10-Q 1 d351841d10q.htm FORM 10-Q Form 10-Q
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2012

OR

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from             to             

Commission file number: 000-51288

 

 

CNL Lifestyle Properties, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Maryland   20-0183627

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

450 South Orange Avenue

Orlando, Florida

  32801
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code (407) 650-1000

 

Former name, former address and former fiscal year, if changed since last report

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer   ¨    Accelerated filer   ¨
Non-accelerated filer   x  (Do not check if a smaller reporting company)    Smaller reporting company   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

The number of shares of common stock outstanding as of August 9, 2012 was 313,226,389.

 

 

 


Table of Contents

TABLE OF CONTENTS

 

          Page  

PART I. FINANCIAL INFORMATION

  

Item 1.

  

Condensed Consolidated Financial Information (unaudited):

  
  

Condensed Consolidated Balance Sheets

     1   
  

Condensed Consolidated Statements of Operations

     2   
  

Condensed Consolidated Statements of Comprehensive Losses

     3   
  

Condensed Consolidated Statements of Stockholders’ Equity

     4   
  

Condensed Consolidated Statements of Cash Flows

     5   
  

Notes to Condensed Consolidated Financial Statements

     6   

Item 2.

  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     33   

Item 3.

  

Quantitative and Qualitative Disclosures About Market Risk

     59   

Item 4.

  

Controls and Procedures

     60   

PART II. OTHER INFORMATION

  

Item 1.

  

Legal Proceedings

     60   

Item 1A.

  

Risk Factors

     60   

Item 2.

  

Unregistered Sales of Equity Securities and Use of Proceeds

     61   

Item 3.

  

Defaults Upon Senior Securities

     62   

Item 4.

  

Mine Safety Disclosures

     62   

Item 5.

  

Other Information

     62   

Item 6.

  

Exhibits

     62   

Signatures

        63   

Exhibits

        64   


Table of Contents
PART I FINANCIAL INFORMATION

 

Item 1. Financial Statements

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands except per share data)

 

     June 30,
2012
    December 31,
2011
 
ASSETS     

Real estate investment properties, net (including $207,459 and $210,866 related to consolidated variable interest entities, respectively)

   $ 2,182,779      $ 2,055,678   

Investments in unconsolidated entities

     299,994        318,158   

Cash

     128,862        162,839   

Mortgages and other notes receivable, net

     123,075        124,352   

Deferred rent and lease incentives

     111,098        94,981   

Other assets

     63,922        48,728   

Restricted cash

     42,302        37,877   

Intangibles, net

     39,734        30,937   

Accounts and other receivables, net

     22,197        17,536   

Assets held for sale

     1,401        2,863   
  

 

 

   

 

 

 

Total Assets

   $ 3,015,364      $ 2,893,949   
  

 

 

   

 

 

 
LIABILITIES AND STOCKHOLDERS’ EQUITY     

Mortgages and other notes payable (including $81,141 and $82,376 related to non-recourse debt of consolidated variable interest entities, respectively)

   $ 614,101      $ 518,194   

Senior notes, net of discount

     393,950        393,782   

Line of credit

     95,000        —     

Other liabilities

     70,836        44,835   

Accounts payable and accrued expenses

     40,333        32,158   

Security deposits

     13,361        13,880   

Due to affiliates

     1,460        1,120   
  

 

 

   

 

 

 

Total Liabilities

     1,229,041        1,003,969   
  

 

 

   

 

 

 

Commitments and contingencies (Note 15)

    

Stockholders’ equity:

    

Preferred stock, $.01 par value per share 200 million shares authorized and unissued

     —          —     

Excess shares, $.01 par value per share 120 million shares authorized and unissued

     —          —     

Common stock, $.01 par value per share

    

One billion shares authorized; 333,251 and 328,884 shares issued and 313,228 and 309,215 shares outstanding as of June 30, 2012 and December 31, 2011, respectively

     3,132        3,092   

Capital in excess of par value

     2,781,887        2,743,972   

Accumulated deficit

     (118,058     (73,373

Accumulated distributions

     (871,243     (774,259

Accumulated other comprehensive loss

     (9,395     (9,452
  

 

 

   

 

 

 

Total Stockholders’ Equity

     1,786,323        1,889,980   
  

 

 

   

 

 

 

Total Liabilities and Stockholders’ Equity

   $ 3,015,364      $ 2,893,949   
  

 

 

   

 

 

 

See accompanying notes to condensed consolidated financial statements.

 

1


Table of Contents

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(in thousands except per share data)

 

     Quarter Ended
June 30,
    Six Months Ended
June 30,
 
     2012     2011     2012     2011  

Revenues:

        

Rental income from operating leases

   $ 37,891      $ 40,718      $ 84,161      $ 88,428   

Property operating revenues

     79,762        61,574        120,247        92,833   

Interest income on mortgages and other notes receivable

     3,166        3,311        6,269        6,520   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     120,819        105,603        210,677        187,781   
  

 

 

   

 

 

   

 

 

   

 

 

 

Expenses:

        

Property operating expenses

     67,922        57,171        111,714        94,455   

Asset management fees to advisor

     8,787        7,813        17,469        15,311   

General and administrative

     4,725        3,766        9,353        6,958   

Ground lease and permit fees

     2,941        3,330        7,136        6,484   

Acquisition fees and costs

     1,680        1,985        2,810        6,911   

Other operating expenses

     2,328        1,372        4,363        2,560   

Bad debt expense

     1,041        471        3,094        606   

Loss on lease termination

     2,925        603        3,293        1,033   

Loan loss provision

     1,699        —          1,699        —     

Depreciation and amortization

     32,851        30,207        65,074        60,223   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     126,899        106,718        226,005        194,541   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating loss

     (6,080     (1,115     (15,328     (6,760
  

 

 

   

 

 

   

 

 

   

 

 

 

Other income (expense):

        

Interest and other income (expense)

     196        (1,274     287        (1,299

Interest expense and loan cost amortization

     (16,737     (15,750     (33,014     (27,057

Equity in earnings (loss) of unconsolidated entities

     2,277        2,161        3,508        (1,705
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other expense

     (14,264     (14,863     (29,219     (30,061
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss from continuing operations

     (20,344     (15,978     (44,547     (36,821

Discontinued operations

     402        245        (138     458   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

   $ (19,942   $ (15,733   $ (44,685   $ (36,363
  

 

 

   

 

 

   

 

 

   

 

 

 

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

        

Loss from continuing operations

     (0.07     (0.05     (0.14     (0.12

Discontinued operations

     0.00        0.00        0.00        0.00   
  

 

 

   

 

 

   

 

 

   

 

 

 
   $ (0.07   $ (0.05   $ (0.14   $ (0.12
  

 

 

   

 

 

   

 

 

   

 

 

 

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

     311,860        304,595        310,548        297,376   
  

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to condensed consolidated financial statements.

 

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Table of Contents

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSES

For the Quarter and Six Months Ended June 30, 2012 and 2011

(UNAUDITED)

(in thousands except per share data)

 

     Quarter Ended
June 30,
    Six Months Ended
June 30,
 
     2012     2011     2012     2011  

Net loss

   $ (19,942   $ (15,733   $ (44,685   $ (36,363

Other comprehensive income (loss), net of tax:

        

Foreign currency translation adjustments

     (642     (121     (117     553   

Changes in fair value of cash flow hedges:

        

Unrealized loss arising during the period

     (866     (2,037     (653     (1,330

Amortization of loss on termination of cash flow hedges

     413        413        827        827   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other comprehensive income (loss)

     (1,095     (1,745     57        50   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive loss

   $ (21,037   $ (17,478   $ (44,628   $ (36,313
  

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to condensed consolidated financial statements.

