8-K/A 1 mnrt-8ka_123013.htm AMENDED CURRENT REPORT FILING

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K/A

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of report (Date of earliest event reported):
December 30, 2013


Moody National REIT I, Inc.

(Exact Name of Registrant as Specified in Charter)


 
 
Maryland 333-150612 26-1812865
(State or Other Jurisdiction
of Incorporation)
(Commission File Number) (IRS Employer
Identification No.)
 
6363 Woodway Drive, Suite 110
Houston, Texas 77057
(Address of Principal Executive Offices, including Zip Code)

Registrant’s telephone number, including area code: (713) 977-7500

Not applicable
(Former Name or Former Address, if Changed Since Last Report)
 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): 

   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

Item 9.01 Financial Statements and Exhibits.

 

On January 6, 2014, Moody National REIT I, Inc. (the “Company”) filed a Form 8-K reporting the Company’s acquisition of an interest in a hotel property located in Austin, Texas, commonly known as the Hampton Inn Austin (the “Austin Hotel”). The Company is filing this Current Report on Form 8-K/A in order to amend the Current Report on Form 8-K filed on January 6, 2014 to provide the required financial information related to the Company’s acquisition of an interest in the Austin Hotel.

 

(a) Financial Statements of Business Acquired

 

Austin Lodging, Inc. and the Tenancy In Common

   
Independent Auditors’ Report F-1
Combined Balance Sheets as of October 7, 2013 and December 31, 2012 F-2
Combined Statements of Operations for the period from January 1, 2013 through October 7, 2013 and the year ended December 31, 2012 F-3
Combined Statements of Owners’ Equity for the period from January 1, 2013 through October 7, 2013 and the year ended December 31, 2012 F-4
Combined Statements of Cash Flows for the period from January 1, 2013 through October 7, 2013 and the year ended December 31, 2012 F-5
Notes to Combined Financial Statements for the period from January 1, 2013 through October 7, 2013 and the year ended December 31, 2012 F-6

 

(b) Pro Forma Financial Information

 

Moody National REIT I, Inc.

   
Unaudited Pro Forma Consolidated Financial Information F-11
Unaudited Pro Forma Consolidated Balance Sheet as of September 30, 2013 F-12
Unaudited Pro Forma Consolidated Statement of Operations for the nine months ended September 30, 2013 F-13
Unaudited Pro Forma Consolidated Statement of Operations for the year ended December 31, 2012 F-14
Unaudited Notes to Pro Forma Consolidated Financial Information F-15

(c) Shell Company Transactions

 

Not applicable

 

(d) Exhibits

 

None

 

INDEPENDENT AUDITORS’ REPORT

 

 

 

To the Board of Directors of

Austin Lodging, Inc. and the

Tenancy In Common

Pinedale, CA

 

We have audited the accompanying combined financial statements of Austin Lodging, Inc. and the Tenancy In Common, which comprise the combined balance sheets as of October 7, 2013 and December 31, 2012, and the related combined statements of operations, owners’ equity, and cash flows for the period from January 1, 2013 to October 7, 2013 and year ended December 31, 2012, respectively, and the related notes to the combined financial statements.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these combined financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors' Responsibility

Our responsibility is to express an opinion on these combined financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the combined financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the combined financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the combined financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the combined financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the combined financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined financial position of Austin Lodging, Inc. and the Tenancy in Common as of October 7, 2013 and December 31, 2012, and the results of their operations and their cash flows for the period from January 1, 2013 through October 7, 2013 and for the year ended December 31, 2012, respectively, in accordance with accounting principles generally accepted in the United States of America.

