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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
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(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
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For the fiscal year ended December 31, 2004 |
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or |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period
from to |
Commission file number 001-11975
Boykin Lodging Company
(Exact Name of Registrant as Specified in Its Charter)
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Ohio
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34-1824586 |
(State or Other Jurisdiction of
Incorporation or Organization) |
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(I.R.S. Employer
Identification No.) |
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Guildhall Building, Suite 1500, 45 W. Prospect
Avenue,
Cleveland, Ohio
(Address of Principal Executive Office) |
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44115
(Zip Code) |
(216) 430-1200
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the
Act:
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Name of Exchange on Which Registered |
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Common Shares, without Par Value
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New York Stock Exchange |
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Depositary Shares, each
representing1/10
of a share of
101/2%
Class A Cumulative Preferred Shares, Series 2002-A,
without par value
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New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the
Act:
None
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 þ No o
Indicate
by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant’s
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.
Indicate
by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange
Act). Yes þ No o
The
aggregate market value of the voting shares held by
non-affiliates of the registrant as of June 30, 2004 was
approximately $131 million. The aggregate market value was
calculated by using the closing price of the shares as of that
date, on the New York Stock Exchange.
As
of March 2, 2005, the registrant had 17,534,081 common
shares issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions
of the Definitive Proxy Statement for the Annual Meeting of
Shareholders to be held May 24, 2005 are incorporated by
reference into Part III, Items 10, 11, 12, 13 and 14
of this report.
TABLE OF CONTENTS
FORWARD LOOKING STATEMENTS
This Form 10-K and the documents incorporated by reference
herein contain statements that constitute forward-looking
statements. Those statements appear in a number of places in
this Form 10-K and the documents incorporated by reference
herein and include statements regarding our intent, belief or
current expectations or those of our directors or officers with
respect to:
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Leasing, management or performance of the hotels; |
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Our plans for expansion, conversion or renovation of the hotels; |
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Adequacy of reserves for renovation and refurbishment; |
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Our financing plans; |
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Our continued qualification as a REIT under applicable tax laws; |
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Our policies and activities regarding investments, acquisitions,
dispositions, financings, conflicts of interest and other
matters; |
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National and international economic, political or market
conditions; and |
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Trends affecting us or any hotel’s financial condition or
results of operations. |
You can identify the forward-looking statements by their use of
forward-looking words, such as “believes,”
“expects,” “may,” “will,”
“should,” “seeks,” “intends,”
“plans,” “estimates,” or
“anticipates,” or the negative of those words or
similar words. You are cautioned that any such forward-looking
statement is not a guarantee of future performance and involves
risks and uncertainties, and that actual results may differ
materially from those in the forward-looking statement as a
result of various factors. The factors that could cause actual
results to differ materially from those expressed in a
forward-looking statement include, among other factors,
financial performance, real estate conditions, execution of
hotel acquisition or disposition programs, changes in local or
national economic conditions and their impact on the occupancy
of our hotels, military action, terrorism, hurricanes, changes
in interest rates, changes in local or national supply and
construction of new hotels, changes in profitability and margins
and the financial condition of our operators and lessee and
other similar variables.
The information contained in this Form 10-K, in the
documents incorporated by reference herein and in Boykin’s
periodic filings with the Securities and Exchange Commission
also identifies important factors that could cause such
differences.
With respect to any such forward-looking statement that includes
a statement of its underlying assumptions or bases, we caution
that, while we believe such assumptions or bases to be
reasonable and have formed them in good faith, assumed facts or
bases almost always vary from actual results, and the
differences between assumed facts or bases and actual results
can be material depending on the circumstances. When, in any
forward-looking statement, we or our management express an
expectation or belief as to future results, that expectation or
belief is expressed in good faith and is believed to have a
reasonable basis, but there can be no assurance that the stated
expectation or belief will result or be achieved or accomplished.
PART I
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(a) General Development of Business |
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About Boykin Lodging Company |
Boykin Lodging Company (“Boykin”), an Ohio
corporation, is a real estate investment trust
(“REIT”) that as of March 11, 2005 owned
interests in 24 hotels located throughout the United States.
Boykin was formed and completed an initial public offering in
1996 to continue and expand the nearly 40-year history of hotel
ownership, acquisition, redevelopment and repositioning
activities of its predecessors, Boykin Management Company and
its affiliates (the “Boykin Group”). Boykin Hotel
Properties, L.P., an Ohio limited partnership (the
“Partnership”), is the operating partnership that
transacts business and holds the direct and indirect ownership
interests in our hotels. As of December 31, 2004, Boykin
had an 85.3% ownership interest in, is the sole general partner
of and conducts all of its business through the Partnership.
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Business and Growth Strategy |
Our primary business objectives are to maximize current returns
to our shareholders by increasing cash flow available for
distribution and long-term total returns to shareholders through
appreciation in value of our common shares. We seek to achieve
these objectives through the following key business strategies
relating to the ownership and operation of our hotels:
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Maximizing operating cash flows of our hotels through: |
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Aggressive asset management to maximize revenue and control
expenses; |
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Reinvestment in our hotels; and |
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Strategic brand positioning. |
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Identifying opportunities to enhance returns on our hotels by
investing in new initiatives such as: |
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Developing ancillary conference centers meeting International
Association of Conference Centers (“IACC”) standards
within certain of our existing hotels and in newly acquired
properties; and |
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Expanding and redeveloping our properties to improve asset
performance. |
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Managing our hotel portfolio mix to enhance its potential for
growth in RevPAR, meaning room revenue per available room, and
operating income by: |
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Identifying key markets with high barriers to entry for future
acquisitions; |
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Acquiring upscale commercial and resort hotels located in these
key markets; |
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Acquiring assets with repositioning and rebranding
opportunities; and |
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Selling assets that we believe have lower long-term growth
prospects because of their physical characteristics or market
location. |
Our management has substantial hotel operating, development,
acquisition and transactional experience. Our executives have
over 100 years of combined experience in the hotel industry
and have directly overseen the acquisition, disposition,
recapitalization, development and repositioning of billions of
dollars of hotel assets throughout the United States.
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Highlights from 2004 and Recent Developments |
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We sold or otherwise divested of five hotels during 2004,
generating gross proceeds of $86.4 million. These hotels
included the Doubletree Portland Downtown, Marriott’s Hunt
Valley Inn, the Holiday Inn Minneapolis West, the Radisson Hotel
Mount Laurel and the Ramada Inn Bellevue Center. |
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In late March 2004, we held the grand opening of the White Sand
Villas hotel condominium tower at our Pink Shell Beach Resort
& Spa (the “Pink Shell”). The sales of all 91
available units were closed by April. The profit realized from
this development project was approximately $12.5 million.
Additionally, all unit owners have entered into agreements with
the resort to put their units back to the resort for use as
hotel rooms. |
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Our next condominium hotel project is currently being marketed
for sale. This project, Captiva Villas, is the final component
to the redevelopment of the Pink Shell. It will contain 43
beach-front units. Similar to White Sand Villas, the units in
the new building will be sold as condominiums, with the
anticipation that the owners will put their unused room nights
back to the resort by contract. Zoning for the new building has
been approved. Buildings previously located on the site were
demolished in February 2005 and construction of the new building
is set to commence once a sufficient level of pre-sales have
been achieved. |
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In April 2004, we completed our third ancillary conference
center project, located at our Doubletree Portland Lloyd Center
hotel. The physical characteristics and the service standards
within the facility were designed to meet criteria established
by IACC. Upon completion of the project, the facilities were
inspected by, and awarded membership to, IACC. |
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In July 2004, the Indiana Gaming Commission (the
“Commission”) selected Trump Hotels & Casino
Resorts (“Trump”) to develop and operate a casino in
French Lick, Indiana. In March 2005, the Commission announced
that they would seek a replacement for the Trump group which is
attempting to reorganize in bankruptcy court. The Commission has
indicated that they intend to move quickly to |
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reinstitute a selection process for a new operator. The other
two final applicants to develop and operate the casino have each
expressed their intent to make new proposals. The process to
choose a new operator could take several months. Once a new
operator is chosen, the development and opening of a casino
remains subject to many items, including the operator’s
ability to raise financing to fund construction of a casino. |
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Five of our hotels were impacted by hurricanes in Florida in
August and September. Two hotels, the Best Western Fort Myers
Island Gateway Hotel and the Radisson Suite Beach
Resort – Marco Island, were evacuated for several
days, suffered minimal damage and were reopened. The Pink Shell
was evacuated for approximately one week. The hurricane damaged
the 43 units in the Useppa and Captiva buildings, which
were subsequently demolished to make way for the new Captiva
Villas building, while the remainder of the resort reopened. At
the beginning of September, Hurricane Frances hit the east coast
of Florida, where the Melbourne Hilton Oceanfront and the
Melbourne Quality Suites are located. Both hotels were evacuated
prior to the storm and both hotels remain closed due to the
damage from the storm. The hotels in Melbourne are not expected
to resume normal operations until late 2005 or early 2006,
subject to the availability of labor and materials. We expect
that a substantial portion of the costs to repair the properties
will be covered under our insurance policies. Additionally, we
also maintain business interruption insurance to partially
offset the effects of the closure on our operating results. |
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Boykin Chicago, L.L.C., a joint venture between AEW
Partners III, L.P., and us, has entered into an agreement
to sell Hotel 71 in Chicago, Illinois. The completion of
the sale, which is subject to customary closing conditions, is
expected to occur during the first quarter of 2005. |
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(b) Financial Information About Industry Segments |
All of Boykin Lodging Company’s operations are in the hotel
industry.
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(c) Narrative Description of Business |
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Boykin Lodging Company’s Hotel Portfolio |
As of March 11, 2005, our hotel portfolio included 23
full-service and one limited-service hotel, all of which compete
in the upscale to moderate price segment of the hospitality
market. All but one of our properties are operated by taxable
REIT subsidiaries of Boykin. Refer to Item 2(a) “Hotel
Properties” for a current listing of our hotels. Also refer
to Item 7 “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” for
discussion surrounding the results of the hotels’
operations.
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Application of Business Strategies |
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Maximizing Operating Cash Flow |
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Aggressive Asset Management |
We closely monitor revenue generation, including rates, group
pacing and yield management, and recommend improvements to
managers’ initiatives to improve hotel performance. We also
utilize Smith Travel Research reports to evaluate the
performance of each of our hotels relative to their competitive
set (the hotels in their market that compete for the same
business). We work closely with the respective management
companies to manage and improve cost control initiatives.
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Reinvestment in Hotel Properties |
We believe that our regular program of capital improvements at
our hotels, including replacement and refurbishment of
furniture, fixtures, and equipment, helps maintain and enhance
their competitiveness and maximizes their profitability.
Consistent with this strategy, we have made significant
renovations at several of our hotels in recent years. In 2004,
2003 and 2002 we spent $30.8 million, $25.8 million
and $13.5 million, respectively, on renovations, excluding
the redevelopment of our Pink Shell Beach Resort & Spa and
projects at the Chicago, Illinois and Lyndhurst, New Jersey
hotels which are owned by unconsolidated joint ventures. This
represented 13%, 11% and 5% of 2004, 2003 and 2002 consolidated
hotel revenues, respectively.
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Strategic Brand Positioning |
We maximize our market share and revenue by taking advantage of
our sales and marketing orientation to identify the most
effective branding strategy for each hotel and to further
leverage the selected brands with effective direct sales
strategies. Factors we consider in determining the most
effective branding strategy are:
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Brand strengths and their current presence in the specific
market; |
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Expected contribution to revenues; |
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Expected capital requirements and ongoing costs of the
franchise; and |
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Strengthening strategic franchisor relationships. |
Our portfolio contains properties that are currently operated
under franchise license agreements with premier
nationally-recognized hotel chains including, but not limited
to, Doubletree®, Marriott®, Radisson®,
Hilton®, Embassy Suites®, Holiday Inn®, Hampton
Inn® and Quality Suites®. In certain circumstances, we
have concluded that operating a hotel independent of a franchise
affiliation is the best branding strategy. Such is the case with
the French Lick Springs Resort and Spa in French Lick, Indiana,
Hotel 71 in Chicago, Illinois, and our Pink Shell Beach
Resort & Spa in Ft. Myers Beach, Florida.
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Initiatives to Enhance Returns on Hotels |
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IACC Ancillary Conference Centers |
We identified a strategic opportunity to enhance revenues from
certain of our hotels by developing ancillary conference centers
meeting IACC standards within those hotels. Each conference
center is a business unit inside an existing full-service hotel,
designed to complement the existing transient and group business.
The conference center strategy is attractive to us because it
creates demand for our guest and meeting rooms from a new client
base, those who prefer to hold meetings at conference centers
that meet IACC standards or who otherwise need the types of
services provided at IACC conference centers. IACC requires
facilities to meet certain technical standards regarding
technology, telecommunications, lighting, sound transmission and
other items, which standards appeal particularly to corporate
and institutional training programs. Further, the conference
center services and pricing are designed on a complete meeting
package basis, meaning that the users pay a fixed daily price
per person on an all-inclusive basis (rooms, meals, breaks,
telephone services, etc.), regardless of utilization, thus
making the cost of the services predictable for the planner and
the hotel.
The benefit of this pricing structure to us is that we
anticipate a higher RevPOR, meaning revenue per occupied room,
because these guests purchase meals and other services at the
hotel as a part of their packages. Additionally, we expect
higher operating margins from this business because predictable
utilization of these services results in the achievement of
greater operational efficiency.
We currently have such centers at our Berkeley, Omaha and
Portland properties.
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Property Redevelopment and Expansion |
We have undertaken a series of projects at our Pink Shell Beach
Resort & Spa in Ft. Myers Beach, Florida to elevate this
resort’s position to a four-star level and to take
advantage of the opportunity to sell portions of the property
while retaining long term cash flow. In 2001, we completed a
$2.7 million renovation of the Sanibel View Villas, a
60-unit tower, which we sold as condominium units. The units
were sold and all of the owners put their unused room nights
back to the resort by contract for use as a hotel room.
Therefore, in addition to the cash flow generated from selling
the units, we receive continuing income from the units placed in
the rental program. During 2002, we demolished and removed
cottages to commence construction of a new 92-unit tower, the
White Sand Villas. The units within the new tower were also
being sold as condominium units with the prospect that the
owners would put their unit back to us for use as hotel rooms.
The tower opened in March 2004, and similar to Sanibel View, all
buyers signed agreements to allow us to use their units as hotel
rooms. The final stage of the redevelopment of the property, the
Captiva Villas, is currently in the marketing phase. Two
low-rise buildings at the property were demolished during the
first quarter of 2005 and are expected to be replaced with a new
43-unit tower called Captiva Villas. Again, the new building
will be sold as condominium units with the expectation that the
unit owners will put their unused room nights back to the resort
for use as hotel rooms.
We are actively exploring the option of converting the Melbourne
Quality Suites to a condominium hotel. We are currently in the
process of preparing condominium documents and the prospectus
and anticipate marketing the
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units beginning in mid-2005. The conversion would be contingent
upon the pre-sale of a minimum number of units. Additionally, we
may convert other hotels which we own in Florida into
condominium hotels.
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Managing Our Hotel Portfolio Mix |
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Acquiring Upscale Commercial and Resort Hotels in Key
Markets |
Our acquisition criteria focuses on hotels in the upper upscale
and upscale segments located in major metropolitan markets and
destination beach markets. These markets have historically
outperformed other markets because of their high barriers to
entry and diversified demand generators. Our current targets
include Boston, New York, Washington, D.C. as well as selected
beachfront and other resort markets. Our success in implementing
this strategy is illustrated by our most recent acquisition, the
Radisson Suite Beach Resort on Marco Island, Florida. Prior
to Marco Island, our other recent acquisitions included the
Meadowlands-Lyndhurst Courtyard by Marriott in the New York City
metropolitan area. We continue to identify and evaluate
potential acquisition candidates.
Funds for future acquisitions or development of hotels are
expected to be derived, in whole or in part, from the proceeds
of the sale of non-strategic hotels, from capital obtained from
borrowings, from additional issuances of common shares,
preferred shares, or other securities, from potential joint
venture partners and from cash flows from operations.
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Disposing of Assets to Provide Capital for Better Investment
Opportunities |
We have been selling assets that we believe have lower long-term
growth prospects because of physical characteristics or market
location. In 2004 we divested five hotels not located within our
target markets for total gross proceeds of $86.4 million.
Those properties included the Doubletree Portland Downtown,
Marriott’s Hunt Valley Inn, the Holiday Inn Minneapolis
West, the Radisson Hotel Mount Laurel and the Ramada Inn
Bellevue Center.
We intend to maintain a geographically diversified hotel
portfolio and may also cluster hotels within certain primary
markets in order to take advantage of operational and managerial
economies of scale. We will acquire or develop additional hotel
properties only as suitable opportunities arise, and will not
undertake acquisition or development of properties unless
adequate sources of capital and financing are available.
In selecting operators, we seek hotel managers with demonstrated
full-service hotel expertise, a stable operating and financial
performance history and an excellent reputation in the
hospitality industry.
As of March 11, 2005, the hotels in our portfolio were
managed by the following entities:
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Boykin Management Company Limited Liability Company
(“BMC”)
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Concord Hospitality Enterprises (“Concord”)
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Chambers Group
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Outrigger Lodging Services (“Outrigger”)
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BMC. Robert W. Boykin (our Chairman of the Board and
Chief Executive Officer) and his brother, John E. Boykin,
control BMC. BMC has continued the over 40-year hotel operation
and management business of the Boykin Group. The Boykin Group
has capabilities in all phases of development and management of
hotel and resort properties. BMC currently manages 29 hotel
properties located throughout the United States, including 21
hotels owned by us. BMC’s subsidiaries include an
award-winning hotel interior design business and a hotel and
restaurant food, beverage, supply and equipment purchasing
business.
BMC and its owners, who have a substantial interest in the
Partnership, have interests that conflict with our interests in
connection with the structuring and enforcement of the
management agreements and other agreements between us and BMC
and in connection with activities that may maximize profits for
BMC without
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necessarily benefiting us. The following factors align the
interests of BMC and its owners with our interests to address
these conflicts of interest:
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BMC’s owners have retained their equity interests in the
Partnership; |
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Our corporate charter documents require that our independent
directors shall make all determinations to be made on behalf of
Boykin Lodging Company with respect to the relationships or
opportunities that represent a conflict of interest for any
officer or director of Boykin Lodging Company; |
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Any affiliate of the Boykin Group, including Robert W. Boykin
and John E. Boykin, will conduct all hotel acquisition,
development and ownership activities only through Boykin Lodging
Company, other than the acquisition through inheritance of the
Miami Hampton Inn by Robert W. Boykin and John E. Boykin, for
which the initial development by William J. Boykin, their
father, was approved by our Board of Directors; |
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BMC is entitled to receive incentive management fees with
respect to certain hotels it manages for us if the hotel
operating performance exceeds benchmarks set forth in the terms
of each management agreement; |
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A portion of BMC’s corporate-level senior executive
team’s compensation is based upon the performance of our
hotels; and |
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BMC has a deferred compensation plan for its corporate-level
senior executives under which the value of each award is based
on, and fluctuates with, the value of our common shares. |
Concord. Concord is a privately owned hotel investment
and management company based in Raleigh, North Carolina. Concord
was formed to acquire, develop and manage both full and
limited-service hotel properties. Concord owns and operates
hotels under franchise agreements with such franchisors as
Marriott®, Radisson®, Hilton®, Residence
Inn® and Hampton Inn®.
Chambers Group. Chambers Group is a privately held
regional hotel management company based in Seattle, Washington.
The Company provides consulting services to the hospitality
industry in all aspects of development, financial analysis, and
operations. Chambers Group has operated a variety of mid-market
hotels in the Northwestern United States.
Outrigger. Outrigger is a privately held hotel management
company based in Encino, California. Outrigger has operated or
currently operates a full range of hotel products, including
Marriott®, Sheraton®, Hilton®, Residence
Inn®, Holiday Inn®, Radisson®, and many limited
service products. In addition to branded hotels, Outrigger
operates upscale boutique hotels.
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Terms of the Management Agreements |
BMC manages 21 of the 24 hotels that we currently have an
ownership interest in. The following is a summary of the
material terms of the BMC management agreements (the
“Management Agreements”) and is qualified in its
entirety by reference to the Form of Management Agreement, which
was filed as an exhibit to our Current Report on Form 8-K,
filed on January 14, 2002.
The Management Agreements have the material terms described
below:
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Duration/ Termination. As of December 31, 2004, the
Management Agreements have remaining terms ranging from one to
eight years. We have the right to terminate 19 of the BMC
agreements upon 90 days advance written notice without
having to pay any damages or a termination fee or penalty. |
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Management Fees. Most of the Management Agreements
provide for base and incentive management fees. The Management
Agreements have base fees which range from 1.5% to 3% of total
revenues. All of the Management Agreements have incentive
management fees payable to BMC based upon the applicable hotel
reaching specified financial performance standards. |
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Operating and Other Expenses. All of the Management
Agreements provide that we are responsible for all operating
expenses associated with the hotels. In addition, we are
responsible to either pay directly or reimburse the operator for
all other expenses relating to the hotel including, without
limitation, real estate taxes, insurance premiums and debt
service. |
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Indemnification. All of the Management Agreements provide
that we will hold the operator harmless from and against all
liabilities, losses, claims, damages, costs and expenses that
arise from or in connection with (a) the performance of the
operator’s services under the agreement, (b) any act
or omission (whether |
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or not willful, tortious, or negligent) of us or any third
party, or (c) any other occurrence related to the hotel,
except for events that result from (i) the fraud, willful
misconduct or gross negligence of the operator or (ii) the
breach by the operator of any provision of the agreement. |
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Events of Default. Events of default include
(a) failure to make any payment required by the agreement,
(b) failure to observe or perform any term or provision
after 30 days’ notice to cure, and (c) failure of
either party to perform in accordance with an applicable
franchise agreement. |
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Joint Ventures with Third Party Hotel Operators |
We have formed joint ventures with third party operators to
align the hotel operator’s economic interests with our
economic interests. In one of these joint ventures, the joint
venture partner’s right to receive cash flow and equity
capital distributions is subordinated to our receipt of
specified minimum distributions. In one of the joint ventures,
the operator leases the hotel from the joint venture and must
maintain a specified net worth to support its lease payment
obligations and has pledged its joint venture interest as
security for the lease payment obligations. We are permitted to
subject any majority-owned joint venture’s hotel to a
mortgage or to sell the hotel or its interest in the joint
venture without obtaining the affected joint venture
partner’s consent.
As of December 31, 2004, we had joint ventures formed with
the following companies or their affiliates who operated and/or
leased the following hotels:
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Boykin Ownership | |
|
JV Ownership | |
|
|
| Name of Joint Venture |
|
JV Partner |
|
Percentage | |
|
Percentage | |
|
Hotel Owned Under Joint Venture |
| |
|
|
|
| |
|
| |
|
|
|
Boykin San Diego, L.L.C
|
|
Outrigger(a) |
|
|
91 |
% |
|
|
9 |
% |
|
Hampton Inn San Diego Airport/ Sea World |
|
BoyCon, L.L.C
|
|
Concord |
|
|
50 |
% |
|
|
50 |
% |
|
Meadowlands-Lyndhurst Courtyard by Marriott |
|
|
|
(a)
|
|
Outrigger leases the property from the joint venture. |
If any of the following risks occur, our business, financial
condition, operating results and cash flows could be materially
adversely affected. Additional risks and uncertainties not
discussed herein may also impair our operations.
|
|
|
Risks Related to the Hotel Industry |
Public reaction to acts of terrorism or military action could
affect our cash flow. We are subject to disruptions in the
lodging industry that would likely result from terrorist attacks
(actual or threatened) or military action affecting the United
States. The uncertainty that would result from these events
would likely increase the public’s reluctance to travel,
which could adversely affect our operations.
Competition, economic conditions and similar factors
affecting us and the hotel industry generally could affect our
performance. Our hotels are subject to all operating risks
common to the hotel industry. These risks include:
|
|
|
| |
• |
Competition for guests from other hotels based upon brand
affiliations, room rates offered including those via internet
wholesalers and distributors, customer service, location and the
condition and upkeep of each hotel in general and in relation to
other hotels in their local market; |
| |
| |
• |
Adverse effects of general and local economic conditions; |
| |
| |
• |
Dependence on demand from business and leisure travelers, which
may fluctuate and be seasonal; |
| |
| |
• |
Increases in energy costs, airline fares, and other expenses
related to travel, which may deter travel; |
| |
| |
• |
Impact of financial difficulties of the airline industry and
potential reduction in service on the demand for our hotel rooms
and the collectibility of our outstanding receivables from the
airlines; |
| |
| |
• |
Increases in operating costs attributable to inflation and other
factors; and |
| |
| |
• |
Overbuilding in the hotel industry, especially in individual
markets. |
The need to make unexpected capital expenditures could
adversely affect our cash flow. Hotels require ongoing
renovations and other capital improvements, including periodic
replacement or refurbishment of furniture, fixtures
7
and equipment. If necessary capital expenditures exceed
expectations, there can be no assurance that sufficient sources
of financing will be available to fund such expenditures. We may
also acquire hotels in the future that require significant
renovation.
Hotel investments are generally illiquid, and we may not be
able to sell our hotels when it is economically advantageous to
do so. Hotel investments generally cannot be sold quickly.
We may not be able to vary our portfolio promptly in accordance
with our strategies or in response to economic or other
conditions. In addition, provisions of the Internal Revenue Code
of 1986, as amended, limit a REIT’s ability to sell its
properties in some situations when it may be economically
advantageous to do so.
|
|
|
Risks Related to Our Operations |
The profitability of our hotels depends on the performance of
the hotel management companies. The profitability of our
hotels depends largely upon the ability of the management
companies to generate revenues at our hotels in excess of their
operating expenses. The failure of the management companies to
manage the hotels effectively would adversely affect our cash
flow received from hotel operations. Before January 1,
2002, our cash flow consisted primarily of lease payments from
lessees. Our lessees were legally bound to make minimum lease
payments even when such payments exceeded the cash flow from the
hotel. Since implementing our taxable REIT subsidiary
(“TRS”) structure on January 1, 2002, the
responsibility and risks associated with making the minimum
lease payments has shifted to lessees owned by the Partnership.
Therefore, we have effectively assumed the risks associated with
operating shortfalls at our hotels operating under the TRS
structure.
Our performance is dependent upon the performance of BMC.
BMC currently manages 21 of our hotels. We are therefore
dependent to a large degree on the operating performance of BMC.
Changes in management at these hotels or at other hotels in the
future could result in temporary service disruptions at the
affected hotels, which could in turn affect their operating and
financial performance.
We are subject to conflicts of interest involving our
Chairman and Chief Executive Officer. Our Chairman and Chief
Executive Officer, Robert W. Boykin, and his brother, John E.
Boykin, own BMC and therefore derive benefits from BMC’s
management of 21 of our hotels. Accordingly, Mr. Boykin has
and will continue to have conflicts of interest with us. He had
conflicts of interest in connection with our January 2002 TRS
transaction and in connection with the structuring of the
management agreements for the hotels currently managed by BMC.
He will have similar conflicts on renewal of those agreements
and in connection with future management agreements and other
transactions that we may enter into with BMC. Conflicts of
interest may also arise in connection with BMC’s management
of our hotels. Under certain circumstances, actions taken and
decisions made by BMC to maximize its profits will not
necessarily benefit us. Additionally, a subsidiary of BMC
provides design services to us for a fee and also receives a
portion of the fees we pay to an independent purchasing agent.
