,180

 

156

 

2005

 

Sep-03

 

Sunrise of Cresskill, NJ

 

25,973

 

4,632

 

33,212

 

 

 

4,632

 

33,212

 

37,844

 

176

 

 

(3)

Sep-03

 

Sunrise of Edmonds, WA

 

10,072

 

968

 

12,681

 

 

 

968

 

12,681

 

13,649

 

457

 

2004

 

Sep-03

 

Sunrise at Five Forks, GA

 

8,126

 

997

 

11,161

 

 

132

 

997

 

11,293

 

12,290

 

683

 

2004

 

Sep-03

 

Sunrise of Madison, NJ

 

11,522

 

1,608

 

14,345

 

 

 

1,608

 

14,345

 

15,953

 

566

 

2004

 

Sep-03

 

Dogwood Forest of Dunwoody, GA

 

 

837

 

4,952

 

 

142

 

837

 

5,094

 

5,931

 

315

 

2000

 

Nov-03

 

EdenGardens of Gainesville, FL

 

 

436

 

7,789

 

 

47

 

436

 

7,836

 

8,272

 

484

 

2000

 

Nov-03

 

EdenBrook of Jacksonville, FL

 

 

1,114

 

6,112

 

14

 

312

 

1,128

 

6,424

 

7,552

 

490

 

1999

 

Nov-03

 

EdenBrook of Tallahassee, FL

 

 

670

 

11,664

 

 

98

 

670

 

11,762

 

12,432

 

717

 

1999

 

Nov-03

 

EdenGardens of Aiken, SC

 

4,901

 

369

 

7,139

 

7

 

113

 

376

 

7,252

 

7,628

 

461

 

1995

 

Nov-03

 

EdenBrook of Alpharetta, GA

 

4,411

 

718

 

6,330

 

 

30

 

718

 

6,360

 

7,078

 

406

 

2000

 

Nov-03

 

EdenGardens of Arlington, TX

 

 

350

 

8,538

 

8

 

4

 

358

 

8,542

 

8,900

 

506

 

2000

 

Nov-03

 

EdenTerrace of Arlington, TX

 

 

668

 

7,616

 

47

 

105

 

715

 

7,721

 

8,436

 

485

 

2000

 

Nov-03

 

EdenBrook of Buckhead, GA

 

4,411

 

782

 

6,971

 

 

11

 

782

 

6,982

 

7,764

 

467

 

2000

 

Nov-03

 

EdenBrook of Champions, TX

 

 

530

 

11,581

 

 

54

 

530

 

11,635

 

12,165

 

713

 

2000

 

Nov-03

 

EdenBrook of Charleston, SC

 

4,901

 

422

 

8,827

 

7

 

101

 

429

 

8,928

 

9,357

 

560

 

2000

 

Nov-03

 

EdenGardens of Columbia, SC

 

 

300

 

4,043

 

9

 

167

 

309

 

4,210

 

4,519

 

270

 

1996

 

Nov-03

 

EdenGardens of Concord, NC

 

2,419

 

393

 

3,548

 

 

 

393

 

3,548

 

3,941

 

228

 

1998

 

Nov-03

 

 

36



 

Edenbrook of Dunwoody, GA

 

4,629

 

368

 

4,559

 

7

 

208

 

375

 

4,767

 

5,142

 

357

 

1998

 

Nov-03

 

Edenbrook of Hunstville AL

 

 

605

 

8,900

 

 

86

 

605

 

8,986

 

9,591

 

579

 

2001

 

Nov-03

 

EdenGardens of Kingwood, TX

 

 

467

 

8,418

 

 

27

 

467

 

8,445

 

8,912

 

552

 

2001

 

Nov-03

 

EdenTerrace of Kingwood, TX

 

 

572

 

10,527

 

 

99

 

572

 

10,626

 

11,198

 

681

 

2001

 

Nov-03

 

EdenBrook of Louisville, KY

 

6,540

 

623

 

10,144

 

7

 

69

 

630

 

10,213

 

10,843

 

649

 

2001

 

Nov-03

 

EdenTerrace of Louisville, KY

 

7,769

 

886

 

11,897

 

5

 

