EX-99.1 2 a18-7167_1ex99d1.htm EX-99.1

Exhibit 99.1

 

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

On December 7, 2017, FelCor/CMB Marlborough Hotel, L.L.C. and DJONT/CMB FCOAM, L.L.C., subsidiaries of FelCor Lodging Limited Partnership (“FelCor LP”), entered into a Purchase and Sale Agreement to sell the Embassy Suites Boston Marlborough hotel to RBH Acquisition L.L.C., a third party unrelated to FelCor LP, for $23.7 million (the “Transaction”).  Right, title and interest to the Embassy Suites Boston Marlborough hotel was transferred on February 21, 2018.  The Embassy Suites Boston Marlborough hotel’s operations constituted a significant amount of income from continuing operations of FelCor LP.

 

Previously, on August 31, 2017 (the “Acquisition Date”), RLJ Lodging Trust (“RLJ”), RLJ Lodging Trust, L.P. (“RLJ LP”), Rangers Sub I, LLC, a wholly owned subsidiary of RLJ LP (“Rangers”), and Rangers Sub II, LP, a wholly owned subsidiary of RLJ LP (“Partnership Merger Sub”) consummated the transactions contemplated by the definitive Agreement and Plan of Merger (the “Merger Agreement”) dated as of April 23, 2017 with FelCor Lodging Trust Incorporated (“FelCor”) and FelCor LP, pursuant to which Partnership Merger Sub merged with and into FelCor LP, with FelCor LP surviving as a wholly owned subsidiary of RLJ LP (the “Partnership Merger”), and, immediately thereafter, FelCor merged with and into Rangers, with Rangers surviving as a wholly owned subsidiary of RLJ LP (the “REIT Merger” and, together with the Partnership Merger, the “Mergers”).

 

RLJ accounted for the Mergers under the acquisition method of accounting in ASC 805, Business Combinations.  In accordance with the guidance, RLJ elected to apply pushdown accounting to FelCor LP’s consolidated financial statements in order to reflect the new basis of accounting established by RLJ for the individual assets acquired and the liabilities assumed in the Mergers.  Accordingly, FelCor LP’s consolidated financial statements for the periods before and after the Acquisition Date reflect different bases of accounting, and the financial positions and the results of operations for those periods are not comparable.  As a result, the consolidated financial statements are separated into two distinct periods; the periods prior to the Acquisition Date are identified as “Predecessor,” and the period after the Acquisition Date is identified as “Successor.”

 

The following unaudited pro forma condensed consolidated financial statements are presented to illustrate the effects of the Transaction.  The unaudited pro forma condensed consolidated balance sheet illustrates the estimated effects of the Transaction as if it occurred on September 30, 2017.  The unaudited pro forma condensed consolidated statements of operations and comprehensive income (loss) set forth the estimated effects of the Transaction as if it occurred on January 1, 2016.

 

The unaudited pro forma condensed consolidated financial statements presented herein are for informational purposes only and do not purport to present what FelCor LP’s actual results would have been had the transaction occurred on the dates assumed, or to project FelCor LP’s results of operations or financial position for any future period.  The unaudited pro forma condensed consolidated financial statements include assumptions that are believed to be reasonable and represent all material information that is necessary to fairly present pro forma financial statements.

 

The unaudited pro forma condensed consolidated financial statements, including the notes thereto, should be read in conjunction with FelCor LP’s audited consolidated financial statements and the notes in FelCor LP’s Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the SEC on February 24, 2017, and in conjunction with FelCor LP’s unaudited consolidated financial statements and the notes in FelCor LP’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, as filed with the SEC on November 14, 2017.