Mr. Boykin may have conflicts of interest with respect to
our procurement of design services and capital goods.
Additionally, the sale of certain of our hotels may result in
different and more adverse tax consequences to Mr. Boykin
than would be experienced by Boykin and our public shareholders,
and he could seek to influence us not to sell a hotel even
though that sale might otherwise be financially advantageous to
us and our public shareholders. Our articles of incorporation
provide that our independent directors are to make all
determinations to be made on our behalf with respect to the
relationships or opportunities that represent a conflict of
interest for any of our officers or directors.
The covenants in our credit agreements may restrict our range
of operating activities, and we are subject to refinancing
risks. We have a senior secured credit facility that enables
us to borrow up to $60.0 million based upon borrowing base
availability and term loans with original balances of $130.0
million and $108.0 million, respectively, each of which is
secured by certain of our hotel properties. Our secured credit
facility requires us, among other things, to maintain a minimum
net worth, a coverage ratio of EBITDA to debt service, a
coverage ratio of EBITDA to debt service and fixed charges, and
a maximum leverage ratio, and places limitations on our common
share distributions and acquisitions. There is no assurance that
we will be able to continue to meet the financial covenants of
the secured credit facility. In addition, our secured loans
limit our ability to sell certain hotel properties. These credit
arrangements may limit our ability to sell certain hotels whose
disposition might be desirable for strategic or financial
purposes. The initial term of the $108.0 million term loan
expired in July 2003; however, management utilized both of the
two one-year extension options available under the terms of the
agreement, therefore the current maturity date is July 2005.
There can be no assurance that we will be able to renew our
credit arrangements upon maturity on favorable terms or at all.
Further, if we are unable to make payments on or to refinance
indebtedness secured by our properties, the properties could be
foreclosed upon with a consequent loss to us of income and asset
value.
8
A portion of our borrowings bear interest at a variable rate, as
may other indebtedness we incur in the future. Accordingly,
increases in market interest rates could increase our debt
service requirements, which could adversely affect our cash flow.
We are subject to risks associated with development,
redevelopment and acquisitions of hotels. New and continued
development projects and hotel acquisitions are subject to a
number of risks, including:
|
|
|
| |
• |
the availability of acceptable financing; |
| |
| |
• |
competition with other entities for investment opportunities; |
| |
| |
• |
acquired properties’ failure to achieve anticipated
operating results; |
| |
| |
• |
construction costs of a property exceeding original estimates; |
| |
| |
• |
delays in construction and renovation projects; |
| |
| |
• |
overruns with respect to the cost of improvements to bring
acquired properties to the requisite standards; and |
| |
| |
• |
the expenditure of funds on, and the devotion of management time
to, transactions that may not come to fruition. |
We are subject to the risks associated with investments
through joint ventures. One of our consolidated hotels is
owned by a joint venture in which we have a controlling
interest. We may enter into similar joint ventures in the
future. Any joint venture investment involves risks such as the
possibility that the co-venturer may seek relief under federal
or state insolvency laws, or have economic or business interests
or goals that are inconsistent with our business interests or
goals. While the bankruptcy or insolvency of our co-venturer
generally should not disrupt the operations of the joint
venture, we could be forced to purchase the co-venturer’s
interest in the joint venture or the interest could be sold to a
third party. Additionally, we have joint ventures in which we
have non-controlling interests and we may enter into similar
joint ventures in the future. If we do not have control over a
joint venture, the value of our investment may be affected
adversely by a third party that may have different goals and
capabilities than ours. It may also be difficult for us to exit
a joint venture that we do not control after an impasse. In
addition, a joint venture partner may be unable to meet its
economic or other obligations and we may be required to or find
it necessary to fulfill those obligations.
Obligations imposed by our franchise agreements could affect
us adversely. Most of our hotels are subject to franchise or
license agreements. The continuation of a franchise or license
agreement is generally subject to specified operating standards.
Action or inaction on our part or by any of our hotel managers
could result in our failure to meet those standards, which could
result in the loss of the franchise. A franchisor also could
condition the continuation of a franchise on the completion of
capital improvements that we determine are too expensive or
otherwise unwarranted in light of general economic conditions or
the operating results or prospects of the affected hotel. In
that event, we may elect to allow the franchise agreement to
lapse. In any case, the loss of a franchise agreement could have
a material adverse effect upon the operations or the underlying
value of the hotel covered by the agreement because of the loss
of associated name recognition, marketing support and
centralized reservation systems provided by the franchisor, or
because of penalties payable upon early termination of the
agreement. Additionally, the franchise agreements may place
restrictions on the transfer or sale of assets or make such
transfers or sales economically infeasible.
Our insurance may not be adequate to cover certain risks.
We continue to carry comprehensive liability, fire, flood,
earthquake, terrorism and business interruption policies that
insure us against losses within policy specification and
insurance limits that we believe are reasonable. There are
certain types of risks, generally of a catastrophic nature, that
may be uninsurable or are not economically insurable or certain
coverages that we currently carry may become uneconomical or
unavailable in the future. Should an uninsured loss or a loss in
excess of insured limits occur, we could lose our investment in
the affected hotel as well as the anticipated future cash flow
from that hotel, while remaining obligated for any mortgage
indebtedness or other financial obligations related to that
hotel.
The costs of complying with laws and regulations could
adversely affect our cash flow. Our hotels must comply with
Title III of the Americans with Disabilities Act (the
“ADA”) to the extent that they are “public
accommodations” or “commercial facilities” as
defined in the ADA. Noncompliance with the ADA could result in
the imposition of fines or an award of damages to private
litigants. If changes in these laws involve substantial
expenditures or must be made on an accelerated basis, our cash
flow could be adversely affected.
9
Under various federal, state and local laws, an owner or
operator of real estate may be liable for the costs of removal
or remediation of certain hazardous or toxic substances on,
under, or in the property. This liability may be imposed without
regard to whether the owner or operator knew of, or was
responsible for, the presence of the substances. Other laws
impose on owners and operators certain requirements regarding
conditions and activities that may affect human health or the
environment. Failure to comply with applicable requirements
could complicate our ability to operate or sell an affected
property and could subject us to monetary penalties, costs
required to achieve compliance and potential liability to third
parties. We may be potentially liable for such costs or claims
in connection with the ownership and operation of our current
hotels and hotels we may acquire in the future. We have not been
notified by any governmental authority of, nor are we aware of,
any material noncompliance, liability or claim relating to
hazardous or toxic substances or other environmental matters in
connection with any of our hotels. Nonetheless, it is possible
that material environmental contamination or conditions exist,
or could arise in the future, in the hotels or on the land upon
which they are located.
We have and will continue to incur additional costs for systems,
staffing and third party services in maintaining compliance with
federal laws and regulations addressing corporate governance
issues, including the Sarbanes-Oxley Act of 2002, and with the
listing requirements of the New York Stock Exchange.
We bear the risk factors common to real estate development as
a result of our projects at the Pink Shell Beach
Resort & Spa. Common risk factors related to
development include, but are not limited to competition from
other condominium projects, construction delays due to weather,
reliance on contractors and subcontractors, construction cost
overruns, the ability of condominium purchasers to secure
financing and completion of the development in accordance with
our agreements.
As of March 11, 2005, we had 18 employees. These employees
perform, directly or through the Partnership, various
acquisition, development, redevelopment and corporate management
functions. All persons employed in the daily operations of the
hotels are employees of the management companies that the
lessees have contracted with to operate the hotels.
|
|
|
Executive Officers of the Registrant |
Our executive officers are elected and serve at the discretion
of the Board of Directors until their successors are duly chosen
and qualified, and are as follows:
| |
|
|
|
|
|
|
| Name |
|
Age | |
|
Position |
| |
|
| |
|
|
|
Robert W. Boykin
|
|
|
55 |
|
|
Chairman of the Board and Chief Executive Officer |
|
Richard C. Conti
|
|
|
54 |
|
|
President and Chief Operating Officer |
|
Shereen P. Jones
|
|
|
43 |
|
|
Executive Vice President, Chief Financial and Investment Officer |
|
Russ C. Valentine
|
|
|
59 |
|
|
Senior Vice President, Acquisitions |
|
Andrew C. Alexander
|
|
|
41 |
|
|
Senior Vice President and General Counsel |
The following is a biographical summary of the business
experience of our executive officers.
Robert W. Boykin has served as our Chief Executive Officer since
our formation. He served as the President and Chief Executive
Officer of Boykin Management Company from 1985 until November
1996. He served as Boykin Management Company’s Executive
Vice President from 1981 until 1985.
Richard C. Conti has served as our Chief Operating Officer since
May 1998. In January 2001, Mr. Conti was promoted to
President and Chief Operating Officer. Prior to joining us,
Mr. Conti was a Principal and Director with
Coopers & Lybrand L.L.P. Mr. Conti was responsible
for Coopers & Lybrand L.L.P.’s hospitality
consulting practice in the Midwest and has been involved in the
hospitality industry for over 25 years. Mr. Conti has
worked closely with many of the leaders in the industry and
brings significant industry knowledge and contacts.
Shereen P. Jones has served as our Executive Vice President,
Chief Financial and Investment Officer since February 2002. She
also serves as our Treasurer. Prior to joining Boykin, she was
with Credit Suisse First Boston in New York where she was
Director and Global Head of Hospitality Investment Banking,
spearheading the development of its lodging investment banking
practice. Previously, she spent seven years with Lehman
Brothers, serving most recently as Senior Vice President and
head of its Real Estate, Lodging and Gaming Mergers &
10
Acquisitions practice. Prior to joining Lehman, she was Vice
President, Corporate Finance, for Oppenheimer & Co. and
Kidder, Peabody & Co.
Russ C. Valentine joined us in June 1999 as our Senior Vice
President, Acquisitions. Prior to joining us, Mr. Valentine
served as Senior Vice President of Acquisitions for American
General Hospitality, a real estate investment trust that was
based in Dallas, Texas. Mr. Valentine played a significant
role in American General’s successful acquisition program
from 1990 to 1998. For over 25 years, Mr. Valentine
has worked for major consulting, investment banking, and hotel
organizations.
Andrew C. Alexander became our Vice President-Corporate Counsel
in July 1997 and was promoted to Senior Vice President and
General Counsel in June 1999. From July 1995 until July 1997,
Mr. Alexander served as Vice President-Corporate Counsel of
Renaissance Hotel Group, N.V., a publicly traded hotel company.
From September 1989 until July 1995, Mr. Alexander was an
attorney at the law firm of Calfee, Halter & Griswold,
LLP.
There are no arrangements or understandings known to us between
any executive officer and any other person pursuant to which any
executive officer was elected to office. There is no family
relationship between any of our directors or executive officers
and any other director or executive officer.
We believe that the composition, structure and performance of
our Board of Directors provide us a strong corporate governance
function and the partnership interest and share ownership of our
officers and directors serve to align the interests of our
management with our shareholders’ interests. In addition,
the terms of our arrangements with BMC serve to minimize
conflicts of interest and to align the interests of BMC with the
interests of Boykin and its shareholders.
Our articles of incorporation and corporate governance
guidelines require that a majority of our directors be
independent. Under the New York Stock Exchange’s listing
standards, a majority of our Board qualifies as independent. Our
articles of incorporation also require that any determination to
be made by our Board in connection with any matter presenting a
conflict of interest for any officer of Boykin, or for any
Boykin director who is not an independent director, be made by
our independent directors.
We have made available on our website at
www.boykinlodging.com copies of the charters of the
audit, compensation and corporate governance and nominating
committees of the Board of Directors, our code of ethics and our
corporate governance guidelines. Copies of these documents are
available in print to any shareholder who requests them.
Requests should be sent to Boykin Lodging Company, Guildhall
Building, Suite 1500, 45 W. Prospect Avenue,
Cleveland, Ohio, 44115, Attn: Investor Relations.
|
|
|
(d) Financial Information About Foreign and Domestic
Operations and Export Sales |
All of our operations are conducted in the United States.
|
|
|
(e) Available Information |
We maintain a website at www.boykinlodging.com. We make
available free of charge on our website our filings with the
Securities and Exchange Commission, including our annual reports
on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K and amendments to those reports filed
or furnished pursuant to Section 13(a) or 15(d) of the
Securities and Exchange Act of 1934, as amended, as soon as
reasonably practicable after we electronically file such
material with the Securities and Exchange Commission.
11
As of March 11, 2005, we own interests in the following 24
hotel properties:
| |
|
|
|
|
|
|
| |
|
Number | |
|
|
| Property |
|
of Rooms | |
|
Location |
| |
|
| |
|
|
|
Doubletree Portland, Lloyd Center
|
|
|
476 |
|
|
Portland, OR |
|
Doubletree Sacramento
|
|
|
448 |
|
|
Sacramento, CA |
|
Doubletree Omaha Downtown
|
|
|
414 |
|
|
Omaha, NE |
|
Doubletree Kansas City
|
|
|
388 |
|
|
Kansas City, MO |
|
Doubletree Hotel & Executive Meeting Center – Berkeley
Marina
|
|
|
369 |
|
|
Berkeley, CA |
|
Doubletree Boise Riverside
|
|
|
304 |
|
|
Boise, ID |
|
Doubletree Colorado Springs
|
|
|
299 |
|
|
Colorado Springs, CO |
|
Doubletree San Antonio
|
|
|
290 |
|
|
San Antonio, TX |
|
Cleveland Airport Marriott
|
|
|
375 |
|
|
Cleveland, OH |
|
Buffalo Marriott
|
|
|
356 |
|
|
Buffalo, NY |
|
Columbus North Marriott
|
|
|
300 |
|
|
Columbus, OH |
|
Meadowlands-Lyndhurst Courtyard by Marriott
|
|
|
227 |
|
|
Lyndhurst, NJ |
|
High Point Radisson
|
|
|
251 |
|
|
High Point, NC |
|
Radisson Suite Beach Resort – Marco Island
|
|
|
233 |
|
|
Marco Island, FL |
|
Holiday Inn Crabtree
|
|
|
176 |
|
|
Raleigh, NC |
|
Embassy Suites Southfield
|
|
|
239 |
|
|
Southfield, MI |
|
Hampton Inn San Diego Airport/ Sea World
|
|
|
199 |
|
|
San Diego, CA |
|
Melbourne Hilton Oceanfront
|
|
|
118 |
|
|
Melbourne, FL |
|
Clarion Hotel & Conference Center
|
|
|
208 |
|
|
Yakima, WA |
|
Melbourne Quality Suites
|
|
|
208 |
|
|
Melbourne, FL |
|
French Lick Springs Resort and Spa
|
|
|
485 |
|
|
French Lick, IN |
|
Hotel 71
|
|
|
454 |
|
|
Chicago, IL |
|
Pink Shell Beach Resort & Spa
|
|
|
192 |
|
|
Fort Myers, FL |
|
Best Western Fort Myers Island Gateway Hotel
|
|
|
157 |
|
|
Fort Myers, FL |
| |
|
|
|
|
|
| |
|
|
7,166 |
|
|
|
| |
|
|
|
|
|
Pursuant to a shared services and office space agreement, we
were reimbursed approximately $12,100 per month in 2004 from BMC
and its subsidiaries for the right to use certain office space
located in Cleveland, Ohio and receive certain related services.
|
|
|
Item 3. Legal Proceedings |
We are subject to various legal proceedings and claims that
arise in the ordinary course of business. In our opinion, the
amount of any ultimate liability with respect to these actions
will not materially affect our financial statements.
|
|
|
Item 4. Submission of Matters to a Vote of Security
Holders |
There were no matters submitted to a vote of security holders
during the fourth quarter of the fiscal year covered by this
Annual Report on Form 10-K.
12
PART II
|
|
|
Item 5. Market for Registrant’s Common Equity,
Related Shareholder Matters and Issuer Purchases of Equity
Securities |
Our common shares are traded on the New York Stock Exchange
under the symbol “BOY.” The following table sets forth
for the indicated periods the high and low sales prices for the
common shares and the cash distributions declared per share:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Price Range | |
|
Cash Distributions | |
| |
|
High | |
|
Low | |
|
Declared Per Share | |
| |
|
| |
|
| |
|
| |
|
Year Ended December 31, 2003:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
First Quarter
|
|
$ |
9.42 |
|
|
$ |
6.65 |
|
|
$ |
.18 |
|
| |
Second Quarter
|
|
$ |
8.58 |
|
|
$ |
7.03 |
|
|
|
— |
|
| |
Third Quarter
|
|
$ |
8.47 |
|
|
$ |
7.44 |
|
|
|
— |
|
| |
Fourth Quarter
|
|
$ |
9.53 |
|
|
$ |
7.82 |
|
|
|
— |
|
|
Year Ended December 31, 2004:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
First Quarter
|
|
$ |
9.86 |
|
|
$ |
9.03 |
|
|
|
— |
|
| |
Second Quarter
|
|
$ |
9.52 |
|
|
$ |
7.00 |
|
|
|
— |
|
| |
Third Quarter
|
|
$ |
8.74 |
|
|
$ |
7.38 |
|
|
|
— |
|
| |
Fourth Quarter
|
|
$ |
9.19 |
|
|
$ |
8.17 |
|
|
|
— |
|
|
|
|
(b) Shareholder Information |
As of March 2, 2005, there were 866 record holders of our
common shares, including shares held in “street name”
by nominees who are record holders, and approximately 8,200
beneficial owners.
In order to comply with certain requirements related to our
qualification as a REIT, our charter limits the number of common
shares that may be owned by any single person or affiliated
group to 9% of the outstanding common shares.
|
|
|
(c) Dividend and Distribution Information |
The declaration and payment of future dividends related to our
common shares is at the discretion of our Board of Directors and
depends on, among other things, our receipt of cash
distributions from the Partnership, our results of operations,
level of indebtedness and restrictions imposed by our lenders,
any contractual restrictions, the annual dividend requirements
under the REIT provisions of the Internal Revenue Code, economic
conditions and other factors considered relevant by our Board.
The level of our cash dividends is determined by the Board of
Directors in light of our cash needs, including our requirements
for investing and financing activities and other anticipated
cash needs.
As a result of the economic downturn in the hotel industry that
was exacerbated by the terrorist attacks on September 11,
2001, and its adverse impact on our cash flow from operations,
our Board of Directors suspended our fourth-quarter 2001 and
first and second-quarter 2002 dividends. In August 2002, our
Board of Directors reinstated a dividend on our common shares by
declaring a dividend of $0.18 per common share for the third
quarter of 2002. Dividends were also declared for the fourth
quarter of 2002 and first quarter of 2003 at the same level. The
fourth quarter dividend was paid in January and the first
quarter dividend was paid in May 2003. No further common share
dividends were declared or paid for the remainder of 2003 or in
2004. Based upon the improving performance of the hotels
anticipated in 2005, we will continue to review our cash flow
and taxable income projections throughout the year and may
consider recommending to the Board the reinstatement of a common
share dividend during 2005.
13
|
|
|
(d) Securities Authorized for Issuance Under Equity
Compensation Plans |
The following sets forth the securities authorized for issuance
under our equity compensation plans as of December 31, 2004:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Number of securities | |
| |
|
|
|
|
|
remaining available for | |
| |
|
|
|
|
|
future issuance under | |
| |
|
Number of securities to | |
|
Weighted-average | |
|
equity compensation plans | |
| |
|
be issued upon exercise of | |
|
exercise price of | |
|
(excluding securities | |
| |
|
outstanding options, | |
|
outstanding options, | |
|
reflected in column (a)) | |
| |
|
warrants and rights | |
|
warrants and rights | |
|
|
| Plan category |
|
(a) | |
|
(b) | |
|
(c) | |
| |
|
| |
|
| |
|
| |
|
Equity compensation plans approved by security holders
|
|
|
839,139 |
* |
|
$ |
11.24 |
** |
|
|
196,149 |
|
|
Equity compensation plans not approved by security holders
|
|
|
None |
|
|
|
None |
|
|
|
None |
|
| |
|
|
|
|
|
|
|
|
|
| |
Total
|
|
|
839,139 |
|
|
$ |
11.24 |
|
|
|
196,149 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Includes 613,006 options which are exercisable as of
December 31, 2004. |
| |
**
|
|
The weighted-average exercise price of the 613,006 exercisable
options as of December 31, 2004 is $12.21. |
|
|
|
(e) Sales of Unregistered Securities |
Not applicable.
|
|
|
(f) Use of Proceeds from Sales of Registered
Securities |
Not applicable.
|
|
|
(g) Purchases of Equity Securities by the Issuer and
Affiliated Purchasers |
Not applicable.
|
|
|
Item 6. Selected Financial Data |
The following tables set forth selected historical operating and
financial data for Boykin Lodging Company.
The following selected financial data should be read in
conjunction with “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” and all
of the financial statements and notes thereto included elsewhere
in this Form 10-K. The financial data related to 2004, 2003
and 2002 is not directly comparable to the prior years as a
result of our implementation of TRS structures in 2002.
Subsequent to the transactions, our financial results include
the operating results of the hotels under the TRS structure
whereas in prior years, only lease revenue was recorded for the
properties.