 

 

/s/ Frazier & Deeter, LLC

Atlanta, Georgia

March 18, 2014

 

F-1
 

 

AUSTIN LODGING, INC. AND THE TENANCY IN COMMON
COMBINED BALANCE SHEETS

AT OCTOBER 7, 2013 AND DECEMBER 31, 2012

 

  

October 7, 2013

  December 31, 2012
ASSETS          
    Investments in hotel property, net  $7,571,190   $7,595,745 
    Cash and cash equivalents   457,067    87,155 
    Guest receivables, net   37,504    31,255 
    Prepaid expenses   800    800 
    Deferred costs, net   50,771    56,096 
    Due from related parties   430,730    717,855 
TOTAL ASSETS  $8,548,062   $8,488,906 
           
LIABILITIES AND OWNERS’ EQUITY          
           
LIABILITIES          
    Accounts payable and accrued expenses  $460,930   $274,843 
    Note payable   4,817,026    5,138,992 
           Total liabilities   5,277,956    5,413,835 
           
OWNERS’ EQUITY   3,270,106    3,075,071 
           
TOTAL LIABILITIES AND OWNERS’ EQUITY  $8,548,062   $8,488,906 

 

 

See accompanying notes to combined financial statements.

F-2
 

 

AUSTIN LODGING, INC. AND THE TENANCY IN COMMON
COMBINED STATEMENTS OF OPERATIONS
FOR THE PERIOD FROM JANUARY 1, 2013 THROUGH OCTOBER 7, 2013 AND

YEAR ENDED DECEMBER 31, 2012

 

  

October 7, 2013

  December 31, 2012
REVENUE          
    Room revenue  $2,899,624   $3,637,923 
         Total revenue   2,899,624    3,637,923 
           
EXPENSES          
    Salaries and wages   396,513    461,061 
    Room   207,015    279,300 
    Food and beverage   80,347    92,990 
    Other operating expenses   21,356    30,482 
    Franchise fees   365,214    405,687 
    Administrative and general   101,822    134,497 
    Advertising   7,058    21,635 
    Management fee   117,436    142,098 
    Repair and maintenance   89,327    97,181 
    Utilities   119,361    141,124 
    Taxes, insurance, and  rentals   256,578    294,919 
    Depreciation and amortization   239,153    531,684 
          Total expenses   2,001,180    2,632,658 
           
OPERATING INCOME   898,444    1,005,265 
           
Interest expense   203,409    265,335 
           
NET INCOME  $695,035   $739,930 

 

 

See accompanying notes to combined financial statements.

F-3
 

 

AUSTIN LODGING, INC. AND THE TENANCY IN COMMON
COMBINED STATEMENTS OF OWNERS' EQUITY
FOR THE PERIOD FROM JANUARY 1, 2013 THROUGH OCTOBER 7, 2013 AND

YEAR ENDED DECEMBER 31, 2012

 

    
BALANCE, January 1, 2012  $3,474,127 
      
    Capital distributions   (1,138,986)
    Net income   739,930 
      
BALANCE, December 31, 2012   3,075,071 
      
    Capital distributions   (500,000)
    Net income   695,035 
      
BALANCE, October 7, 2013  $3,270,106 

 

 

See accompanying notes to combined financial statements.

F-4
 

 

AUSTIN LODGING, INC. AND THE TENANCY IN COMMON
COMBINED STATEMENTS OF CASH FLOWS
FOR THE PERIOD FROM JANUARY 1, 2013 THROUGH OCTOBER 7, 2013 AND

YEAR ENDED DECEMBER 31, 2012

 

  

October 7, 2013

  December 31, 2012
       
CASH FLOWS FROM OPERATING ACTIVITIES          
    Net income  $695,035   $739,930 
    Adjustments to reconcile net income to net cash provided          
    by operating activities:          
        Depreciation and amortization   239,153    531,684 
    Changes in assets and liabilities:          
        Guest receivables, net   (6,249)   3,051 
        Due from related parties   287,125    (10,422)
        Accounts payable and accrued expenses   186,087    204,609 
             Net cash provided by operating activities   1,401,151    1,468,852 
           
CASH FLOWS FROM INVESTING ACTIVITIES          
    Investment in hotel property   (209,273)   (370,943)
            Net cash used in investing activities   (209,273)   (370,943)
           
CASH FLOWS FROM FINANCING ACTIVITIES          
    Payments on note payable   (321,966)   (492,826)
    Proceeds of note payable   —      1,038,986 
    Payment of deferred costs   —      (61,094)
    Cash outstanding in excess of book balance   —      (356,834)
    Capital distributions   (500,000)   (1,138,986)
           Net cash used in financing activities   (821,966)   (1,010,754)
           