15

 

891

 

11,912

 

12,803

 

746

 

2001

 

Nov-03

 

EdenGardens of Marietta, GA

 

 

571

 

4,397

 

 

49

 

571

 

4,446

 

5,017

 

287

 

1998

 

Nov-03

 

EdenBrook of Plano, TX

 

6,273

 

464

 

12,004

 

 

28

 

464

 

12,032

 

12,496

 

730

 

2000

 

Nov-03

 

EdenGardens of Rock Hill, SC

 

 

277

 

6,783

 

23

 

222

 

300

 

7,005

 

7,305

 

459

 

1995

 

Nov-03

 

EdenBrook of The Woodlands, TX

 

4,901

 

395

 

13,490

 

 

40

 

395

 

13,530

 

13,925

 

822

 

2000

 

Nov-03

 

Summit at Park Hills, OH

 

 

149

 

6,230

 

 

 

149

 

6,230

 

6,379

 

254

 

2001

 

Jun-04

 

Brighton Gardens of Carlsbad, CA

 

13,961

 

5,530

 

9,007

 

 

 

5,530

 

9,007

 

14,537

 

324

 

1999

 

Nov-04

 

Brighton Gardens of San Dimas, CA

 

12,535

 

3,390

 

19,788

 

 

 

3,390

 

19,788

 

23,178

 

632

 

1999

 

Nov-04

 

Brighton Gardens of Carmel Valley, CA

 

7,849

 

3,729

 

22,081

 

 

 

3,729

 

22,081

 

25,810

 

714

 

1999

 

Nov-04

 

Brighton Gardens of San Juan Capistrano, CA

 

4,380

 

3,009

 

5,144

 

 

 

3,009

 

5,144

 

8,153

 

234

 

1999

 

Nov-04

 

Brighton Gardens of Woodbridge, CT

 

3,777

 

1,624

 

5,457

 

 

 

1,624

 

5,457

 

7,081

 

192

 

1998

 

Nov-04

 

Brighton Gardens of Pikesville, MD

 

14,646

 

1,118

 

8,264

 

 

 

1,118

 

8,264

 

9,382

 

288

 

1999

 

Nov-04

 

Brighton Gardens of North Shore, MA

 

4,958

 

1,815

 

25,311

 

 

 

1,815

 

25,311

 

27,126

 

772

 

1999

 

Nov-04

 

Brighton Gardens of Dedham, MA

 

11,055

 

1,806

 

18,682

 

 

 

1,806

 

18,682

 

20,488

 

613

 

1999

 

Nov-04

 

Brighton Gardens of Paramus, NJ

 

12,226

 

2,826

 

20,012

 

 

 

2,826

 

20,012

 

22,838

 

653

 

1999

 

Nov-04

 

Brighton Gardens of Arlington, VA

 

10,029

 

4,658

 

13,907

 

 

 

4,658

 

13,907

 

18,565

 

458

 

1999

 

Nov-04

 

Brighton Gardens of Richmond, VA

 

4,584

 

905

 

7,604

 

 

 

905

 

7,604

 

8,509

 

266

 

1999

 

Nov-04

 

Bickford Cottage of Davenport, IA

 

3,411

 

213

 

5,639

 

 

 

213

 

5,639

 

5,852

 

211

 

1999

 

Aug-04

 

Bickford Cottage of Marion, IA

 

2,794

 

224

 

5,711

 

 

 

224

 

5,711

 

5,935

 

213

 

1998

 

Aug-04

 

Bickford Cottage of Champaign, IL

 

 

54

 

2,501

 

 

 

54

 

2,501

 

2,555

 

100

 

2003

 

Aug-04

 

 

37



 

Bickford House of Bloomington, IL

 

 

514

 

6,866

 

 

 

514

 

6,866

 

7,380

 

262

 

2000

 

Aug-04

 

Bickford Cottage of Macomb, IL

 

 

54

 

4,315

 

 

 

54

 

4,315

 

4,369

 

164

 

2003

 

Aug-04

 

Bickford Cottage of Peoria, IL

 

 

375

 

7,659

 

 

 

375

 

7,659

 

8,034

 

290

 