14
BOYKIN LODGING COMPANY
SELECTED HISTORICAL OPERATING AND FINANCIAL DATA
(AMOUNTS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Year Ended December 31, | |
| |
|
2004 | |
|
2003 | |
|
2002 | |
|
2001 | |
|
2000 | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
OPERATING DATA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Hotel, lease and other operating revenue
|
|
$ |
212,843 |
|
|
$ |
194,672 |
|
|
$ |
205,037 |
|
|
$ |
57,247 |
|
|
$ |
67,857 |
|
| |
|
Revenues from condominium development and unit sales
|
|
|
7,541 |
|
|
|
36,883 |
|
|
|
8,715 |
|
|
|
— |
|
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Total revenues
|
|
|
220,384 |
|
|
|
231,555 |
|
|
|
213,752 |
|
|
|
57,247 |
|
|
|
67,857 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Property taxes, insurance, hotel operations, general and other
|
|
|
183,032 |
|
|
|
168,430 |
|
|
|
164,997 |
|
|
|
14,472 |
|
|
|
14,152 |
|
| |
|
Cost of condominium development and unit sales
|
|
|
5,509 |
|
|
|
24,645 |
|
|
|
6,474 |
|
|
|
— |
|
|
|
— |
|
| |
|
Real estate related depreciation and amortization
|
|
|
24,017 |
|
|
|
26,085 |
|
|
|
23,377 |
|
|
|
22,309 |
|
|
|
22,781 |
|
| |
|
Impairment of real estate
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
13,613 |
|
|
|
3,600 |
|
| |
|
Costs associated with termination of leases
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
14,575 |
|
|
|
— |
|
| |
|
Gain on property insurance recovery
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(407 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Operating income (loss)
|
|
|
7,826 |
|
|
|
12,395 |
|
|
|
18,904 |
|
|
|
(7,722 |
) |
|
|
27,731 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Other income
|
|
|
8 |
|
|
|
39 |
|
|
|
80 |
|
|
|
137 |
|
|
|
410 |
|
| |
|
Interest income
|
|
|
387 |
|
|
|
602 |
|
|
|
126 |
|
|
|
312 |
|
|
|
315 |
|
| |
|
Interest expense
|
|
|
(13,629 |
) |
|
|
(14,923 |
) |
|
|
(18,068 |
) |
|
|
(19,639 |
) |
|
|
(22,380 |
) |
| |
|
Amortization of deferred financing costs
|
|
|
(1,367 |
) |
|
|
(1,906 |
) |
|
|
(2,105 |
) |
|
|
(1,129 |
) |
|
|
(1,146 |
) |
| |
|
Minority interest in (earnings) loss of joint ventures and
operating partnership
|
|
|
1,738 |
|
|
|
1,813 |
|
|
|
847 |
|
|
|
2,291 |
|
|
|
(220 |
) |
| |
|
Equity in income (loss) of unconsolidated joint ventures
|
|
|
(814 |
) |
|
|
(870 |
) |
|
|
(2,040 |
) |
|
|
589 |
|
|
|
68 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Income (loss) before gain (loss) on sale/disposal of assets,
discontinued operations and cumulative effect of change in
accounting principle
|
|
|
(5,851 |
) |
|
|
(2,850 |
) |
|
|
(2,256 |
) |
|
|
(25,161 |
) |
|
|
4,778 |
|
| |
|
Gain (loss) on sale/disposal of assets
|
|
|
3,157 |
|
|
|
954 |
|
|
|
(16 |
) |
|
|
240 |
|
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Income (loss) before discontinued operations and cumulative
effect of change in accounting principle
|
|
|
(2,694 |
) |
|
|
(1,896 |
) |
|
|
(2,272 |
) |
|
|
(24,921 |
) |
|
|
4,778 |
|
| |
|
Discontinued operations, net of minority interest
|
|
|
2,534 |
|
|
|
(1,530 |
) |
|
|
1,901 |
|
|
|
(4,276 |
) |
|
|
2,952 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Income (loss) before cumulative effect of change in accounting
principle
|
|
|
(160 |
) |
|
|
(3,426 |
) |
|
|
(371 |
) |
|
|
(29,197 |
) |
|
|
7,730 |
|
| |
|
Cumulative effect of change in accounting principle, net of
minority interest
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(373 |
) |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Net income (loss)
|
|
|
(160 |
) |
|
|
(3,426 |
) |
|
|
(371 |
) |
|
|
(29,570 |
) |
|
|
7,730 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Preferred dividends
|
|
|
(4,751 |
) |
|
|
(4,751 |
) |
|
|
(1,109 |
) |
|
|
— |
|
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Net income (loss) attributable to common shareholders
|
|
$ |
(4,911 |
) |
|
$ |
(8,177 |
) |
|
$ |
(1,480 |
) |
|
$ |
(29,570 |
) |
|
$ |
7,730 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Year Ended December 31, | |
| |
|
2004 | |
|
2003 | |
|
2002 | |
|
2001 | |
|
2000 | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
EARNINGS PER SHARE:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Net income (loss) attributable to common shareholders before
discontinued operations and cumulative effect of change in
accounting principle:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Basic
|
|
$ |
(0.43 |
) |
|
$ |
(0.38 |
) |
|
$ |
(0.20 |
) |
|
$ |
(1.45 |
) |
|
$ |
0.28 |
|
| |
|
Diluted
|
|
$ |
(0.43 |
) |
|
$ |
(0.38 |
) |
|
$ |
(0.20 |
) |
|
$ |
(1.45 |
) |
|
$ |
0.28 |
|
| |
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Basic
|
|
$ |
0.15 |
|
|
$ |
(0.09 |
) |
|
$ |
0.11 |
|
|
$ |
(0.25 |
) |
|
$ |
0.17 |
|
| |
|
Diluted
|
|
$ |
0.14 |
|
|
$ |
(0.09 |
) |
|
$ |
0.11 |
|
|
$ |
(0.25 |
) |
|
$ |
0.17 |
|
| |
Net income (loss) attributable to common shareholders before
cumulative effect of change in accounting principle:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Basic
|
|
$ |
(0.28 |
) |
|
$ |
(0.47 |
) |
|
$ |
(0.09 |
) |
|
$ |
(1.70 |
) |
|
$ |
0.45 |
|
| |
|
Diluted
|
|
$ |
(0.28 |
) |
|
$ |
(0.47 |
) |
|
$ |
(0.09 |
) |
|
$ |
(1.70 |
) |
|
$ |
0.45 |
|
| |
Net income (loss) attributable to common shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Basic
|
|
$ |
(0.28 |
) |
|
$ |
(0.47 |
) |
|
$ |
(0.09 |
) |
|
$ |
(1.72 |
) |
|
$ |
0.45 |
|
| |
|
Diluted
|
|
$ |
(0.28 |
) |
|
$ |
(0.47 |
) |
|
$ |
(0.09 |
) |
|
$ |
(1.72 |
) |
|
$ |
0.45 |
|
| |
Weighted average number of common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Basic
|
|
|
17,426 |
|
|
|
17,336 |
|
|
|
17,248 |
|
|
|
17,176 |
|
|
|
17,137 |
|
| |
|
Diluted
|
|
|
17,553 |
|
|
|
17,470 |
|
|
|
17,383 |
|
|
|
17,281 |
|
|
|
17,305 |
|
|
HISTORICAL BALANCE SHEET DATA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Investment in hotel properties, net
|
|
$ |
410,795 |
|
|
$ |
409,876 |
|
|
$ |
376,003 |
|
|
$ |
399,954 |
|
|
$ |
432,037 |
|
| |
Assets of discontinued operations, net
|
|
|
— |
|
|
|
82,784 |
|
|
|
119,133 |
|
|
|
122,151 |
|
|
|
135,156 |
|
| |
Total assets
|
|
|
477,380 |
|
|
|
591,292 |
|
|
|
575,531 |
|
|
|
559,218 |
|
|
|
600,593 |
|
| |
Total debt
|
|
|
199,985 |
|
|
|
282,019 |
|
|
|
241,082 |
|
|
|
285,226 |
|
|
|
277,696 |
|
| |
Liabilities of discontinued operations
|
|
|
— |
|
|
|
19,772 |
|
|
|
40,725 |
|
|
|
36,413 |
|
|
|
37,086 |
|
| |
Minority interest
|
|
|
10,989 |
|
|
|
12,462 |
|
|
|
15,176 |
|
|
|
16,933 |
|
|
|
14,709 |
|
| |
Shareholders’ equity
|
|
|
227,448 |
|
|
|
231,541 |
|
|
|
240,291 |
|
|
|
202,646 |
|
|
|
253,266 |
|
|
OTHER DATA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Funds from operations attributable to common shareholders
(FFO)(a)(c)
|
|
$ |
9,742 |
|
|
$ |
18,275 |
|
|
$ |
25,391 |
|
|
$ |
(2,635 |
) |
|
$ |
35,579 |
|
| |
Earnings before interest, taxes, depreciation and amortization
(EBITDA)(b)(c)
|
|
$ |
32,807 |
|
|
$ |
45,629 |
|
|
$ |
54,099 |
|
|
$ |
21,639 |
|
|
$ |
65,837 |
|
| |
Net cash provided by operating activities
|
|
$ |
42,640 |
|
|
$ |
2,173 |
|
|
$ |
39,188 |
|
|
$ |
34,043 |
|
|
$ |
43,400 |
|
| |
Net cash provided by (used in) investing activities
|
|
$ |
63,527 |
|
|
$ |
(23,783 |
) |
|
$ |
(11,985 |
) |
|
$ |
(14,798 |
) |
|
$ |
(23,109 |
) |
| |
Net cash provided by (used in) financing activities
|
|
$ |
(106,659 |
) |
|
$ |
10,170 |
|
|
$ |
(5,360 |
) |
|
$ |
(19,810 |
) |
|
$ |
(20,087 |
) |
| |
Cash dividends declared — common shares
|
|
|
— |
|
|
$ |
3,174 |
|
|
$ |
6,297 |
|
|
$ |
19,030 |
|
|
$ |
28,889 |
|
| |
Weighted average number of common shares and units outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Basic
|
|
|
20,144 |
|
|
|
20,055 |
|
|
|
19,966 |
|
|
|
18,467 |
|
|
|
18,428 |
|
| |
|
Diluted
|
|
|
20,271 |
|
|
|
20,188 |
|
|
|
20,101 |
|
|
|
18,572 |
|
|
|
18,596 |
|
|
|
|
|
(a) |
|
The White Paper on Funds From Operations approved by the Board
of Governors of the National Association of Real Estate
Investment Trusts (“NAREIT”) in April 2002 defines FFO
as net income (loss) |
16
|
|
|
|
|
|
(computed in accordance with GAAP), excluding gains (or losses)
from sales of properties, plus real estate related depreciation
and amortization, and after comparable adjustments for our
portion of these items related to unconsolidated entities and
joint ventures. We believe that FFO is helpful as a measure of
the performance of an equity REIT because it provides investors
and management with another indication of the Company’s
performance prior to deduction of real estate related
depreciation and amortization. |
| |
|
|
|
We compute FFO in accordance with our interpretation of
standards established by NAREIT which may not be comparable to
FFO reported by other REITs that do not define the term in
accordance with the current NAREIT definition or that interpret
the NAREIT definition differently than us. FFO does not
represent cash generated from operating activities as determined
by GAAP and should not be considered as an alternative to GAAP
net income as an indication of our financial performance or to
cash flow from operating activities as determined by GAAP as a
measure of our liquidity, nor is it indicative of funds
available to fund our cash needs, including our ability to make
cash distributions. |
The following is a reconciliation between net income (loss) and
FFO (in thousands):
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
2004 | |
|
2003 | |
|
2002 | |
|
2001 | |
|
2000 | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Net income (loss)
|
|
$ |
(160 |
) |
|
$ |
(3,426 |
) |
|
$ |
(371 |
) |
|
$ |
(29,570 |
) |
|
$ |
7,730 |
|
|
Minority interest
|
|
|
803 |
|
|
|
(3,319 |
) |
|
|
(507 |
) |
|
|
(2,999 |
) |
|
|
860 |
|
|
Real estate related depreciation and amortization
|
|
|
24,017 |
|
|
|
26,085 |
|
|
|
23,377 |
|
|
|
22,309 |
|
|
|
22,781 |
|
|
Real estate related depreciation and amortization included in
discontinued operations
|
|
|
2,602 |
|
|
|
5,632 |
|
|
|
6,797 |
|
|
|
6,165 |
|
|
|
7,593 |
|
|
(Gain) loss on sale/disposal of assets
|
|
|
(13,065 |
) |
|
|
(1,724 |
) |
|
|
16 |
|
|
|
(240 |
) |
|
|
— |
|
|
(Gain) loss on sale/disposal of assets included in discontinued
operations
|
|
|
(15 |
) |
|
|
(550 |
) |
|
|
2 |
|
|
|
— |
|
|
|
— |
|
|
Cumulative effect of change in accounting principle
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
373 |
|
|
|
— |
|
|
Gain on property insurance recovery
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(407 |
) |
|
Equity in (income) loss of unconsolidated joint ventures
|
|
|
814 |
|
|
|
870 |
|
|
|
2,040 |
|
|
|
(589 |
) |
|
|
(68 |
) |
|
FFO adjustment related to joint ventures
|
|
|
1,016 |
|
|
|
2,324 |
|
|
|
(852 |
) |
|
|
1,718 |
|
|
|
(229 |
) |
|
Preferred dividends declared
|
|
|
(4,751 |
) |
|
|
(4,751 |
) |
|
|
(1,109 |
) |
|
|
— |
|
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funds from operations after preferred dividends
|
|
|
11,261 |
|
|
|
21,141 |
|
|
|
29,393 |
|
|
|
(2,833 |
) |
|
|
38,260 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Funds from operations related to minority interest
|
|
|
1,519 |
|
|
|
2,866 |
|
|
|
4,002 |
|
|
|
(198 |
) |
|
|
2,681 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funds from operations attributable to common shareholders
|
|
$ |
9,742 |
|
|
$ |
18,275 |
|
|
$ |
25,391 |
|
|
$ |
(2,635 |
) |
|
$ |
35,579 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(b)
|
|
We believe that EBITDA is helpful to investors and management as
a measure of the performance of the Company because it provides
an indication of the operating performance of the properties
within the portfolio and is not impacted by the capital
structure of the REIT. |
17
The following is a reconciliation between operating income
(loss) and EBITDA (in thousands):
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
2004 | |
|
2003 | |
|
2002 | |
|
2001 | |
|
2000 | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Operating income (loss)
|
|
$ |
7,826 |
|
|
$ |
12,395 |
|
|
$ |
18,904 |
|
|
$ |
(7,722 |
) |
|
$ |
27,731 |
|
| |
Other income
|
|
|
8 |
|
|
|
39 |
|
|
|
80 |
|
|
|
137 |
|
|
|
410 |
|
| |
Interest income
|
|
|
387 |
|
|
|
602 |
|
|
|
126 |
|
|
|
312 |
|
|
|
315 |
|
| |
Real estate related depreciation and amortization
|
|
|
24,017 |
|
|
|
26,085 |
|
|
|
23,377 |
|
|
|
22,309 |
|
|
|
22,781 |
|
| |
EBITDA attributable to discontinued operations
|
|
|
(1,959 |
) |
|
|
2,783 |
|
|
|
11,060 |
|
|
|
3,534 |
|
|
|
13,354 |
|
| |
Company’s share of EBITDA of unconsolidated joint ventures
|
|
|
2,713 |
|
|
|
2,667 |
|
|
|
724 |
|
|
|
2,784 |
|
|
|
1,428 |
|
| |
EBITDA applicable to joint venture minority interest
|
|
|
(185 |
) |
|
|
1,058 |
|
|
|
(172 |
) |
|
|
285 |
|
|
|
(182 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
EBITDA
|
|
$ |
32,807 |
|
|
$ |
45,629 |
|
|
$ |
54,099 |
|
|
$ |
21,639 |
|
|
$ |
65,837 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(c)
|
|
Neither FFO nor EBITDA represent cash generated from operating
activities as determined by GAAP and neither should be
considered as an alternative to GAAP net income as an indication
of the Company’s financial performance or to cash flow from
operating activities as determined by GAAP as a measure of
liquidity, nor is either indicative of funds available to fund
cash needs, including the ability to make cash distributions.
FFO and EBITDA may include funds that may not be available for
the Company’s discretionary use due to functional
requirements to conserve funds for capital expenditures and
property acquisitions, and other commitments and uncertainties. |
18
|
|
|
Item 7. Management’s Discussion and Analysis
of Financial Condition and Results of Operations |
Boykin Lodging Company (“Boykin”), an Ohio
corporation, is a real estate investment trust
(“REIT”) that was formed and completed an initial
public offering in 1996 to continue and expand the nearly
40-year history of hotel ownership, acquisition, redevelopment
and repositioning activities of its predecessors, Boykin
Management Company and its affiliates. Boykin Hotel Properties,
L.P., an Ohio limited partnership (the “Partnership”),
is the operating partnership that transacts business and holds
the direct and indirect ownership interests in Boykin’s
hotels. As of March 2, 2005, Boykin has an 85.4% ownership
interest in, is the sole general partner of and does all its
business through the Partnership.
Since our initial public offering, we have raised capital
through a combination of common and preferred share issuances,
various debt financings, capital from strategic joint venture
partners and cash flow generated from operations.
At the end of 2004, we owned interests in 24 hotels containing a
total of 7,209 guestrooms located in 16 different states. During
February 2005, 43 units comprised of the two-low rise buildings
at the Pink Shell Beach Resort & Spa were demolished to make
way for Captiva Villas. Therefore, as of March 11, 2005, we
owned interests in 24 hotels containing 7,166 guestrooms located
in 16 different states.
|
|
|
Critical Accounting Policies |
The critical accounting policies which we believe are the most
significant to fully understand and evaluate our reported
financial results include the following:
|
|
|
| |
• |
Investment in Hotel Properties – Hotel
properties are stated at cost, net of any impairment charges,
and are depreciated using the straight-line method over
estimated useful lives ranging from ten to 35 years for
buildings and improvements and three to 20 years for
furniture, fixtures and equipment. |
|
|
| |
We review our hotel properties for impairment whenever events or
changes in circumstances indicate the carrying value of the
hotel properties may not be recoverable. Events or circumstances
that may cause a review include, but are not limited to, adverse
changes in the demand for lodging at the properties due to
declining national or local economic conditions, new hotel
construction in markets where the hotels are located or changes
in the expected holding period of the property. When such
conditions exist, management performs an analysis to determine
if the estimated undiscounted future cash flows from operations
and the proceeds from the ultimate disposition of a hotel
property are equal to or exceed its carrying value. If the
estimated undiscounted future cash flows are less than the
carrying amount of the asset, an adjustment to reduce the
carrying amount to the related hotel property’s estimated
fair market value is recorded and an impairment loss recognized. |
| |
| |
In 2004, we recorded a charge of $4.3 million for the
impairment of real estate on the Ramada Inn Bellevue Center due
to a change in the intended holding period of the property. In
2003, we recorded a charge of $2.8 million for impairment of
real estate on our Holiday Inn Minneapolis West, as a result of
a change in management’s intended holding period of the
property. Pursuant to the terms of the joint venture which owned
the property, over 40% of this charge was allocable to the joint
venture’s minority interest partner. There were no charges
recorded for impairment of real estate in 2002. As of
December 31, 2004, we did not believe that there were any
factors or circumstances indicating impairment of any other of
our investments in hotel properties. |
| |
| |
We estimate the fair market values of our properties through a
combination of comparable property sales, replacement cost and
cash flow analysis taking into account each property’s
expected cash flow generated from operations, holding period and
ultimate proceeds from disposition. In projecting the expected
cash flows from operations of the asset, we base our estimates
on future projected earnings before interest expense, income
taxes, depreciation and amortization, or EBITDA, and deduct
expected capital expenditure requirements. We then apply growth
assumptions to project these amounts over the expected holding
period of the asset. Our growth assumptions are based on
estimated changes in room rates and expenses and the demand for
lodging at our properties, as impacted by local and national
economic conditions and estimated or known future new hotel
supply. The estimated proceeds from disposition are judgmentally
determined based on a combination of anticipated cash flow in
the year of disposition, terminal capitalization rate, ratio of
selling price to gross hotel revenues and selling price per room. |
19
|
|
| |
If actual conditions differ from those in our assumptions, the
actual results of each asset’s future operations and fair
market value could be significantly different from the estimated
results and value used in our analysis. Our operating results
are also subject to the risks set forth under Items 1(c) and 7
of this Form 10-K. |
|
|
| |
Hotel revenues – Hotel revenues, including
room, food, beverage and other hotel revenues, are recognized as
the related services are delivered. Ongoing credit evaluations
are performed and an allowance for potential credit losses is
provided against the portion of accounts receivable that is
estimated to be uncollectible. |
| |
| |
Lease revenue – Percentage lease revenue is
based upon the room, food and beverage and other revenues of our
hotels. |
| |
| |
Hotel Condominium revenues– |
|
|
| |
Percentage of completion – In 2003, we began
recognizing revenue related to the White Sand Villas project
under the percentage of completion method. Condominium project
revenues and expenses are recognized on the percentage of
completion method upon satisfaction of the following criteria:
(a) construction is determined to be beyond a preliminary
stage, (b) the buyer is not entitled to a refund except for
nondelivery of the unit, (c) sufficient units are under
binding contract to assure the entire property will not revert
to rental property, (d) sales prices have been determined
to be collectible, and (e) aggregate sales proceeds and
costs can be reasonably estimated. In 2003 and 2004, revenue was
recognized under percentage of completion accounting as the
project had satisfied the criteria outlined above. Percentage of
completion accounting involves the use of estimates for the
relation of revenues on sold units to total revenues of the
project and for total cost of the project. The sales of all of
the 91 available units closed in 2004, and the proceeds had been
collected; therefore, all project revenues have been recognized
as of December 31, 2004. White Sand Villas unit owners
contract with the resort to allow their unused room nights to be
rented out by the resort as hotel rooms. |
| |
| |
Sales of condominium units – During 2001, we
completed a renovation of a 60-unit tower at the Pink Shell
Beach Resort. These renovated units were sold as Sanibel View
Villas Condominiums; the revenue related to the sales was
recorded upon closing of the sales. As of December 31,
2003, we had closed on the sale of all 59 of the available units
within the tower and all of the unit owners have contracted with
us to allow their unused room nights to be rented out as hotel
rooms. |
| |
| |
The related gross rental income generated by the units put back
to the resort by contract is recorded by the resort and included
in hotel revenues within the consolidated financial statements.
Under the terms of their contracts, a percentage of the gross
rental income of each unit is to be remitted to the respective
unit owner. The remitted amounts are recorded as expenses within
the property taxes, insurance and other line of the consolidated
financial statements. |
|
|
| |
Insurance Recoveries – In 2003, we disposed of
certain assets due to water infiltration remediation activities.
Property insurance proceeds received in 2003 and 2004 in excess
of the net book value of the disposed assets are recorded within
the gain (loss) on sale/disposal of assets within the
consolidated financial statements. Advances on our business
interruption insurance claim related to the period in which the
remediation activities occurred are recorded as other hotel
revenues within the consolidated financial statements. |
| |
| |
Since September 2004, our two hotels located in Melbourne,
Florida have been closed due to damage sustained from Hurricane
Frances. We have recorded estimated business interruption
insurance recoveries in the amount of the loss sustained by the
hotels since the storm. These estimates are recorded as other
hotel revenues within the consolidated financial statements.
Estimated property insurance recoveries have been recorded as
gain on sale/disposal of assets within the consolidated
financial statements to the extent we experienced a loss on the
writeoff of the damaged or destroyed assets. |
| |
| |
As other property insurance claims are filed for repair work
done at the properties, we record estimated recoveries to offset
the costs incurred, less appropriate deductibles. |
|
|
|
| |
• |
Income Tax Valuation Allowance. Upon the effective date
of the establishment of Boykin’s taxable REIT subsidiaries
(“TRSs”), the subsidiaries became subject to federal
and state income taxes. Boykin’s TRSs |
20
|
|
|
| |
|
account for income taxes in accordance with the provisions of
SFAS No. 109, “Accounting for Income Taxes.” As
of December 31, 2004, Boykin’s TRSs have a deferred
tax asset of approximately $10.2 million, prior to any
valuation allowance, related to the assumption of the retained
deficit of Westboy as well as the operating losses of the TRSs
and their subsidiaries. Boykin’s TRSs have recorded a 100%
valuation allowance against this asset due to the uncertainty of
realization of the deferred tax asset thus no provision or
benefit from income taxes is reflected in the accompanying
consolidated statements of operations. |
Our significant accounting policies are more fully described in
Note 2 to Boykin Lodging Company’s Notes to Consolidated
Financial Statements included within this Annual Report on
Form 10-K.
|
|
|
December 31, 2004 Compared to December 31, 2003 |
In accordance with the provisions of Statement of Financial
Accounting Standards (“SFAS”) No. 144,
“Accounting for the Impairment or Disposal of Long-Lived
Assets,” the assets and liabilities of the Doubletree
Portland Downtown Hotel, Marriott’s Hunt Valley Inn, the
Holiday Inn Minneapolis West, the Radisson Hotel Mount Laurel
and the Ramada Inn Bellevue Center as of December 31, 2003
have been classified as discontinued operations in the
accompanying financial statements. As such, the only material
changes in our financial condition as a result of the disposal
of the hotels in 2004 has been the removal of these segregated
assets and liabilities and the receipt of the cash in excess of
the paydown of the related debt instruments, of which a portion
was used to fund restricted cash balances.
As a result of the completion of the White Sand Villas and the
closing of the sale of the 91 available units during 2004,
outstanding accounts receivable related to the recognition of
revenue for the units based upon the percentage of completion
method decreased by more than $32.1 million. Release of
restricted cash related to deposits made on the pre-sales
(approximately $4.7 million at December 31, 2003) and
the remaining proceeds from the closing of the sale of the 91
units were used to repay the construction loan related to the
project ($13.2 million outstanding as of December 31,
2003) as well as to provide cash for general corporate purposes.
Additionally, approximately $7.8 million of payables
related to deposits received for pre-sales (whether or not used
to fund construction) were released upon closing of the units.
Included in accounts receivable as of December 31, 2004 is
$4.7 million of property damage and business interruption
insurance recoveries related to the two Melbourne properties
closed since Hurricane Frances struck the area in
September 2004.
The operating results of the properties sold in 2004 and 2003
are reflected in the financial statements as discontinued
operations for all periods presented.
|
|
|
Results of Operations Year Ended December 31, 2004
Compared to 2003 |
Total revenues from continuing operations decreased to
$220.4 million in 2004 from $231.6 million in 2003.
|
|
|
| |
• |
Hotel revenues increased $18.0 million from
$192.4 million in 2003 to $210.4 million in 2004 as a
result of the following: |
|
|
|
| |
• |
An increase of $10.8 million related to the inclusion of
the hotel revenue of the Marco Island property for a full year
in 2004 versus a partial year in 2003, as it was acquired in
August 2003; |
| |
| |
• |
A $3.3 million decrease in revenue contribution from the
two Melbourne, Florida properties as a result of their closure
after Hurricane Frances struck in early September; |
| |
| |
• |
The inclusion of approximately $2.3 million of business
interruption insurance recoveries within other hotel revenues
related to (a) a remediation project at a property which
left rooms out of service during 2003 and 2004 and (b) the
closure of the two Melbourne properties; and |
| |
| |
• |
An approximate 3.3% increase in revenue per available room
(“RevPAR”) from 2003 for the 18 consolidated
hotels which were open and operated under the TRS structure for
both full years of 2004 and 2003. The increase in RevPAR was the
result of an increase in occupancy levels of 1.9 points
combined with a 0.1% increase in the average daily rate. |
21
|
|
|
| |
• |
Revenues from condominium development and unit sales decreased
to $7.5 million in 2004 versus $36.9 million in 2003
as a result of the completion of the White Sand Villas
development project in 2004 and the completion of sales of
Sanibel View Villas units during 2003. |
Hotel operating expenses
|
|
|
| |
• |
In 2004, we incurred total hotel operating expenses, which
include hotel departmental expenses, indirect expenses and
management fees, of $159.1 million. The gross operating
profit of these hotels for the periods owned and operated under
a TRS totaled 24.4% in 2004 versus 24.2% for 2003. The hotels
experienced decreases in general and administrative expenses as
a percentage of revenues, offset by increases in franchise fees. |
Property Taxes, Insurance and Other
|
|
|
| |
• |
Total expenses related to property taxes, insurance and other of
$15.1 million recorded for 2004 increased $0.6 million
over 2003. The increase is primarily due to increased
contractual payments to owners of the condominiums at the Pink
Shell for use of their units as hotel rooms as a result of the
sellout of Sanibel View Villas in 2003 and the completion and
sales of the White Sand Villas tower in 2004. All unit owners in
each building contractually put their units back to the resort
for use as hotel rooms. In addition, a full year of taxes and
insurance expenses related to the Marco Island property are
recorded in 2004, as opposed to a partial year in 2003. |
Corporate general and administrative
|
|
|
| |
• |
Total expenses recorded for 2004 were $8.8 million compared
with 2003 expenses of $8.1 million primarily as a result of
additional staffing and third party services in maintaining
compliance with new federal laws and regulations addressing
corporate governance issues, including the Sarbanes-Oxley Act of
2002, and with the new listing requirements of the New York
Stock Exchange. |
Cost of condominium development and unit sales
|
|
|
| |
• |
Total expenses recorded for 2004 were $5.5 million compared
with $24.6 million in 2003 |
|
|
|
| |
• |
Amounts expensed under the percentage of completion method of
accounting for the White Sand Villas totaled $5.5 million
during 2004 versus $21.6 million in 2003. |
| |
| |
• |
2003 costs include $3.0 million related to the sale of
19 Sanibel View Villas units. |
Real estate related depreciation and amortization
|
|
|
| |
• |
Depreciation and amortization decreased approximately
$2.1 million in 2004 from 2003 as a result of: |
|
|
|
| |
• |
The inclusion of $3.4 million of accelerated depreciation
related to pending demolition and removal of two existing
buildings at the Pink Shell to make way for the new Captiva
Villas in 2003, |
| |
| |
• |
An additional $0.5 million of depreciation in 2004 related
to a full year of ownership of the Marco Island property, and |
| |
| |
• |
Increases in depreciation related to recent capital expenditures. |
Interest expense
|
|
|
| |
• |
Interest expense decreased approximately $1.3 million in
2004 from 2003 as a result of: |
|
|
|
| |
• |
A decrease in the weighted average interest rate due to the
expiration of a previously existing swap in 2003 which fixed
$83.0 million of our debt at 7.32% during the first six
months of 2003; and |
| |
| |
• |
An approximate 4% decline in our weighted average outstanding
debt during 2004. The decline was due to the application of
proceeds from property sales to reduce borrowings on the credit
facility as well as the scheduled amortization of the
$130.0 million term loan. |
Amortization of deferred financing costs
|
|
|
| |
• |
Amortization of deferred financing costs decreased approximately
$0.5 million to $1.4 million in 2004 primarily as a
result of the replacement of the previously existing credit
facility and a $45.0 million term loan with a new credit
facility in October 2003. The new facility had approximately
$2.0 million less of deferred costs to be amortized. |
22
Gain (loss) on sale/disposal of assets
|
|
|
| |
• |
Gain on sale/disposal of assets increased to $3.2 million
in 2004 from $1.0 million in 2003 primarily as a result of
additional property insurance recoveries received. |
Discontinued operations
|
|
|
| |
• |
Please refer to Note 4 of Boykin Lodging Company’s Notes to
Consolidated Financial Statements included within this Annual
Report on Form 10-K for a summary of discontinued
operations. Discontinued operations reflect the operations of
the properties disposed of during 2004 prior to their
sale/disposal. Included in 2004 discontinued operations is a
$4.3 million impairment charge related to the Ramada Inn
Bellevue Center and $2.1 million of minority interest
expense related to the joint venture partner as a result of the
sale of Marriott’s Hunt Valley Inn. Also included in 2004
discontinued operations is the net gain on sale/disposal of the
five properties of $8.4 million. |
Based upon the above, 2004 had a net loss attributable to common
shareholders of $4.9 million compared to the
$8.2 million loss for 2003.