NET CHANGES IN CASH AND CASH EQUIVALENTS   369,912    87,155 
           
CASH AND CASH EQUIVALENTS, beginning of period   87,155    0 
           
CASH AND CASH EQUIVALENTS, end of period  $457,067   $87,155 
           
SUPPLEMENTAL DISCLOSURES OF          
  CASH FLOW INFORMATION          
    Cash paid during the year for interest  $203,409   $265,335 
           

 

See accompanying notes to combined financial statements.

F-5
 

 

AUSTIN LODGING, INC. AND THE TENANCY IN COMMON

NOTES TO COMBINED FINANCIAL STATEMENTS

FOR THE PERIOD FROM JANUARY 1, 2013 THROUGH OCTOBER 7, 2013 AND

YEAR ENDED DECEMBER 31, 2012

 

 

1. ORGANIZATION AND BASIS OF PRESENTATION

 

The Hampton Inn Austin (the “Austin Hotel”), is a 123-suite hotel property located in Austin, Texas. The Austin Hotel is owned by Sethi Family Trust Dated October 1, 1998, Kapil D. Prashar and Sadhana Prashar through undivided interests as tenants-in-common (each a “Tenant In Common” and collectively, the “Tenancy In Common”). As used herein, unless specifically stated otherwise, the term “Austin Hotel” shall be deemed to mean the combined financial position of the Austin Hotel based upon the books and records of the Tenancy In Common and Austin Lodging, Inc. (the “Operator”). The Operator leases the Austin Hotel from the Tenancy In Common under a master triple-net lease.

 

These combined financial statements of the Austin Hotel have been prepared for the purpose of complying with the provisions of Article 8-04 of Regulation S-X promulgated by the Securities and Exchange Commission (the “SEC”), which requires certain information with respect to acquired businesses to be included with certain filings with the SEC.  

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The accompanying combined financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”). The combined financial statements of the Austin Hotel include the accounts of the Tenancy In Common and the Operator. All significant intercompany transactions have been eliminated. The Austin Hotel’s accounting cycle is composed of 13 four-week accounting periods beginning each January 1st with a final one- or two-day accounting period ending December 31st.

 

Use of Estimates

 

The preparation of combined financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the combined financial statements, and the reported amounts of revenue and expenses during the reporting period. Significant estimates include the valuation of guest receivables, useful lives of real estate assets for purposes of determining depreciation expense and assessments as to whether there is impairment in the value of long-lived assets. Actual results could differ from those estimates.

 

Investments in Hotel Property

 

Investments in hotel property are stated at cost. Major renovations and purchases of equipment are capitalized. Maintenance and repairs are charged to expense as incurred.

 

Depreciation of investments in hotel property is computed using straight-line and declining balance methods over the estimated useful lives of the related assets as follows:

 

  Buildings and improvements 10 - 39 years
  Furniture and fixtures 5 years

 

Depreciation expense for the period from January 1, 2013 through October 7, 2013, and the year ended December 31, 2012, was $233,828, and $459,641, respectively.

 

F-6
 

 

Impairment of Long-Lived Assets

 

Long-lived assets are reviewed for impairment if events or changes in circumstances indicate that the carrying amounts may not be recoverable. If such an event occurs in which the carrying amount of long-lived assets may not be recoverable, a comparison is made of the aggregate amount of current and projected operating cash flows into the foreseeable future on an undiscounted basis to the carrying amount. The carrying amount is adjusted, if necessary, to the estimated fair value to reflect impairment in the value of the asset. Fair values are determined by management utilizing cash flow models and market discount rates, or by obtaining third-party broker or appraisal estimates in accordance with the fair value measurements policy.