 

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Table of Contents

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Six Months Ended June 30, 2012 and the Year Ended December 31, 2011

(UNAUDITED)

(in thousands except per share data)

 

     Common Stock     Capital in                 Accumulated
Other
    Total  
     Number
of Shares
    Par
Value
    Excess of
Par Value
    Accumulated
Earnings
    Accumulated
Distributions
    Comprehensive
Loss
    Stockholders’
Equity
 

Balance at December 31, 2010

     284,687      $ 2,847      $ 2,523,405      $ (3,763   $ (585,812   $ (5,637   $ 1,931,040   

Subscriptions received for common stock through public offering and reinvestment plan

     27,585        276        270,775        —          —          —          271,051   

Redemption of common stock

     (3,057     (31     (29,969     —          —          —          (30,000

Stock issuance and offering costs

         (20,239     —          —          —          (20,239

Net loss

     —          —          —          (69,610     —          —          (69,610

Distributions, declared and paid ($0.6252 per share)

     —          —          —          —          (188,447     —          (188,447

Foreign currency translation adjustment

               (585     (585

Amortization of loss on termination of cash flow hedges

     —          —          —          —          —          1,626        1,626   

Current period adjustment to recognize changes in fair value of cash flow hedges, net of reclassifications

     —          —          —          —          —          (4,856     (4,856
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at December 31, 2011

     309,215      $ 3,092      $ 2,743,972      $ (73,373   $ (774,259   $ (9,452   $ 1,889,980   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Subscriptions received for common stock through reinvestment plan

     4,366        44        41,411        —          —          —          41,455   

Redemption of common stock

     (353     (4     (3,496     —          —          —          (3,500

Net loss

     —          —          —          (44,685     —          —          (44,685

Distributions, declared and paid ($0.3126 per share)

     —          —          —          —          (96,984     —          (96,984

Foreign currency translation adjustment

     —          —          —          —          —          (117     (117

Amortization of loss on termination of cash flow hedges

     —          —          —          —          —          827        827   

Current period adjustment to recognize changes in fair value of cash flow hedges, net of reclassifications (Note 10)

     —          —          —          —          —          (653     (653
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at June 30, 2012

     313,228      $ 3,132      $ 2,781,887      $ (118,058   $ (871,243   $ (9,395   $ 1,786,323   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to condensed consolidated financial statements.

 

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Table of Contents

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)

 

     Six Months Ended
June 30,
 
     2012     2011  

Operating activities:

    

Net cash provided by operating activities

   $ 36,182      $ 51,574   
  

 

 

   

 

 

 

Investing activities:

    

Acquisition of properties

     (168,650     —     

Capital expenditures

     (31,510     (21,491

Investments in and contributions to unconsolidated entities

     (1,864     (131,476

Distributions from unconsolidated entities

     13,372        3,442   

Deposits on real estate investments

     —          (1,050

Issuance of mortgage loans receivable

     —          (2,047

Acquisition fees on mortgage notes receivable

     —          (37

Principal payments received on mortgage loans receivable

     22        79   

Changes in restricted cash

     (4,428     (5,684
  

 

 

   

 

 

 

Net cash used in investing activities

     (193,058     (158,264
  

 

 

   

 

 

 

Financing activities:

    

Offering proceeds

     —          187,505   

Redemptions of common stock

     (3,500     (14,930

Distributions to stockholders, net of reinvestments

     (55,529     (51,263

Stock issuance costs

     —          (20,763

Proceeds under line of credit

     95,000        —     

Proceeds from mortgage loans and other notes payable

     122,300        18,540   

Proceeds from unsecured senior notes

     —          396,996   

Principal payments on mortgage loans and senior notes

     (26,325     (186,906

Principal payments on capital leases

     (1,541     (2,420

Payment of loan costs

     (7,457     (19,472

Principal payments on line of credit

     —          (58,000
  

 

 

   

 

 

 

Net cash provided by financing activities

     122,948        249,287   
  

 

 

   

 

 

 

Effect of exchange rate fluctuations on cash

     (49     (171
  

 

 

   

 

 

 

Net increase (decrease) in cash

     (33,977     142,426   

Cash at beginning of period

     162,839        200,517   
  

 

 

   

 

 

 

Cash at end of period

   $ 128,862      $ 342,943   
  

 

 

   

 

 

 

See accompanying notes to condensed consolidated financial statements.

 

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Table of Contents

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED JUNE 30, 2012

(UNAUDITED)

 

1. Organization and Nature of Business:

CNL Lifestyle Properties, Inc. (the “Company”), was organized in Maryland on August 11, 2003. The Company operates and has elected to be taxed as a real estate investment trust (a “REIT”) for federal income tax purposes. Various wholly-owned subsidiaries have been and will be formed by the Company for the purpose of acquiring and owning direct or indirect interests in real estate. The Company generally invests in lifestyle properties in the United States that are primarily leased on a long-term (generally five to 20-years, plus multiple renewal options), triple-net or gross basis to tenants or operators that the Company considers to be industry leading. The Company also leases properties to taxable REIT subsidiary (“TRS”) tenants and engages independent third-party managers to operate those properties. In the event of certain tenant defaults, the Company has also engaged third-party managers to operate properties on its behalf until they are re-leased.

As of June 30, 2012, the Company owned 177 lifestyle properties directly and indirectly within the following asset classes: ski and mountain lifestyle, golf facilities, senior housing, attractions, marinas and additional lifestyle properties. Fifty of these 177 properties are owned through unconsolidated joint ventures and three are located in Canada. As of June 30, 2012, the Company has fully invested its net offering proceeds but it anticipates continuing to raise capital through its distribution reinvestment plan and will use such proceeds to make additional new investments and enhancements to its existing portfolio. Additionally, the Company may make selected dispositions and reinvest those proceeds in other income producing investment opportunities or other permitted investments in order to maximize the growth and value of its portfolio.

 

2. Significant Accounting Policies:

Principles of Consolidation and Basis of Presentation — The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and note disclosures required by generally accepted accounting principles in the United States (“GAAP”). The unaudited condensed consolidated financial statements reflect all normal recurring adjustments, which, in the opinion of management are necessary for the fair statement of the Company’s results for the interim period presented. Operating results for the six months ended June 30, 2012 may not be indicative of the results that may be expected for the year ending December 31, 2012. Amounts as of December 31, 2011 included in the unaudited condensed consolidated financial statements have been derived from audited consolidated financial statements as of that date but do not include all disclosures required by GAAP. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

In accordance with the guidance for the consolidation of variable interest entities (“VIEs”), the Company analyzes its variable interests, including loans, leases and investments in partnerships and joint ventures, to determine if the entity in which it has a variable interest is a variable interest entity. The Company’s analysis includes both quantitative and qualitative reviews. The Company bases its quantitative analysis on the forecasted cash flows of the entity, and its qualitative analysis on its review of the design of the entity, its organizational structure including decision-making ability and financial agreements. The Company also uses its quantitative and qualitative analyses to determine if it must consolidate a variable interest entity as the primary beneficiary.

Use of Estimates — The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, the reported amounts of revenues and expenses during the reporting periods and the disclosure of contingent liabilities. For example, significant estimates and assumptions are made in connection with the allocation of purchase price and the analysis of real estate, equity method investments and impairments. Actual results could differ from those estimates.

 

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Table of Contents

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED JUNE 30, 2012

(UNAUDITED)

 

 

2. Significant Accounting Policies (Continued):

 

Reclassifications — Certain prior period amounts in the unaudited condensed consolidated financial statements have been reclassified to conform to the current period presentation with no effect on previously reported net loss or stockholders’ equity. The results of operations of the real estate properties that are classified as held for sale, along with properties sold during the period, are reflected in discontinued operations for all periods presented.

Recent Accounting Pronouncements — In December 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2011-11, “Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities (Topic 210).” This ASU also serves to amend the disclosure requirements in FASB ASU 815, “Derivatives and Hedging.” This ASU will require companies to provide both net amounts (those that are offset) and gross information (as if amounts are not offset) in notes to the financial statements. This ASU is effective for interim and annual periods beginning after January 1, 2013. Because this ASU impacts presentation only, it will have no effect on the Company’s financial condition.