2001

 

Aug-04

 

Courtyard Manor of Auburn Hills, MI

 

 

1,746

 

7,574

 

 

31

 

1,746

 

7,605

 

9,351

 

367

 

1999

 

Apr-04

 

Courtyard Manor at Sterling Heights, MI

 

 

1,076

 

7,834

 

5

 

11

 

1,081

 

7,845

 

8,926

 

375

 

1989

 

Apr-04

 

The Park at Olympia Fields, IL

 

22,007

 

3,303

 

38,891

 

 

 

3,303

 

38,891

 

42,194

 

1,910

 

1999

 

Feb-04

 

East Bay Manor, RI

 

9,372

 

686

 

12,752

 

 

 

686

 

12,752

 

13,438

 

652

 

1992

 

Feb-04

 

Greenwich Bay Manor, RI

 

6,540

 

180

 

11,401

 

 

103

 

180

 

11,504

 

11,684

 

573

 

1980

 

Feb-04

 

West Bay Manor, RI

 

10,982

 

1,900

 

15,481

 

 

79

 

1,900

 

15,560

 

17,460

 

768

 

1972

 

Feb-04

 

Waterside Retirement Estates, FL

 

26,033

 

1,820

 

32,645

 

 

56

 

1,820

 

32,701

 

34,521

 

1,575

 

1980

 

Feb-04

 

Carrington Pointe, CA

 

16,718

 

1,636

 

27,753

 

10

 

 

1,646

 

27,753

 

29,399

 

1,323

 

1988

 

Feb-04

 

Cherry Hills Club, CA

 

9,815

 

1,428

 

23,814

 

 

 

1,428

 

23,814

 

25,242

 

1,178

 

1987

 

Feb-04

 

The Park at Golf Mills, IL

 

28,346

 

2,291

 

58,811

 

 

38

 

2,291

 

58,849

 

61,140

 

2,869

 

1989

 

Feb-04

 

The Heritage Palmeras, AZ

 

32,319

 

1,556

 

45,622

 

 

428

 

1,556

 

46,050

 

47,606

 

2,246

 

1996

 

Feb-04

 

The Pointe at Newport Place, FL

 

4,696

 

900

 

6,453

 

 

37

 

900

 

6,490

 

7,390

 

376

 

2000

 

Feb-04

 

Newport Place, FL

 

28,938

 

5,265

 

41,850

 

 

110

 

5,265

 

41,960

 

47,225

 

2,063

 

1993

 

Feb-04

 

Prosperity Oaks, FL

 

21,039

 

5,415

 

59,690

 

63

 

519

 

5,478

 

60,209

 

65,687

 

2,903

 

1988

 

Feb-04

 

Pinecrest Place Retirement Community, FL

 

31,815

 

893

 

60,674

 

 

149

 

893

 

60,823

 

61,716

 

2,968

 

1988

 

Feb-04

 

North Bay Manor, RI

 

 

464

 

19,402

 

 

 

464

 

19,402

 

19,866

 

973

 

1989

 

Feb-04

 

South Bay Manor, RI

 

 

654

 

16,606

 

 

 

654

 

16,606

 

17,260

 

821

 

1988

 

Feb-04

 

Emerald Bay Manor, RI

 

 

1,382

 

18,237

 

 

 

1,382

 

18,237

 

19,619

 

925

 

1999

 

Feb-04

 

Treemont Retirement Community, TX

 

 

3,211

 

17,096

 

 

423

 

3,211

 

17,519

 

20,730

 

887

 

1974

 

Feb-04

 

The Park at Riverchase, AL

 

 

1,159

 

6,246

 

 

 

1,159

 

6,246

 

7,405

 

372

 

1997

 

Feb-04

 

Heron’s Run, FL

 

 

446

 

1,798

 

 

 

446

 

1,798

 

2,244

 

89

 

1993

 

Feb-04

 

Sakonnet Bay Manor, RI

 

 

4,383

 

21,963

 

 

 

4,383

 

21,963

 

26,346

 

797

 

1998

 

Aug-04

 

Terrace at Memorial City, TX

 

19,000

 

4,336

 

33,496

 

15

 

 

 