 

For real estate, the Austin Hotel monitors events and changes in circumstances indicating that the carrying amounts of the real estate assets may not be recoverable. When such events or changes in circumstances are present, the Austin Hotel assesses potential impairment by comparing estimated future undiscounted operating cash flows expected to be generated over the life of the asset and from its eventual disposition, to the carrying amount of the asset. In the event that the carrying amount exceeds the estimated future undiscounted operating cash flows, the Austin Hotel recognizes an impairment loss to adjust the carrying amount of the asset to estimated fair value for assets held for use and fair value less costs to sell for assets held for sale. There were no such impairment losses for the period from January 1, 2013 through October 7, 2013, and the year ended December 31, 2012.

 

Cash and Cash Equivalents

 

All highly liquid investments with original maturities of three months or less are considered to be cash equivalents.

 

Revenue Recognition

 

Hotel revenues, including room, food, beverage, and ancillary revenues such as long-distance telephone service and laundry, are recognized when services have been rendered.

 

The Austin Hotel is required to collect certain taxes from customers on behalf of government agencies and remit these back to the applicable governmental entity on a periodic basis. These taxes are collected from customers at the time of purchase, but are not included in revenue. The Austin Hotel records a liability upon collection from the customer and relieves the liability when payments are remitted to the applicable governmental agency.

 

Guest Receivables

 

Guest receivables include hotel guests and corporate accounts. The Austin Hotel maintains an allowance for doubtful accounts for estimated losses resulting from the inability of customers to make required payments. Receivables are considered past due based on the due date determined by contractual terms. Balances that remain outstanding after the Austin Hotel has used reasonable collection efforts are written off through a charge to the allowance for doubtful accounts and a credit to accounts receivable.

 

Guest receivables are reported net of the allowance for doubtful accounts. The Austin Hotel’s estimate of the allowance is based on historical collection experience and a review of other accounts receivable. There was no allowance for doubtful accounts as of October 7, 2013 and December 31, 2012.

 

Deferred Costs, net

 

Deferred costs consist of franchise fees and other costs that are amortized over the lives of the respective contracts.

F-7
 

 

Owners’ Equity

 

The Austin Hotel is owned by the Tenancy In Common individually through undivided interests as tenants-in-common. Owners’ equity includes capital contributions provided by the tenants-in-common offset by costs of the offering of the tenant-in-common interests. Distributions are reflected when paid or declared, if applicable.

 

Income Taxes

 

The ownership of the Austin Hotel is organized using a tenants-in-common structure. Each Tenant In Common has an undivided interest in the assets and liabilities of the Austin Hotel. No tax return is filed by the Austin Hotel since the taxable income and deductions are reported by each individual Tenant In Common. The Tenancy In Common is not a tax paying entity under the existing provisions of the Internal Revenue Code of 1986, as amended. Income and losses of the Austin Hotel flow through to the Tenancy In Common as tenants-in-common. Accordingly, no provision has been made for federal and state income taxes in the accompanying combined financial statements.

 

The Austin Hotel has reviewed tax positions under GAAP guidance that clarify the relevant criteria and approach for the recognition and measurement of uncertain tax positions. The guidance prescribes a recognition threshold and measurement of uncertain tax positions. The guidance prescribes a recognition threshold and measurement attribute for the financial statement recognition of a tax position taken, or expected to be taken, in a tax return. A tax position may only be recognized in the combined financial statements if it is more likely than not that the tax position will be sustained upon examination. The Austin Hotel has no material uncertain tax positions as of October 7, 2013 or December 31, 2012.

 

Advertising Expenses

 

Advertising and sales promotion costs are expensed as incurred. Advertising expense was $7,058 and $21,635 for the period from January 1, 2013 through October 7, 2013 and the year ended December 31, 2012, respectively.

 

3. INVESTMENT IN THE HOTEL

 

Investment in the Austin Hotel consists of the following:

 

   October 7, 2013  December 31, 2012
           
Land  $950,000   $950,000 
Building and improvements   8,139,067    8,135,247 
Furniture and fixtures   2,063,840    1,858,387 
 
Investment in hotel property, gross
   11,152,907    10,943,634 
Less accumulated depreciation   (3,581,717)   (3,347,889)
Investment in hotel property, net  $7,571,190   $7,595,745 

 

F-8
 

 

 4. DEFERRED COSTS

 

The hotel franchise cost and certain other fees totaling $61,184 are being amortized over fifteen years and are being charged to amortization expense.