In June 2011, the FASB issued ASU No. 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income.” This ASU requires companies to present the components of net income (loss) and other comprehensive income (loss) either as one continuous statement or as two consecutive statements. It eliminates the option to present components of other comprehensive income (loss) as part of the statement of changes in stockholders’ equity. In December 2011, FASB issued ASU No. 2011-12, “Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05.” This ASU defers the presentation requirement of ASU No. 2011-05, “Comprehensive Income (Topic 220)”, relating to the reclassification from accumulated other comprehensive income (loss) to net income (loss) within the respective components of net income (loss) and other comprehensive income (loss). These ASUs do not change the items which must be reported in other comprehensive income (loss), how such items are measured or when they must be reclassified to net income (loss). These ASUs are effective for interim and annual periods beginning after December 15, 2011. The adoption of these ASUs did not have a material effect on the Company’s disclosures.

In May 2011, the FASB issued ASU No. 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.” This ASU clarifies the application of existing fair value measurements and disclosure requirements and certain changes to principles and requirements for measuring fair value. This update is to be applied prospectively and is effective during interim and annual periods beginning after December 15, 2011. The adoption of this ASU did not have a material impact on the Company’s financial statements and disclosures.

 

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CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED JUNE 30, 2012

(UNAUDITED)

 

3. Acquisitions:

Consolidated Entities — During the six months ended June 30, 2012, the Company acquired the following properties (in thousands):

 

Product/Description

   Location    Date of
Acquisition
   Purchase
Price
 

Solomon Dogwood Forest Alpharetta — One senior housing property

   Georgia    4/30/2012    $ 15,300   

Solomon Dogwood Forest Fayetteville — One senior housing property

   Georgia    4/30/2012    $ 12,900   

Solomon Dogwood Forest Gainesville — One senior housing property

   Georgia    4/30/2012    $ 38,800   

Solomon Dogwood Forest Stockbridge — One senior housing property

   Georgia    4/30/2012    $ 12,800   

Godfrey — One senior housing property

   Illinois    5/7/2012    $ 11,000   

Amber Ridge Memory Care — One senior housing property

   Illinois    6/29/2012    $ 6,900   

Amber Ridge Assisted Living — One senior housing property

   Illinois    6/29/2012    $ 3,600   

The Lodge — One senior housing property

   Nevada    6/29/2012    $ 15,500   

Rapids Waterpark — One attractions property

   Florida    6/29/2012    $ 51,850   
        

 

 

 
         $ 168,650   
        

 

 

 

The senior housing properties are operated under management agreements with third-party management operators for an initial term of five to 10 years, with renewal options. The attractions property is subject to a long-term triple-net lease for an initial term of 20 years with renewal options.

The following summarizes the allocation of the purchase price for the above properties and the estimated fair values of the assets acquired (in thousands):

 

     Total Purchase
Price  Allocation
 

Land and land improvements

   $ 26,850   

Buildings

     103,420   

Equipment

     25,750   

In-place lease intangibles (1)

     6,500   

Trade name intangibles

     4,434   

Other assets

     1,696   
  

 

 

 

Net assets acquired

   $ 168,650   
  

 

 

 

 

FOOTNOTE:

 

(1) The weighted-average amortization period for in-place lease intangible is 2 years as of the date of acquisition.

The revenue and net operating income (loss) attributable to these newly acquired properties included in the Company’s condensed consolidated statements of operations for the quarter and six months ended June 30, 2012 were approximately $3.1 million and $(0.9) million, respectively.

 

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Table of Contents

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED JUNE 30, 2012

(UNAUDITED)

 

 

3. Acquisitions (Continued):

 

The following table presents the unaudited pro forma results of operations of the Company as if each of the properties were acquired as of January 1, 2011 and owned during the quarter and six months ended June 30, 2012 and 2011 (in thousands, except per share data):

 

     Quarter Ended
June 30,
    Six Months Ended
June 30,
 
     2012     2011     2012     2011  

Revenues

   $ 124,947      $ 112,791      $ 221,994      $ 202,158   

Expenses (1)

     129,392        113,934        234,852        208,116   

Other expense

     (14,264     (14,863     (29,219     (30,061
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (18,709   $ (16,006   $ (42,077   $ (36,019
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) per share of common stock (basic and diluted)

   $ (0.06   $ (0.05   $ (0.14   $ (0.12
  

 

 

   

 

 

   

 

 

   

 

 

 

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

     311,680        304,595        310,548        297,376   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

FOOTNOTE:

 

(1) The pro forma for the quarter and six months ended June 30, 2012, were adjusted to exclude approximately $0.9 million of acquisition related expenses incurred in 2012. The pro forma for the quarter and six months ended June 30, 2011, were adjusted to include these charges.

 

4. Real Estate Investment Properties, net:

As of June 30, 2012 and December 31, 2011, real estate investment properties consisted of the following (in thousands):

 

     June 30,
2012
    December 31,
2011
 

Land and land improvements

   $ 1,042,889      $ 1,012,132   

Leasehold interests and improvements

     315,622        314,334   

Buildings

     824,554        718,470   

Equipment

     584,490        533,325   

Less: accumulated depreciation and amortization

     (584,776     (522,583
  

 

 

   

 

 

 
   $ 2,182,779      $ 2,055,678   
  

 

 

   

 

 

 

The Company had depreciation and amortization expense of approximately $32.9 million and $65.1 million for the quarter and six months ended June 30, 2012, respectively, and $30.2 million and $60.2 million for the quarter and six months ended June 30, 2011, respectively.

 

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CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED JUNE 30, 2012

(UNAUDITED)

 

5. Intangible Assets, net:

The gross carrying amount and accumulated amortization of the Company’s intangible assets as of June 30, 2012 and December 31, 2011 are as follows (in thousands):

 

                                                                                            

Intangible Assets

   Gross
Carrying
Amount
     Accumulated
Amortization
    June 30, 2012
Net  Book Value
 

In place leases

   $ 31,971       $ (7,642   $ 24,329   

Trade name

     10,798         (1,408     9,390   

Trade name

     6,015         —          6,015   
  

 

 

    

 

 

   

 

 

 

Total

   $ 48,784       $ (9,050   $ 39,734   
  

 

 

    

 

 

   

 

 

 

 

                                                                                            

Intangible Assets

   Gross
Carrying
Amount
     Accumulated
Amortization
    December 31, 2011
Net Book Value
 

In place leases

   $ 25,249       $ (5,410   $ 19,839   

Trade name

     10,798         (1,281     9,517   

Trade name

     1,581         —          1,581   
  

 

 

    

 

 

   

 

 

 

Total

   $ 37,628       $ (6,691   $ 30,937   
  

 

 

    

 

 

   

 

 

 

Amortization expense was approximately $1.3 million and $2.5 million for the quarter and six months ended June 30, 2012 respectively, and $0.3 million and $0.6 million for the quarter and six months ended June 30, 2011, respectively. The Company wrote off approximately $0.5 million and $0.2 million of in-place lease intangibles related to lease terminations for the six months ended June 30, 2012 and the year ended December 31, 2011, respectively.

The estimated future amortization expense for the Company’s intangible assets, as of June 30, 2012 is as follows (in thousands):

 

2012

   $ 3,424   

2013

     6,842   

2014

     3,468   

2015

     1,362   

2016

     1,229   

Thereafter

     17,394   
  

 

 

 

Total

   $ 33,719   
  

 

 

 

 

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Table of Contents

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED JUNE 30, 2012

(UNAUDITED)

 

6. Discontinued Operations:

The Company classified the revenues and expenses related to four real estate properties sold and the one remaining property considered as held for sale as of June 30, 2012, as discontinued operations in the condensed consolidated statements of operations.  The table is a summary of income (loss) from discontinued operations for the quarter and six months ended June 30, 2012 and 2011 (in thousands):

 

     Quarter Ended
June 30,
    Six Months Ended
June 30,
 
     2012     2011     2012     2011  

Revenues

   $ —        $ 894      $ —        $ 1,877   

Expenses

     (1     (299     (178     (661

Depreciation and amortization

     —          (238     —          (476

Impairment provision

     —          —          (267     —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

   $ (1   $ 357      $ (445   $ 740   

Total other income (expense)

     403        (112     307        (282
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from discontinued operations

   $ 402      $ 245      $ (138   $ 458   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

7. Variable Interest and Unconsolidated Entities:

Consolidated VIEs — The Company has five wholly-owned subsidiaries, designed as single property entities to own and lease their respective properties to single tenant operators, which are VIEs due to potential future buy-out options held by the respective tenants. Three tenants’ buy-out options were exercisable as of June 30, 2012 and are exercisable through March 2026, the date of lease expiration. At June 30, 2012, the tenants have not elected to exercise the buy-out options. The remaining two buy-out options become exercisable in 2014. In addition, two other entities that hold the properties in which service providers have a significant variable interest were also determined to be VIEs. The Company determined it is the primary beneficiary and holds a controlling financial interest in each of these entities due to the Company’s power to direct the activities that most significantly impact the economic performance of the entities, as well as its obligation to absorb the losses and its right to receive benefits from these entities that could potentially be significant to these entities. As such, the transactions and accounts of these VIEs are included in the accompanying condensed consolidated financial statements.