4,351

 

33,482

 

37,833

 

962

 

1992

 

Dec-04

 

 

38



 

Spring Shadows Place, TX

 

6,419

 

2,943

 

6,288

 

 

 

2,943

 

6,288

 

9,231

 

186

 

1973

 

Dec-04

 

Terrace at West University, TX

 

17,281

 

3,650

 

24,976

 

 

 

3,650

 

24,976

 

28,626

 

763

 

1998

 

Dec-04

 

Terrace at Willowbrook, TX

 

17,800

 

2,243

 

23,551

 

 

 

2,243

 

23,551

 

25,794

 

685

 

1996

 

Dec-04

 

Terrace at Clear Lake, TX

 

11,750

 

2,068

 

22,769

 

 

 

2,068

 

22,769

 

24,837

 

689

 

2000

 

Dec-04

 

Terrace at First Colony, TX

 

17,750

 

2,160

 

22,871

 

 

 

2,160

 

22,871

 

25,031

 

691

 

2000

 

Dec-04

 

Sunrise of Des Peres, MO

 

 

4,129

 

16,284

 

 

 

4,129

 

16,284

 

20,413

 

634

 

2004

 

Mar-04

 

Sunrise of Clayton, MO

 

 

3,565

 

14,819

 

 

 

3,565

 

14,819

 

18.384

 

735

 

2004

 

Mar-04

 

Sunrise of Wilmette, IL

 

 

2,640

 

7,053

 

 

 

2,640

 

7,053

 

9,693

 

296

 

2004

 

Mar-04

 

Boardwalk Medical Office, TX

 

7,587

 

1,665

 

11,366

 

 

 

1,665

 

11,366

 

13,031

 

707

 

1997

 

Apr-04

 

Las Colinas Medical Plaza II, TX

 

6,863

 

1,763

 

8,801

 

 

1

 

1,763

 

8,802

 

10,565

 

665

 

2001

 

Apr-04

 

Independence Park-4204, NC

 

3,376

 

1,768

 

8,160

 

 

440

 

1,768

 

8,600

 

10,368

 

567

 

1994

 

Apr-04

 

Independence Park-4228, NC

 

1,070

 

888

 

2,483

 

 

 

888

 

2,483

 

3,371

 

243

 

1997

 

Apr-04

 

Independence Park-4233, NC

 

1,263

 

1,880

 

2,075

 

 

 

1,880

 

2,075

 

3,955

 

406

 

1996

 

Apr-04

 

Independence Park-4323, NC

 

1,153

 

694

 

2,647

 

 

 

694

 

2,647

 

3,341

 

195

 

1997

 

Apr-04

 

Tampa Medical Tower, FL

 

6,069

 

2,648

 

7,243

 

 

736

 

2,648

 

7,979

 

10,627

 

1,355

 

1984

 

Apr-04

 

Yorktown 50, VA

 

14,722

 

2,089

 

22,618

 

 

337

 

2,089

 

22,955

 

25,044

 

1,553

 

1974

 

Apr-04

 

Sherman Oaks Medical Center, CA

 

9,545

 

9,024

 

5,272

 

 

158

 

9,024

 

5,430

 

14,454

 

1,127

 

1953

 

Apr-04

 

Valencia Medical Center, CA

 

5,117

 

1,312

 

5,336

 

 

130

 

1,312

 

5,466

 

6,778

 

575

 

1983

 

Apr-04

 

Encino Medical Plaza, CA

 

7,429

 

6,904

 

9,253

 

 

246

 

6,904

 

9,499

 

16,403

 

1,108

 

1973

 

Apr-04

 

Rocky Mountain Cancer Center, CO

 

4,601

 

1,069

 

7,801

 

 

45

 

1,069

 

7,846

 

8,915

 

466

 

1993

 

Apr-04

 

Aurora Medical Center II, CO

 

5,209

 

134

 

9,220

 

 

92

 

134

 

9,312

 

9,446

 

887

 

1994

 

Apr-04

 

Aurora Medical Center I, CO

 

4,653

 

123

 

8,485

 

 

142

 

123

 

8,627

 

8,750

 

921

 

1981

 