 

Deferred fees for the periods covered are as follows:

 

   October 7, 2013  December 31, 2012
           
Deferred fees  $61,184   $61,184 
Less accumulated amortization   (10,413)   (5,088)

Deferred costs, net
  $50,771   $56,096 
           

 

 

Expected future amortization of deferred costs is as follows:

 

  Years Ending    
  October 7    
  2014   $ 7,099
  2015   7,099
  2016   7,099
  2017   7,099
  Thereafter     22,375
  Total   $ 50,771

 

 

5.  NOTE PAYABLE

 

In connection with the acquisition of the Austin Hotel on June 21, 2005, the Tenancy In Common financed $3,200,000 of the purchase price with a loan from Wells Fargo Bank (the “Lender”) secured by the Austin Hotel (the “First Loan”).  In March 2009, the Tenancy in Common borrowed an additional $3,500,000 from the Lender secured by the Austin Hotel (the “Second Loan”) to finance improvements to the property. The First Loan required monthly principal and interest payments of approximately $33,000, bearing an interest rate of 6.70% and the Second Loan required monthly principal and interest payments of approximately $40,000, bearing an interest rate of 6.50%.  In June 2012, the Tenancy in Common obtained a new loan secured by the Austin Hotel (the “Third Loan”) in the amount of $5,350,000. The proceeds of the Third Loan were used to repay in full the First and Second Loans and to pay a cash distribution to the Tenants in Common of $1,038,986. The Third Loan requires monthly principal and interest payments of approximately $57,000, bearing an interest rate of 5.05% with the entire unpaid principal balance and all accrued and unpaid interest thereon due and payable in full on June 5, 2019.

F-9
 

 

Principal payments of $449,565, $472,797, $497,238, $522,936, $549,966 and $2,324,524 are due for the periods ending October 7, 2014, 2015, 2016, 2017, 2018 and thereafter, respectively. As of October 7, 2013, there was $4,817,026 outstanding on the Third Loan.

 

6. MANAGEMENT FEES

 

The Austin Hotel is managed and operated by Sethi Management, Inc. (“Property Manager”) pursuant to a management agreement (“Management Agreement”) with the Operator. Pursuant to the terms of the Management Agreement, the Property Manager is responsible for the day-to-day operations of the Austin Hotel in accordance with the hotel business plan.  The Management Agreement is effective as of January 1, 2010 and expires on December 31, 2015. The Management Agreement shall be renewed automatically annually after its expiration unless either the Operator or the Property Manager gives written notice of termination to the other party 90 days prior to the anniversary thereof.

 

The Management Agreement includes a basic management fee equal to 4% of gross revenues.  These fees amounted to $117,436 and $142,098 for the period ended October 7, 2013 and the year ended December 31, 2012, respectively. If the Management Agreement is terminated prior to its expiration, certain fees may be assessed in accordance with the terms.

 

7. COMMITMENTS AND CONTINGENCIES

 

The Austin Hotel is subject to various legal proceedings and claims that arise in the ordinary course of business. The Austin Hotel believes that the final outcome of known matters will not have a material adverse effect on the combined financial position, results of operations, or cash flows of the Austin Hotel.

 

8. SIGNIFICANT CONCENTRATIONS

 

Cash Concentrations

 

Financial instruments that potentially subject the Austin Hotel to concentrations of credit risk consist principally of cash deposits resulting from daily operations. The Austin Hotel has a concentration of credit risk represented by cash balances in certain large commercial banks in amounts that occasionally exceed current federal deposit insurance limits. The financial condition of the institutions are periodically assessed and management believes the risk of loss is minimal.