Our FFO for 2004 was $9.7 million compared to
$18.3 million in 2003. For a detailed definition of FFO, a
reconciliation of net loss to FFO and a discussion of why we
believe FFO is a useful measure of a REIT’s financial
performance, please see Item 6 “Selected Financial
Data.”
|
|
|
Results of Operations Year Ended December 31, 2003
Compared to 2002 |
Total revenues from continuing operations increased to
$231.6 million in 2003 from $213.8 million in 2002.
|
|
|
| |
• |
Hotel revenues decreased $10.3 million from
$202.7 million in 2002 to $192.4 million in 2003 as a
result of the following: |
|
|
|
| |
• |
Increase of $2.7 million related to the inclusion of the
hotel revenue of the Marco Island property subsequent to its
acquisition in August 2003; offset by |
| |
| |
• |
An approximate 5.9% decrease in revenue per available room
(“RevPAR”) from 2002 for the 20 consolidated hotels
which were operated under the TRS structure for both full years
of 2003 and 2002. Comprising the decline in RevPAR was a drop in
occupancy levels of 2.8 points combined with a decrease in the
average daily rate of approximately 1.6%, primarily as a result
of the weak economy. |
|
|
|
| |
• |
Revenues from condominium development and unit sales increased
to $36.9 million in 2003 versus $8.7 million in 2002
as we started recognizing revenue under the percentage of
completion method in 2003 related to the White Sand Villas
project as certain thresholds regarding number of pre-sales and
progress on construction were met. Total revenue recognized in
2003 totaled $32.2 million. Additionally, 2003 revenues
include $4.7 million related to the sales of the remaining
19 Sanibel View Villas units whereas in 2002 there were revenues
of approximately $8.7 million related to the sales of 40
Sanibel View Villas units. |
Hotel operating expenses
|
|
|
| |
• |
In 2003, we incurred total hotel operating expenses, which
include hotel departmental expenses, indirect expenses and
management fees, of $145.8 million. This is related to the
costs associated with operating the 21 hotels under the TRS
structure for the full year 2003 as well as the expenses related
to the Marco Island property subsequent to acquisition. The
gross operating profit of these hotels for the periods owned and
operated under a TRS totaled 24.2% for 2003 versus 28.1% in
2002. The main drivers for the loss of gross profit margins
include increases in payroll and related employee costs and
benefits, insurance, food and energy. |
Property Taxes, Insurance and Other
|
|
|
| |
• |
Total expenses related to property taxes, insurance and other of
$14.5 million recorded for 2003 increased $1.6 million
over 2002. The addition of Marco Island accounted for
$0.3 million of this increase. Additionally, the portfolio
experienced an increase in insurance costs. |
Corporate general and administrative
|
|
|
| |
• |
Total expenses recorded for 2003 were $8.1 million compared
with 2002 expenses of $6.4 million as a result of increased
legal and professional fees, costs related to the exchange of
collateral for the $130.0 million loan and increased
directors and officers insurance costs. |
23
Cost of condominium development and unit sales
|
|
|
| |
• |
Total expenses recorded for 2003 were $24.6 million
compared with $6.5 million in 2002 |
|
|
|
| |
• |
Due to progress made on the White Sand Villas, amounts expensed
under the percentage of completion method of accounting totaled
$21.6 million |
| |
| |
• |
2003 costs include $3.0 million related to the sale of
19 Sanibel View Villas units where in 2002 costs totaled
$6.5 million. The decline in cost per unit was due to
depreciation taken on the units prior to sale. |
Real estate related depreciation and amortization
|
|
|
| |
• |
Depreciation and amortization in 2003 of $26.1 million
included $3.4 million of accelerated depreciation related
to pending demolition and removal of two existing buildings at
the Pink Shell to make way for the new Captiva Villas. |
| |
| |
• |
Depreciation and amortization in 2002 of $23.4 million
included $1.7 million of accelerated depreciation related
to the demolition and removal of the cottages at the Pink Shell
to make way for the new White Sand Villas building. |
| |
| |
• |
Disregarding these events, the depreciation and amortization for
2003 increased approximately $1.0 million as a result of
recent capital expenditures and the acquisition of the Marco
Island property in August 2003. |
Interest expense
|
|
|
| |
• |
Interest expense decreased approximately $3.1 million in
2003 from 2002 as a result of: |
|
|
|
| |
• |
A significant decrease in the weighted average outstanding
balance on our applicable secured credit facilities; |
| |
| |
• |
Approximately $42.0 million on the previously existing
$45.0 million term note was outstanding for just over
9 months during 2003 versus being outstanding at
$45.0 million for the first nine months of 2002 and
$42.0 million for the remaining months of 2002; |
| |
| |
• |
An average interest rate decline on the outstanding balance of
our $108.0 million term loan of approximately 60 basis
points; and |
| |
| |
• |
A declining outstanding principal balance on our
$130.0 million term loan as a result of the loan’s
amortization schedule. |
Equity in income (loss) of unconsolidated joint ventures
|
|
|
| |
• |
Our share of loss related to our unconsolidated joint ventures
totaled $0.9 million in 2003 versus $2.0 million in
2002 as both of the hotels we owned and accounted for as
unconsolidated joint ventures were in their ramp up periods
after major guestroom renovations. The primary driver behind
this change relates to our share of the joint venture which owns
Hotel 71. The hotel experienced a significant number of
room nights out of service related to its renovation in 2002;
subsequent to completion, these rooms were back in service and
due to the upgrade of the hotel, the property experienced higher
average daily room rates. Similarly, the total operating costs
of the property increased as a result of the increased number of
rooms occupied in 2003 compared with 2002. The depreciation
related to Hotel 71 in 2003 increased significantly over
2002 levels as the costs related to the renovation, which were
in excess of $20.0 million, began depreciating in late 2002
in conjunction with the completion of the renovation. |
Discontinued operations
|
|
|
| |
• |
Please refer to Note 4 of Boykin Lodging Company’s
Notes to Consolidated Financial Statements included within this
Annual Report on Form 10-K for a summary of discontinued
operations. Discontinued operations reflect the operations of
the properties disposed of during 2003 and 2004 prior to their
sale. Included in 2003 discontinued operations is the
$2.8 million impairment charge related to the Holiday Inn
Minneapolis West and the offsetting $1.2 million of the
charge that was allocated to the joint venture partner. Also
included in 2003 discontinued operations is the net gain on sale
of the five properties of $0.7 million. |
Distribution to preferred shareholders
|
|
|
| |
• |
Approximately $4.8 million of dividends related to the
outstanding preferred depositary shares were declared in 2003;
those dividends reduced net income attributable to common
shareholders. The preferred |
24
|
|
|
| |
|
shares were issued during the fourth quarter of 2002 and there
was approximately one quarter of this amount declared for 2002. |
Based upon the above, 2003 had a net loss attributable to common
shareholders of $8.2 million compared to the
$1.5 million loss for 2002.
Our FFO for 2003 was $18.3 million compared to
$25.4 million in 2002. For a detailed definition of FFO, a
reconciliation of net loss to FFO and a discussion of why we
believe FFO is a useful measure of a REIT’s financial
performance, please see Item 6 “Selected Financial
Data.”
|
|
|
Liquidity and Capital Resources |
Our principal source of cash to meet our cash requirements,
including dividends to shareholders, is our share of the
Partnership’s cash flow from the operations of the hotels
and condominium sales. Cash flow from hotel operations is
subject to all operating risks common to the hotel industry,
including, but not limited to:
|
|
|
| |
• |
Competition for guests from other hotels; |
| |
| |
• |
Adverse effects of general and local economic conditions; |
| |
| |
• |
Dependence on demand from business and leisure travelers, which
may be seasonal and which may be adversely impacted by health
and safety-related concerns; |
| |
| |
• |
Increases in energy costs, airline fares, and other expenses
related to travel, which may deter traveling; |
| |
| |
• |
Impact of the financial difficulties of the airline industry; |
| |
| |
• |
Increases in operating costs related to inflation and other
factors, including wages, benefits, insurance and energy; |
| |
| |
• |
Overbuilding in the hotel industry, especially in particular
markets; and |
| |
| |
• |
Actual or threatened acts of terrorism and actions taken against
terrorists that cause public concern about travel safety. |
The cash flow from condominium development is subject to risk
factors common to real estate sales and development, including,
but not limited to:
|
|
|
| |
• |
Competition from other condominium projects; |
| |
| |
• |
Construction delays; |
| |
| |
• |
Reliance on contractors and subcontractors; |
| |
| |
• |
Construction cost overruns; and |
| |
| |
• |
The ability of the condominium purchasers to secure financing. |
As of December 31, 2004, we had $13.5 million of
unrestricted cash and cash equivalents and $13.0 million of
restricted cash for the payment of capital expenditures, real
estate taxes, interest and insurance. There were outstanding
borrowings at year end totaling $193.5 million against our
two term notes payable.
We have a $60.0 million credit facility ($6.4 million
outstanding as of December 31, 2004) to fund acquisitions
of additional hotels, renovations and capital expenditures, and
for our working capital needs, subject to limitations contained
in the credit agreement. The borrowing base availability under
the credit facility was approximately $47.0 million at
December 31, 2004.
For information relating to the terms of our credit facility and
our term notes, please see Notes 5 and 6, respectively, of the
Notes to Consolidated Financial Statements of Boykin Lodging
Company included in this Annual Report on Form 10-K.
Our $130.0 million and $108.0 million term notes
payable are property-specific mortgages and have only financial
reporting covenants. The credit facility contains covenants
regarding overall leverage and debt service coverage. As of
December 31, 2004, we are in compliance with such covenants.
The remaining balance of the $108.0 million term note
matures in July 2005. We anticipate refinancing this obligation
by utilizing a combination of increased borrowing availability
under the credit facility and proceeds from additional secured
debt facilities.
25
We may seek to negotiate additional credit facilities,
replacement credit facilities, or we may issue debt instruments.
Any debt incurred or issued by us may be secured or unsecured,
long-term, medium-term or short-term, bear interest at a fixed
or variable rate, and be subject to such other terms as the
Board of Directors considers prudent. The availability of
borrowings under the credit facility is restrained by borrowing
base and loan-to-value limits, as well as other financial
performance covenants contained in the agreement. There can be
no assurance that funds will be available in anticipated amounts
from the credit facility.
Currently, we expect to continue to pay a regular quarterly
dividend on our preferred shares. The resumption of a common
dividend will depend upon the improving performance of our
hotels and other factors that our Board of Directors considers
relevant.
In 2005, we expect to spend approximately $18.0 million
related to capital expenditures at our consolidated hotels,
excluding the Pink Shell Beach Resort & Spa project
discussed below as well as the restoration of the Melbourne,
Florida properties. This amount includes planned refurbishments
and replacements at selected existing hotels. We expect to use
cash available from operations and restricted capital
expenditure reserves, as well as borrowings under our line of
credit, to fund our 2005 renovations. Current estimates are that
the aggregate cost of the repairs from the damage caused by the
hurricanes at our two Melbourne, Florida properties may exceed
$30 million.
We expect to commence construction of Captiva Villas at the Pink
Shell in mid-2005. We are currently talking to various lenders
regarding our financing options for the construction of Captiva
Villas.
We have considered our short-term (defined as one-year or less)
liquidity needs and the adequacy of our estimated cash flow from
operations and other expected liquidity sources to meet these
needs. We expect our principal short-term liquidity needs will
be to fund normal recurring expenses, debt service requirements,
scheduled debt maturities, distributions on the preferred shares
and any minimum distribution required to maintain our REIT
status. We anticipate that these needs will be met with cash
flows provided by operating activities, using availability under
the credit facility, proceeds from dispositions of non-core
assets and proceeds from additional financings. We also consider
capital improvements and property acquisitions as short-term
needs that can be funded either with cash flows provided by
operating activities, by utilizing availability under our credit
facility, or from proceeds from additional financings.
We expect to meet long-term (defined as greater than one year)
liquidity requirements such as property acquisitions, scheduled
debt maturities, major renovations, development projects and
other nonrecurring capital improvements utilizing cash flow from
operations, proceeds from dispositions of non-core assets,
additional debt financings and preferred or common equity
offerings. We expect to acquire or develop additional hotel
properties only as suitable opportunities arise, and we will not
undertake acquisition or development of properties unless
stringent criteria have been met.
|
|
|
Off Balance Sheet Arrangements |
We believe that neither Boykin nor its unconsolidated entities
have entered into any off balance sheet arrangements which would
have a current or future impact on our financial condition,
changes in financial condition, results of operations, liquidity
or capital resources in ways which would be considered material
to our investors.
26
|
|
|
Tabular Disclosure of Contractual Obligations |
The following is a summary of Boykin’s obligations and
commitments as of December 31, 2004, excluding
unconsolidated joint ventures (in thousands):
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Payments due by period | |
| |
|
|
|
Less than | |
|
|
|
More than | |
| Contractual Obligations |
|
Total | |
|
1 year | |
|
1-3 years | |
|
3-5 years | |
|
5 years | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Long-Term Debt Obligations
|
|
$ |
193,539 |
|
|
$ |
95,010 |
|
|
$ |
8,614 |
|
|
$ |
9,922 |
|
|
$ |
79,993 |
|
|
Capital Lease Obligations
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
Operating Lease Obligations
|
|
$ |
27,080 |
|
|
$ |
1,793 |
|
|
$ |
1,639 |
|
|
$ |
1,060 |
|
|
$ |
22,588 |
|
|
Purchase Obligations
|
|
$ |
2,763 |
|
|
$ |
2,206 |
|
|
$ |
368 |
|
|
$ |
100 |
|
|
$ |
89 |
|
|
Other Long-Term Liabilities Reflected on the Registrant’s
Balance Sheet under GAAP
|
|
$ |
6,235 |
|
|
$ |
258 |
|
|
$ |
253 |
|
|
$ |
335 |
|
|
$ |
5,389 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
229,617 |
|
|
$ |
99,267 |
|
|
$ |
10,874 |
|
|
$ |
11,417 |
|
|
$ |
108,059 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In addition to the amounts disclosed above, Boykin and its
subsidiaries are subject to various franchise, management, lease
and other agreements with parties that have ongoing fees that
are contingent upon future results of operations of the hotels
in its portfolio as well as a potential for termination fees
dependent upon the timing and method of termination of such
agreements.
Included in long-term liabilities above are liabilities relating
to Boykin Kansas City, LLC. These liabilities were assumed in
connection with the acquisition of the Doubletree Kansas City in
November of 1997. Please refer to Note 13 of Boykin Lodging
Company’s Notes to Consolidated Financial Statements
included within this Annual Report on Form 10-K for a
discussion of our obligations related to the tax increment
financing of the Doubletree Kansas City.
Operators of hotels in general can change room rates quickly,
but competitive pressures may limit operators’ ability to
raise rates to keep pace with inflation.
Our general and administrative costs as well as real estate and
personal property taxes, property and casualty insurance and
ground rent are subject to inflation.
Our hotels’ operations historically have been seasonal. The
five hotels located in Florida experience their highest
occupancy in the first quarter, while the remaining hotels
maintain high occupancy rates during the second and third
quarters. This seasonality pattern can be expected to cause
fluctuations in our quarterly operating results and cash flow
received from hotel operations.
|
|
|
Competition and Other Economic Factors |
Our hotels are located in developed areas that contain other
hotel properties. The future occupancy, average daily rate and
RevPAR of any hotel could be materially and adversely affected
by an increase in the number of or quality of the competitive
hotel properties in its market area. Competition could also
affect the quality and quantity of future investment
opportunities, or our ability to sell existing properties.
As a portion of the lodging industry’s sales are based upon
business, commercial and leisure travel, changes in general
economic conditions, demographics, or changes in local business
economics, could affect these and other travel segments. This
may affect demand for rooms, which would affect hotel revenues.
Please refer to Item 1(c) of this Form 10-K for
further discussion regarding Competition.
|
|
|
New Accounting Pronouncements |
In November 2002, the Financial Accounting Standard Board
(“FASB”) issued Interpretation No. 45,
“Guarantor’s Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of Indebtedness of
Others,” which addresses the disclosure to be made by a
guarantor in its interim and annual
27
financial statements about its obligations under guarantees.
Interpretation No. 45 also requires the recognition of a
liability by a guarantor at the inception of certain guarantees.
Interpretation No. 45 requires the guarantor to recognize a
liability for the non-contingent component of the guarantee,
this is the obligation to stand ready to perform in the event
that specified triggering events or conditions occur. The
initial measurement of this liability is the fair value of the
guarantee at inception. The recognition of the liability is
required even if it is not probable that payments will be
required under the guarantee or if the guarantee was issued with
a premium payment or as part of a transaction with multiple
elements. We have adopted the disclosure requirements of
Interpretation No. 45 and will apply the recognition and
measurement provisions for all guarantees entered into prior to
January 1, 2003. There are no guarantees which require
recognition under this Interpretation as of December 31,
2004.
In December 2002, the FASB issued Statement No. 148,
“Accounting for Stock-Based Compensation-Transition and
Disclosure – an amendment of FASB Statement
No. 123.” Statement No. 148 amends FASB Statement
No. 123, “Accounting for Stock-Based
Compensation,” to provide alternative methods of transition
for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition,
Statement No. 148 amends the disclosure requirements of
Statement No. 123 to require prominent disclosures in both
annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect
of the method used on reported results. Adoption did not have a
material effect on the financial condition or results of
operations of Boykin.
In January 2003, the FASB issued Interpretation No. 46,
“Consolidation of Variable Interest Entities,” which
addresses consolidation by business enterprises of variable
interest entities. In general, a variable interest entity is a
corporation, partnership, trust, or any other legal structure
used for business purposes that either (a) does not have
equity investors with voting rights or (b) has equity
investors that do not provide sufficient financial resources for
the entity to support its activities. Interpretation No. 46
requires a variable interest entity to be consolidated by a
company if that company is subject to a majority of the risk of
loss from the entity’s activities or is entitled to receive
a majority of the entity’s residual returns or both. The
consolidation requirements of Interpretation No. 46 apply
immediately to variable interest entities created after
January 31, 2003 and apply to older entities in the fourth
quarter of 2003. In December 2003, the FASB issued a revised
Interpretation which modifies and clarifies various aspects of
the original Interpretation. We do not believe that we have any
unconsolidated variable interest entities as of
December 31, 2004.
On April 30, 2003 the FASB issued Statement No. 149
(“SFAS 149”), “Amendment of Statement 133 on
Derivative Instruments and Hedging Activities.”
SFAS 149 amends and clarifies accounting for derivative
instruments, including certain derivative instruments embedded
in other contracts, and for hedging activities under Statement
133. In particular, this Statement clarifies under what
circumstances a contract with an initial net investment meets
the characteristic of a derivative as discussed in Statement 133
and it clarifies when a derivative contains a financing
component that warrants special reporting in the statement of
cash flows. SFAS 149 is effective for contracts entered
into or modified after December 31, 2003 and for hedging
relationships designated after December 31, 2003 and is to
be applied prospectively. This statement has not had and is not
expected to have a material impact on our financial position or
results of operations.
In May 2003, the FASB issued Statement No. 150
(“SFAS 150”), “Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities
and Equity,” which establishes standards for how an issuer
classifies and measures certain financial instruments with
characteristics of both liabilities and equity. It requires that
an issuer classify a financial instrument that is within its
scope as a liability. The effective date of a portion of the
Statement has been indefinitely postponed by the FASB. We did
not enter into new financial instruments subsequent to May 2003
which would fall within the scope of this statement. This
statement has not had and is not expected to have a material
impact on our financial position or results of operations.
As of December 31, 2004, Boykin had a Long-Term Incentive
Plan (“LTIP”). Boykin has adopted the disclosure only
provisions of SFAS No. 123, “Accounting for
Stock-Based Compensation,” and applies Accounting
Principles Board Opinion No. 25 and related interpretations
in accounting for its employee share option plan. If Boykin had
elected to recognize compensation costs for the LTIP based on
the fair value at the grant dates for option awards consistent
with the method prescribed by SFAS No. 123, reported
amounts of net loss and net loss per share would have been
changed to the pro forma amounts indicated below.
28
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
| |
|
|
|
|
|
|
|
|
|
| |
|
Year Ended December 31, | |
| |
|
2004 | |
|
2003 | |
| |
|
Pro Forma | |
|
Pro Forma | |
| |
|
| |
|
| |
|
Net loss attributable to common shareholders
|
|
$ |
(4,911 |
) |
|
$ |
(8,177 |
) |
|
Stock-based employee compensation expense
|
|
|
(126 |
) |
|
|
(126 |
) |
| |
|
|
|
|
|
|
|
Proforma net loss attributable to common shareholders
|
|
$ |
(5,037 |
) |
|
$ |
(8,303 |
) |
| |
|
|
|
|
|
|
|
Proforma net loss attributable to common shareholders per share:
|
|
|
|
|
|
|
|
|
| |
Basic
|
|
$ |
(0.29 |
) |
|
$ |
(0.48 |
) |
| |
Diluted
|
|
$ |
(0.29 |
) |
|
$ |
(0.48 |
) |
In December 2004, the FASB issued revised SFAS No. 123
(Statement 123(R)), Share-Based Payment
(“SFAS No. 123R”). SFAS No. 123R
requires all entities to recognize the fair value of share-based
payment awards (stock compensation) classified in equity, unless
they are unable to reasonably estimate the fair value of the
award. Boykin will adopt the provisions of
SFAS No. 123R on July 1, 2005, using the modified
prospective approach permitted by the literature. This approach
requires that any unvested portion of options at the time of
adoption be expensed in the earnings statement over the
remaining service period of those options. We expect adoption of
this approach to result in an immaterial impact on net income.
In December 2004, the FASB decided to defer the issuance of
their final standard on earnings per share (EPS) entitled
“Earnings per Share – an Amendment to
FAS 128.” The final standard will be effective in 2005
and will require retrospective application for all prior periods
presented. The significant proposed changes to the EPS
computation are changes to the treasury stock method and
contingent share guidance for computing year-to-date diluted
EPS, removal of the ability to overcome the presumption of share
settlement when computing diluted EPS when there is a choice of
share or cash settlement and inclusion of mandatorily
convertible securities in basic EPS. We are currently evaluating
the proposed provisions of this amendment to determine the
impact on our consolidated financial statements.
|
|
|
Item 7A. Quantitative and Qualitative Disclosures
About Market Risk |
Our primary market risk exposure consists of changes in interest
rates on borrowings under our debt instruments that bear
interest at variable rates that fluctuate with market interest
rates. These debt instruments include the secured credit
facility, the $108.0 million secured term loan and our
share of floating rate debt under our unconsolidated joint
ventures of $25.0 million at year end.
We have entered into both variable and fixed rate debt
arrangements to allow us to optimize the balance of using
variable rate debt versus fixed rate debt. Our variable rate
debt allows us to maximize financial flexibility when selling
properties and minimize potential prepayment penalties typical
of fixed rate loans. Our $130.0 million, 6.9% fixed rate
term note allows us to minimize our interest rate risk exposure.
Approximately 51% of our outstanding debt at December 31,
2004 was fixed-rate in nature, compared with 41% at the end of
2003, primarily as a result of the paydown of outstanding debt
with proceeds from the 2004 property sales. The weighted average
interest rate of our variable rate debt and total debt as of
December 31, 2004 was 4.7% and 5.8%, respectively. The
weighted average interest rate of our variable rate debt and
total debt as of December 31, 2003 was 4.1% and 5.2%,
respectively.
We review interest rate exposure continuously in an effort to
minimize the risk of interest rate fluctuations. It is our
policy to manage our exposure to fluctuations in market interest
rates on our borrowings through the use of fixed rate debt
instruments, to the extent that reasonably favorable rates are
obtainable with such arrangements, and after considering the
need for financial flexibility related to our debt arrangements.
We may enter into forward interest rate agreements, or similar
agreements, to hedge our variable rate debt instruments where we
believe the risk of adverse changes in market rates is
significant. Under a forward interest rate agreement, if the
referenced interest rate increases, we would be entitled to a
receipt in settlement of the agreement that economically would
offset the higher financing cost of the debt issued. If the
referenced interest rate decreases, we would make payments in
settlement of the agreement, creating an expense that
economically would offset the reduced financing cost of the debt
issued. As of December 31, 2004, we do not have any
material market-sensitive financial instruments.
29
We do not believe that changes in market interest rates will
have a material impact on the performance or fair value of our
hotel portfolio as the value of our hotel portfolio is based
primarily on the operating cash flow of the hotels, before
interest expense charges. However, a change of 1/4% in the index
rate to which our variable rate debt is tied would change our
annual interest incurred by $0.2 million, based upon the
balances outstanding on our variable rate instruments at
December 31, 2004.
Using sensitivity analysis to measure the potential change in
fair value of financial instruments based on changes in interest
rates, we have determined that a hypothetical increase of 1% in
the interest rates for instruments with similar maturities would
decrease the fair value of our fixed rate debt by $3.0 million
as compared with the fair value at December 31, 2004, which
approximated $105,000.
|
|
|
Item 8. Consolidated Financial Statements and
Supplemental Data |
See Index to the Financial Statements on page F-1.
|
|
|
Item 9. Changes in and Disagreements with
Accountants on Accounting and Financial Disclosure |
On April 14, 2004, the Audit Committee of the Board of
Directors voted to approve the engagement of Grant Thornton LLP
(“Grant”) as the Company’s independent auditor
for the year ending December 31, 2004, to be effective upon
Grant’s acceptance of the engagement to act as the
Company’s independent auditor. On April 16, 2004,
Grant accepted the engagement. As such, on April 16, 2004,
Deloitte & Touche, LLP (“D&T”), was dismissed
as Boykin’s independent auditor.
The reports of D&T on the Company’s financial
statements for the two fiscal years ended December 31, 2003
and 2002 did not contain an adverse opinion or a disclaimer of
opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principles.
In connection with the audits of the Company’s financial
statements for each of the two fiscal years ended
December 31, 2003 and 2002, and during the interim period
through April 16, 2004, there were no disagreements with
D&T on any matters of accounting principles or practices,
financial statement disclosure, or auditing scope and procedures
which, if not resolved to the satisfaction of D&T would have
caused D&T to make reference to the matter in their report.
During the two fiscal years ended December 31, 2003 and
2002, and the subsequent interim period through April 16,
2004, there were no reportable events as defined in
Item 304(a)(1)(v) of Regulation S-K. D&T has
furnished the Company a letter addressed to the Securities and
Exchange Commission stating that it agrees with the above
statements. A copy of that letter, dated April 19, 2004,
was filed as Exhibit 16.1 to the Company’s Current
Report on Form 8-K filed with the Securities and Exchange
Commission on April 20, 2004.
During the two fiscal years ended December 31, 2003 and
2002 and their subsequent interim period through April 16,
2004, neither the Company nor anyone on behalf of the Company
consulted with Grant regarding either the application of
accounting principles to a specified transaction, either
completed or proposed; or the type of audit opinion that might
be rendered on the Company’s financial statements; or on
any matter considered important by the Company in reaching a
decision as to any accounting, auditing or financial reporting
issue or any matter that was either the subject of a
disagreement as defined in Item 304(a)(1)(v)(iv) of
Regulation S-K, or any reportable event, as defined in
Item 304(a)(1)(v) of Regulation S-K.
|
|
|
Item 9A. Controls and Procedures |
|
|
|
Evaluation of Disclosure Controls and Procedures |
Under the supervision and with the participation of our
management, including our principal executive officer and our
principal financial officer, we conducted an evaluation of our
disclosure controls and procedures, as such term is defined
under Exchange Act Rules 13a – 15(e) and
15d – 15(e). Based upon this evaluation, our principal
executive officer and our principal financial officer concluded
that our disclosure controls and procedures were effective as of
the end of the period covered by this Annual Report.
|
|
|
Management’s Report on Internal Control Over Financial
Reporting |
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting, as such term
is defined in Exchange Act Rules 13a – 15(f) and
15d – 15(f). Management assessed the effectiveness of
our internal control as of December 31, 2004. In making
this assessment, management used the criteria set forth in
Internal Control – Integrated Framework issued
by the Committee of Sponsoring
30
Organizations of the Treadway Commission. Based on our
assessment, management concluded that our internal control over
financial reporting was effective as of December 31, 2004.
Grant Thornton LLP, an independent registered public accounting
firm, has audited and issued their report on management’s
assessment of its internal control over financial reporting,
which is included herein.
|
|
|
Changes in Internal Control Over Financial Reporting |
There have not been any changes in our internal control over
financial reporting that occurred during our last fiscal quarter
that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
|
|
|
Item 9B. Other Information |
None.