Apr-04

 

Dorsey Hall Medical Center, MD

 

3,833

 

1,324

 

4,020

 

 

51

 

1,324

 

4,071

 

5,395

 

504

 

1988

 

Apr-04

 

Chesapeake Medical Center, VA

 

 

2,087

 

7,520

 

 

11

 

2,087

 

7,531

 

9,618

 

793

 

1988

 

Apr-04

 

Randolph Medical Center, MD

 

 

2,575

 

6,453

 

 

644

 

2,575

 

7,097

 

9,672

 

656

 

1975

 

Apr-04

 

 

39



 

Plano Medical Center, TX

 

 

2,519

 

12,190

 

 

140

 

2,519

 

12,330

 

14,849

 

1,125

 

1984

 

Apr-04

 

Medical Place I, TX

 

 

19

 

24,746

 

 

402

 

19

 

25,148

 

25,167

 

2,568

 

1984

 

Apr-04

 

Northwest Regional Medical Center, TX

 

 

599

 

6,646

 

 

14

 

599

 

6,660

 

7,259

 

474

 

1999

 

Apr-04

 

The Diagnostic Clinic, FL

 

 

2,569

 

26,918

 

 

137

 

2,569

 

27,055

 

29,624

 

1,691

 

1972

 

Apr-04

 

BayCare Health Headquarters, FL

 

 

3,019

 

6,713

 

 

 

3,019

 

6,713

 

9,732

 

702

 

1988

 

Apr-04

 

Southwest General Birth Place, TX

 

 

990

 

12,308

 

 

 

990

 

12,308

 

13,298

 

559

 

1994

 

Aug-04

 

Baytown Plaza I & II, TX

 

1,200

 

337

 

1,096

 

 

1

 

337

 

1,097

 

1,434

 

237

 

1972

 

Aug-04

 

South Seminole Medical Office Building II, FL

 

2,710

 

709

 

4,063

 

 

51

 

709

 

4,114

 

4,823

 

486

 

1987

 

Aug-04

 

South Seminole Medical Office Building III, FL

 

1,500

 

769

 

1,768

 

 

6

 

769

 

1,774

 

2,543

 

358

 

1993

 

Aug-04

 

Orlando Professional Center I, FL

 

800

 

384

 

788

 

 

29

 

384

 

817

 

1,201

 

162

 

1969

 

Aug-04

 

Orlando Professional Center II, FL

 

1,600

 

1,258

 

1,704

 

323

 

29

 

1,581

 

1,733

 

3,314

 

274

 

1963

 

Aug-04

 

Oviedo Medical Center, FL

 

4,500

 

1,712

 

6,484

 

 

439

 

1,452

 

6,923

 

8,375

 

1,101

 

1997

 

Aug-04

 

MedPlex B at Sand Lake Commons, FL

 

2,400

 

2,679

 

3,235

 

 

66

 

2,679

 

3,301

 

5,980

 

294

 

1988

 

Aug-04

 

Eagle Creek Medical Plaza, KY

 

1,900

 

14

 

3,411

 

 

258

 

14

 

3,669

 

3,683

 

501

 

1982

 

Aug-04

 

Sand Lake Physicians Office Building, FL

 

 

23

 

1,748

 

 

 

23

 

1,748

 

1,771

 

161

 

1985

 

Aug-04

 

North Alvernon Medical, AZ

 

6,250

 

2,969

 

9,197

 

 

86

 

2,969

 

9,283

 

12,252

 

883

 

1986

 

Aug-04

 

St. Joseph’s Medical Plaza, AZ

 

6,250

 

511

 

7,736

 

 

39

 

511

 

7,775

 

8,286

 

697

 

1985

 

Aug-04

 

Mercy Medical Office Building

 

1,650

 

 

3,049

 

 

11

 

 

3,060

 

3,060

 

315

 

1986

 

Aug-04

 

Elgin Medical Office Building I, IL

 

4,000

 

 

6,291

 

 

74

 

 

6,365

 

6,365

 

581

 

1991

 

Aug-04

 

Elgin Medical Office Building II, IL

 

4,250

 

 

6,861

 

 

60

 

 

6,921

 