 


 

FelCor Lodging Limited Partnership

 

Unaudited Pro Forma Condensed Consolidated Balance Sheet

 

(in thousands)

 

 

 

 

 

Embassy Suites

 

 

 

 

Historical

 

Boston Marlborough

 

Pro Forma

 

 

Successor

 

Successor

 

Successor

 

 

September 30, 2017

 

September 30, 2017

 

September 30, 2017

 

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

Investment in hotel properties, net

 

  $

2,672,728

 

  $

(24,753)

  (a)

  $

2,647,975

Investment in unconsolidated joint ventures

 

17,117

 

-     

 

17,117

Cash and cash equivalents

 

10,503

 

-     

 

10,503

Restricted cash reserves

 

6,671

 

-     

 

6,671

Related party rent receivable

 

12,582

 

(489)

  (a)

12,093

Intangible assets, net

 

129,703

 

-     

 

129,703

Prepaid expense and other assets

 

11,058

 

(36)

  (a)

11,022

Total assets

 

  $

2,860,362

 

  $

(25,278)

 

  $

2,835,084

 

 

 

 

 

 

 

Liabilities and Partners’ Capital

 

 

 

 

 

 

Debt, net

 

  $

1,303,907

 

  $

-     

 

  $

1,303,907

Accounts payable and other liabilities

 

72,451

 

(44)

  (a)

72,407

Accrued interest

 

12,049

 

-     

 

12,049

Distributions payable

 

4,308

 

-     

 

4,308

Total liabilities

 

1,392,715

 

(44)

 

1,392,671

 

 

 

 

 

 

 

Commitments and Contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

Partners’ Capital

 

 

 

 

 

 

Partners’ capital:

 

 

 

 

 

 

Partners’ capital

 

1,413,565

 

(24,871)

  (b)

1,388,694

Retained earnings

 

4,366

 

(363)

  (b)

4,003

Total partners’ capital

 

1,417,931

 

(25,234)

 

1,392,697

Noncontrolling interest in consolidated joint ventures

 

5,286

 

-     

 

5,286

Preferred capital in a consolidated joint venture, liquidation value of $45,401 at September 30, 2017

 

44,430

 

-     

 

44,430

Total partners’ capital

 

1,467,647

 

(25,234)

 

1,442,413

Total liabilities and partners’ capital

 

  $

2,860,362

 

  $

(25,278)

 

  $

2,835,084

 

See the accompanying notes to the unaudited pro forma condensed consolidated financial statements

 


 

FelCor Lodging Limited Partnership

 

Unaudited Pro Forma Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

 

(in thousands, except per unit data)

 

 

 

Embassy Suites

 

 

 

Embassy Suites

 

 

Boston Marlborough

 

 

 

Boston Marlborough

 

 

 

 

Pro Forma

 

 

 

 

 

 

 

Pro Forma

 

 

 

 

Historical

 

Adjustment

 

Pro Forma

 

 

 

Historical

 

Adjustment

 

Pro Forma

 

 

 

Successor

 

 

 

 

 

Predecessor

 

 

 

September 1

 

September 1

 

September 1

 

 

 

January 1

 

January 1

 

January 1

 

 

through

 

through

 

through

 

 

 

through

 

through

 

through

 

 

September 30,

 

September 30,

 

September 30,

 

 

 

August 31,

 

August 31,

 

August 31,

 

 

2017

 

2017

 

2017

 

 

 

2017

 

2017

 

2017

 

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

 

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Room revenue

 

 $

-    

 

 $

-    

 

 $

-    

 

 

 

 $

425,682

 

  $

(6,285)

 (c)

  $

419,397

Food and beverage revenue

 

-    

 

-    

 

-    

 

 

 

90,572

 

(731)

 (c)

89,841

Related party lease revenue

 

20,854

 

(489)

 (c)

20,365

 

 

 

-    

 

-    

 

-    

Other revenue

 

-    

 

-    

 

-    

 

 

 

35,261

 

(89)

 (c)

35,172

Total revenue

 

20,854

 

(489)

 

20,365

 

 

 

551,515

 

(7,105)

 

544,410

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Room expense

 

-    

 

-    

 

-    

 

 

 

112,813

 

(1,554)

 (c)

111,259

Food and beverage expense

 

-    

 

-    

 

-    

 

 

 

71,828

 

(572)

 (c)

71,256

Management and franchise fee expense

 

-    

 