PART III
|
|
|
Item 10. Directors and Executive Officers of the
Registrant |
The information required by this Item 10 is incorporated by
reference to the information under the headings “Election
of Directors” and “Section 16(a) Beneficial
Ownership Reporting Compliance” contained in Boykin’s
Proxy Statement in connection with its Annual Meeting of
Shareholders to be held on May 24, 2005, and the
information under the headings “Executive Officers of the
Registrant” and “Corporate Governance” in Part I
of this Annual Report on Form 10-K.
|
|
|
Item 11. Executive Compensation |
The information required by this Item 11 is incorporated by
reference to the information under the heading “Executive
Compensation” contained in Boykin’s Proxy Statement in
connection with its Annual Meeting of Shareholders to be held on
May 24, 2005.
|
|
|
Item 12. Security Ownership of Certain Beneficial
Owners and Management |
The information required by this Item 12, other than the
information required by Item 201(d) of Regulation S-K,
is incorporated by reference to the information under the
heading “Security Ownership of Certain Beneficial Owners
and Management” contained in Boykin’s Proxy Statement
in connection with its Annual Meeting of Shareholders to be held
on May 24, 2005. The information required by
Item 201(d) of Regulation S-K is set forth in section
(d) of Item 5 of this Annual Report on Form 10-K.
|
|
|
Item 13. Certain Relationships and Related
Transactions |
The information required by this Item 13 is incorporated by
reference to the information under the heading “Certain
Relationships and Related Transactions” contained in
Boykin’s Proxy Statement in connection with its Annual
Meeting of Shareholders to be held on May 24, 2005.
|
|
|
Item 14. Principal Accounting Fees and Services |
The information required by this Item 14 is incorporated by
reference to the information under the heading “Principal
Accounting Fees and Services” contained in Boykin’s
Proxy Statement in connection with its Annual Meeting of
Shareholders to be held on May 24, 2005.
31
PART IV
|
|
|
Item 15. Exhibits, Financial Statement Schedules |
(a) See
page F-1 for an index to financial statements and required
schedules. All other financial statement schedules within
the provisions of Regulation S-X that are not listed in the
index are either not required to be included under the related
instructions or are not applicable or the appropriate
information is included in the notes to the consolidated
financial statements and therefore, have been omitted.
| |
|
|
|
|
| Exhibits | |
|
|
| | |
|
|
| |
3.1 |
(a) |
|
Amended and Restated Articles of Incorporation, as amended |
| |
3.2 |
(b) |
|
Code of Regulations |
| |
4.1 |
(b) |
|
Specimen Share Certificate |
| |
4.2 |
(a) |
|
Dividend Reinvestment and Optional Share Purchase Plan |
| |
4.3 |
(d) |
|
Shareholder Rights Agreement, dated as of May 25, 1999
between Boykin Lodging Company and National City Bank as rights
agent |
| |
4.3a |
(g) |
|
Amendment to Shareholder Rights Agreement, dated as of
December 31, 2001 |
| |
10.1 |
(i) |
|
Third Amended and Restated Agreement of Limited Partnership of
Boykin Hotel Properties, L.P. |
| |
10.2 |
(b) |
|
Form of Registration Rights Agreement |
| |
10.3 |
(b) |
|
Long-Term Incentive Plan* |
| |
10.4 |
(b) |
|
Directors’ Deferred Compensation Plan* |
| |
10.5 |
(b) |
|
Employment Agreement between the Company and Robert W. Boykin* |
| |
10.6 |
(b) |
|
Form of Percentage Lease |
| |
10.7 |
(b) |
|
Intercompany Convertible Note |
| |
10.8 |
(b) |
|
Agreements with General Partners of the Contributed Partnerships |
| |
10.9 |
(b) |
|
Form of Noncompetition Agreement |
| |
10.10 |
(b) |
|
Alignment of Interests Agreement |
| |
10.11 |
(c) |
|
Description of Employment Arrangement between the Company and
Richard C. Conti* |
| |
10.12 |
(d) |
|
Limited Liability Company Agreement of Boykin/ AEW LLC dated as
of February 1, 1999 |
| |
10.13 |
(e) |
|
Stock Purchase Option Agreement by and among Boykin Lodging
Company, Boykin Hotel Properties, L.P. and AEW Partners III,
L.P. dated as of February 1, 1999 |
| |
10.14 |
(e) |
|
Warrant to Purchase Class A Cumulative Preferred Stock,
Series 1999-A of Boykin Lodging Company dated as of
February 1, 1999 |
| |
10.15 |
(e) |
|
Registration Rights Agreement by and among Boykin Lodging
Company and AEW Partners III, L.P. dated as of February 1,
1999 |
| |
10.16 |
(f) |
|
Key Employee Severance Plan* |
| |
10.17 |
(f) |
|
Form of Severance Agreement* |
| |
10.18 |
(g) |
|
Master Contribution Agreement between BMC, JABO LLC, the Company
and the Partnership dated as of December 31, 2001 |
| |
10.19 |
(g) |
|
Form of Hotel Management Agreement* |
| |
10.20 |
(g) |
|
Registration Rights Agreement between the Company and JABO LLC
dated January 1, 2002 |
| |
10.21 |
(j) |
|
Description of Employment Arrangement between the Company and
Shereen P. Jones* |
| |
10.22 |
|
|
Hotel Purchase and Sale Agreement; Hotel 71 Chicago, Illinois,
By and Between Boykin Chicago L.L.C., as Seller and the Falor
Companies, Inc., as Purchaser |
| |
10.23 |
|
|
Modification Letter – Stock Purchase Option Agreement
by and among Boykin Lodging Company, Boykin Hotel Properties,
L.P. and AEW Partners III, L.P. dated as of February 1, 1999 |
| |
10.24 |
|
|
Modification of Employment Agreement between the Company and
Robert W. Boykin* |
| |
12 |
|
|
Statement re Computation of Ratios |
| |
16.1 |
(h) |
|
Letter of Deloitte & Touche LLP required by Item 304 of
Regulation S-K |
| |
21 |
|
|
Subsidiaries of the Registrant |
| |
23.1 |
|
|
Consent of Independent Registered Public Accounting Firm |
| |
23.2 |
|
|
Consent of Independent Registered Public Accounting Firm |
| |
31.1 |
|
|
Certification Pursuant to Rule 13a-14(a), in Accordance
with Section 302 of the Sarbanes-Oxley Act of 2002 |
| |
31.2 |
|
|
Certification Pursuant to Rule 13a-14(a), in Accordance
with Section 302 of the Sarbanes-Oxley Act of 2002 |
| |
32.1 |
|
|
Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 |
| |
32.2 |
|
|
Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 |
|
|
|
|
(a) |
|
Incorporated by reference from Boykin’s Form 10-Q for
the quarter ended June 30, 1999. |
| |
|
(b) |
|
Incorporated by reference from Amendment No. 3 to
Boykin’s Registration Statement on Form S-11
(Registration No. 333-6341) (the
“Form S-11”) filed on October 24, 1996. Each
of the above exhibits has the same exhibit number in the
Form S-11. |
| |
|
(c) |
|
Incorporated by reference from Boykin’s Form 10-Q for
the quarter ended June 30, 1998. |
| |
|
(d) |
|
Incorporated by reference from Boykin’s Form 10-Q for
the quarter ended March 31, 1999. |
| |
|
(e) |
|
Incorporated by reference from Boykin’s Form 10-Q for
the quarter ended March 31, 1999. |
| |
|
(f) |
|
Incorporated by reference from Boykin’s Form 10-K for
the year ended December 31, 1999. |
32
|
|
|
|
(g) |
|
Incorporated by reference from Boykin’s Form 8-K filed
on January 14, 2002. |
| |
|
(h) |
|
Incorporated by reference from Boykin’s Form 8-K filed
on April 20, 2004. |
| |
|
(i) |
|
Incorporated by reference from Boykin’s Form 8-K filed
on October 4, 2002. |
| |
|
(j) |
|
Incorporated by reference from Boykin’s Form 10-K for
the year ended December 31, 2002. |
| |
|
* |
|
Management contract or compensatory plan or arrangement. |
33
INDEX TO FINANCIAL STATEMENTS
| |
|
|
|
|
|
BOYKIN LODGING COMPANY:
|
|
|
|
|
|
Reports of Independent Registered Public Accounting Firms
|
|
|
F-2 |
|
|
Consolidated Balance Sheets as of December 31, 2004 and 2003
|
|
|
F-5 |
|
|
Consolidated Statements of Operations for the Years Ended
December 31, 2004, 2003 and 2002
|
|
|
F-6 |
|
|
Consolidated Statements of Shareholders’ Equity and
Comprehensive Income (Loss) for the Years Ended
December 31, 2004, 2003 and 2002
|
|
|
F-7 |
|
|
Consolidated Statements of Cash Flows for the Years Ended
December 31, 2004, 2003 and 2002
|
|
|
F-8 |
|
|
Notes to Consolidated Financial Statements
|
|
|
F-9 |
|
|
Schedule III – Real Estate and Accumulated
Depreciation as of December 31, 2004
|
|
|
F-30 |
|
| |
|
BOYKIN/ AEW, LLC AND SUBSIDIARIES:
|
|
|
|
|
|
Reports of Independent Registered Public Accounting Firms
|
|
|
F-32 |
|
|
Consolidated Balance Sheets as of December 31, 2004 and 2003
|
|
|
F-34 |
|
|
Consolidated Statements of Operations for the Years Ended
December 31, 2004, 2003 and 2002
|
|
|
F-35 |
|
|
Consolidated Statements of Members’ Equity for the Years
Ended December 31, 2004, 2003 and 2002
|
|
|
F-36 |
|
|
Consolidated Statements of Cash Flows for the Years Ended
December 31, 2004, 2003 and 2002
|
|
|
F-37 |
|
|
Notes to Consolidated Financial Statements
|
|
|
F-38 |
|
|
Schedule III – Real Estate and Accumulated
Depreciation as of December 31, 2004
|
|
|
F-42 |
|
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Shareholders of Boykin Lodging Company
We have audited management’s assessment, included in the
accompanying Management’s Report on Internal Control over
Financial Reporting included in Item 9a of the
Form 10K, that Boykin Lodging Company (an Ohio Corporation)
and subsidiaries maintained effective internal control over
financial reporting as of December 31, 2004, based on
criteria established in Internal Control – Integrated
Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO). Boykin Lodging Company’s
management is responsible for maintaining effective internal
control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting. Our
responsibility is to express an opinion on management’s
assessment and an opinion on the effectiveness of the
company’s internal control over financial reporting based
on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, evaluating
management’s assessment, testing and evaluating the design
and operating effectiveness of internal control, and performing
such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable
basis for our opinions.
A company’s internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance of
records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, management’s assessment that Boykin Lodging
Company maintained effective internal control over financial
reporting as of December 31, 2004, is fairly stated, in all
material respects, based on criteria established in Internal
Control – Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO).
Also in our opinion, Boykin Lodging Company maintained, in all
material respects, effective internal control over financial
reporting as of December 31, 2004, based on criteria
established in Internal Control – Integrated Framework
issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO).
We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated balance sheet of Boykin Lodging Company as of
December 31, 2004, and the related statements of
operations, shareholders’ equity, and cash flows for the
year ended December 31, 2004 and our report dated March 1,
2005 expressed an unqualified opinion on those financial
statements.
/s/ Grant Thornton LLP
Cleveland, Ohio
March 1, 2005
F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Boykin Lodging Company
We have audited the accompanying consolidated balance sheet of
Boykin Lodging Company (an Ohio corporation) and subsidiaries as
of December 31, 2004, and the related consolidated
statements of operations, shareholders’ equity and cash
flows for the year then ended. These financial statements are
the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of Boykin Lodging Company and subsidiaries as of
December 31, 2004, and the results of their operations and
their cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States of
America.
Our audit was conducted for the purpose of forming an opinion on
the basic financial statements taken as a whole.
Schedule III is presented for purposes of additional
analysis and is not a required part of the basic financial
statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial
statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as
a whole.
We also have audited, in accordance with the standards of the
Public Accounting Oversight Board (United States), the
effectiveness of Boykin Lodging Company’s internal control
over financial reporting as of December 31, 2004, based on
criteria established in Internal Control — Integrated
Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO) and our report dated
March 1, 2005 expressed an unqualified opinion thereon.
/s/ Grant Thornton LLP
Cleveland, Ohio
March 1, 2005
F-3
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Boykin Lodging Company:
Cleveland, Ohio
We have audited the accompanying consolidated balance sheet of
Boykin Lodging Company (an Ohio corporation) and subsidiaries
(the “Company”) as of December 31, 2003, and the
related consolidated statements of operations,
shareholders’ equity, and cash flows for each of the two
years in the period ended December 31, 2003. These
financial statements are the responsibility of the
Company’s management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of
Boykin Lodging Company and subsidiaries as of December 31,
2003, and the results of their operations and their cash flows
for each of the two years in the period ended December 31,
2003, in conformity with accounting principles generally
accepted in the United States of America.
/s/ Deloitte & Touche
LLP
Cleveland, Ohio
March 25, 2004 (March 2, 2005 as to the effects of the
discontinued operations in fiscal 2004 described in Note 4)
F-4
BOYKIN LODGING COMPANY
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2004 AND 2003
(DOLLAR AMOUNTS IN THOUSANDS)
| |
|
|
|
|
|
|
|
|
|
|
| |
|
2004 | |
|
2003 | |
| |
|
| |
|
| |
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Investment in hotel properties
|
|
$ |
545,142 |
|
|
$ |
534,475 |
|
| |
Accumulated depreciation
|
|
|
(134,347 |
) |
|
|
(124,599 |
) |
| |
|
|
|
|
|
|
|
Investment in hotel properties, net
|
|
|
410,795 |
|
|
|
409,876 |
|
|
Cash and cash equivalents
|
|
|
13,521 |
|
|
|
14,013 |
|
|
Restricted cash
|
|
|
13,022 |
|
|
|
15,365 |
|
|
Accounts receivable, net of allowance for doubtful accounts of
$87 and $144 as of December 31, 2004 and 2003, respectively
|
|
|
12,170 |
|
|
|
39,988 |
|
|
Receivables from lessee
|
|
|
10 |
|
|
|
254 |
|
|
Inventories
|
|
|
1,709 |
|
|
|
1,591 |
|
|
Deferred financing costs and other, net
|
|
|
2,014 |
|
|
|
2,948 |
|
|
Investment in unconsolidated joint ventures
|
|
|
14,048 |
|
|
|
16,158 |
|
|
Other assets
|
|
|
10,091 |
|
|
|
8,315 |
|
|
Assets related to discontinued operations, net
|
|
|
— |
|
|
|
82,784 |
|
| |
|
|
|
|
|
|
| |
|
$ |
477,380 |
|
|
$ |
591,292 |
|
| |
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
Borrowings against credit facility
|
|
$ |
6,446 |
|
|
$ |
71,945 |
|
|
Term notes payable
|
|
|
193,539 |
|
|
|
210,074 |
|
|
Accounts payable and accrued expenses
|
|
|
36,707 |
|
|
|
43,273 |
|
|
Accounts payable to related party
|
|
|
1,063 |
|
|
|
873 |
|
|
Dividends/distributions payable
|
|
|
1,188 |
|
|
|
1,188 |
|
|
Due to lessees
|
|
|
— |
|
|
|
164 |
|
|
Minority interest in joint ventures
|
|
|
927 |
|
|
|
967 |
|
|
Minority interest in operating partnership
|
|
|
10,062 |
|
|
|
11,495 |
|
|
Liabilities related to discontinued operations
|
|
|
— |
|
|
|
19,772 |
|
|
SHAREHOLDERS’ EQUITY:
|
|
|
|
|
|
|
|
|
| |
Preferred shares, without par value; 10,000,000 shares
authorized; 181,000 shares issued and outstanding as of
December 31, 2004 and 2003 (liquidation preference of
$45,250)
|
|
|
— |
|
|
|
— |
|
| |
Common shares, without par value; 40,000,000 shares authorized;
17,450,314 and 17,344,380 shares outstanding at
December 31, 2004 and 2003, respectively
|
|
|
— |
|
|
|
— |
|
| |
Additional paid-in capital
|
|
|
358,688 |
|
|
|
357,290 |
|
| |
Distributions in excess of income
|
|
|
(129,232 |
) |
|
|
(124,321 |
) |
| |
Unearned compensation – restricted shares
|
|
|
(2,008 |
) |
|
|
(1,428 |
) |
| |
|
|
|
|
|
|
| |
|
Total shareholders’ equity
|
|
|
227,448 |
|
|
|
231,541 |
|
| |
|
|
|
|
|
|
| |
|
$ |
477,380 |
|
|
$ |
591,292 |
|
| |
|
|
|
|
|
|
See notes to consolidated financial statements.
F-5
BOYKIN LODGING COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
(AMOUNTS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
2004 | |
|
2003 | |
|
2002 | |
| |
|
| |
|
| |
|
| |
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Hotel revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Rooms
|
|
$ |
133,597 |
|
|
$ |
122,821 |
|
|
$ |
129,341 |
|
| |
|
Food and beverage
|
|
|
62,407 |
|
|
|
58,268 |
|
|
|
61,728 |
|
| |
|
Other
|
|
|
14,414 |
|
|
|
11,314 |
|
|
|
11,632 |
|
| |
|
|
|
|
|
|
|
|
|
| |
Total hotel revenues
|
|
|
210,418 |
|
|
|
192,403 |
|
|
|
202,701 |
|
| |
Other lease revenue
|
|
|
2,045 |
|
|
|
1,958 |
|
|
|
1,885 |
|
| |
Other operating revenue
|
|
|
380 |
|
|
|
311 |
|
|
|
451 |
|
| |
Revenues from condominium development and unit sales
|
|
|
7,541 |
|
|
|
36,883 |
|
|
|
8,715 |
|
| |
|
|
|
|
|
|
|
|
|
| |
|
Total revenues
|
|
|
220,384 |
|
|
|
231,555 |
|
|
|
213,752 |
|
| |
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Hotel operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Rooms
|
|
|
33,772 |
|
|
|
30,850 |
|
|
|
31,432 |
|
| |
|
Food and beverage
|
|
|
43,045 |
|
|
|
40,877 |
|
|
|
42,984 |
|
| |
|
Other direct
|
|
|
8,181 |
|
|
|
7,142 |
|
|
|
7,342 |
|
| |
|
Indirect
|
|
|
68,256 |
|
|
|
61,672 |
|
|
|
57,912 |
|
| |
|
Management fees to related party
|
|
|
5,801 |
|
|
|
4,339 |
|
|
|
3,741 |
|
| |
|
Management fees – other
|
|
|
59 |
|
|
|
882 |
|
|
|
2,261 |
|
| |
|
|
|
|
|
|
|
|
|
| |
Total hotel operating expenses
|
|
|
159,114 |
|
|
|
145,762 |
|
|
|
145,672 |
|
| |
Property taxes, insurance and other
|
|
|
15,117 |
|
|
|
14,530 |
|
|
|
12,921 |
|
| |
Cost of condominium development and unit sales
|
|
|
5,509 |
|
|
|
24,645 |
|
|
|
6,474 |
|
| |
Real estate related depreciation and amortization
|
|
|
24,017 |
|
|
|
26,085 |
|
|
|
23,377 |
|
| |
Corporate general and administrative
|
|
|
8,801 |
|
|
|
8,138 |
|
|
|
6,404 |
|
| |
|
|
|
|
|
|
|
|
|
| |
|
Total operating expenses
|
|
|
212,558 |
|
|
|
219,160 |
|
|
|
194,848 |
|
| |
|
|
|
|
|
|
|
|
|
| |
|
Operating income
|
|
|
7,826 |
|
|
|
12,395 |
|
|
|
18,904 |
|
| |
|
|
|
|
|
|
|
|
|
| |
Interest income
|
|
|
387 |
|
|
|
602 |
|
|
|
126 |
|
| |
Other income
|
|
|
8 |
|
|
|
39 |
|
|
|
80 |
|
| |
Interest expense
|
|
|
(13,629 |
) |
|
|
(14,923 |
) |
|
|
(18,068 |
) |
| |
Amortization of deferred financing costs
|
|
|
(1,367 |
) |
|
|
(1,906 |
) |
|
|
(2,105 |
) |
| |
Minority interest in earnings of joint ventures
|
|
|
(141 |
) |
|
|
(133 |
) |
|
|
(133 |
) |
| |
Minority interest in loss of operating partnership
|
|
|
1,879 |
|
|
|
1,946 |
|
|
|
980 |
|
| |
Equity in loss of unconsolidated joint ventures
|
|
|
(814 |
) |
|
|
(870 |
) |
|
|
(2,040 |
) |
| |
|
|
|
|
|
|
|
|
|
|
Loss before gain (loss) on sale/disposal of assets and
discontinued operations
|
|
|
(5,851 |
) |
|
|
(2,850 |
) |
|
|
(2,256 |
) |
| |
Gain (loss) on sale/disposal of assets
|
|
|
3,157 |
|
|
|
954 |
|
|
|
(16 |
) |
| |
|
|
|
|
|
|
|
|
|
|
Loss before discontinued operations
|
|
|
(2,694 |
) |
|
|
(1,896 |
) |
|
|
(2,272 |
) |
| |
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Operating income (loss) from discontinued operations, net
of operating partnership minority interest income
(expense) of $1,038, $387 and $(340), for the years ended
December 31, 2004, 2003 and 2002, respectively
|
|
|
(5,890 |
) |
|
|
(2,184 |
) |
|
|
1,901 |
|
| |
Gain on sale of assets, net of operating partnership minority
interest expense of $1,484 and $116 for the years ended
December 31, 2004 and 2003, respectively
|
|
|
8,424 |
|
|
|
654 |
|
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$ |
(160 |
) |
|
$ |
(3,426 |
) |
|
$ |
(371 |
) |
| |
|
|
|
|
|
|
|
|
|
| |
Preferred dividends
|
|
|
(4,751 |
) |
|
|
(4,751 |
) |
|
|
(1,109 |
) |
| |
|
|
|
|
|
|
|
|
|
|
Net loss attributable to common shareholders
|
|
$ |
(4,911 |
) |
|
$ |
(8,177 |
) |
|
$ |
(1,480 |
) |
| |
|
|
|
|
|
|
|
|
|
|
Net loss per share attributable to common shareholders before
discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Basic
|
|
$ |
(0.43 |
) |
|
$ |
(0.38 |
) |
|
$ |
(0.20 |
) |
| |
Diluted
|
|
$ |
(0.43 |
) |
|
$ |
(0.38 |
) |
|
$ |
(0.20 |
) |
|
Discontinued operations per share
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Basic
|
|
$ |
0.15 |
|
|
$ |
(0.09 |
) |
|
$ |
0.11 |
|
| |
Diluted
|
|
$ |
0.14 |
|
|
$ |
(0.09 |
) |
|
$ |
0.11 |
|
|
Net loss per share attributable to common
shareholders(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Basic
|
|
$ |
(0.28 |
) |
|
$ |
(0.47 |
) |
|
$ |
(0.09 |
) |
| |
Diluted
|
|
$ |
(0.28 |
) |
|
$ |
(0.47 |
) |
|
$ |
(0.09 |
) |
|
Weighted average number of common shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Basic
|
|
|
17,426 |
|
|
|
17,336 |
|
|
|
17,248 |
|
| |
Diluted
|
|
|
17,553 |
|
|
|
17,470 |
|
|
|
17,383 |
|
|
|
|
(a)
|
|
Per share amounts may not add due to rounding |
See notes to consolidated financial statements.