6,921

 

727

 

2001

 

Aug-04

 

Santa Rosa Medical Office Building, GA

 

 

13

 

8,111

 

 

196

 

13

 

8,307

 

8,320

 

388

 

2003

 

Aug-04

 

Fannin Medical Office Building, GA

 

 

9

 

2,397

 

 

118

 

9

 

2,515

 

2,524

 

135

 

2002

 

Aug-04

 

Physicians East and West, TX

 

 

3

 

4,276

 

 

156

 

3

 

4,432

 

4,435

 

425

 

1991

 

Aug-04

 

Brentwood Medical Center, CA

 

 

10

 

26,331

 

 

 

10

 

26,331

 

26,341

 

453

 

2005

 

Aug-04

 

Heartland Regional Medical Office Building, IL

 

 

99

 

9,788

 

 

305

 

99

 

10,093

 

10,192

 

791

 

2002

 

Aug-04

 

 

40



 

Saint Joseph East Office Park, KY

 

 

17

 

9,896

 

 

212

 

17

 

10,108

 

10,125

 

525

 

2003

 

Aug-04

 

Central Mississippi Medical Center Building, MS

 

 

34

 

8,409

 

 

236

 

34

 

8,645

 

8,679

 

463

 

2002

 

Aug-04

 

River Oaks Medical Building, MS

 

 

19

 

7,127

 

 

456

 

19

 

7,583

 

7,602

 

404

 

2003

 

Aug-04

 

Parker Adventist Professional Building, CO

 

 

16

 

14,586

 

 

1,091

 

16

 

15,677

 

15,693

 

908

 

2004

 

Aug-04

 

NASA Parkway Medical Office Building, TX

 

 

460

 

7,478

 

 

19

 

460

 

7,497

 

7,957

 

453

 

2002

 

Aug-04

 

Lake Granbury Medical Plaza, TX

 

 

63

 

6,197

 

 

1,690

 

63

 

7,887

 

7,950

 

330

 

2001

 

Aug-04

 

Durant Medical Center, OK

 

 

1,133

 

7,914

 

 

170

 

1,133

 

8,084

 

9,217

 

467

 

1998

 

Aug-04

 

Jackson Central II, MS

 

5,114

 

 

4,729

 

 

 

 

4,729

 

4,729

 

46

 

2005

 

Aug-04

 

McDowell Mountain Medical Plaza, AZ

 

10,866

 

6,219

 

9,066

 

6

 

161

 

6,225

 

9,227

 

15,452

 

762

 

1999

 

Nov-04

 

Lakeside Healthpark Medical Office Building, NE

 

11,750

 

 

12,024

 

 

 

 

12,024

 

12,024

 

200

 

2005

 

Nov-04

 

Texarkana Professional Building, TX

 

7,585

 

1,061

 

7,620

 

 

 

1,061

 

7,620

 

8,681

 

255

 

1978

 

Jan-05

 

The Park at Vernon Hills, IL

 

25,063

 

3,481

 

47,220

 

 

 

3,481

 

47,220

 

50,701

 

1,101

 

2001

 

Feb-05

 

Oakbrook Terrace Medical Center I, IL

 

 

1,446

 

8,188

 

 

 

1,446

 

8,188

 

9,634

 

636

 

1989

 

Feb-05

 

Oakbrook Terrace Medical Center II, IL

 

 

1,162

 

8,665

 

 

 

1,162

 

8,665

 

9,827

 

455

 

1986

 

Feb-05

 

Deaconess-Gateway Medical Office Building, IN

 

6,096

 

 

6,739

 

 

 

 

6,739

 

6,739

 

40

 

2005

 

Feb-05

 

Canyon Hills Club, CA

 

14,585

 

2,599

 

28,696

 

 

 

2,599

 

28,696

 

31,295

 

533

 

1989

 

Mar-05

 

Woodmont Retirement Residence, FL

 

4,986

 

388

 

9,120

 

 

 

388

 

9,120

 

9,508

 

172

 

1986

 

Mar-05

 

Calaroga Terrace, OR

 

14,327

 

1,875

 

16,628

 

 

 

1,875

 

16,628

 

18,503

 