The aggregate carrying amount and major classifications of the consolidated assets that can be used to settle obligations of the VIEs and liabilities of the consolidated VIEs that are non-recourse to the Company are as follows (in thousands):

 

     June 30,
2012
     December 31,
2011
 

Assets

     

Real estate investment properties, net

   $ 207,459       $ 210,866   

Other assets

   $ 28,751       $ 31,319   

Liabilities

     

Mortgages and other notes payable

   $ 81,141       $ 82,376   

Other liabilities

   $ 16,249       $ 17,225   

The Company’s maximum exposure to loss as a result of its involvement with these VIEs is limited to its net investment in these entities, which totaled approximately $138.8 million and $142.6 million as of June 30, 2012 and December 31, 2011, respectively. The Company’s exposure is limited because of the non-recourse nature of the borrowings of the VIEs.

 

11


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CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED JUNE 30, 2012

(UNAUDITED)

 

7. Variable Interest and Unconsolidated Entities (Continued):

 

Unconsolidated EntitiesThe Company also holds ownership in five ventures, the DMC Partnership, the Intrawest Venture, CNLSun I Venture, CNLSun II Venture and CNLSun III Venture. Of these, the Intrawest Venture was deemed a VIE in which the Company is not the primary beneficiary. While several significant decisions are shared between the Company and its joint venture partners, the Company does not direct the activities that most significantly impact the venture’s performance and has not consolidated the activities of the venture. The Company’s maximum exposure to loss as a result of its interest in the Intrawest Venture is primarily limited to the carrying amount of its investment in the venture, which totaled approximately $29.4 million and $30.4 million as of June 30, 2012 and December 31, 2011, respectively.

The following tables present financial information for the Company’s unconsolidated entities for the quarter and six months ended June 30, 2012 and 2011, and as of June 30, 2012 and December 31, 2011 (in thousands):

Summarized operating data:

 

     Quarter Ended June 30, 2012  
     DMC
Partnership
    Intrawest
Venture
    CNLSun I
Venture
    CNLSun II
Venture
    CNLSun III
Venture
    Total  

Revenues

   $ 6,875      $ 3,736      $ 34,272      $ 9,099      $ 10,460      $ 64,442   

Property operating expenses

     (106     (1,948     (22,314     (6,194     (7,378     (37,940

Depreciation and amortization

     (2,246     (997     (6,569     (1,328     (1,737     (12,877

Interest expense

     (2,072     (1,343     (8,113     (1,235     (1,464     (14,227

Interest and other income (expense)

     3        29        544        (248     293        621   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 2,454      $ (523   $ (2,180   $ 94      $ 174      $ 19   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss allocable to other venture partners (1)

   $ (366   $ (400   $ (2,521   $ 105      $ (211   $ (3,393
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) allocable to the Company (1)

   $ 2,820      $ (123   $ 341      $ (11   $ 385      $ 3,412   

Amortization of capitalized costs

     (121     (59     (652     (216     (87     (1,135
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Equity in earnings (loss) of unconsolidated entities

   $ 2,699      $ (182   $ (311   $ (227   $ 298      $ 2,277   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Distribution declared to the Company

   $ 2,821      $ 796      $ 3,910      $ 564      $ 833      $ 8,924   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Distributions received by the Company

   $ 5,641      $ 568      $ 3,895      $ 615      $ 880      $ 11,599   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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Table of Contents

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED JUNE 30, 2012

(UNAUDITED)

 

 

7. Variable Interest and Unconsolidated Entities (Continued):

 

Summarized operating data:

 

     Quarter Ended June 30, 2011  
     DMC
Partnership
    Intrawest
Venture
    CNL Sun I
Venture
    Total  

Revenues

   $ 6,869      $ 3,974      $ 32,281      $ 43,124   

Property operating expenses

     (212     (1,744     (20,404     (22,360

Depreciation & amortization expenses

     (2,220     (1,014     (6,607     (9,841

Interest expense

     (2,126     (1,385     (8,097     (11,608

Interest and other income (expense)

     6        95        10        111   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 2,317      $ (74   $ (2,817   $ (574
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss allocable to other venture partners (1)

   $ (491   $ (402   $ (2,674   $ (3,567
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) allocable to the Company (1)

   $ 2,808      $ 328      $ (143   $ 2,993   

Amortization of capitalized costs

     (121     (59     (652     (832
  

 

 

   

 

 

   

 

 

   

 

 

 

Equity in earnings (loss) of unconsolidated entities

   $ 2,687      $ 269      $ (795   $ 2,161   
  

 

 

   

 

 

   

 

 

   

 

 

 

Distributions declared to the Company

   $ 2,578      $ 534      $ 3,867      $ 6,979   
  

 

 

   

 

 

   

 

 

   

 

 

 

Distributions received by the Company

   $ 2,777      $ —        $ 3,442      $ 6,219   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

     Six Months Ended June 30, 2012  
     DMC
Partnership
    Intrawest
Venture
    CNLSun I
Venture
    CNLSun II
Venture
    CNLSun III
Venture
    Total  

Revenues

   $ 14,119      $ 7,531      $ 67,974      $ 18,135      $ 21,163      $ 128,922   

Property operating expenses

     (269     (3,642     (43,974     (13,122     (14,471     (75,478

Depreciation and amortization

     (4,494     (2,009     (11,797     (2,688     (3,309     (24,297

Interest expense

     (4,159     (2,695     (16,226     (2,403     (2,929     (28,412

Interest and other income (expense)

     24        66        362        —          33        485   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 5,221      $ (749   $ (3,661   $ (78   $ 487      $ 1,220   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss allocable to other venture partners (1)

   $ (420   $ (755   $ (3,222   $ 234      $ (393   $ (4,556
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) allocable to the Company (1)

   $ 5,641      $ 6      $ (439   $ (312   $ 880      $ 5,776   

Amortization of capitalized costs

     (243     (117     (1,305     (431     (172     (2,268
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Equity in earnings (loss) of unconsolidated entities

   $ 5,398      $ (111   $ (1,744   $ (743   $ 708      $ 3,508   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Distribution declared to the Company

   $ 5,642      $ 864      $ 7,804      $ 2,706 (3)    $ 3,629 (3)    $ 20,645   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Distributions received by the Company

   $ 8,501      $ 886      $ 7,804      $ 2,766 (3)    $ 3,582 (3)    $ 23,539   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

13


Table of Contents

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED JUNE 30, 2012

(UNAUDITED)

 

 

7. Variable Interest and Unconsolidated Entities (Continued):

 

Summarized operating data:

 

     Six Months Ended June 30, 2011  
     DMC
Partnership
    Intrawest
Venture
    CNL Sun I
Venture (2)
    Total  

Revenues

   $ 13,738      $ 7,669      $ 61,769      $ 83,176   

Property operating expenses

     (362     (3,074     (39,498     (42,934

Depreciation & amortization expenses

     (4,437     (2,047     (12,853     (19,337

Interest expense

     (4,241     (2,770     (15,046     (22,057

Interest and other income (expense)

     13        126        (10,179     (10,040
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 4,711      $ (96   $ (15,807   $ (11,192
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss allocable to other venture partners (1)

   $ (874   $ (922   $ (9,247   $ (11,043
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) allocable to the Company (1)

   $ 5,585      $ 826      $ (6,560   $ (149

Amortization of capitalized costs

     (243     (117     (1,196     (1,556
  

 

 

   

 

 

   

 

 

   

 

 

 

Equity in earnings (loss) of unconsolidated entities

   $ 5,342      $ 709      $ (7,756   $ (1,705
  

 

 

   

 

 

   

 

 

   

 

 

 

Distributions declared to the Company

   $ 5,355      $ 1,174      $ 7,309      $ 13,838   
  

 

 

   

 

 

   

 

 

   

 

 

 

Distributions received by the Company

   $ 5,767      $ 640      $ 3,442      $ 9,849   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

FOOTNOTES:

 

(1) Income is allocated between the Company and its partnership using the hypothetical liquidation book value (“HLBV”) method of accounting.
(2) Represents operating data from the date of acquisition through the end of the period presented.
(3) Includes approximately $1.2 million and $1.7 million in distributions representing our respective preferred return on CNLSun II and CNLSun III ventures, respectively, in accordance with the venture agreements and approximately $1.5 million and $1.9 million in return of capital on CNLSun II and CNLSun III, respectively, for the six months ended June 30, 2012.