F-6
BOYKIN LODGING COMPANY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
AND COMPREHENSIVE INCOME (LOSS)
FOR THE YEARS ENDED DECEMBER 31, 2004, 2003, AND 2002
(DOLLAR AMOUNTS IN THOUSANDS)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Additional | |
|
Distributions | |
|
Other | |
|
|
|
|
| |
|
Preferred | |
|
Common | |
|
Paid-In | |
|
In Excess of | |
|
Comprehensive | |
|
Unearned | |
|
|
| |
|
Shares | |
|
Shares | |
|
Capital | |
|
Income | |
|
Gain/(Loss) | |
|
Compensation | |
|
Total | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Balance at January 1, 2002
|
|
|
— |
|
|
|
17,191,954 |
|
|
$ |
312,171 |
|
|
$ |
(105,193 |
) |
|
$ |
(2,838 |
) |
|
$ |
(1,494 |
) |
|
$ |
202,646 |
|
| |
Issuance of common shares, net of offering expenses of $3
|
|
|
— |
|
|
|
104,461 |
|
|
|
1,126 |
|
|
|
— |
|
|
|
— |
|
|
|
(692 |
) |
|
|
434 |
|
| |
Issuance of preferred shares, net of offering expenses of $2,016
|
|
|
181,000 |
|
|
|
— |
|
|
|
43,234 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
43,234 |
|
| |
Common share purchases for treasury
|
|
|
— |
|
|
|
(20,008 |
) |
|
|
(303 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(303 |
) |
| |
Dividends declared
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
– $0.36 per common share
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(6,297 |
) |
|
|
— |
|
|
|
— |
|
|
|
(6,297 |
) |
| |
|
– $6.125 per Class A preferred share
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,109 |
) |
|
|
— |
|
|
|
— |
|
|
|
(1,109 |
) |
| |
Amortization of unearned compensation
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
992 |
|
|
|
992 |
|
| |
Net loss
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(371 |
) |
|
|
— |
|
|
|
— |
|
|
|
(371 |
) |
| |
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
– net unrealized gain on interest rate swap
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,065 |
|
|
|
— |
|
|
|
1,065 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Total comprehensive income
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
694 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2002
|
|
|
181,000 |
|
|
|
17,276,407 |
|
|
|
356,228 |
|
|
|
(112,970 |
) |
|
|
(1,773 |
) |
|
|
(1,194 |
) |
|
|
240,291 |
|
| |
Issuance of common shares, net of offering expenses of $4
|
|
|
— |
|
|
|
77,528 |
|
|
|
1,143 |
|
|
|
— |
|
|
|
— |
|
|
|
(990 |
) |
|
|
153 |
|
| |
Common share purchases for treasury
|
|
|
— |
|
|
|
(9,555 |
) |
|
|
(81 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(81 |
) |
| |
Dividends declared
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
– $0.18 per common share
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(3,174 |
) |
|
|
— |
|
|
|
— |
|
|
|
(3,174 |
) |
| |
|
– $26.25 per Class A preferred share
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(4,751 |
) |
|
|
— |
|
|
|
— |
|
|
|
(4,751 |
) |
| |
Amortization of unearned compensation
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
756 |
|
|
|
756 |
|
| |
Net loss
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(3,426 |
) |
|
|
— |
|
|
|
— |
|
|
|
(3,426 |
) |
| |
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
– net unrealized gain on interest rate swap
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,773 |
|
|
|
— |
|
|
|
1,773 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Total comprehensive loss
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,653 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2003
|
|
|
181,000 |
|
|
|
17,344,380 |
|
|
|
357,290 |
|
|
|
(124,321 |
) |
|
|
— |
|
|
|
(1,428 |
) |
|
|
231,541 |
|
| |
Issuance of common shares
|
|
|
— |
|
|
|
128,745 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| |
Restricted common share grants
|
|
|
— |
|
|
|
— |
|
|
|
1,589 |
|
|
|
— |
|
|
|
— |
|
|
|
(1,589 |
) |
|
|
— |
|
| |
Common share purchases for treasury
|
|
|
— |
|
|
|
(22,811 |
) |
|
|
(191 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(191 |
) |
| |
Dividends declared
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
– $26.25 per Class A preferred share
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(4,751 |
) |
|
|
— |
|
|
|
— |
|
|
|
(4,751 |
) |
| |
Amortization of unearned compensation
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,009 |
|
|
|
1,009 |
|
| |
Net loss
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(160 |
) |
|
|
— |
|
|
|
— |
|
|
|
(160 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2004
|
|
|
181,000 |
|
|
|
17,450,314 |
|
|
$ |
358,688 |
|
|
$ |
(129,232 |
) |
|
$ |
— |
|
|
$ |
(2,008 |
) |
|
$ |
227,448 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
F-7
BOYKIN LODGING COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
(AMOUNTS IN THOUSANDS)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
2004 | |
|
2003 | |
|
2002 | |
| |
|
| |
|
| |
|
| |
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Net loss
|
|
$ |
(160 |
) |
|
$ |
(3,426 |
) |
|
$ |
(371 |
) |
| |
Adjustments to reconcile net loss to net cash flow provided by
operating activities –
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
(Gain) loss on sale/disposal of assets
|
|
|
(13,080 |
) |
|
|
(2,274 |
) |
|
|
18 |
|
| |
|
Impairment of real estate
|
|
|
4,300 |
|
|
|
2,800 |
|
|
|
— |
|
| |
|
Depreciation and amortization
|
|
|
28,073 |
|
|
|
33,822 |
|
|
|
32,356 |
|
| |
|
Amortization of unearned compensation
|
|
|
1,009 |
|
|
|
756 |
|
|
|
992 |
|
| |
|
Equity in loss of unconsolidated joint ventures
|
|
|
814 |
|
|
|
870 |
|
|
|
2,040 |
|
| |
|
Minority interests
|
|
|
803 |
|
|
|
(3,319 |
) |
|
|
(507 |
) |
| |
|
Changes in assets and liabilities –
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
Accounts receivable and inventories
|
|
|
28,808 |
|
|
|
(31,083 |
) |
|
|
266 |
|
| |
|
|
Restricted cash
|
|
|
2,343 |
|
|
|
(1,851 |
) |
|
|
(4,069 |
) |
| |
|
|
Accounts payable and accrued expenses
|
|
|
(9,118 |
) |
|
|
1,902 |
|
|
|
1,321 |
|
| |
|
|
Amounts due to/from lessees
|
|
|
80 |
|
|
|
(217 |
) |
|
|
3,092 |
|
| |
|
|
Other
|
|
|
(1,232 |
) |
|
|
4,193 |
|
|
|
4,050 |
|
| |
|
|
|
|
|
|
|
|
|
|
Net cash flow provided by operating activities
|
|
|
42,640 |
|
|
|
2,173 |
|
|
|
39,188 |
|
| |
|
|
|
|
|
|
|
|
|
| |
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Cash assumed in connection with termination of leases
|
|
|
— |
|
|
|
— |
|
|
|
5,765 |
|
| |
Investment in unconsolidated joint ventures
|
|
|
(438 |
) |
|
|
(481 |
) |
|
|
(4,408 |
) |
| |
Distributions received from unconsolidated joint ventures
|
|
|
1,698 |
|
|
|
572 |
|
|
|
148 |
|
| |
Improvements and additions to hotel properties, net
|
|
|
(30,834 |
) |
|
|
(54,210 |
) |
|
|
(13,490 |
) |
| |
Net proceeds from sale of assets
|
|
|
93,101 |
|
|
|
30,336 |
|
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
Net cash flow provided by (used in) investing activities
|
|
|
63,527 |
|
|
|
(23,783 |
) |
|
|
(11,985 |
) |
| |
|
|
|
|
|
|
|
|
|
| |
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Payments of dividends and distributions
|
|
|
(4,751 |
) |
|
|
(11,485 |
) |
|
|
(3,638 |
) |
| |
Net borrowings (repayments) against credit facilities
|
|
|
(65,500 |
) |
|
|
71,946 |
|
|
|
(39,000 |
) |
| |
Term note borrowings
|
|
|
14,133 |
|
|
|
13,222 |
|
|
|
— |
|
| |
Repayment of term notes
|
|
|
(47,537 |
) |
|
|
(61,106 |
) |
|
|
(5,144 |
) |
| |
Payment of deferred financing costs
|
|
|
(327 |
) |
|
|
(2,339 |
) |
|
|
(830 |
) |
| |
Net proceeds from issuance of preferred shares
|
|
|
— |
|
|
|
— |
|
|
|
43,234 |
|
| |
Net proceeds from issuance of common shares
|
|
|
— |
|
|
|
153 |
|
|
|
434 |
|
| |
Cash payment for common share purchases
|
|
|
(191 |
) |
|
|
(81 |
) |
|
|
(172 |
) |
| |
Distributions to joint venture minority interest partners, net
|
|
|
(2,486 |
) |
|
|
(140 |
) |
|
|
(244 |
) |
| |
|
|
|
|
|
|
|
|
|
|
Net cash flow provided by (used in) financing activities
|
|
|
(106,659 |
) |
|
|
10,170 |
|
|
|
(5,360 |
) |
| |
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents
|
|
$ |
(492 |
) |
|
$ |
(11,440 |
) |
|
$ |
21,843 |
|
|
Cash and cash equivalents, beginning of year
|
|
|
14,013 |
|
|
|
25,453 |
|
|
|
3,610 |
|
| |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of year
|
|
$ |
13,521 |
|
|
$ |
14,013 |
|
|
$ |
25,453 |
|
| |
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
F-8
BOYKIN LODGING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
Boykin Lodging Company, an Ohio Corporation (together with its
subsidiaries “Boykin”), is a real estate investment
trust (“REIT”) that owns hotels throughout the United
States of America. As of December 31, 2004, Boykin owned
interests in 24 hotels containing a total of 7,209 guestrooms
located in 16 states, 21 of which were affiliated with
nationally-recognized franchisors. Boykin’s largest
franchise affiliation is with Doubletree®. As of
December 31, 2004, Boykin owned eight Doubletree hotels in
seven states, which accounted for approximately 41% of the total
rooms in Boykin’s portfolio. Other brands that Boykin is
affiliated with include Hilton®, Marriott® and
Radisson®.
The operations of the hotels have historically been seasonal.
The five hotels located in Florida have historically experienced
their highest occupancy in the first quarter, while the
remaining hotels have historically maintained higher occupancy
rates during the second and third quarters.
Boykin was formed and completed an initial public offering (the
“IPO”) in 1996 to continue and expand the nearly
40-year history of hotel ownership, acquisition, redevelopment
and repositioning activities of its predecessors, Boykin
Management Company and its affiliates. Boykin Hotel Properties,
L.P., an Ohio limited partnership (the “Partnership”),
is the operating partnership that transacts business and holds
the direct and indirect ownership interest in Boykin’s
hotels. As of December 31, 2004, Boykin had an 85.3%
ownership interest in and is the sole general partner of the
Partnership.
Since the IPO, Boykin has raised capital through a combination
of common and preferred share issuances, various debt
financings, capital from strategic joint venture partners and
cash flow generated from operations.
As of December 31, 2004, Boykin Management Company Limited
Liability Company (“BMC”) and certain of its
subsidiaries managed 21 of the 24 hotels in which Boykin had
ownership interests. BMC is owned by Robert W. Boykin, Chairman
and Chief Executive Officer of Boykin (53.8%) and his brother,
John E. Boykin (46.2%).
|
|
|
Consolidated Joint Ventures |
During the three year period ended December 31, 2004,
Boykin was a party to the following joint ventures for the
purposes of owning hotels. In 2004, the joint ventures which
owned the Holiday Inn Minneapolis West and Marriott’s Hunt
Valley Inn, sold their respective hotels.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
Boykin | |
|
JV | |
|
|
|
|
|
|
| |
|
|
|
Ownership | |
|
Ownership | |
|
|
|
Hotel | |
|
Date of Hotel | |
| Name of Joint Venture |
|
JV Partner |
|
Percentage | |
|
Percentage | |
|
Hotel Owned Under Joint Venture |
|
Manager | |
|
Sale | |
| |
|
|
|
| |
|
| |
|
|
|
| |
|
| |
|
BoyStar Ventures, L.P.
|
|
Interstate Hotels and Resorts |
|
|
91% |
|
|
|
9% |
|
|
Holiday Inn Minneapolis West |
|
|
BMC |
|
|
|
August 2004 |
|
|
Shawan Road Hotel L.P.
|
|
Davidson Hotel Company |
|
|
91% |
|
|
|
9% |
|
|
Marriott’s Hunt Valley Inn |
|
|
Davidson |
|
|
|
July 2004 |
|
|
Boykin San Diego LLC
|
|
Outrigger Lodging Services |
|
|
91% |
|
|
|
9% |
|
|
Hampton Inn
San DiegoAirport/Sea World |
|
|
Outrigger |
|
|
|
N/A |
|
|
|
|
Unconsolidated Joint Ventures |
In 1999, Boykin formed a joint venture with AEW Partners III,
L.P. (“AEW”), an investment partnership managed by AEW
Capital Management, L.P., a Boston-based real estate investment
firm. Boykin has a 25% ownership interest in the joint venture.
In the same year, the Boykin/ AEW venture formed and acquired a
75% ownership interest in Boykin Chicago, L.L.C., which
purchased a hotel in downtown Chicago, now named Hotel 71.
In 2000, Boykin purchased the remaining 25% ownership interest
in Boykin Chicago, L.L.C. from a private investor thereby
increasing Boykin’s total ownership percentage in the hotel
to 43.75%. Boykin Chicago, L.L.C. entered into a contract to
sell Hotel 71 in 2004.
F-9
In July 2001, Boykin formed a joint venture with Concord
Hospitality Enterprises (“Concord”), a privately owned
hotel investment and management company based in Raleigh, North
Carolina. Boykin has a 50% ownership interest in the joint
venture, which acquired a full-service hotel in Lyndhurst, New
Jersey.
Because of the non-controlling nature of Boykin’s ownership
interests in these joint ventures, Boykin accounts for these
investments using the equity method. Refer to Note 9 for
further discussions of the aforementioned joint venture with AEW.
Boykin’s carrying value of its investments in these joint
ventures differs from its share of the partnership equity
reported in the balance sheets of the unconsolidated joint
ventures due to Boykin’s cost of its investment in excess
of the historical net book values related to the direct
investment in Boykin Chicago, L.L.C. Boykin’s
additional basis is allocated to depreciable assets and is
recognized on a straight line basis over 30 years.
The following table sets forth the total assets, liabilities,
revenues and net income (loss), including Boykin’s share,
related to the unconsolidated joint ventures discussed above as
of December 31, 2004 and 2003 and for each of the three
years in the period ended December 31, 2004:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Boykin/AEW | |
|
Boykin/Concord | |
| |
|
December 31, | |
|
December 31, | |
| |
|
| |
|
| |
| |
|
2004 | |
|
2003 | |
|
2004 | |
|
2003 | |
| |
|
| |
|
| |
|
| |
|
| |
|
Total assets
|
|
$ |
65,975 |
|
|
$ |
68,601 |
|
|
$ |
21,069 |
|
|
$ |
22,272 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued expenses
|
|
|
2,593 |
|
|
|
2,884 |
|
|
|
485 |
|
|
|
469 |
|
|
Outstanding debt
|
|
|
36,116 |
|
|
|
37,236 |
|
|
|
18,398 |
|
|
|
16,728 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
38,709 |
|
|
|
40,120 |
|
|
|
18,883 |
|
|
|
17,197 |
|
|
Minority interest
|
|
|
6,781 |
|
|
|
7,081 |
|
|
|
— |
|
|
|
— |
|
|
Equity
|
|
|
20,485 |
|
|
|
21,400 |
|
|
|
2,186 |
|
|
|
5,075 |
|
|
Boykin’s share of equity and minority interest
|
|
|
11,999 |
|
|
|
12,627 |
|
|
|
1,093 |
|
|
|
2,537 |
|
|
Boykin’s additional basis in Boykin Chicago, L.L.C.
|
|
|
956 |
|
|
|
994 |
|
|
|
— |
|
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in unconsolidated joint venture
|
|
$ |
12,955 |
|
|
$ |
13,621 |
|
|
$ |
1,093 |
|
|
$ |
2,537 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Boykin/AEW | |
|
Boykin/Concord | |
| |
|
December 31, | |
|
December 31, | |
| |
|
| |
|
| |
| |
|
2004 | |
|
2003 | |
|
2002 | |
|
2004 | |
|
2003 | |
|
2002 | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Revenues
|
|
$ |
16,093 |
|
|
$ |
14,942 |
|
|
$ |
10,049 |
|
|
$ |
7,437 |
|
|
$ |
6,709 |
|
|
$ |
5,529 |
|
|
Hotel operating expenses
|
|
|
(10,698 |
) |
|
|
(9,836 |
) |
|
|
(8,752 |
) |
|
|
(4,297 |
) |
|
|
(3,856 |
) |
|
|
(3,495 |
) |
|
Management fees – related parties
|
|
|
(483 |
) |
|
|
(446 |
) |
|
|
(75 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Real estate related depreciation
|
|
|
(3,102 |
) |
|
|
(3,099 |
) |
|
|
(1,938 |
) |
|
|
(1,114 |
) |
|
|
(1,139 |
) |
|
|
(1,011 |
) |
|
Property taxes, insurance and other
|
|
|
(1,710 |
) |
|
|
(1,245 |
) |
|
|
(1,360 |
) |
|
|
(554 |
) |
|
|
(537 |
) |
|
|
(493 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
100 |
|
|
|
316 |
|
|
|
(2,076 |
) |
|
|
1,472 |
|
|
|
1,177 |
|
|
|
530 |
|
|
Interest and other income
|
|
|
35 |
|
|
|
14 |
|
|
|
26 |
|
|
|
5 |
|
|
|
13 |
|
|
|
2 |
|
|
Amortization
|
|
|
(289 |
) |
|
|
(282 |
) |
|
|
(334 |
) |
|
|
(151 |
) |
|
|
(88 |
) |
|
|
(87 |
) |
|
Interest expense
|
|
|
(1,760 |
) |
|
|
(1,716 |
) |
|
|
(1,648 |
) |
|
|
(926 |
) |
|
|
(792 |
) |
|
|
(799 |
) |
|
Other
|
|
|
(1 |
) |
|
|
(5 |
) |
|
|
(107 |
) |
|
|
(156 |
) |
|
|
(578 |
) |
|
|
(94 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) before minority interest
|
|
|
(1,915 |
) |
|
|
(1,673 |
) |
|
|
(4,139 |
) |
|
|
244 |
|
|
|
(268 |
) |
|
|
(448 |
) |
|
Boykin’s share of net income (loss)
|
|
|
(936 |
) |
|
|
(736 |
) |
|
|
(1,816 |
) |
|
|
122 |
|
|
|
(134 |
) |
|
|
(224 |
) |
|
|
|
Taxable REIT Subsidiary Transactions |
The Work Incentives Improvement Act of 1999 (“REIT
Modernization Act”) amended the tax laws to permit REITs,
like Boykin, to lease hotels to a subsidiary that qualifies as a
taxable REIT subsidiary (“TRS”) as long as the TRS
engages an independent hotel management company to operate those
hotels under a management contract. Boykin implemented this
structure for certain properties previously leased to the hotel
management companies effective January 1, 2002.
In conjunction with the transaction, the Partnership acquired
16 subsidiaries of BMC for consideration comprised of
limited partnership units (Note 8) and the assumption of
working capital liabilities in excess of assets relating to
Westboy LLC (“Westboy”), one of the subsidiaries
(Note 14).
F-10
The Partnership then contributed the acquired subsidiaries to
Bellboy, Inc. (“Bellboy”), a wholly owned subsidiary
of the Partnership, or terminated the existing lease agreement
with the hotel managers and re-leased the properties to
subsidiaries of Bellboy. Bellboy has elected to be treated as a
TRS.
Effective September 1, 2002, Shawan Road Hotel L.P.
formed a TRS, Hunt Valley Leasing, Inc. (“Hunt
Valley”), to lease the Marriott’s Hunt Valley Inn.
Davidson continued to manage the property until Shawan Road
Hotel L.P. sold the hotel in 2004.
As Boykin Chicago, L.L.C. and the Boykin/ Concord joint
venture each also have TRS entities which lease their
properties, 71 E. Wacker Leasing, Inc. and BoyCon
Leasing, Inc., respectively, as of December 31, 2004, all
hotels Boykin had an ownership interest in, other than the
Hampton Inn San Diego Airport/Sea World, were operated under the
TRS structure.
As a result of the TRS transactions discussed above, from the
effective date of each transaction going forward, the
consolidated financial statements of Boykin include the
operating results of the consolidated hotels under the TRS
structure. Previously, revenues recorded on the consolidated
financial statements were derived primarily from lease payment
obligations which were made out of the net operating income of
the properties; now reported revenues reflect total operating
revenues from the properties with the related operating expenses
also being reported.
|
|
|
Hilton Modification Agreement |
Westboy, a subsidiary of Bellboy subsequent to the TRS
transaction, historically leased from Boykin ten Doubletree
branded hotels which were managed by a subsidiary of Hilton
Hotels Corporation (“Hilton”) under a long-term
management agreement. On April 30, 2003, Boykin entered
into an agreement (the “Modification Agreement”) with
Hilton to terminate the long-term management agreement. Six of
the hotels continued to be Doubletree hotels under license
agreements which became effective in May 2003, and Boykin then
engaged BMC to manage the properties. One of these properties,
the Doubletree Portland Downtown, was subsequently divested in
2004. Of the remaining four properties, three were subsequently
sold and one property, the Yakima hotel was managed by Hilton
until February 2004, at which point it became a Clarion hotel
and Boykin entered into an agreement with the Chambers Group to
manage the property.
The terms of the Modification Agreement included a discounted
payoff of $3,600 on a $6,000 deferred incentive management fee
which had been expensed by Boykin but was not yet payable to
Hilton, a $2,100 termination fee and other professional fees
related to the transaction. The approximate gain of $150
recorded on the transaction is reflected in property taxes,
insurance and other expenses in 2003.
|
|
|
2. Summary of Significant Accounting Policies: |
The separate financial statements of Boykin, the Partnership,
Bellboy, Hunt Valley and the consolidated joint ventures
discussed above are consolidated because Boykin exercises
unilateral control over these entities. All significant
intercompany transactions and balances have been eliminated.
Boykin believes that the results of operations contained within
the consolidated financial statements reflect all costs of
Boykin doing business.
|
|
|
Investment in Hotel Properties |
Hotel properties are stated at cost, net of any impairment
charges, and are depreciated using the straight-line method over
estimated useful lives ranging from ten to 35 years for
buildings and improvements and three to 20 years for
furniture, fixture and equipment.
F-11
Investment in hotel properties as of December 31, 2004 and
2003 consisted of the following:
| |
|
|
|
|
|
|
|
|
| |
|
2004 | |
|
2003 | |
| |
|
| |
|
| |
|
Land
|
|
$ |
55,009 |
|
|
$ |
55,009 |
|
|
Buildings and improvements
|
|
|
416,563 |
|
|
|
409,393 |
|
|
Furniture and equipment
|
|
|
68,893 |
|
|
|
64,659 |
|
|
Construction in progress
|
|
|
4,677 |
|
|
|
5,414 |
|
| |
|
|
|
|
|
|
| |
|
|
545,142 |
|
|
|
534,475 |
|
|
Less – Accumulated depreciation
|
|
|
(134,347 |
) |
|
|
(124,599 |
) |
| |
|
|
|
|
|
|
| |
|
$ |
410,795 |
|
|
$ |
409,876 |
|
| |
|
|
|
|
|
|
Boykin reviews the hotel properties for impairment whenever
events or changes in circumstances indicate the carrying value
of the hotel properties may not be recoverable. Events or
circumstances that may cause a review include, but are not
limited to, adverse changes in the demand for lodging at the
properties due to declining national or local economic
conditions, new hotel construction in markets where the hotels
are located or changes in the expected holding period of the
property. When such conditions exist, management performs an
analysis to determine if the estimated undiscounted future cash
flows from operations and the proceeds from the ultimate
disposition of a hotel property exceed its carrying value. If
the estimated undiscounted future cash flows are less than the
carrying amount of the asset, an adjustment to reduce the
carrying amount to the related hotel property’s estimated
fair market value is recorded and an impairment loss recognized.
In 2004, Boykin identified changes in circumstances, namely the
intended holding period of the property, which indicated that
the carrying value of the Ramada Inn Bellevue Center was
impaired and accordingly recorded an impairment charge of
$4,300. In 2003, management identified changes in circumstances,
namely the intended holding period of the property, which
indicated that the carrying value of one of its properties, the
Holiday Inn Minneapolis West, was impaired and accordingly
recorded an impairment charge of $2,800. Both of these
properties were sold in 2004. Boykin noted no such circumstances
in 2002. Boykin does not believe that there are any factors or
circumstances indicating impairment of any other investments in
hotel properties at this time.
Fair market values of hotel properties are estimated through a
combination of comparable property sales, replacement cost and a
discounted cash flow analysis taking into account each
property’s expected cash flow generated from operations,
holding period and ultimate proceeds from disposition. In
projecting the expected cash flows from operations of the asset,
the estimates are based on future projected earnings before
interest expense, income taxes, depreciation and amortization,
or EBITDA, and deduct expected capital expenditure requirements.
Growth assumptions are applied to project these amounts over the
expected holding period of the asset. The growth assumptions are
based on estimated inflationary increases in room rates and
expenses and the demand for lodging at the properties, as
impacted by local and national economic conditions and estimated
or known future new hotel supply. The estimated proceeds from
disposition are judgmentally determined based on a combination
of anticipated cash flow in the year of disposition,
capitalization rate, ratio of selling price to gross hotel
revenues and selling price per room.
If actual conditions differ from the assumptions, the actual
results of each asset’s future operations and fair market
value could be significantly different from the estimated
results and value used in the analysis.
There were no consolidated properties held for sale at
December 31, 2004 and 2003, as defined within the
provisions of Statement of Financial Accounting Standards
(“SFAS”) No. 144 “Accounting for the
Impairment or Disposal of Long-Lived Assets.” Boykin
considers assets to be “held for sale” when they are
under contract, significant non-refundable deposits have been
made by the potential buyer and the assets are immediately
available to be sold.
|
|
|
Cash and Cash Equivalents |
Cash and cash equivalents are defined as cash on hand and in
banks plus short-term investments with an original maturity of
three months or less.
Restricted cash consists of cash held in escrow reserves under
the terms of the term notes payable discussed in Note 6 and
deposits on the White Sand Villas condominium sales as discussed
further below. The escrow reserves
F-12
relate to the payment of capital expenditures, real estate
taxes, interest and insurance as well as reserves relating to
the financing of Boykin Chicago L.L.C.
Accounts receivable, consisting primarily of recognition of
revenue related to projects accounted for under the percentage
of completion method and hotel guest receivables, is stated at
fair value. Bad debt expense for the hotels owned as of
December 31, 2004 was $67, $93 and $733 for 2004, 2003 and
2002, respectively.
Inventories consisting primarily of food and beverages and gift
store merchandise are stated at the lower of first-in, first-out
cost or market.
|
|
|
Deferred Financing Costs and Other, net |
Included in deferred financing costs and other at
December 31, 2004 and 2003 were the following:
| |
|
|
|
|
|
|
|
|
| |
|
2004 | |
|
2003 | |
| |
|
| |
|
| |
|
Financing costs
|
|
$ |
5,269 |
|
|
$ |
5,092 |
|
|
Franchise fees
|
|
|
352 |
|
|
|
272 |
|
| |
|
|
|
|
|
|
| |
|
|
5,621 |
|
|
|
5,364 |
|
|
Accumulated amortization
|
|
|
(3,607 |
) |
|
|
(2,416 |
) |
| |
|
|
|
|
|
|
| |
|
$ |
2,014 |
|
|
$ |
2,948 |
|
| |
|
|
|
|
|
|
Deferred financing costs are being amortized using the
straight-line method over the terms of the related financing
agreements, including extension options where it is the intent
of Boykin to exercise such options. In 2004, additional
financing costs amounted to $554 and write offs due to
repayments or maturities of underlying agreements amounted to
$377. Additionally, financing costs for 2003 have been restated
to reflect the removal of costs related to the debt
collateralized by the properties sold during 2004 of $198.
Accumulated amortization at December 31, 2004 and 2003 was
$3,491 and $2,324, respectively.
Deferred franchise fees are being amortized on a straight-line
basis over the terms of the related franchise agreements. In
2004, additional franchise fees amounted to $80. Franchise fees
for 2003 have been restated to reflect amounts related to
properties sold during 2004 of $199. Accumulated amortization at
December 31, 2004 and 2003 was $116 and $92, respectively.
Pursuant to our Chairman and Chief Executive Officer’s
employment agreement, Boykin was obligated to provide certain
split-dollar life insurance benefits to him. During 2004, Boykin
amended its agreement with Mr. Boykin to provide that
Mr. Boykin would surrender one policy (along with the cash
surrender value of such policy) to Boykin and the split dollar
feature would be removed from the other policy. In consideration
of Mr. Boykin’s agreement to surrender one policy and
remove the split dollar features from the other, the
Compensation Committee of the Board of Directors agreed to make
a one-time payment of $416 to Mr. Boykin and increase his
annual base compensation by $40 to compensate for the current
value and lost future benefit that the Company would otherwise
be required to provide. Amounts recorded for the two policies
totaled $924 and $478 as of December 31, 2004 and 2003,
respectively, and are reflected in the consolidated balance
sheets as other assets. As of December 31, 2004 and 2003,
there were loans against the cash surrender value of the
policies related to the 2004 and 2003 premiums totaling $244 and
$121, respectively, which are reflected in the consolidated
balance sheets as accounts payable and accrued expenses.
|
|
|
Deferred Compensation Plans |
As of December 31, 2004, Boykin had nonqualified deferred
compensation programs which permitted certain employees to
annually elect (via individual contracts) to defer a portion of
their compensation on a pre-tax basis. To assist in the funding
of these programs, Boykin has purchased shares of mutual funds
as directed by the participants and placed them in rabbi trusts.
The market value of the mutual fund shares included in other
assets totaled $2,634 and $1,858 at December 31, 2004 and
2003, respectively. A liability of the equal amount is
F-13
recorded within accounts payable and accrued expenses within the
consolidated financial statements as of each period.
The payment of dividends on Boykin’s common shares is
dependent upon the receipt of distributions from the
Partnership. The declaration of a common dividend and at what
rate is subject to the discretion of Boykin’s Board of
Directors.
Dividends on the preferred shares (Note 7) are cumulative
from the date of issue at the rate of
101/2%
of the liquidation preference per year and are payable quarterly
in arrears based upon authorization of the Board of Directors.
Dividends will accrue whether or not Boykin has earnings,
whether or not there are funds legally available for the payment
of such dividends and whether or not such dividends are declared.
Hotel revenues – Hotel revenues, including
room, food, beverage and other hotel revenues, are recognized as
the related services are delivered. Ongoing credit evaluations
are performed and an allowance for potential credit losses is
provided against the portion of accounts receivable that is
estimated to be uncollectible.
Lease revenue – Boykin recognizes lease
revenue for interim and annual reporting purposes on an accrual
basis pursuant to the terms of the respective percentage leases
once all terms have been satisfied and certain thresholds have
been met. Boykin recognizes the revenue in accordance with
Securities and Exchange Commission (“SEC”) Staff
Accounting Bulletin (“SAB”) No. 101 “Revenue
Recognition in Financial Statements.” The adoption of SAB
No. 101 impacts the interim reporting of revenues related
to Boykin’s leases for properties not operated under the
TRS structure, but has no impact on its interim cash flow or
year-end results of operations.