 

9. SUBSEQUENT EVENT

 

On December 30, 2013, Moody National REIT I, Inc. (the “Moody REIT”) acquired the Austin Hotel from the Tenancy In Common through Moody National Austin-GOVR Holding, LLC, Moody REIT’s indirect wholly owned subsidiary (“Moody Holding”). Moody REIT owns a 100% interest in Moody Holding through Moody REIT’s operating partnership. The aggregate purchase price paid by Moody Holding for the Austin Hotel was $15,350,000, excluding closing costs. Moody Holding financed the purchase price for the Austin Hotel with (1) proceeds from Moody REIT’s ongoing public offering and (2) the proceeds of a mortgage loan with an original principal amount of $11,500,000 secured by the Austin Hotel.. The note payable described in Note 5 was paid in full and the Management Agreement described in Note 6 was terminated without penalty at the close of the sale of the Austin Hotel.

 

The Austin Hotel evaluated subsequent events through March 18, 2014, for inclusion in the combined financial statements.

 

F-10
 

MOODY NATIONAL REIT I, INC.

 

Unaudited Pro Forma Consolidated Financial Information

On December 30, 2013, Moody National REIT I, Inc. (the “Company”) acquired the Hampton Inn Austin, a 123-suite hotel property located in Austin, Texas (the “Austin Hotel”), through Moody National Austin-GOVR Holding, LLC, the Company’s indirect wholly owned subsidiary (“Moody Holding”). The Company owns a 100% interest in Moody Holding through the Company’s operating partnership. The aggregate purchase price paid by Moody Holding for the Austin Hotel was $15,350,000, plus closing costs. The Company financed the purchase price of the Austin Hotel with proceeds from the Company’s ongoing public offering and the proceeds of a mortgage loan with an original principal amount of $11,500,000 secured by the Austin Hotel.

 

The following unaudited pro forma consolidated balance sheet as of September 30, 2013 is presented as if the Company acquired the Austin Hotel on September 30, 2013.  The following unaudited pro forma consolidated statements of operations for the nine months ended September 30, 2013 and the year ended December 31, 2012 are presented as if the Company had acquired the Austin Hotel on January 1, 2012.  This unaudited pro forma consolidated financial information should be read in conjunction with the Company’s historical financial statements and notes thereto as filed in the Company’s quarterly report on Form 10-Q for the nine months ended September 30, 2013 and the Company’s annual report on Form 10-K for the year ended December 31, 2012. This pro forma information is not necessarily indicative of what the Company’s actual financial position or results of operations would have been had the Company’s acquisition of the Austin Hotel occurred on or been in effect during the periods indicated, nor is it necessarily indicative of the Company’s future results. In the Company’s opinion, all material adjustments necessary to reflect the effects of the above transaction have been made.

 

F-11
 

 

MOODY NATIONAL REIT I, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2013
          
          
   September 30, 2013 (a)  Pro Forma Adjustments (b)  Pro Forma September  30, 2013
          
ASSETS               
  Investment in hotel properties, net  $34,343,381   $15,350,000   $49,693,381 
  Cash and cash equivalents   3,788,942    (3,780,000)   8,942 
  Restricted cash   2,033,929    —      2,033,929 
  Accounts receivable, net of allowance of $10,000   147,826    —      147,826 
  Mortgage note receivable   12,320,620    —      12,320,620 
  Earnest money and deposits   145,000    —      145,000 
  Prepaid expenses   164,615    —      164,615 
Deferred costs, net of accumulated amortization of $54,527   430,556    130,000    560,556 
Total Assets  $53,374,869   $11,700,000   $65,074,869 
                
LIABILITIES AND EQUITY               
Liabilities:               
  Notes payable  $33,112,648   $11,500,000   $44,612,648 
  Accounts payable and accrued expenses   1,173,362    —      1,173,362 
  Due to related parties   108,797    —      108,797 
  Dividends payable   163,255    —      163,255 
Total Liabilities   34,558,062    11,500,000    46,058,062 
                
Special partnership Units - 100 Special units of the Operating Partnership   1,000    —      1,000 
                
Equity:               
Stockholders’ equity:               
Common stock, $0.01 par value per share; 400,000,000 shares authorized, 2,524,512 issued and outstanding at September 30, 2013   25,245    200    25,445 
Preferred stock, $0.01 par value per share; 50,000,000 shares authorized, no shares issued and outstanding   —      —      —   
Additional paid-in capital   21,053,479    199,800    21,253,279 
Accumulated deficit   (2,742,083)   —      (2,742,083)
Total stockholders’ equity   18,336,641    200,000    18,536,641 
Noncontrolling interest - 100 common units of the Operating Partnership   801    —      801 
Noncontrolling interest in consolidated joint venture   478,365    —      478,365 
Total Equity   18,815,807    200,000    19,015,807 
                
TOTAL LIABILITIES AND EQUITY  $53,374,869   $11,700,000   $65,074,869 
                
See accompanying unaudited notes to pro forma consolidated financial statements.
                