Summarized balance sheet data:

 

     As of June 30, 2012  
     DMC
Partnership
    Intrawest
Venture
    CNLSun I
Venture
    CNLSun II
Venture
    CNLSun III
Venture
    Total  

Real estate assets, net

   $ 239,412      $ 88,783      $ 603,834      $ 124,327      $ 165,048      $ 1,221,404   

Intangible assets, net

     6,641        1,011        2,974        60        315        11,001   

Other assets

     3,291        13,611        25,714        5,525        7,904        56,045   

Mortgages and other notes payable

     136,725        73,880        434,940        104,549        120,000        870,094   

Other liabilities

     2,009        13,639        18,490        4,175        7,775        46,088   

Partners’ capital

     110,610        15,886        179,092        21,188        45,492        372,268   

Carrying amount of investment (1)

     105,007        29,413        115,388        16,276        33,910        299,994   

Company’s ownership percentage (1)

     82.0     80.0     60.0     70.0     67.9  

 

14


Table of Contents

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED JUNE 30, 2012

(UNAUDITED)

 

 

7. Variable Interest and Unconsolidated Entities (Continued):

 

Summarized balance sheet data:

 

     As of December 31, 2011  
     DMC
Partnership
    Intrawest
Venture
    CNLSun I
Venture
    CNLSun II
Venture
    CNLSun III
Venture
    Total  

Real estate assets, net

   $ 241,606      $ 90,748      $ 614,548      $ 126,488      $ 164,642      $ 1,238,032   

Intangible assets, net

     6,797        1,123        2,617        419        874        11,830   

Other assets

     6,480        12,582        28,757        7,223        9,718        64,760   

Mortgages and other notes payable

     138,533        74,823        434,940        104,549        120,000        872,845   

Other liabilities

     4,633        12,746        21,258        4,586        5,693        48,916   

Partners’ capital

     111,717        16,884        189,724        24,995        49,541        392,861   

Carrying amount of investment (1)

     108,101        30,415        123,072        19,785        36,785        318,158   

Company’s ownership percentage (1)

     82.0     80.0     60.0     70.0     67.9  

 

FOOTNOTE:

 

(1) As of June 30, 2012 and December 31, 2011, the Company’s share of partners’ capital determined under HLBV was approximately $281.5 million and $294.5 million, respectively, and the total difference between the carrying amount of the investment and the Company’s share of partners’ capital determined under HLBV was approximately $18.5 million and $23.6 million, respectively.

 

8. Mortgages and Other Notes Receivable:

In April 2012, the Company restructured a $6 million outstanding working capital line of credit receivable with a borrower that was having financial difficulties, into a $6 million term loan. As part of the restructure, the Company reduced the interest rate from a fixed rate of 11% per annum to a rate of LIBOR plus 4% per annum and extended the maturity date from November 2013 to December 2016, with no payments of principal or interest required until January 2014. The borrower has an option to extend the maturity date to December 2021, subject to certain terms and conditions. The Company recorded a loan loss provision under this troubled debt restructure of approximately $1.7 million representing the difference between the expected future cash flows discounted at the original loan’s effective interest rate and the net carrying value of the loan.

The fair market value and carrying value of the Company’s mortgages and other notes receivable was approximately $120.3 million as of June 30, 2012 and December 31, 2011, based on discounted cash flows for each individual instrument based on market interest rates as of June 30, 2012 and December 31, 2011, respectively. Because this methodology includes inputs that are less observable by the public and are not necessarily reflected in active markets, the measurement of the estimated fair values related to the Company’s mortgage and other notes receivable is categorized as Level 3 on the three-level valuation hierarchy. The estimated fair value of accounts and other receivables approximates the carrying value as of June 30, 2012 and December 31, 2011 because of the relatively short maturities of the obligations.

 

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CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED JUNE 30, 2012

(UNAUDITED)

 

9. Indebtedness:

Mortgages and Other Notes Payable — During the six months ended June 30, 2012, the Company obtained the following fixed-rate loans (in thousands):

 

    

Monthly Payment Terms

(Loan Collateral)

   Interest
Rate
  Date of
Agreement
   Maturity
Date
     Principal
Amount
 

Mortgage debt (1)

  

Monthly principal and interest

(three senior housing properties)

   4.4%-4.5%   2/28/2012      10/5/2018       $ 17,500   

Mortgage debt (1)

  

Monthly principal and interest

(one ski and mountain resort lifestyle property)

   6.0%   3/2/2012      4/5/2017         13,300   

Mortgage debt

  

Monthly principal and interest

(one attractions property)

   6.0%   5/1/2012      4/30/2018         45,000   

Mortgage debt

  

Monthly principal and interest

(four senior housing properties)

   3.79%   6/29/2012      7/1/2019         46,500   
             

 

 

 
             Total       $ 122,300   
             

 

 

 

  

 

FOOTNOTE:

 

(1) These loans are cross-collateralized with two of the Company’s existing loans, one of which resulted in an extension of maturity to April 5, 2017.

The Company repaid $14.4 million of sellers financing, when it matured in March 2012. Additional sellers financing of $37.6 million was extended with a new maturity date of December 31, 2014. This loan has an annual fixed interest rate of 8.0% that increases to 9.5% and requires monthly payments of interest only. In May 2012, $3.0 million of the remaining seller financing was prepaid resulting in an outstanding principal balance of $34.6 million as of June 30, 2012.

Line of Credit — As of June 30, 2012, the Company had drawn $95.0 million under its revolving line of credit in connection with the acquisition of nine properties during the six months ended June 30, 2012.

The fair market value and carrying value of the mortgage notes, senior notes and other notes payable were approximately $1,063 million and $1,103 million, respectively, as of June 30, 2012, and $847.1 million and $912.0 million, respectively, as of December 31, 2011 based on then-current rates and spreads the Company would expect to obtain for similar borrowings. Because this methodology includes inputs that are less observable by the public and are not necessarily reflected in active markets, the measurement of the estimated fair values related to the Company’s mortgage notes payable is categorized as Level 3 on the three-level valuation hierarchy. The estimated fair value of accounts payable and accrued expenses approximates the carrying value as of June 30, 2012 and December 31, 2011 because of the relatively short maturities of the obligations.

 

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CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED JUNE 30, 2012

(UNAUDITED)

 

10. Derivative Instruments and Hedging Activities:

The Company utilizes derivative instruments to offset partially the effect of fluctuating interest rates on the cash flows associated with its variable-rate debt. The Company follows established risk management policies and procedures in its use of derivatives and does not enter into or hold derivatives for trading or speculative purposes. The Company records all derivative instruments on its balance sheet at fair value. On the date the Company enters into a derivative contract, the derivative is designated as a hedge of the exposure to variable cash flows of a forecasted transaction. The effective portion of the derivative’s gain or loss is initially reported as a component of other comprehensive income (loss) and subsequently recognized in the statements of operations in the periods in which earnings are impacted by the variability of the cash flows of the hedged item. Any ineffective portion of the gain or loss is reflected in interest expense in the statements of operations.