-    

 

-    

 

 

 

19,901

 

(337)

 (c)

19,564

Other operating expense

 

-    

 

-    

 

-    

 

 

 

147,827

 

(2,263)

 (c)

145,564

Total property operating expense

 

-    

 

-    

 

-    

 

 

 

352,369

 

(4,726)

 

347,643

Depreciation and amortization

 

5,974

 

(77)

 (c)

5,897

 

 

 

73,065

 

(745)

 (c)

72,320

Impairment loss

 

-    

 

-    

 

-    

 

 

 

35,109

 

-    

 

35,109

Property tax, insurance and other

 

4,449

 

(45)

 (c)

4,404

 

 

 

44,278

 

(322)

 (c)

43,956

General and administrative

 

192

 

-    

 

192

 

 

 

16,006

 

(64)

 (c)

15,942

Transaction costs

 

1,039

 

(4)

 (c)

1,035

 

 

 

68,248

 

-    

 

68,248

Total operating expense

 

11,654

 

(126)

 

11,528

 

 

 

589,075

 

(5,857)

 

583,218

Operating income (loss)

 

9,200

 

(363)

 

8,837

 

 

 

(37,560)

 

(1,248)

 

(38,808)

Other income

 

-    

 

-    

 

-    

 

 

 

100

 

-    

 

100

Interest income

 

3

 

-    

 

3

 

 

 

126

 

-    

 

126

Interest expense

 

(4,779)

 

-    

 

(4,779)

 

 

 

(51,690)

 

-    

 

(51,690)

Loss on debt extinguishment

 

-    

 

-    

 

-    

 

 

 

(3,278)

 

-    

 

(3,278)

Income (loss) before equity in income from unconsolidated joint ventures

 

4,424

 

(363)

 

4,061

 

 

 

(92,302)

 

(1,248)

 

(93,550)

Equity in income from unconsolidated joint ventures

 

115

 

-    

 

115

 

 

 

1,074

 

-    

 

1,074

Income (loss) before income tax expense

 

4,539

 

(363)

 

4,176

 

 

 

(91,228)

 

(1,248)

 

(92,476)

Income tax expense

 

-    

 

-    

 

-    

 

 

 

(499)

 

-    

 

(499)

Income (loss) from continuing operations

 

4,539

 

(363)

 

4,176

 

 

 

(91,727)

 

(1,248)

 

(92,975)

Loss from discontinued operations

 

-    

 

-    

 

-    

 

 

 

(3,415)

 

-    

 

(3,415)

 

Income before gain (loss) on sale of hotel properties

 

4,539

 

(363)

 

4,176

 

 

 

(95,142)

 

(1,248)

 

(96,390)

Loss on sale of hotel properties

 

-    

 

-    

 

-    

 

 

 

(1,764)

 

-    

 (c)

(1,764)

Net income (loss) and comprehensive income (loss)

 

4,539

 

(363)

 

4,176

 

 

 

(96,906)

 

(1,248)

 

(98,154)

Net (income) loss attributable to noncontrolling interests:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noncontrolling interest in consolidated joint ventures

 

(51)

 

-    

 

(51)

 

 

 

545

 

-    

 

545

Preferred distributions - consolidated joint venture

 

(122)

 

-    

 

(122)

 

 

 

(979)

 

-    

 

(979)

Net income (loss) and comprehensive income (loss) attributable to FelCor LP

 

4,366

 

(363)

 

4,003

 

 

 

(97,340)

 

(1,248)

 

(98,588)

Preferred distributions

 

-    

 

-    

 

-    

 

 

 

(16,744)

 

-    

 

(16,744)

Net income (loss) and comprehensive income (loss) attributable to FelCor LP partners and common unitholders

 

 $

4,366

 

 $

(363)

 

 $

4,003

 

 

 

 $

(114,084)

 

  $

(1,248)

 

  $

(115,332)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted per common unit data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from continuing operations per unit attributable to common unitholders (e)

 

 

 

 

 

 

 

 

 

 $

(0.80)