320

 

1968

 

Mar-05

 

Encore Senior Village at Naples, FL

 

786

 

1,005

 

1,280

 

 

 

1,005

 

1,280

 

2,285

 

31

 

1999

 

Mar-05

 

Encore Senior Village at Clearwater, FL

 

3,575

 

595

 

4,522

 

 

 

595

 

4,522

 

5,117

 

91

 

1999

 

Mar-05

 

 

41



 

Encore Senior Village at Fort Myers, FL

 

2,476

 

1,400

 

4,417

 

 

 

1,400

 

4,417

 

5,817

 

85

 

1998

 

Mar-05

 

Encore Senior Village at Greenacres, FL

 

3,534

 

2,191

 

3,260

 

 

 

2,191

 

3,260

 

5,451

 

66

 

1998

 

Mar-05

 

Encore Senior Village at Pensacola, FL

 

3,123

 

523

 

5,508

 

 

 

523

 

5,508

 

6,031

 

100

 

1997

 

Mar-05

 

Carpenter’s Creek-Pensacola, FL

 

5,579

 

547

 

8,533

 

 

 

547

 

8,533

 

9,080

 

165

 

1988

 

Mar-05

 

Valley Crest, CA

 

1,226

 

298

 

2,241

 

 

 

298

 

2,241

 

2,539

 

42

 

1986

 

Mar-05

 

Encore Senior Village at Riverside, CA

 

2,276

 

805

 

2,824

 

 

 

805

 

2,824

 

3,629

 

53

 

1997

 

Mar-05

 

Encore Senior Village at Peoria, AZ

 

7,216

 

1,241

 

8,810

 

 

 

1,241

 

8,810

 

10,051

 

158

 

1997

 

Mar-05

 

Encore Senior Village at Paradise Valley, AZ

 

3,181

 

1,649

 

3,357

 

 

 

1,649

 

3,357

 

5,006

 

61

 

1998

 

Mar-05

 

Encore Senior Village at Tucson, AZ

 

6,180

 

 

8,836

 

 

 

 

8,836

 

8,836

 

170

 

1999

 

Mar-05

 

Encore Senior Village at Portland, OR

 

7,308

 

889

 

10,491

 

 

 

889

 

10,491

 

11,380

 

203

 

1997

 

Mar-05

 

Millcreek Retirement Residence, UT

 

3,540

 

365

 

4,581

 

 

 

365

 

4,581

 

4,946

 

89

 

1996

 

Mar-05

 

Mary Washington Hospital, VA

 

 

1,403

 

2,675

 

 

 

1,403

 

2,675

 

4,078

 

 

 

(3)

Apr-05

 

Sierra Vista, CA

 

1,657

 

337

 

1,786

 

 

 

337

 

1,786

 

2,123

 

23

 

1990

 

Jun-05

 

Mission Surgery Center, TN

 

 

 

10,477

 

 

 

 

10,477

 

10,477

 

250

 

2003

 

Jun-05

 

Memorial Plaza, TN

 

 

 

36

 

 

 

 

36

 

36

 

341

 

1995

 

Jun-05

 

St. Vincent Clinic-South University, AR

 

 

653

 

3,008

 

 

 

653

 

3,008

 

3,661

 

45

 

1983

 

Jun-05

 

St. Vincent Clinic-Rodney Parham, AR

 

 

652

 

74

 

 

 

652

 

74

 

726

 

3

 

1972

 

Jun-05

 

St Anthony’s, CO

 

 

 

 

 

 

 

 

 

 

 

(3)

Sep-05

 

Park Cities Medical Plaza, TX

 

10,575

 

1,375

 

14,177

 

 

 

1,375

 

14,177

 

15,552

 

149

 

2002

 

Sep-05

 

Trophy Club Professional Office Building, TX

 

11,375

 

945

 

23,420

 

 

 

945

 

23,420

 

24,365

 

249

 

2004

 

Sep-05

 

Trophy Club Medical Center, TX

 

16,380

 

1,444

 

16,161

 

 

 

1,444

 

16,161

 

17,605

 

202

 

2004

 

Sep-05

 

 

42



 