The Company has five interest rate swaps that were designated as cash flow hedges of interest payments from their inception.  The following table summarizes the terms and fair values of the Company’s derivative financial instruments as of June 30, 2012 and December 31, 2011, which are included in other liabilities in the accompanying unaudited condensed consolidated balance sheets (in thousands):

 

                              Fair Value Liability  
Notional
Amount
    Strike     Credit
Spread (1)
    Trade
Date
    Maturity
Date
    June 30,
2012
    December 31,
2011
 
$ 63,760        1.9     1.3     12/6/10        1/2/16      $ (2,497   $ (2,129
$ 9,226        3.6     3.3     9/28/09        9/1/19      $ (1,262   $ (1,136
$ 18,214 (2)      2.7 %(2)      3.7     12/1/09        12/1/14      $ (611   $ (796
$ 16,800        2.2     4.5     1/13/11        12/31/15      $ (817   $ (762
$ 25,000        1.3     3.0     8/30/11        8/28/16      $ (650   $ (361

 

FOOTNOTES:

 

(1) The strike rate does not include the credit spread on each of the notional amounts.
(2) The Company swapped the interest rate on its $20.0 million loan denominated in Canadian dollars to a fixed interest rate of 6.4%. The notional amount has been converted from Canadian dollars to U.S. dollars at an exchange rate of 0.98 Canadian dollars for $1.00 U.S. dollar on June 30, 2012 and December 31, 2011, respectively.

As of June 30, 2012, the Company’s hedges qualified as highly effective and, accordingly, all of the change in value is reflected in other comprehensive income (loss). Determining fair value and testing effectiveness of these financial instruments requires management to make certain estimates and judgments. Changes in assumptions could have a positive or negative impact on the estimated fair values and measured effectiveness of such instruments could, in turn, impact the Company’s results of operations.

 

11. Fair Value Measurements:

The Company is making an accounting policy election to use the exception in ASU 820-10-35-18D with respect to measuring fair value of a group of financial assets and financial liabilities entered into with a particular counterparty, where the Company reports the net exposure to the credit risk of that counterparty.

The Company’s derivative instruments are valued primarily based on inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, volatilities, and credit risks) and are classified as Level 2 in the fair value hierarchy. The valuation of derivative instruments also includes a credit value adjustment which is a Level 3 input. However, the impact of the assumption is not significant to its overall valuation calculation, and therefore the Company considers its derivative instruments to be classified as Level 2. The fair value of such instruments is included in other liabilities in the accompanying condensed consolidated balance sheets.

 

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CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED JUNE 30, 2012

(UNAUDITED)

 

 

11. Fair Value Measurements (Continued):

 

The Company has one investment property that was classified as assets held for sale and was carried at fair value as of June 30, 2012. The Level 3 unobservable inputs used in determining the fair value of the real estate properties include, but are not limited to, management’s estimated cash flows over various holding periods, discounted using a range of estimated capitalization rates.

The following tables show the fair value of the Company’s financial assets and liabilities carried at fair value as of June 30, 2012 and December 31, 2011, as follows (in thousands):

 

     Fair Value
Measurement
as of June 30,
2012
     Level 1      Level 2      Level 3  

Assets:

           

Assets held for sale carried at fair value

   $ 1,401       $ —         $ —         $ 1,401   
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities:

           

Derivative instruments

   $ 5,837       $ —         $ 5,837       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     Fair Value
Measurement
as of
December 31,
2011
     Level 1      Level 2      Level 3  

Assets:

           

Assets held for sale carried at fair value

   $ 2,863       $ —         $ —         $ 2,863   
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities:

           

Derivative instruments

   $ 5,184       $ —         $ 5,184       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

The following information details the changes in the fair value measurements using significant unobservable inputs (Level 3) for the six months ended June 30, 2012 (in thousands):

 

     Assets  

Balance at December 31, 2011

   $ 2,863   

Adjustment to impairment provision

     (267

Fair value of the properties sold

     (1,195
  

 

 

 

Balance as of June 30, 2012

   $ 1,401   
  

 

 

 

 

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CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED JUNE 30, 2012

(UNAUDITED)

 

12. Related Party Arrangements:

For the quarter and six months ended June 30, 2012 and 2011, the Advisor and former advisor collectively earned fees and incurred reimbursable expenses as follows (in thousands):

 

     Quarter Ended
June 30,
     Six Months Ended
June 30,
 
     2012      2011      2012      2011  

Acquisition fees:

           

Acquisition fees from offering proceeds and dividend distribution reinvestment plan

   $ 565       $ 1,781       $ 1,139       $ 6,428   

Acquisition fees from debt proceeds

     4,188         7,350         5,112         15,180   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     4,753         9,131         6,251         21,608   
  

 

 

    

 

 

    

 

 

    

 

 

 

Asset management fees

     8,787         7,813         17,469         15,311   
  

 

 

    

 

 

    

 

 

    

 

 

 

Reimbursable expenses:

           

Offering costs

     —           389         —           1,086   

Acquisition costs

     99         43         177         122   

Operating expenses

     2,181         3,752         4,159         5,938   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     2,280         4,184         4,336         7,146   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total fees earned and reimbursable expenses

   $ 15,820       $ 21,128       $ 28,056       $ 44,065   
  

 

 

    

 

 

    

 

 

    

 

 

 

The Company incurred the following fees to related parties in connection with shares sold through its public offerings. In April 2011, the Company completed its third and final public offering. As a result, there are no fees to related parties in connection with shares sold for the quarter and six months ended June 30, 2012 (in thousands):

 

     Quarter Ended
June  30,
2012
     Six Months Ended
June  30,
2011
 

Selling commissions

   $ —         $ 12,855   

Marketing support fee and due diligence expense reimbursements

     —           5,520   
  

 

 

    

 

 

 

Total

   $ —         $ 18,375   
  

 

 

    

 

 

 

Amounts due to affiliates for fees and expenses described above are as follows (in thousands):

 

     June 30,
2012
     December 31,
2011
 

Due to the Advisor and its affiliates:

     

Offering expenses

   $ —         $ 24   

Operating expenses

     862         619   

Acquisition fees and expenses

     598         477   
  

 

 

    

 

 

 

Total due to affiliates

   $ 1,460       $ 1,120   
  

 

 

    

 

 

 

 

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CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED JUNE 30, 2012

(UNAUDITED)

 

 

12. Related Party Arrangements (Continued):

 

The Advisor and its affiliates are entitled to reimbursement of certain expenses incurred on behalf of the Company in connection with the Company’s organization, offering, acquisitions, and operating activities. Pursuant to the advisory agreement, the Company will not reimburse the Advisor for any amount by which total operating expenses paid or incurred by the Company exceed the greater of 2% of average invested assets or 25% of net income (the “Expense Cap”) in any expense year, as defined in the advisory agreement. For the expense year ended June 30, 2012, operating expenses did not exceed the Expense Cap.

The Company also maintains accounts at a bank in which the Company’s chairman and former vice-chairman serve as directors. The Company had deposits at that bank of approximately $5.8 million and $4.4 million as of June 30, 2012 and December 31, 2011, respectively.

A due from, an affiliate of the Company of approximately $0.3 million was recorded in other assets in the accompanying unaudited condensed consolidated balance sheets as of June 30, 2012.

 

13. Stockholders’ Equity:

Distribution Reinvestment Plan — For the six months ended June 30, 2012, the Company received aggregate proceeds of approximately $41.5 million (representing 4.4 million shares) through its distribution reinvestment plan.

Distributions — For the six months ended June 30, 2012 and 2011, the Company declared and paid distributions of approximately $97.0 million ($0.3126 per share) and $92.5 million ($0.3126 per share), respectively.