 

F-12
 

 

MOODY NATIONAL REIT I, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2013

 

 

   Nine Months Ended
September 30, 2013
As Reported
(a)
  Historical Statement
Of Operations
(b)
  Pro Forma
Adjustments
  Pro Forma
Nine Months Ended
September 30, 2013
                     
Revenue                    
  Room revenue  $5,001,786   $2,899,624   $(72,491)(d) $7,828,919 
  Other hotel revenue   184,528    —      —      184,528 
    Total hotel revenue   5,186,314    2,899,624    (72,491)   8,013,447 
  Interest income from note receivable   483,823    —      —      483,823 
    Total revenue   5,670,137    2,899,624    (72,491)   8,497,270 
                     
Expenses                    
  Hotel operating expenses   3,137,949    1,505,449    (37,636)(d)  4,605,762 
  Property taxes, insurance and other   342,448    256,578    (6,414)(d)  592,612 
  Depreciation and amortization   774,983    239,153    257,774(c)  1,271,910 
  Property acquisition   890,692    —      —      890,692 
  Corporate general and administrative   206,151    —      —      206,151 
    Total expenses   5,352,223    2,001,180    213,724    7,567,127 
                     
Operating Income   317,914    898,444    (286,215)   930,143 
                     
Interest expense and amortization of deferred loan costs   852,154    203,409    269,783(e)  1,325,346 
Income (loss) before income tax expense   (534,240)   695,035    (555,998)   (395,203)
Income tax expense   30,600    —      —      30,600 
                     
Net Income (Loss)   (564,840)   695,035    (555,998)   (425,803)
Income attributable to noncontrolling interest from consolidated joint ventures   (58,468)   —      —      (58,468)
                     
Loss attributable to noncontrolling interest in common operating partnership units   22    —      —      22 
Net income (loss) attributable to common shareholders  $(623,286)  $695,035   $(555,998)  $(484,249)
                     
Net income per common share, basic and diluted                 $(0.25)
Weighted average shares outstanding                  1,962,055 
                     
See accompanying unaudited notes to pro forma consolidated financial statements.
F-13
 

 

MOODY NATIONAL REIT I, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2012
    
  

Year Ended 

December 31, 2012

As Reported
(a)

  Historical Statement
Of Operations
(b)
  Pro Forma
Adjustments
  Pro Forma Year Ended December 31, 2012
                     
Revenue                    
  Room revenue  $424,678   $3,637,923   $—     $4,062,601 
  Other hotel revenue   11,974    —      —      11,974 
    Total hotel revenue   436,652    3,637,923    —      4,074,575 
  Interest income from note receivable   658,268    —      —      658,268 
    Total revenue   1,094,920    3,637,923    —      4,732,843 
Expenses                    
  Hotel operating expenses   274,322    1,806,055    —      2,080,377 
  Property taxes, insurance and other   29,615    294,919    —      324,534 
  Depreciation and amortization   58,650    531,684    212,085(c)  802,419 
  Property acquisition   365,720    —           365,720 
  Corporate general and administrative   138,479    —           138,479 
    Total expenses   866,786    2,632,658    212,085    3,711,529 
                     
Operating Income   228,134    1,005,265    (212,085)   1,021,314 
                     
Interest expense and amortization of deferred loan costs   413,954    265,335    367,322(d)  1,046,611 
Income (loss) from continuing operations   (185,820)   739,930    (579,407)   (25,297)
Discontinued operations:                    
Operating loss from discontinued operations   (329,353)   —      —      (329,353)
Gain on disposition of hotel property   1,510,786    —      —      1,510,786 
Income tax expense   (1,500)   —      —      (1,500)
Total income from discontinued operations   1,179,933    —      —      1,179,933 
Net Income   994,113    739,930    (579,407)   1,154,636 
Income attributable to noncontrolling interest from consolidated joint ventures   (373,806)   —      —      (373,806)
                     