 

 $

(0.01)

 

  $

(0.81)

Net loss per unit attributable to common unitholders

 

 

 

 

 

 

 

 

 

 $

(0.83)

 

 $

(0.01)

 

  $

(0.84)

Weighted-average common units outstanding

 

 

 

 

 

 

 

 

 

137,942

 

137,942

 

137,942

 

See the accompanying notes to the unaudited pro forma condensed consolidated financial statements

 


 

FelCor Lodging Limited Partnership

 

Unaudited Pro Forma Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

 

(in thousands, except per unit data)

 

 

 

 

 

Embassy Suites

 

 

 

 

 

 

Boston Marlborough

 

 

 

 

Historical

 

Pro Forma Adjustment

 

Pro Forma

 

 

Predecessor

 

Predecessor

 

Predecessor

 

 

Year Ended

 

Year Ended

 

Year Ended

 

 

December 31, 2016

 

December 31, 2016

 

December 31, 2016

 

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

 

 

 

 

 

 

Revenue

 

 

 

 

 

 

Operating revenue

 

 

 

 

 

 

Room revenue

 

  $

661,640

 

  $

(9,874)

  (c)

  $

651,766

Food and beverage revenue

 

155,227

 

(1,164)

  (c)

154,063

Other revenue

 

50,087

 

(144)

  (c)

49,943

Total revenue

 

866,954

 

(11,182)

 

855,772

 

 

 

 

 

 

 

Expense

 

 

 

 

 

 

Operating expense

 

 

 

 

 

 

Room expense

 

171,883

 

(2,220)

  (c)

169,663

Food and beverage expense

 

119,047

 

(900)

  (c)

118,147

Management and franchise fee expense

 

32,935

 

(586)

  (c)

32,349

Other operating expense

 

227,300

 

(3,610)

  (c)

223,690

Total property operating expense

 

551,165

 

(7,316)

 

543,849

Depreciation and amortization

 

114,054

 

(1,177)

  (c)

112,877

Impairment loss

 

26,459

 

-    

 

26,459

Property tax, insurance and other

 

70,057

 

(483)

  (c)

69,574

General and administrative

 

27,037

 

(104)

  (c)

26,933

Transaction costs

 

-    

 

-    

 

-    

Total operating expense

 

788,772

 

(9,080)

 

779,692

Operating income

 

78,182

 

(2,102)

 

76,080

Other income

 

342

 

-    

 

342

Interest income

 

62

 

-    

 

62

Interest expense

 

(78,244)

 

-    

 

(78,244)

Income before equity in income from unconsolidated joint ventures

 

342

 

(2,102)

 

(1,760)

Equity in income from unconsolidated joint ventures

 

1,533

 

-    

 

1,533

Income before income tax expense

 

1,875

 

(2,102)

 

(227)

Income tax expense

 

(873)

 

-    

 

(873)

Income from continuing operations

 

1,002

 

(2,102)

 

(1,100)

Loss from discontinued operations

 

(3,131)

 

-    

 

(3,131)

Loss before gain on sale of hotel properties

 

(2,129)

 

(2,102)

 

(4,231)

Gain on sale of hotel properties

 

6,322

 

-    

 

6,322

Net income and comprehensive income

 

4,193

 

(2,102)

 

2,091

Net (income) loss attributable to noncontrolling interests:

 

 

 

 

 

 

Noncontrolling interest in consolidated joint ventures

 

673

 

-    

 

673

Preferred distributions - consolidated joint venture

 

(1,461)

 

-    

 

(1,461)

Net income and comprehensive income attributable to FelCor LP

 

3,405

 

(2,102)

 

1,303

Preferred distributions

 

(25,115)

 

-    

 

(25,115)

Net loss and comprehensive loss attributable to FelCor LP partners

 

  $

(21,710)

 

  $

(2,102)

 

  $

(23,812)

 

 

 

 

 

 

 

Basic and diluted per common unit data:

 

 

 

 

 

 

Loss from continuing operations per unit attributable to common unitholders

 