Redemption of Shares — The redemption price per share is based on the amount of time that the redeeming stockholder has held the applicable shares, but in no event is the redemption price greater than the price of shares sold to the public in the Company’s offerings. The amount redeemed on a quarterly basis, if any, is determined by the Board of Directors in its sole discretion. On February 29, 2012, the Company’s Board of Directors approved redemptions of up to $1.75 million per calendar quarter. The following details the activity of the pending redemption requests for the six months ended June 30, 2012 (in thousands except per share data):

 

2012 Quarters    First     Second     Year-To-Date  

Requests in queue

     6,419        7,763        6,419   

Redemptions requested

     1,574        1,010        2,584   

Shares redeemed:

      

Prior period requests

     (4     (177     (181

Current period requests

     (172     —          (172

Adjustments (2)

     (54     (84     (138
  

 

 

   

 

 

   

 

 

 

Pending redemption requests (2)

     7,763        8,512        8,512   
  

 

 

   

 

 

   

 

 

 

Average price paid per share

   $ 9.92      $ 9.92      $ 9.92   
  

 

 

   

 

 

   

 

 

 

 

FOOTNOTES:

 

(1) This amount represents redemption request cancellations and other adjustments.
(2) Requests that are not fulfilled in whole during a particular quarter will be redeemed on a pro rata basis to the extent funds are made available pursuant to the redemption plan.

 

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CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED JUNE 30, 2012

(UNAUDITED)

 

14. Supplemental Condensed Consolidating Financial Statements:

The Company had issued senior obligations which are guaranteed by certain of the Company’s consolidated subsidiaries (the “Guarantor Subsidiaries”). The guarantees are joint and several, full and unconditional.

During the quarter ended June 30, 2012, the Company revised the classification of intercompany financing with its consolidated subsidiaries on its condensed consolidated statement of cash flows to present them correctly as cash flows from investing activities. These amounts were previously classified as cash flows from financing activities. As other prior period financial information is presented the Company will similarly revise the unaudited condensed consolidated statement of cash flows in its future filings. The Company has determined that these revisions are not material to the related financial statements. The impact of these revisions (which eliminate in consolidation) are to increase (decrease) cash inflows from investing activities and increase (decrease) cash inflows from financing activities for the Issuer as follows (in thousands):

 

For the years ended:

  

December 31, 2011

   $ (384,226

December 31, 2010

   $ (114,389

December 31, 2009

   $ (20,484

For the:

  

Three months ended March 31, 2012

   $ 30,261   

Nine months ended September 30, 2011

   $ (322,691

Six months ended June 30, 2011

   $ (322,980

Three months ended March 31, 2011

   $ (99,223

 

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CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED JUNE 30, 2012

(UNAUDITED)

 

14. Supplemental Condensed Consolidating Financial Statements (Continued):

 

The following summarizes the Company’s unaudited condensed consolidating balance sheet as of June 30, 2012 and December 31, 2011, statement of operations, statement of comprehensive income (loss) and statement of cash flows for the six months ended June 30, 2012 and 2011 (in thousands):

Condensed Consolidating Balance Sheet:

 

     As of June 30, 2012  
     Issuer     Guarantor
Subsidiaries
    Non-Guarantor
Subsidiaries
    Consolidating
Adjustments
    Consolidated  
ASSETS           

Real estate investment properties, net

   $ —        $ 969,289      $ 1,213,490      $ —        $ 2,182,779   

Investments in unconsolidated entities

     —          299,994        —          —          299,994   

Investments in subsidiaries

     2,084,914        1,219,374        1,068,821        (4,373,109     —     

Cash

     88,458        8,029        32,375        —          128,862   

Mortgages and other notes receivable, net

     —          94,483        119,541        (90,949     123,075   

Deferred rent and lease incentives

     —          87,837        23,261        —          111,098   

Other assets

     15,945        18,591        29,386        —          63,922   

Restricted cash

     91        21,143        21,068        —          42,302   

Intangibles, net

     —          18,172        21,562        —          39,734   

Accounts and other receivables, net

     —          9,643        12,554        —          22,197   

Assets held for sale

     —          1,401        —          —          1,401   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Assets

   $ 2,189,408      $ 2,747,956      $ 2,542,058      $ (4,464,058   $ 3,015,364   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
LIABILITIES AND STOCKHOLDERS’ EQUITY           

Mortgages and other notes payable

   $ —        $ 202,255      $ 476,714      $ (64,868   $ 614,101   

Senior notes, net of discount

     393,950        —          —          —          393,950   

Line of Credit

       95,000            95,000   

Other liabilities

     —          36,410        34,426        —          70,836   

Accounts payable and accrued expenses

     7,709        8,274        50,431        (26,081     40,333   

Security deposits

     —          8,728        4,633        —          13,361   

Due to affiliates

     1,426        5        29        —          1,460   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Liabilities

     403,085        350,672        566,233        (90,949     1,229,041   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Commitments and contingencies

          

Stockholders’ equity:

          

Preferred stock, $.01 par value per share

     —          —          —          —          —     

Excess shares, $.01 par value per share

     —          —          —          —          —     

Common stock, $.01 par value per share

     3,132        —          —          —          3,132   

Capital in excess of par value

     2,781,887        4,908,521        7,122,108        (12,030,629     2,781,887   

Accumulated earnings (deficit)

     (122,823     274,301        335,640        (605,176     (118,058

Accumulated distributions

     (875,873     (2,785,538     (5,472,528     8,262,696        (871,243

Accumulated other comprehensive loss

     —          —          (9,395     —          (9,395
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     1,786,323        2,397,284        1,975,825        (4,373,109     1,786,323   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Liabilities and Stockholders’ Equity

   $ 2,189,408      $ 2,747,956      $ 2,542,058      $ (4,464,058   $ 3,015,364   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED JUNE 30, 2012

(UNAUDITED)

 

 

14. Supplemental Condensed Consolidating Financial Statements (Continued):

 

Condensed Consolidating Balance Sheet:

 

     As of December 31, 2011  
     Issuer     Guarantor
Subsidiaries
    Non-Guarantor
Subsidiaries
    Consolidating
Adjustments
    Consolidated  
ASSETS           

Real estate investment properties, net

   $ —        $ 989,652      $ 1,066,026      $ —        $ 2,055,678   

Investments in unconsolidated entities

     —          318,158        —          —          318,158   

Investments in subsidiaries

     2,140,835        901,798        1,148,640        (4,191,273     —     

Cash

     134,608        5,036        23,195        —          162,839   

Mortgages and other notes receivable, net

     —          88,567        118,474        (82,689     124,352   

Deferred rent and lease incentives

     —          70,680        24,301        —          94,981   

Other assets

     16,899        15,133        16,696        —          48,728   

Restricted cash

     91        19,364        18,422        —          37,877   

Intangibles, net

     —          18,881        12,056        —          30,937   

Accounts and other receivables, net

     1        10,198        7,337        —          17,536   

Assets held for sale

     —          2,863        —          —          2,863   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Assets

   $ 2,292,434      $ 2,440,330      $ 2,435,147      $ (4,273,962   $ 2,893,949   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
LIABILITIES AND STOCKHOLDERS’ EQUITY           

Mortgages and other notes payable

   $ —        $ 206,986      $ 374,072      $ (62,864   $ 518,194   

Senior notes, net of discount

     393,782        —          —          —          393,782   

Other liabilities

     —          27,078        17,757        —          44,835   

Accounts payable and accrued expenses

     7,562        3,408        41,013        (19,825     32,158   

Security deposits

     —          10,405        3,475        —          13,880   

Due to affiliates

     1,110        2        8        —          1,120   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Liabilities

     402,454        247,879        436,325        (82,689     1,003,969   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Commitments and contingencies

          

Stockholders’ equity:

          

Preferred stock, $.01 par value per share

     —          —          —          —          —     

Excess shares, $.01 par value per share

     —          —          —          —          —     

Common stock, $.01 par value per share

     3,092        —          —          —          3,092   

Capital in excess of par value

     2,743,972        4,275,586        4,655,057        (8,930,643     2,743,972   

Accumulated earnings (deficit)

     (78,138     268,711        335,158        (599,104     (73,373

Accumulated distributions loss

     (778,946     (2,351,846     (2,981,941     5,338,474        (774,259

Accumulated other comprehensive loss

     —          —          (9,452     —          (9,452
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     1,889,980        2,192,451        1,998,822        (4,191,273     1,889,980   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Liabilities and Stockholders’ Equity