Percentage of Completion – The revenue and
expenses of condominium projects under construction are
recognized on the percentage of completion method upon
satisfaction of the following criteria: (a) construction is
determined to be beyond a preliminary stage, (b) the buyer
is not entitled to a refund except for nondelivery of the unit,
(c) sufficient units are under binding contract to assure
the entire property will not revert to rental property,
(d) sales prices have been determined to be collectible,
and (e) aggregate sales proceeds and costs can be
reasonably estimated. Beginning in 2003, Boykin recognized
revenue under percentage of completion accounting as the White
Sand Villas project had satisfied the criteria outlined above.
Percentage of completion accounting involves the use of
estimates for the relation of revenues on sold units to total
revenues of the project and for total cost of the project.
The related gross rental income generated by the units put back
to the resort by contract for use as hotel rooms and the units
owned by Boykin is recorded by the resort and included in hotel
revenues within the consolidated financial statements. Under the
terms of the contract, a percentage of the gross rental income
of each unit is to be remitted to the respective unit owner.
During 2002, Boykin began construction of a 92-unit tower at the
Pink Shell Beach Resort. In order to prepare the site for
construction of the tower, Boykin paid for the removal of
cottages occupying the space. Depreciation of the cottages was
accelerated through the period of disposal resulting in an
additional $1,700 charge in 2002, recorded in accordance with
the provisions of SFAS No. 144 as it relates to asset
abandonment. The costs of removing the cottages and preparing
the site for construction of the new building were capitalized
to the extent that total expected costs did not exceed the
expected net realizable value for the project.
Deposits totaling $7,864 at December 31, 2003 received for
the purchase of units in the White Sand Villas are included in
accounts payable and accrued expenses on the balance sheet. A
portion of the deposits was available for use as payment of
construction costs. The portion that was not available was
reflected in restricted cash.
The amount of costs in excess of the revenue recognized on the
White Sand Villas project was $518 as of December 31, 2003
and is reflected in other assets within the consolidated balance
sheet. The outstanding
F-14
accounts receivable related to the recognition of revenue for
the White Sand Villas units totaled $32,173 as of
December 31, 2003.
The sales of all of the 91 available units closed in 2004,
the proceeds had been collected and the contractors had
completed their obligations; therefore, all project revenues and
related costs have been recognized as of December 31, 2004.
Boykin reported $7,541 and $32,173 in revenues and $5,509 and
$21,629 in costs under the percentage of completion method of
accounting for the years ended December 31, 2004 and 2003.
All of the White Sand Villas unit owners have contracted with
the resort to allow their unused room nights to be rented out as
hotel rooms. For the year ended December 31, 2004, $1,188
was remitted to third party unit owners and is included within
property taxes, insurance and other in the consolidated
financial statements.
During 2001, Boykin completed a $2,700 renovation of a 60-unit
tower at the Pink Shell Beach Resort. These renovated studio
units were sold as Sanibel View Villas Condominiums. The revenue
related to the sale of the units was recorded upon satisfaction
of the following two criteria: (a) the profit is
determinable and (b) the earnings process is virtually
complete. These criteria are generally met at the closing of the
sale. Through December 31, 2002, 40 of the units were
sold, generating revenues of $8,715 and costs of $6,474.
As of December 31, 2003, all of the 59 available units were
sold. Revenues from condominium development and unit sales for
2003 include $4,710 of revenue related to the sale of 19 Sanibel
View Villas condominium units. Costs of the Sanibel View unit
sales totaled $3,016 during 2003.
All of the Sanibel View unit owners have contracted with the
resort to allow their unused room nights to be rented out as
hotel rooms. For the years ended December 31, 2004 and
2003, $882 and $923 was remitted to third party unit owners and
is included within property taxes, insurance and other in the
consolidated financial statements.
During 2003, Boykin made the decision to move forward with the
plans for the final phase of redevelopment of the Pink Shell
Beach Resort; which includes the demolition of two existing
low-rise buildings and the construction of a new 43-unit
building. Similar to the other projects at the resort, the units
in the new building will be sold as condominiums with the
prospect that the owners will put their unused room nights back
to the resort by contract for use as hotel rooms. In conjunction
with the pending demolition of the existing buildings, in
accordance with the provisions of SFAS No. 144 as it
relates to asset abandonment, depreciation on the existing
buildings was accelerated, resulting in an additional $3,456 of
depreciation in 2003. Through December 31, 2004 and 2003,
costs incurred in preparing for the construction totaling $1,015
and $554, respectively, as well as the original $900 basis in
the land on which the new building will be constructed are
reflected in the consolidated balance sheets as other assets.
In 2003, Boykin disposed of certain assets due to water
infiltration remediation activities. Property insurance proceeds
received in 2003 in excess of the net book value of the disposed
assets were $913 and are recorded within the gain (loss) on
sale/ disposal of assets within the consolidated financial
statements. Additional property insurance proceeds of $3,383
received in 2004 are recorded as a gain on sale/ disposal of
assets within the consolidated financial statements. During
2004, Boykin received a $750 advance on its business
interruption insurance claim related to the period in which the
remediation activities occurred. These proceeds are recorded as
other hotel revenues within the consolidated financial
statements.
Since September 2004, Boykin’s two hotels located in
Melbourne, Florida have been closed due to damage sustained from
Hurricane Frances. Boykin has recorded estimated business
interruption insurance recoveries in the amount of the loss
sustained by the hotels since the storm. These estimates,
totaling $1,514, are recorded as other hotel revenues within the
consolidated financial statements. Estimated property insurance
recoveries totaling $5,656 have been recorded as gain on
sale/disposal of assets within the consolidated financial
statements to the extent Boykin experienced a loss on the
writeoff of the damaged or destroyed assets. Included in
accounts receivable as of December 31, 2004 is $4,669 of
property damage and business interruption insurance recoveries
related to these properties.
F-15
As other property insurance claims are filed for repair work
done at the properties, Boykin records estimated recoveries to
offset the costs incurred, less appropriate deductibles.
Minority interest in the Partnership represents the limited
partners’ proportionate share of the equity in the
Partnership. Income is allocated to minority interest based on
the weighted average limited partnership percentage ownership
throughout the period.
Minority interest in joint ventures represents the joint venture
partners’ proportionate share of the equity in the joint
ventures. Income and losses are allocated to minority interest
based on the joint venture partners’ percentage ownership
throughout the period and flow of cash distributions, subject to
minimum returns to the Partnership, as defined in the joint
venture agreements.
Boykin qualifies as a REIT under Sections 856-860 of the
Internal Revenue Code. As a REIT, Boykin generally will not be
subject to federal corporate income tax on that portion of its
net income that relates to non-TRS subsidiaries. Accordingly, no
provision for income taxes has been reflected in the
accompanying consolidated financial statements for the corporate
level entities.
Upon the effective date of the establishment of Boykin’s
TRSs, Bellboy and Hunt Valley, the subsidiaries became subject
to federal and state income taxes. Boykin’s TRSs account
for income taxes in accordance with the provisions of SFAS
No. 109, “Accounting for Income Taxes.” As of
December 31, 2004 and 2003, Boykin’s TRSs have a
deferred tax asset of $10,155 and $5,735, respectively, prior to
any valuation allowance, related to the assumption of the
retained deficit of Westboy as well as the net operating losses
of the TRSs and their subsidiaries. Boykin’s TRSs have
recorded a 100% valuation allowance against these assets due to
the uncertainty of realization of the deferred tax asset and
therefore, no provision or benefit from income taxes is
reflected in the accompanying consolidated statements of
operations. As of December 31, 2004, the net operating loss
carryforwards have remaining lives of 17 to 19 years.
Boykin’s earnings and profits, as defined by federal income
tax law, will determine the taxability of distributions to
shareholders. Earnings and profits will differ from income
reported for financial reporting purposes primarily due to the
differences in the estimated useful lives and methods used to
compute depreciation, differences in timing of certain revenue
recognition, and differences in the timing of when certain
expenses are deductible for tax purposes. For federal income tax
purposes, dividends to shareholders applicable to 2004, 2003 and
2002 operating results represented the following allocations of
ordinary taxable income, qualified, return of capital, and 20%
capital gain:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Common Shares | |
| | |
| Year |
|
Ordinary Income | |
|
Return of Capital | |
|
20% Capital Gain | |
|
Total | |
| |
|
| |
|
| |
|
| |
|
| |
|
2004
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
2003
|
|
|
— |
|
|
|
100.0 |
% |
|
|
— |
|
|
|
100.0% |
|
|
2002
|
|
|
90.8 |
% |
|
|
— |
|
|
|
9.2 |
% |
|
|
100.0% |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Preferred Shares | |
| | |
| Year |
|
Ordinary Income | |
|
Qualified | |
|
Return of Capital | |
|
20% Capital Gain | |
|
Total | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
2004
|
|
|
89.9% |
|
|
|
8.1 |
% |
|
|
2.0 |
% |
|
|
— |
|
|
|
100.0 |
% |
|
2003
|
|
|
92.9% |
|
|
|
— |
|
|
|
7.1 |
% |
|
|
— |
|
|
|
100.0 |
% |
|
2002
|
|
|
90.8% |
|
|
|
— |
|
|
|
— |
|
|
|
9.2 |
% |
|
|
100.0 |
% |
Basic earnings per share is based on the weighted average number
of common shares outstanding during the period whereas diluted
earnings per share adjusts the weighted average shares
outstanding for the effect of all
F-16
dilutive securities. For the years ended December 31, 2004,
2003 and 2002, the weighted average basic and diluted common
shares outstanding were as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Year Ended December 31, | |
| |
|
2004 | |
|
2003 | |
|
2002 | |
| |
|
| |
|
| |
|
| |
|
Basic
|
|
|
17,426,458 |
|
|
|
17,336,258 |
|
|
|
17,248,173 |
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Common stock options
|
|
|
28,213 |
|
|
|
18,332 |
|
|
|
51,523 |
|
| |
Restricted share grants
|
|
|
98,530 |
|
|
|
115,062 |
|
|
|
83,063 |
|
| |
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
17,553,201 |
|
|
|
17,469,652 |
|
|
|
17,382,759 |
|
There are no adjustments to the reported amounts of income in
computing diluted per share amounts.
|
|
|
Partnership Units/ Minority Interests |
A total of 2,718,256 limited partnership units (Note 8) were
issued and outstanding at December 31, 2004 and 2003. The
weighted average number of limited partnership units outstanding
for each of the periods ended December 31, 2004, 2003 and
2002 was also 2,718,256.
|
|
|
Fair Value of Financial Instruments |
Fair values are determined by using available market information
and appropriate valuation methodologies. Boykin’s principal
financial instruments are cash, cash equivalents, restricted
cash, accounts receivable, borrowings against the credit
facility, the term notes payable and interest rate protection
instruments.
Cash, cash equivalents, restricted cash and accounts receivable,
due to their short maturities, are carried at amounts which
reasonably approximate fair value. As borrowings against the
credit facility (Note 5) bear interest at variable market
rates, its carrying value approximates market value at
December 31, 2004.
At December 31, 2004, the fair value of the $130,000 term
note payable (Note 6) approximated $105,000 versus the
carrying value of $102,414 as the interest rate associated with
the note exceeds market rates currently offered for debt with
similar risk factors, terms and maturities.
At December 31, 2004, the fair value of the $91,125
remaining balance of the $108,000 term loan (Note 6)
approximates the carrying value due to its short-term nature.
Boykin has adopted the provisions of SFAS No. 133,
“Accounting for Derivative Instruments and Hedging
Activities.” This statement requires companies to carry all
derivative instruments, including embedded derivatives, in the
balance sheet at fair value. The accounting for changes in the
fair value of a derivative instrument depends on whether it has
been designated and qualifies as part of a hedging relationship
and, if so, on the reason for holding it. For financial
reporting purposes, the change in market value of the effective
portion of an instrument defined as a cash flow hedge flows
through the other comprehensive income component of equity. All
other changes will flow through earnings.
Subject to the terms of the $108,000 term loan, Boykin is
required to maintain interest rate protection on the outstanding
balance to cap the interest rate at no more than 10.25%. Changes
in the fair value of the interest rate cap are recorded through
the statement of operations. The interest rate cap is with a
third party and had no value at December 31, 2004 based
upon estimated market valuations. In March 2001, Boykin entered
into an interest rate swap, which fixed the overall interest
rate at 7.32% on $83,000 of Boykin’s $108,000 term note.
Changes in the contract’s fair value, if applicable, were
recorded through the statement of operations. The swap expired
in July 2003, and Boykin did not renew the swap or purchase a
replacement instrument.
Comprehensive income is defined as changes in shareholders’
equity from non-owner sources, which for Boykin consisted of the
difference between the cost basis and fair market value of its
interest rate swap. For the years ended December 31, 2003
and 2002, the difference between net income (loss) and
comprehensive income (loss) was due to the change in the
market value of the swap.
F-17
|
|
|
New Accounting Pronouncements |
In November 2002, the Financial Accounting Standards Board
(“FASB”) issued Interpretation No. 45,
“Guarantor’s Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of Indebtedness of
Others,” which addresses the disclosure to be made by a
guarantor in its interim and annual financial statements about
its obligations under guarantees. Interpretation No. 45
also requires the recognition of a liability by a guarantor at
the inception of certain guarantees. Interpretation No. 45
requires the guarantor to recognize a liability for the
non-contingent component of the guarantee, this is the
obligation to stand ready to perform in the event that specified
triggering events or conditions occur. The initial measurement
of this liability is the fair value of the guarantee at
inception. The recognition of the liability is required even if
it is not probable that payments will be required under the
guarantee or if the guarantee was issued with a premium payment
or as part of a transaction with multiple elements. Boykin has
adopted the disclosure requirements of Interpretation
No. 45 for all guarantees entered into prior to
January 1, 2003. There are no guarantees which require
recognition under this Interpretation as of December 31,
2004.
In December 2002, the FASB issued Statement No. 148,
“Accounting for Stock-Based Compensation-Transition and
Disclosure – an amendment of FASB Statement
No. 123.” Statement No. 148 amends FASB Statement
No. 123, “Accounting for Stock-Based
Compensation,” to provide alternative methods of transition
for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition,
Statement No. 148 amends the disclosure requirements of
Statement No. 123 to require prominent disclosures in both
annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect
of the method used on reported results. Adoption did not have a
material effect on the financial condition or results of
operations of Boykin.
In January 2003, the FASB issued Interpretation No. 46,
“Consolidation of Variable Interest Entities,” which
addresses consolidation by business enterprises of variable
interest entities. In general, a variable interest entity is a
corporation, partnership, trust, or any other legal structure
used for business purposes that either (a) does not have
equity investors with voting rights or (b) has equity
investors that do not provide sufficient financial resources for
the entity to support its activities. A variable interest entity
often holds financial assets, including loans or receivables,
real estate or other property. A variable interest entity may be
essentially passive or it may engage in research and development
or other activities on behalf of another company. The objective
of Interpretation No. 46 is not to restrict the use of
variable interest entities but to improve financial reporting by
companies involved with variable interest entities. Until now, a
company generally has included another entity in its
consolidated financial statements only if it controlled the
entity through voting interests. Interpretation No. 46
changes that by requiring a variable interest entity to be
consolidated by a company if that company is subject to a
majority of the risk of loss from the variable interest
entity’s activities or is entitled to receive a majority of
the entity’s residual returns or both. The consolidation
requirements of Interpretation No. 46 apply immediately to
variable interest entities created after January 31, 2003.
In December 2003, the FASB issued a revised Interpretation which
modifies and clarifies various aspects of the original
Interpretation. The consolidation requirements apply to older
entities in the first fiscal year or interim period beginning
after December 15, 2003 for those entities which may be
defined as special purpose entities. Certain of the disclosure
requirements apply in all financial statements issued after
January 31, 2003, regardless of when the variable interest
entity was established. Boykin does not have any unconsolidated
variable interest entities as of December 31, 2004.
On April 30, 2003 the FASB issued Statement No. 149
(“SFAS 149”), “Amendment of
Statement 133 on Derivative Instruments and Hedging
Activities.” SFAS 149 amends and clarifies accounting
for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging
activities under Statement 133. In particular, this
Statement clarifies under what circumstances a contract with an
initial net investment meets the characteristic of a derivative
as discussed in Statement 133 and it clarifies when a
derivative contains a financing component that warrants special
reporting in the statement of cash flows. SFAS 149 is
effective for contracts entered into or modified after
December 31, 2003 and for hedging relationships designated
after December 31, 2003 and is to be applied prospectively.
This Statement has not had and is not expected to have a
material impact on Boykin’s financial position or results
of operations.
In May 2003, the FASB issued Statement No. 150
(“SFAS 150”), “Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities
and Equity,” which establishes standards for how an issuer
classifies and measures certain financial instruments with
characteristics of both liabilities and equity. It requires that
an issuer classify a financial instrument that is within its
scope as a liability. The effective date of a portion of the
Statement has been indefinitely postponed by the FASB. Boykin
did not enter into new financial
F-18
instruments subsequent to May 2003 which would fall within the
scope of this statement. This statement has not had and is not
expected to have a material impact on our financial position or
results of operations.
At December 31, 2004, Boykin had a Long-Term Incentive
Plan, which is described more fully in Note 11. Boykin has
adopted the disclosure only provisions of SFAS No. 123,
“Accounting for Stock-Based Compensation,” and applies
Accounting Principles Board Opinion No. 25 and related
interpretations in accounting for its employee share option
plan. If Boykin had elected to recognize compensation costs for
the LTIP based on the fair value at the grant dates for option
awards consistent with the method prescribed by SFAS
No. 123, reported amounts of net loss and loss per share
would have been changed to the pro forma amounts indicated below.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Year Ended December 31, | |
| |
|
2004 | |
|
2003 | |
|
2002 | |
| |
|
Pro Forma | |
|
Pro Forma | |
|
Pro Forma | |
| |
|
| |
|
| |
|
| |
|
Net loss attributable to common shareholders
|
|
$ |
(4,911 |
) |
|
$ |
(8,177 |
) |
|
$ |
(1,480 |
) |
|
Stock-based employee compensation expense
|
|
|
(126 |
) |
|
|
(126 |
) |
|
|
(151 |
) |
| |
|
|
|
|
|
|
|
|
|
|
Proforma net loss attributable to common shareholders
|
|
$ |
(5,037 |
) |
|
$ |
(8,303 |
) |
|
$ |
(1,631 |
) |
| |
|
|
|
|
|
|
|
|
|
|
Proforma net loss attributable to common shareholders per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Basic
|
|
$ |
(0.29 |
) |
|
$ |
(0.48 |
) |
|
$ |
(0.09 |
) |
| |
Diluted
|
|
$ |
(0.29 |
) |
|
$ |
(0.48 |
) |
|
$ |
(0.09 |
) |
In December 2004, the FASB issued revised SFAS No. 123
(Statement 123(R)), Share-Based Payment (“SFAS
No. 123R”). SFAS No. 123R requires all entities
to recognize the fair value of share-based payment awards (stock
compensation) classified in equity, unless they are unable to
reasonably estimate the fair value of the award. Boykin will
adopt the provisions of SFAS No. 123R on July 1, 2005,
using the modified prospective approach permitted by the
literature. This approach requires that any unvested portion of
options at the time of adoption be expensed in the earnings
statement over the remaining service period of those options.
Boykin expects adoption of this approach to result in an
immaterial impact on net income.
In December 2004, the FASB decided to defer the issuance of
their final standard on earnings per share (EPS) entitled
“Earnings per Share – an Amendment to
FAS 128.” The final standard will be effective in 2005
and will require retrospective application for all prior periods
presented. The significant proposed changes to the EPS
computation are changes to the treasury stock method and
contingent share guidance for computing year-to-date diluted
EPS, removal of the ability to overcome the presumption of share
settlement when computing diluted EPS when there is a choice of
share or cash settlement and inclusion of mandatorily
convertible securities in basic EPS. Boykin is currently
evaluating the proposed provisions of this amendment to
determine the impact on its consolidated financial statements.
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could
differ from those estimates.
Certain reclassifications have been made to the prior year
financial statements to conform with the current year
presentation.
F-19
The following table summarizes Boykin’s hotel acquisition
and dispositions in 2004, 2003 and 2002:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Percentage |
|
|
| |
|
|
|
Acquisition/ |
|
Number of |
|
Purchase/ | |
|
owned by |
|
|
| Hotel |
|
Location |
|
Disposition Date |
|
Rooms |
|
Sale Price | |
|
Partnership |
|
Manager |
| |
|
|
|
|
|
|
|
| |
|
|
|
|
|
Acquisition:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Radisson Suite Beach Resort
|
|
Marco Island, FL |
|
August 2003 |
|
233 |
|
$ |
27,250 |
|
|
100% |
|
BMC |
|
Dispositions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ramada Inn Bellevue Center
|
|
Bellevue, WA |
|
November 2004 |
|
208 |
|
$ |
9,800 |
|
|
100% |
|
BMC |
|
Radisson Hotel Mount Laurel
|
|
Mount Laurel, NJ |
|
September 2004 |
|
283 |
|
$ |
14,250 |
|
|
100% |
|
BMC |
|
Holiday Inn Minneapolis West
|
|
Minneapolis, MN |
|
August 2004 |
|
196 |
|
$ |
9,325 |
|
|
91% |
|
BMC |
|
Marriott’s Hunt Valley Inn
|
|
Hunt Valley, MD |
|
July 2004 |
|
392 |
|
$ |
31,000 |
|
|
91% |
|
Davidson |
|
Doubletree Portland Downtown
|
|
Portland, OR |
|
March 2004 |
|
235 |
|
$ |
22,000 |
|
|
100% |
|
BMC |
|
Doubletree Spokane Valley
|
|
Spokane, WA |
|
August 2003 |
|
237 |
|
$ |
5,400 |
|
|
100% |
|
Hilton |
|
Springfield
|
|
Springfield, OR |
|
July 2003 |
|
234 |
|
$ |
6,500 |
|
|
100% |
|
Hilton |
|
Holiday Inn Lake Norman
|
|
Charlotte, NC |
|
June 2003 |
|
119 |
|
$ |
2,550 |
|
|
100% |
|
BMC |
|
Hampton Inn Lake Norman
|
|
Charlotte, NC |
|
February 2003 |
|
117 |
|
$ |
3,700 |
|
|
100% |
|
BMC |
|
Knoxville Hilton
|
|
Knoxville, TN |
|
February 2003 |
|
317 |
|
$ |
11,500 |
|
|
100% |
|
BMC |
The operating results of the Radisson Suite Beach Resort
are included in the consolidated operating results of Boykin
starting on the date of acquisition.
|
|
|
4. Discontinued Operations: |
The provisions of SFAS No. 144, “Accounting for the
Impairment or Disposal of Long-Lived Assets” require that
hotels sold or held for sale be treated as discontinued
operations. Boykin considers assets to be “held for
sale” when they are under contract, significant
non-refundable deposits have been made by the potential buyer
and the assets are immediately available to be sold.
During 2004, Boykin disposed of the Doubletree Portland
Downtown, Marriott’s Hunt Valley Inn, the Holiday Inn
Minneapolis West, the Radisson Hotel Mount Laurel and the Ramada
Inn Bellevue Center for aggregate proceeds of $86,375. The
proceeds from the acquisition of the Doubletree Portland
Downtown by the City of Portland through its power of eminent
domain, were used to reduce the outstanding balance on the
$130,000 term loan and for general corporate purposes. The
proceeds from the sales of Marriott’s Hunt Valley Inn and
the Holiday Inn Minneapolis West were used to reduce the
outstanding balance on the credit facility. The proceeds from
the sales of the Radisson Hotel Mount Laurel and the Ramada Inn
Bellevue Center were used to reduce the outstanding balance on
the credit facility and for general corporate purposes.
During 2003, Boykin sold the Knoxville Hilton, the Hampton Inn
Lake Norman, the Holiday Inn Lake Norman, a hotel in
Springfield, Oregon and the Doubletree Spokane Valley for
aggregate proceeds of $29,650. The net proceeds of the Knoxville
Hilton, Hampton Inn Lake Norman and Holiday Inn Lake Norman were
applied to the $108,000 term loan in connection with a release
of the assets as security for the loan. Net proceeds from the
sale of the Springfield hotel and the Doubletree Spokane Valley
were used to pay off outstanding amounts on Boykin’s
previously existing credit facility as well as for general
corporate purposes.
The assets and liabilities of the five properties sold in 2004
as of December 31, 2003 and the results of operations of
the properties through the 2004 disposal/sale date and for years
ended December 31, 2003, and 2002, have been reclassified
as discontinued operations in the accompanying financial
statements. The operating results of the five properties sold
during 2003 have also been reclassified as discontinued
operations in the accompanying financial statements. Interest
expense and deferred loan costs have been attributed to the
properties, as applicable, based upon the term loan amounts that
were repaid with the proceeds of the sales.
F-20
The results of operations and the financial position related to
the applicable properties were as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Year Ended December 31, | |
| |
|
2004 | |
|
2003 | |
|
2002 | |
| |
|
| |
|
| |
|
| |
|
Lease revenue
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
2,845 |
|
|
Hotel revenues
|
|
|
20,169 |
|
|
|
44,745 |
|
|
|
50,258 |
|
|
Hotel operating expenses
|
|
|
(16,281 |
) |
|
|
(35,422 |
) |
|
|
(38,153 |
) |
|
Management fees to related party
|
|
|
(261 |
) |
|
|
(419 |
) |
|
|
(598 |
) |
|
Management fees – other
|
|
|
(193 |
) |
|
|
(672 |
) |
|
|
(798 |
) |
|
Property taxes, insurance and other
|
|
|
(1,076 |
) |
|
|
(2,674 |
) |
|
|
(2,979 |
) |
|
Other expenses
|
|
|
(71 |
) |
|
|
(35 |
) |
|
|
(96 |
) |
|
Interest income
|
|
|
14 |
|
|
|
18 |
|
|
|
17 |
|
|
Other income
|
|
|
40 |
|
|
|
42 |
|
|
|
564 |
|
|
Interest expense
|
|
|
(200 |
) |
|
|
(1,307 |
) |
|
|
(1,943 |
) |
|
Real estate related depreciation and amortization
|
|
|
(2,602 |
) |
|
|
(5,632 |
) |
|
|
(6,797 |
) |
|
Impairment of real estate
|
|
|
(4,300 |
) |
|
|
(2,800 |
) |
|
|
— |
|
|
Amortization of deferred financing costs
|
|
|
(87 |
) |
|
|
(200 |
) |
|
|
(77 |
) |
|
Minority interest in (earnings) loss of joint ventures
|
|
|
(2,095 |
) |
|
|
1,235 |
|
|
|
— |
|
|
Gain (loss) on sale of individual assets
|
|
|
15 |
|
|
|
550 |
|
|
|
(2 |
) |
| |
|
|
|
|
|
|
|
|
|
| |
Income (loss) from discontinued operations
|
|
$ |
(6,928 |
) |
|
$ |
(2,571 |
) |
|
$ |
2,241 |
|
| |
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
| |
|
December 31, | |
| |
|
2003 | |
| |
|
| |
|
Accounts receivable, net
|
|
$ |
879 |
|
|
Inventories
|
|
|
229 |
|
|
Other assets
|
|
|
669 |
|
|
Deferred financing costs, net
|
|
|
158 |
|
|
Investment in hotel properties, net
|
|
|
80,849 |
|
| |
|
|
|
| |
Total assets
|
|
$ |
82,784 |
|
| |
|
|
|
|
Accounts payable and accrued expenses
|
|
$ |
2,574 |
|
|
Accounts payable to related party
|
|
|
118 |
|
|
Term notes payable
|
|
|
16,870 |
|
|
Minority interest
|
|
|
210 |
|
| |
|
|
|
| |
Total liabilities
|
|
$ |
19,772 |
|
| |
|
|
|
In October 2003, Boykin entered into a new secured, revolving
credit facility with a financial institution which enabled
Boykin to borrow up to $78,000, subject to borrowing base and
loan-to-value limitations. The credit facility was reduced from
$78,000 to $60,000 in 2004. Boykin had borrowed $6,446 and
$71,945 as of December 31, 2004 and 2003, respectively. The
facility expires in October 2006 and bears interest at a
floating rate of LIBOR plus 3.75% (6.19% at December 31,
2004). Boykin is required to pay a fee of 0.375% on the unused
portion of the credit facility. The new facility is secured by
five hotel properties with a net carrying value of $53,655 at
December 31, 2004 and seven hotel properties with a
carrying value of $90,518 at December 31, 2003.