Income attributable to noncontrolling interest in common operating partnership units   (79)   —      —      (79)
Net income (loss) attributable to common shareholders  $620,228   $739,930   $(579,407)  $780,751 
Net income per common share, basic and diluted                 $0.82 
Weighted average shares outstanding                  950,374 
                     
See accompanying unaudited notes to pro forma consolidated financial statements.
                     
F-14
 

MOODY NATIONAL REIT I, INC.

 

UNAUDITED NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

 

Unaudited Pro Forma Consolidated Balance Sheet

 

  1. Reflects the Company’s historical unaudited balance sheet as of September 30, 2013 as filed with the Securities and Exchange Commission on November 14, 2013.
  2. Reflects the acquisition of a 100% interest in the Austin Hotel on December 30, 2013 for approximately $15,350,000. The acquisition was funded with proceeds from the Company’s ongoing public offering and $11,500,000 of debt secured by the Austin Hotel.

Equity reflects additional offering proceeds to provide cash required to close the purchase of the Austin Hotel.

Depreciation and amortization are computed using the straight-line and accelerated methods based upon the following estimated useful lives:

Description   Allocation    Estimated Useful Life 
Land  $1,500,000    —   
Buildings and improvements   12,835,000    39 years 
Furniture, fixtures, and equipment   1,015,000    5 years 
   $15,350,000      

  

Other assets and liabilities were not acquired.

 

 

F-15
 

MOODY NATIONAL REIT I, INC.

 

UNAUDITED NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

 

Unaudited Pro Forma Consolidated Statement of Operations for the nine months ended September 30, 2013

 

  1. Reflects the Company’s unaudited historical operations for the nine months ended September 30, 2013 as filed with the Securities and Exchange Commission on November 14, 2013.
  2. Reflects historical operations of the Austin Hotel for the period from January 1, 2013 through October 7, 2013.
  3. Reflects the removal of historical depreciation and amortization expense of $236,721 and recognition of pro forma depreciation and amortization expense of $496,927. Depreciation for the building is computed using the straight-line method over the estimated useful life of 39 years and for furniture, fixtures, and equipment is computed using a declining method over the useful life of 5 years. Amortization for the franchise cost is computed using the straight-line method over the term of the franchise agreement of 15 years.
  4. Reflects adjustment of historical 280-day period from January 1, 2013 through October 7, 2013 to a nine-month period ending September 30, 2013.
  5. Reflects the removal of historical interest expense of $203,409 and the recognition of pro forma interest expense $473,192 on purchase money debt of $11,500,000.

 

F-16
 

 

MOODY NATIONAL REIT I, INC.

 

UNAUDITED NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

 

Unaudited Pro Forma Consolidated Statement of Operations for the year ended December 31, 2012

 

  1. Reflects the Company’s historical operations for the year ended December 31, 2012 as filed with the Securities and Exchange Commission on March 29, 2013. The figures have been reclassified for this statement to reflect discontinued operations.
  2. Reflects historical operations of the Austin Hotel for the year ended December 31, 2012.
  3. Reflects the removal of historical depreciation and amortization expense of $471,353 and recognition of pro forma depreciation and amortization expense of $743,769. Depreciation for the building is computed using the straight-line method over the estimated useful life of 39 years and for furniture, fixtures, and equipment is computed using a declining method over the useful life of 5 years. Amortization for the franchise cost is computed using the straight-line method over the term of the franchise agreement of 15 years.
  4. Reflects the removal of historical interest expense of $265,335 and the recognition of pro forma interest expense $632,657 on purchase money debt of $11,500,000.
F-17
 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

    MOODY NATIONAL REIT I, INC.
     
Date: March 18, 2014   By: /s/ Brett C. Moody
    Brett C. Moody
    Chief Executive Officer and President