Glen Lakes Health Plaza, TX

 

4,615

 

1,380

 

5,927

 

 

 

1,380

 

5,927

 

7,307

 

135

 

1981

 

Sep-05

 

Valley View Medical Building, TX

 

3,315

 

1,122

 

4,010

 

 

 

1,122

 

4,010

 

5,132

 

75

 

1973

 

Sep-05

 

Coppell Healthcare Center, TX

 

4,940

 

1,144

 

6,605

 

 

 

1,144

 

6,605

 

7,749

 

111

 

2004

 

Sep-05

 

Meridian Medical Tower, OK

 

4,290

 

1,316

 

5,271

 

 

 

1,316

 

5,271

 

6,587

 

200

 

1982

 

Sep-05

 

Meridian Medical Center, OK

 

2,165

 

657

 

3,634

 

 

 

657

 

3,634

 

4,291

 

74

 

1984

 

Sep-05

 

St. Joseph Medical Center, MD

 

216

 

 

992

 

 

 

 

996

 

996

 

 

 

(3)

Oct-05

 

Memorial Hospital Cy-Fair, TX

 

189

 

 

538

 

 

 

 

538

 

538

 

 

 

(3)

Nov-05

 

Memorial Hospital Pearland, TX

 

 

 

 

 

 

 

 

 

 

 

(3)

Nov-05

 

Other

 

 

 

 

82

 

1,921

 

82

 

1,922

 

2,004

 

231

 

n/a

 

n/a

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

1,349,848

 

$

344,031

 

$

2,684,355

 

$

1,905

 

$

42,272

 

$

345,936

 

$

2,726,627

 

$

3,072,563

 

$

157,746

 

 

 

 

 

 


(1)                                  Excludes encumbrances of $111.9 million that are carried on Properties accounted for using the direct financing method.

 

(2)                                  Includes Properties under construction.

 

(3)                                  Property was under construction at December 31, 2005.

 

43



 

CNL RETIREMENT PROPERTIES, INC.
AND SUBSIDIARIES

 

NOTES TO SCHEDULE III—REAL ESTATE AND ACCUMULATED DEPRECIATION

 

December 31, 2005

 

(dollars in thousands)

 

(a)                                  Transactions in real estate and accumulated depreciation during 2003, 2004 and 2005 are summarized as follows:

 

 

 

Cost(b)(d)

 

Accumulated
Depreciation

 

 

 

 

 

 

 

Property investments under operating leases:

 

 

 

 

 

Balance, December 31, 2002

 

$

241,200

 

$

3,765

 

Acquisitions

 

850,430

 

 

Real estate held for sale

 

(6,602

)

(232

)

Depreciation expense(c)

 

 

16,345

 

 

 

 

 

 

 

Balance, December 31, 2003

 

1,085,028

 

19,878

 

Acquisitions

 

1,573,078

 

 

Impairment provisions

 

(1,883

)

 

Real estate held for sale

 

(1,559

)

(526

)

Depreciation expense(c)

 

 

54,364

 

 

 

 

 

 

 

Balance, December 31, 2004

 

2,654,664

 

73,716

 

Acquisitions

 

426,390

 

 

Impairment provisions

 

(7,740

)

 

Real estate held for sale

 

(186

)

(220

)

Depreciation expense(c)

 

 

84,250

 

 

 

 

 

 

 

Balance, December 31, 2005

 

$

3,073,128

 

$

157,746

 

 

(b)                                 As of December 31, 2005, 2004, and 2003 the aggregate cost of the Properties owned by the Company for federal income tax purposes, including Properties accounted for using the operating method and those accounted for using the direct financing method, was $3.4 billion, $3.0 billion and $1.3 billion, respectively. Certain leases accounted for under the direct financing method are treated as operating leases for federal income tax purposes.

 

(c)                                  Depreciation expense is computed for buildings and equipment based upon estimated lives of 39 to 40 years, and 3 to 7 years, respectively.

 

(d)                                 Acquisition fees and miscellaneous closing costs of $15.5 million, $78.3 million and $60.1 million are included in land, buildings, equipment and intangible lease costs at December 31, 2005, 2004 and 2003, respectively.

 

44