  $

(0.13)

 

  $

(0.02)

 

  $

(0.15)

Net Loss per unit attributable to common unitholders (e)

 

  $

(0.16)

 

  $

(0.02)

 

  $

(0.17)

Basic weighted-average common units outstanding

 

138,739

 

138,739

 

138,739

Diluted weighted-average common units outstanding

 

138,739

 

138,739

 

138,739

 

See the accompanying notes to the unaudited pro forma condensed consolidated financial statements

 


 

NOTES TO UNAUDITED PRO FORMA

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Overview

 

On December 7, 2017, FelCor/CMB Marlborough Hotel, L.L.C. and DJONT/CMB FCOAM, L.L.C., subsidiaries of FelCor Lodging Limited Partnership (“FelCor LP”), entered into a Purchase and Sale Agreement to sell the Embassy Suites Boston Marlborough hotel to RBH Acquisition, L.L.C., a third party unrelated to FelCor LP, for $23.7 million (the “Transaction”).  Right, title and interest to the Embassy Suites Boston Marlborough hotel was transferred on February 21, 2018.  The Embassy Suites Boston Marlborough hotel’s operations constituted a significant amount of income from continuing operations of FelCor LP.

 

On August 31, 2017 (the “Acquisition Date”), RLJ Lodging Trust (“RLJ”), RLJ Lodging Trust, L.P. (“RLJ LP”), Rangers Sub I, LLC, a wholly owned subsidiary of RLJ LP (“Rangers”), and Rangers Sub II, LP, a wholly owned subsidiary of RLJ LP (“Partnership Merger Sub”) consummated the transactions contemplated by the definitive Agreement and Plan of Merger (the “Merger Agreement”) dated as of April 23, 2017 with FelCor Lodging Trust Incorporated (“FelCor”) and FelCor LP, pursuant to which Partnership Merger Sub merged with and into FelCor LP, with FelCor LP surviving as a wholly owned subsidiary of RLJ LP (the “Partnership Merger”), and, immediately thereafter, FelCor merged with and into Rangers, with Rangers surviving as a wholly owned subsidiary of RLJ LP (the “REIT Merger” and, together with the Partnership Merger, the “Mergers”).

 

RLJ accounted for the Mergers under the acquisition method of accounting in ASC 805, Business Combinations.  In accordance with the guidance, RLJ elected to apply pushdown accounting to FelCor LP’s consolidated financial statements in order to reflect the new basis of accounting established by RLJ for the individual assets acquired and the liabilities assumed in the Mergers.  Accordingly, FelCor LP’s consolidated financial statements for the periods before and after the Acquisition Date reflect different bases of accounting, and the financial positions and the results of operations for those periods are not comparable.  As a result, the consolidated financial statements are separated into two distinct periods; the periods prior to the Acquisition Date are identified as “Predecessor,” and the period after the Acquisition Date is identified as “Successor.”

 

Reclassifications

 

As a result of the merger with RLJ, certain prior period amounts in the Predecessor consolidated statements of operations and comprehensive income (loss) have been reclassified to conform to the financial statement presentation of the company’s parent company, RLJ.

 

Adjustments to the Unaudited Pro Forma Condensed Consolidated Financial Statements

 

The unaudited pro forma condensed consolidated financial statements are presented to illustrate the effects of the Transaction.  The unaudited pro forma condensed consolidated balance sheet illustrates the estimated effects of the Transaction as if it occurred on September 30, 2017.  The unaudited pro forma condensed consolidated statements of operations and comprehensive income (loss) set forth the estimated effects of the Transaction as if it occurred on January 1, 2016.

 

Noted below are the explanations for the adjustments included in the unaudited pro forma condensed consolidated financial statements:

 


 

a)            The pro forma adjustment relates to the removal of the assets and liabilities of the sold hotel property.

 

b)           The pro forma adjustment relates to the removal of partners’ capital of the sold hotel property.

 

c)            The pro forma adjustment relates to the removal of the revenues and expenses associated with the sold hotel property.