   $ 2,292,434      $ 2,440,330      $ 2,435,147      $ (4,273,962   $ 2,893,949   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

23


Table of Contents

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED JUNE 30, 2012

(UNAUDITED)

 

 

14. Supplemental Condensed Consolidating Financial Statements (Continued):

 

Condensed Consolidating Statement of Operations:

 

     For the Quarter Ended June 30, 2012  
     Issuer     Guarantor
Subsidiaries
    Non-Guarantor
Subsidiaries
    Consolidating
Adjustments
    Consolidated  

Revenues:

          

Rental income from operating leases

   $ —        $ 22,644      $ 15,247      $ —        $ 37,891   

Property operating revenues

     —          14,881        64,881        —          79,762   

Interest income on mortgages and other notes receivable

     —          587        2,929        (350     3,166   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     —          38,112        83,057        (350     120,819   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Expenses:

          

Property operating expenses

     —          13,619        54,303        —          67,922   

Asset management fees to advisor

     8,787        —          —          —          8,787   

General and administrative

     4,207        65        453        —          4,725   

Ground lease and permit fees

     —          2,158        783        —          2,941   

Acquisition fees and costs

     1,664        —          16        —          1,680   

Other operating expenses

     —          1,084        1,244        —          2,328   

Bad debt expense

     —          797        244        —          1,041   

Loss on lease termination

     —          2,370        555        —          2,925   

Loss on loan provision

     —          —          1,699        —          1,699   

Depreciation and amortization

     —          14,707        18,144        —          32,851   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     14,658        34,800        77,441        —          126,899   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

     (14,658     3,312        5,616        (350     (6,080
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other income (expense):

          

Interest and other income

     23        57        116        —          196   

Interest expense and loan cost amortization

     (8,003     (4,179     (4,905     350        (16,737

Equity in earnings of unconsolidated entities

     —          2,277        —          —          2,277   

Equity in earnings (loss), intercompany

     2,696        (2,694     17,706        (17,708     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other income (expense)

     (5,284     (4,539     12,917        (17,358     (14,264
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations

     (19,942     (1,227     18,533        (17,708     (20,344

Discontinued operations

     —          402        —          —          402   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (19,942   $ (825   $ 18,533      $ (17,708   $ (19,942
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

24


Table of Contents

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED JUNE 30, 2012

(UNAUDITED)

 

 

14. Supplemental Condensed Consolidating Financial Statements (Continued):

 

Condensed Consolidating Statement of Operations:

 

     For the Quarter Ended June 30, 2011  
     Issuer     Guarantor
Subsidiaries
    Non-Guarantor
Subsidiaries
    Consolidating
Adjustments
    Consolidated  

Revenues:

          

Rental income from operating leases

   $ —        $ 24,803      $ 15,915      $ —        $ 40,718   

Property operating revenues

     —          11,372        50,202        —          61,574   

Interest income on mortgages and other notes receivable

     —          727        3,048        (464     3,311   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     —          36,902        69,165        (464     105,603   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Expenses:

          

Property operating expenses

     —          10,108        47,063        —          57,171   

Asset management fees to advisor

     7,813        —          —          —          7,813   

General and administrative

     3,171        446        149        —          3,766   

Ground lease and permit fees

     —          1,322        2,008        —          3,330   

Acquisition fees and costs

     2,038        —          (53     —          1,985   

Other operating expenses

     865        (834     1,341        —          1,372   

Bad debt expense

     —          466        5        —          471   

Loss on lease terminations

     —          603        —          —          603   

Depreciation and amortization

     —          14,725        15,482        —          30,207   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     13,887        26,836        65,995        —          106,718   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

     (13,887     10,066        3,170        (464     (1,115
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other income (expense):

          

Interest and other income

     95        (1,191     (178     —          (1,274

Interest expense and loan cost amortization

     (7,590     (2,105     (6,519     464        (15,750

Equity in loss of unconsolidated entities

     —          2,161        —          —          2,161   

Equity in earnings (loss), intercompany

     5,649        (1,820     10,689        (14,518     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other income (expense)

     (1,846     (2,955     3,992        (14,054     (14,863
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations

     (15,733     7,111        7,162        (14,518     (15,978

Discontinued operations

     —          244        1        —          245   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (15,733   $ 7,355      $ 7,163      $ (14,518   $ (15,733
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

25


Table of Contents

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED JUNE 30, 2012

(UNAUDITED)

 

 

14. Supplemental Condensed Consolidating Financial Statements (Continued):

 

Condensed Consolidating Statement of Operations:

 

     For The Six Months Ended June 30, 2012  
     Issuer     Guarantor
Subsidiaries
    Non-Guarantor
Subsidiaries
    Consolidating
Adjustments
    Consolidated  

Revenues:

          

Rental income from operating leases

   $ —        $ 48,379      $ 35,782      $ —        $ 84,161   

Property operating revenues

     —          21,309        98,938        —          120,247   

Interest income on mortgages and other notes receivable

     —          2,799        6,119        (2,649     6,269   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     —          72,487        140,839        (2,649     210,677   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Expenses:

          

Property operating expenses

     —          21,229        90,485        —          111,714   

Asset management fees to advisor

     17,469        —          —          —          17,469   

General and administrative

     7,941        253        1,159        —          9,353   

Ground lease and permit fees

     —          4,515        2,621        —          7,136   

Acquisition fees and costs

     2,591        —          219        —          2,810   

Other operating expenses

     126        1,334        2,903        —          4,363   

Bad debt expense

     —          2,840        254        —          3,094   

Loss on lease termination

     —          2,738        555        —          3,293   

Loss on loan provision

     —          —          1,699        —          1,699   

Depreciation and amortization

     —          29,502        35,572        —          65,074   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     28,127        62,411        135,467        —          226,005   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

     (28,127     10,076        5,372        (2,649     (15,328
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other income (expense):

          

Interest and other income

     74        81        132        —          287   

Interest expense and loan cost amortization

     (15,943     (8,176     (11,544     2,649        (33,014

Equity in earnings of unconsolidated entities

     —          3,508        —          —          3,508   

Equity in loss, intercompany

     (689     238        6,524        (6,073     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other expense

     (16,558     (4,349     (4,888     (3,424     (29,219
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations

     (44,685     5,727        484        (6,073     (44,547

Discontinued operations

     —          (138     —          —          (138
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net Income (loss)

   $ (44,685   $ 5,589      $ 484      $ (6,073   $ (44,685
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

26


Table of Contents

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED JUNE 30, 2012

(UNAUDITED)

 

 

14. Supplemental Condensed Consolidating Financial Statements (Continued):

 

Condensed Consolidating Statement of Operations:

 

     For the Six Months Ended June 30, 2011  
     Issuer     Guarantor
Subsidiaries
    Non-Guarantor
Subsidiaries
    Consolidating
Adjustments
    Consolidated  

Revenues:

          

Rental income from operating leases

   $ —        $ 53,521      $ 34,907      $ —        $ 88,428   

Property operating revenues

     —          16,654        76,179        —          92,833   

Interest income on mortgages and other notes receivable

     —          2,955        6,145        (2,580     6,520   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     —          73,130        117,231        (2,580     187,781   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Expenses:

          

Property operating expenses

     —          19,698        74,757        —          94,455   

Asset management fees to advisor

     15,311        —          —          —          15,311   

General and administrative

     5,794        650        514        —          6,958   

Ground lease and permit fees

     —          3,524        2,960        —          6,484   

Acquisition fees and costs

     6,911        —          —          —          6,911   

Other operating expenses

     918        268        1,374        —          2,560   

Bad debt expense

     —          268        338        —          606   

Loss on lease terminations

     —          1,033        —          —          1,033   

Depreciation and amortization

     —          29,470        30,753        —          60,223   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     28,934        54,911        110,696        —          194,541   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

     (28,934     18,219        6,535        (2,580     (6,760
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other income (expense):

          

Interest and other income

     177        (1,196     (280     —          (1,299

Interest expense and loan cost amortization

     (7,590