The credit facility requires Boykin, among other things, to
maintain a minimum net worth, a coverage ratio of EBITDA to debt
service, a coverage ratio of EBITDA to debt service and fixed
charges and a maximum leverage ratio. Further, Boykin is
required to maintain the franchise agreement at each hotel and
to maintain its REIT status. The terms of the agreement provide
certain restrictions on common share dividends; however, Boykin
is entitled to distribute sufficient dividends to maintain its
REIT status. Boykin was in compliance with its covenants at
December 31, 2004.
F-21
Red Lion Inns Operating L.P. (“OLP”), a wholly-owned
subsidiary of the Partnership, has a $130,000 term loan
agreement that expires in June 2023 and may be prepaid without
penalty after May 21, 2008. The outstanding balance as of
December 31, 2004 and 2003 was $102,414 and $122,597,
respectively. The loan bears interest at a fixed rate of 6.9%
until May 2008, and at a new fixed rate to be determined
thereafter. The loan was secured by six Doubletree hotels with a
net carrying value of $189,333 at December 31, 2004 and
seven Doubletree hotels with a net carrying value of $209,123 at
December 31, 2003. The loan requires principal repayments
based on a 25-year amortization schedule. Under covenants in the
loan agreement, assets of OLP are not available to pay the
creditors of any other Boykin entity, except to the extent of
permitted cash distributions from OLP to Boykin. Likewise, the
assets of other Boykin entities are not available to pay the
creditors of OLP. The loan agreement also requires OLP to hold
funds in escrow for the payment of capital expenditures,
insurance and real estate taxes and requires OLP to maintain
certain financial reporting requirements. OLP was in compliance
with these requirements at December 31, 2004 and 2003.
Boykin Holding, LLC (“BHC”), a wholly-owned subsidiary
of the Partnership, has a $108,000 term loan agreement. In
connection with the sale of the Knoxville Hilton, the Hampton
Inn Lake Norman and the Holiday Inn Lake Norman in 2003, the
loan balance was reduced to $91,125. The loan had an initial
maturity date of July 2003. Boykin exercised its options to
extend the maturity date to July 2005. As of December 31,
2004 and 2003, the loan was secured by six hotel properties with
a net carrying value of $65,916 and $61,273, respectively. The
term loan bears interest at a rate that fluctuates at LIBOR plus
2.35% (4.63% at December 31, 2004). Under covenants in the
loan agreement, assets of BHC are not available to pay the
creditors of any other Boykin entity, except to the extent of
permitted cash distributions from BHC to Boykin. Likewise, the
assets of other entities are not available to pay the creditors
of BHC. The loan agreement also requires BHC to hold funds in
escrow for the payment of capital expenditures, insurance,
interest and real estate taxes and requires BHC to maintain
certain financial reporting requirements. BHC was in compliance
with these requirements at December 31, 2004 and 2003.
In 2001, the Partnership entered into an interest rate swap
which fixed the overall interest rate at 7.32% on $83,000 of
debt designated to BHC’s $108,000 term note. The swap
expired in July 2003, and Boykin did not renew the swap or
purchase a replacement instrument. BHC also had interest rate
protection on the remaining $25,000 original principal to cap
the overall loan interest rate at no more than 10.25%. The
initial cap matured in July 2003, at which time BHC purchased
interest rate protection on the entire outstanding balance of
$91,125, to cap the interest rate at no more than 10.25% for a
period of one year. In conjunction with the extension of the
maturity date of the loan to July 2005, BHC purchased another
one-year cap. The cap had no value at December 31, 2004.
Boykin previously had an outstanding term loan which had an
original balance of $45,000 and was secured by three hotel
properties. Boykin used a portion of the net proceeds from the
preferred stock offering in October 2002 (Note 7) to reduce
the outstanding loan balance to $41,967. The loan bore interest
at a rate that fluctuated at LIBOR plus 2.0% to LIBOR plus 4.0%.
In October 2003, Boykin used a portion of the proceeds from the
new credit facility to repay the entire outstanding balance of
$41,967.
In 2003, White Sand Villas Development LLC, a wholly-owned
subsidiary of Bellboy, closed on a $23,300 construction loan
with a bank. The loan, which had an outstanding balance of
$13,222 at December 31, 2003, required principal payments
based upon the closing of White Sand Villas unit sales and was
repaid during the first quarter of 2004. The loan bore interest
at a rate that fluctuated at LIBOR plus 2.50%.
As a part of normal business activities, Boykin issues letters
of credit through major banking institutions as required by
certain debt and insurance agreements. As of December 31,
2004 and 2003, there were no letters of credit outstanding. As
of December 31, 2004, Boykin has not entered into any
significant other off-balance sheet financing arrangements.
F-22
Maturities of long-term debt at December 31, 2004 were as
follows:
| |
|
|
|
|
|
2005
|
|
$ |
95,010 |
|
|
2006
|
|
|
4,166 |
|
|
2007
|
|
|
4,448 |
|
|
2008
|
|
|
4,788 |
|
|
2009
|
|
|
5,134 |
|
|
2010 and thereafter
|
|
|
79,993 |
|
| |
|
|
|
| |
|
$ |
193,539 |
|
| |
|
|
|
|
|
|
7. Description of Capital Shares: |
Holders of Boykin’s common shares are entitled to receive
dividends, as and if declared by the Board of Directors, out of
funds legally available therefore. The holders of common shares,
upon any liquidation, dissolution or winding-up of Boykin, are
entitled to share ratably in any assets remaining after payment
in full of all liabilities of Boykin and all preferences of the
holders of any outstanding preferred shares. The common shares
possess ordinary voting rights, each share entitling the holder
thereof to one vote. Holders of common shares do not have
cumulative voting rights in the election of directors and do not
have preemptive rights.
The Board of Directors is authorized to provide for the issuance
of two classes of preferred shares, each in one or more series,
to establish the number of shares in each series and to fix the
designation, powers, preferences and rights (other than voting
rights) of each series and the qualifications, limitations or
restrictions thereon. Because the Board of Directors has the
power to establish the preferences and rights of each series of
preferred shares, the Board of Directors may afford the holders
of any series of preferred shares preferences, powers and
rights. The issuance of preferred shares could have the effect
of delaying or preventing a change in control of Boykin. As a
result of the preferred offering in October 2002 as discussed
below, there were 181,000 preferred shares issued and
outstanding at December 31, 2004 and 2003.
In October 2002, Boykin completed an underwritten public
offering of 1,800,000 preferred depositary shares. Each
depositary share represents a 1/10 interest in one share of
Boykin’s
101/2%
Class A Cumulative Preferred Shares, Series 2002-A,
and has a liquidation preference of $25 per share. Dividends on
the depositary shares are payable quarterly, upon authorization
by the Board of Directors, beginning on January 15, 2003 at
an annual rate of $2.625 per depositary share and are senior to
the common shares. The shares are listed and traded on the New
York Stock Exchange. The shares do not have a stated maturity
and are not subject to any sinking fund or mandatory redemption
provisions. Net proceeds from the offering were used to repay
the outstanding balance on the previously existing credit
facility and pay down $3,033 on the previously existing $45,000
term note (Note 6). An additional 10,000 depositary shares
were later issued to cover over-allotments.
|
|
|
8. Limited Partnership Interests: |
Pursuant to the Partnership Agreement, the minority interest
limited partners of the Partnership have exchange rights which
enable them to cause the Partnership to pay cash for their
interests in the Partnership or, at Boykin’s election, to
exchange common shares for such interests. The exchange rights
may be exercised in whole or in part. As of December 31,
2004 and 2003, there were 2,718,256 minority interest limited
partnership units outstanding. The number of shares issuable
upon exercise of the exchange rights will be adjusted upon the
occurrence of stock splits, mergers, consolidations or similar
pro rata share transactions, which otherwise would have the
effect of diluting the ownership interests of the limited
partners or the shareholders of Boykin.
Boykin owns a corresponding Series A Preferred equity
interest in the Partnership that entitles it to income and
distributions in amounts equal to the dividends payable on the
Series A Preferred shares discussed in Note 7.
|
|
|
9. Joint Venture with AEW: |
In February 1999, Boykin formed a joint venture with AEW.
Pursuant to the joint venture agreement, AEW has contributed
$22,396 of equity capital into the joint venture. Boykin has
contributed $7,465, has served as the operating partner of the
joint venture for which it receives compensation from the joint
venture, and has the right
F-23
to receive incentive returns based on the performance of
acquired assets. Because of the non-controlling nature of its
ownership interest in the joint venture, Boykin accounts for its
investment utilizing the equity method.
In August 1999, the Boykin/AEW venture partnered with a private
investor, forming Boykin Chicago, L.L.C., in which Boykin/AEW
has a 75% interest. Boykin Chicago, L.L.C. purchased
Hotel 71, located in Chicago, Illinois for cash
consideration of $48,000. The acquisition was accounted for as a
purchase and was funded with proceeds from a $30,000 secured
mortgage note with the remainder in cash from the partners. In
September 2000, Boykin purchased the 25% interest in Boykin
Chicago, L.L.C. from the private investor for $6,270, thereby
increasing Boykin’s total ownership interest in the hotel
from 18.75% to 43.75%. A subsidiary of BMC leased the property
pursuant to a long-term percentage lease agreement, which was
terminated on June 30, 2001. Subsequently, a TRS of Boykin
Chicago, L.L.C. entered into a management agreement with the
subsidiary of BMC to manage the property.
|
|
|
10. Percentage Lease Agreements: |
Rent due under percentage leases is the greater of minimum rent,
as defined, or percentage rent. Percentage rent applicable to
room and other hotel revenues varies by lease and is calculated
by multiplying fixed percentages by the total amounts of such
revenues over specified threshold amounts. Both the minimum rent
and the revenue thresholds used in computing percentage rents
applicable to room and other hotel revenues are subject to
annual adjustments based on increases in the United States
Consumer Price Index (“CPI”). Effective
January 1, 2002, the majority of Boykin’s hotels were
leased to consolidated subsidiaries under the TRS structure
(Note 1).
Percentage lease revenues related to the hotel owned as of
December 31, 2004 that is not operated under the TRS
structure were $2,045, $1,958 and $1,885 respectively, for the
years ended December 31, 2004, 2003 and 2002, of which
approximately $673, $611 and $569, respectively, was in excess
of minimum rent. As of December 31, 2004, the lease related
to this hotel has a noncancelable remaining term of
approximately three years, subject to earlier termination on the
occurrence of certain contingencies, as defined. The net book
value of the hotel subject to this lease was $7,739 and $7,997
as of December 31, 2004 and 2003, respectively. Future
minimum rentals (excluding future CPI increases) to be received
by Boykin from this lease for each of the years in the period
2005 to 2007 are as follows:
| |
|
|
|
|
|
2005
|
|
$ |
1,418 |
|
|
2006
|
|
|
1,418 |
|
|
2007
|
|
|
1,209 |
|
| |
|
|
|
| |
|
$ |
4,045 |
|
| |
|
|
|
|
|
|
11. Share Compensation Plans: |
Boykin has a Long-Term Incentive Plan (“LTIP”) which
provides for the granting to officers and eligible employees of
incentive or nonqualified share options, restricted shares,
deferred shares, share purchase rights and share appreciation
rights in tandem with options, or any combination thereof.
Boykin has reserved 1,700,000 common shares for issuance under
the LTIP.
F-24
The following summarizes information related to share option
activity in 2004, 2003 and 2002:
| |
|
|
|
|
|
|
|
|
|
| |
|
|
|
Weighted Average Per | |
| |
|
Number of Options | |
|
Share Exercise Price | |
| |
|
| |
|
| |
|
Outstanding at January 1, 2002
|
|
|
594,139 |
|
|
$ |
12.84 |
|
| |
Options granted (officers and employees)
|
|
|
353,000 |
|
|
$ |
8.30 |
|
| |
Options exercised/ forfeited/expired
|
|
|
(108,000 |
) |
|
$ |
10.48 |
|
| |
|
|
|
|
|
|
|
Outstanding at December 31, 2002
|
|
|
839,139 |
|
|
$ |
11.24 |
|
| |
Options granted
|
|
|
— |
|
|
|
— |
|
| |
Options exercised/ forfeited/expired
|
|
|
— |
|
|
|
— |
|
| |
|
|
|
|
|
|
|
Outstanding at December 31, 2003
|
|
|
839,139 |
|
|
$ |
11.24 |
|
| |
Options granted
|
|
|
— |
|
|
|
— |
|
| |
Options exercised/ forfeited/expired
|
|
|
— |
|
|
|
— |
|
| |
|
|
|
|
|
|
|
Outstanding at December 31, 2004
|
|
|
839,139 |
|
|
$ |
11.24 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Exercisable Options | |
| |
|
|
|
Weighted Average | |
|
| |
| |
|
Options | |
|
Fair Value of | |
|
|
|
Weighted Average Per | |
| Year |
|
Granted | |
|
Options Granted | |
|
Options Outstanding | |
|
Share Exercise Price | |
| |
|
| |
|
| |
|
| |
|
| |
|
2004
|
|
|
— |
|
|
|
— |
|
|
|
613,006 |
|
|
$ |
12.21 |
|
|
2003
|
|
|
— |
|
|
|
— |
|
|
|
518,539 |
|
|
$ |
12.87 |
|
|
2002
|
|
|
353,000 |
|
|
$ |
1.05 |
|
|
|
422,405 |
|
|
$ |
13.72 |
|
As of December 31, 2004, information related to outstanding
options was as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Total Options | |
|
Exercisable Options | |
| |
|
| |
|
| |
| |
|
|
|
Weighted Average | |
|
Weighted Average | |
|
|
|
Weighted Average | |
| Range of |
|
Options | |
|
Per Share | |
|
Remaining | |
|
Options | |
|
Per Share | |
| Exercise Prices |
|
Outstanding | |
|
Exercise Price | |
|
Contractual Life | |
|
Outstanding | |
|
Exercise Price | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
$7.295 – $8.40
|
|
|
479,000 |
|
|
$ |
8.00 |
|
|
|
7.0 years |
|
|
|
272,667 |
|
|
$ |
7.72 |
|
|
$10.938 – $13.75
|
|
|
235,139 |
|
|
$ |
12.36 |
|
|
|
4.5 years |
|
|
|
215,339 |
|
|
$ |
12.49 |
|
|
$20.00 – $25.626
|
|
|
125,000 |
|
|
$ |
21.52 |
|
|
|
2.1 years |
|
|
|
125,000 |
|
|
$ |
21.52 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
839,139 |
|
|
$ |
11.24 |
|
|
|
5.6 years |
|
|
|
613,006 |
|
|
$ |
12.21 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options vest over various periods ranging from one to nine years
from the date of grant. In addition, certain outstanding options
are also subject to vesting based upon financial performance
targets. The term of each option granted will not exceed ten
years from date of grant, and the exercise price may not be less
than 100% of the fair market value of Boykin’s common
shares on the grant date.
The fair value of employee share options used to compute the pro
forma amounts of net income (loss) and basic earnings per share
presented in Note 2 was estimated using the Black-Scholes
option pricing model with the following weighted average
assumptions:
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Options Issued In: | |
| |
|
2004 | |
|
2003 | |
|
2002 | |
| |
|
| |
|
| |
|
| |
|
Dividend yield
|
|
|
— |
|
|
|
— |
|
|
|
10.00% |
|
|
Expected volatility
|
|
|
— |
|
|
|
— |
|
|
|
34.30% |
|
|
Risk-free interest rate
|
|
|
— |
|
|
|
— |
|
|
|
4.40% |
|
|
Expected holding period
|
|
|
— |
|
|
|
— |
|
|
|
5.0 years |
|
F-25
|
|
|
Restricted Share Grant Plan |
The following table summarizes Boykin’s restricted share
grant activity related to its officers, eligible employees and
non-employee directors.
| |
|
|
|
|
|
|
|
|
| |
|
2004 | |
|
2003 | |
| |
|
| |
|
| |
|
Restricted shares outstanding – beginning of year
|
|
|
288,740 |
|
|
|
219,352 |
|
|
New share grants
|
|
|
174,789 |
|
|
|
132,000 |
|
|
Shares cancelled
|
|
|
— |
|
|
|
(3,481 |
) |
|
Shares vested
|
|
|
(128,745 |
) |
|
|
(59,131 |
) |
| |
|
|
|
|
|
|
|
Restricted shares outstanding – end of year
|
|
|
334,784 |
|
|
|
288,740 |
|
| |
|
|
|
|
|
|
The restricted shares vest over various periods ranging from one
to five years from the date of grant. The value of shares
granted has been calculated based on the average of the high and
low share price on the date of grant and is being amortized as
compensation expense over the respective vesting periods. For
the years ended December 31, 2004, 2003 and 2002,
Boykin’s compensation expense related to these restricted
shares was $1,009, $756 and $992, respectively. As of
December 31, 2004, the unearned compensation related to
restricted share grants was $2,008 and has been classified as a
component of shareholders’ equity in the accompanying
balance sheet.
|
|
|
12. Employee Benefit Plans: |
Boykin maintains two employee benefit plans, the Boykin Lodging
Company Money Purchase Pension Plan and the Boykin Lodging
Company Profit Sharing Plan. Both plans are defined contribution
plans which were established to provide retirement benefits to
eligible employees. Boykin’s contributions to these plans
for the years ended December 31, 2004, 2003 and 2002
totaled $292, $290 and $219, respectively.
Portions of land related to five of the hotels owned by Boykin
as of December 31, 2004 are subject to land leases which
expire at various dates through 2068. All leases require minimum
annual rentals, and one lease requires percentage rent based on
hotel revenues. The other four leases are adjusted for increases
in CPI every one to ten years. Rental expense charged to
operations related to these leases for the years ended
December 31, 2004, 2003 and 2002 was $877, $889 and $942,
respectively for continuing operations. Rental expense charged
to operations related to discontinued operations for the years
ended December 31, 2004, 2003 and 2002 totaled $6, $31 and
$45, respectively.
Boykin entered into a lease agreement which expires in January
2008 for the office space currently used by Boykin and BMC and
its subsidiaries. Pursuant to a shared services and office space
agreement, BMC reimburses Boykin for its proportionate share of
the cost of the space used under the lease agreement.
Boykin’s expense charged to operations related to its
proportionate share of the utilized space for the years ended
December 31, 2004, 2003 and 2002 was $71, $75 and $64,
respectively. Amounts reimbursed from BMC for the years ended
December 31, 2004, 2003 and 2002 was $146, $147 and $119,
respectively.
As a part of normal operations, Boykin has numerous operating
leases related to the hotels in its portfolio or its corporate
office. Additionally, as a part of ongoing capital improvement
projects at the hotels and corporate offices, purchase
obligations are often entered into.
Boykin’s annual obligations to make future minimum payments
under the land lease agreements (excluding future CPI
increases), the office space lease, other operating leases and
purchase obligations which are not required to be reflected in
the balance sheet as of December 31, 2004 are as follows:
| |
|
|
|
|
|
2005
|
|
$ |
3,999 |
|
|
2006
|
|
|
1,075 |
|
|
2007
|
|
|
932 |
|
|
2008
|
|
|
624 |
|
|
2009
|
|
|
536 |
|
|
2010 and thereafter
|
|
|
22,677 |
|
| |
|
|
|
| |
|
$ |
29,843 |
|
| |
|
|
|
F-26
In addition to the amounts disclosed above, as of
December 31, 2004 Boykin has also entered into various
franchise, management and other lease agreements that are
contingent upon future results of operations of the hotels in
its portfolio and provide for potential termination fees
dependent upon the timing and method of termination of such
agreements.
Upon purchasing the Doubletree Kansas City in 1997, Boykin
assumed certain obligations related to a tax increment financing
(“TIF”). The hotel is subject to a lease (the
“Lease”) with the City of Kansas City (the
“City”), which provides for rent payments equal to the
debt service related to the Taxable Lease Revenue Bonds
(Municipal Auditorium and the 13th and Wyandotte Hotel
Redevelopment Projects), Series 1996 (the
“Bonds”), issued by the Land Clearance for
Redevelopment Authority of Kansas City, Missouri (the
“Authority”), offset by incremental tax and parking
revenues received by the City which are generated by the
project, including real estate tax revenues and special
assessments paid by the hotel and parking rental payments made
by the hotel plus a credit enhancement fee. Revenues received by
the City have, and are expected to continue to, fully offset
rent payments which would otherwise be due pursuant to the Lease
other than the credit enhancement fee. The present value of the
fixed and determinable payments to be made pursuant to a special
assessment, credit enhancement fees and a garage management
agreement have been reflected as liabilities totaling $6,077 and
$6,106 in Boykin’s financial statements as of
December 31, 2004 and 2003, respectively, in accordance
with the provisions of Emerging Issues Task Force 91-10,
“Accounting for Special Assessments and Tax Increment
Financing Entities.”
The City and the Authority have the right, commencing in 2006
and upon no less than 12 months notice, to require Boykin
Kansas City LLC, owner of the hotel and wholly-owned subsidiary
of the Partnership, to purchase certain property (including the
land under the hotel and parking areas) at a price based
primarily on the redemption price of the Bonds (the
“Purchase”). The balance on the Bonds as of
December 31, 2004 was $14,120. Under certain circumstances,
this Purchase may be delayed by Boykin Kansas City LLC for up to
two years. In the event the City requires Boykin Kansas City LLC
to complete the Purchase and redeem the Bonds, the City has
indicated that it will continue to make the incremental tax
revenues available to support a refinancing of the Bonds. The
hotel serves as collateral for the Lease and certain other
obligations of Boykin Kansas City LLC.
|
|
|
14. Related Party Transactions: |
The Chairman and Chief Executive Officer of Boykin is the
majority shareholder of BMC.
As a result of the TRS transaction discussed in Note 1,
Boykin acquired 16 subsidiaries of BMC whose primary assets were
leasehold interests in 25 hotel properties owned by Boykin for
consideration comprised of 1,427,142 limited partnership units
valued at approximately $11,400 (based upon the average closing
price of the common shares for the five-day period prior to the
closing of the transaction), and the assumption of $1,600 of
working capital liabilities in excess of assets relating to
Westboy. In connection with these events, Boykin’s Board of
Directors established a special committee (the “Special
Committee”), consisting only of independent directors, to
evaluate and negotiate the transactions with BMC. In determining
the amount of the consideration paid to BMC, the Special
Committee considered, among other things, the expected
profitability of the entities acquired offset by the expected
costs of management fees and income taxes to be incurred by the
TRS following the transaction. The Special Committee also took
into account the benefits of expected operational efficiencies
as well as the elimination of potential lease termination fees
upon the sale of hotels. The Special Committee was advised by
independent counsel and financial advisors. Boykin believes that
the methodology used to determine the consideration paid to BMC
was reasonable.
Also in conjunction with the TRS transaction, effective
January 1, 2002, BMC assumed management of 16 of the
consolidated properties in which Boykin owned an interest.
Additionally, during October 2002, BMC assumed management of the
Doubletree Kansas City and the Pink Shell Beach Resort after
Boykin terminated the previously existing management agreements
with Interstate Hotels and Resorts (“Interstate”).
During 2003, BMC assumed management of seven other hotels in
conjunction with the Hilton Modification Agreement as discussed
in Note 1 and assumed management of the Holiday Inn
Minneapolis West after Boykin terminated the previously existing
management agreement with Interstate. Management fees earned by
BMC related to the continuing operations of these hotels during
the years ended December 31, 2004, 2003 and 2002 totaled
$5,801, $4,339 and $3,741, respectively. Management fees earned
by BMC related to discontinued operations totaled $261, $419 and
$598 for 2004, 2003 and 2002, respectively. An additional $25
and $12 was paid during 2004 and 2003, respectively, for other
services provided pursuant to the management agreements.
F-27
The management agreements between Boykin and BMC were approved
by the independent members of Boykin’s Board of Directors.
As of December 31, 2004 and 2003, Boykin had related party
payables to BMC related to continuing operations of $1,063 and
$873, primarily related to management fees and reimbursements of
expenses on behalf of the hotel properties.
Boykin Chicago L.L.C. has entered into a management agreement
with a wholly-owned subsidiary of BMC to manage Hotel 71.
Management and other fees earned by the subsidiary was $483,
$446 and $75 during 2004, 2003 and 2002, respectively. An
additional $1 was paid for other services provided pursuant to
the management agreement for each of the years ended 2004 and
2003. During 2004 and 2003, fees of $1 and $12 were paid to a
wholly-owned subsidiary of BMC for design services related to
capital improvements at the hotel.
During the years ended December 31, 2004, 2003 and 2002,
Boykin paid a wholly-owned subsidiary of BMC $329, $630 and
$192, respectively, for design and project management services
and for reimbursement of expenses related to capital
improvements at its consolidated hotels. During 2001, a
subsidiary of BMC sold a portion of its business to an unrelated
third party. A portion of the sales price is payable contingent
upon future revenues of the business, including revenues from
Boykin. During 2004, 2003 and 2002, an additional $53, $59 and
$78 of sales proceeds was provided to BMC as a result of
purchases made by Boykin.
Fees paid to BMC and its subsidiaries for services which are not
subject to management agreements are at market prices as
determined by the independent members of the Board of Directors.
The Board’s market price determinations are based from time
to time on market checks performed by management and outside
consultants, comparative information provided by BMC and
industry publications.
Boykin believes that the methodologies used for determining
amounts to be paid to BMC and its subsidiaries for management
and other services are reasonable.
|
|
|
15. Statements of Cash Flows, Supplemental
Disclosures: |
As of both December 31, 2004 and 2003, there were $1,188 of
dividends and Partnership distributions which were declared but
not paid.
Interest paid during the years ended December 31, 2004,
2003, and 2002 was $13,922, $16,743 and $20,240, respectively.
|
|
|
16. Quarterly Operating Results (Unaudited): |
Boykin’s unaudited consolidated quarterly operating data
for the years ended December 31, 2004 and 2003 follows. In
the opinion of management, all adjustments (consisting of normal
recurring accruals) necessary for a fair presentation of
quarterly results have been reflected in the data. Quarterly
operating results are not necessarily indicative of the results
to be achieved in succeeding quarters or years.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
For the 2004 Quarter Ended | |
| |
|
March 31 | |
|
June 30 | |
|
September 30 | |
|
December 31 | |
| |
|
| |
|
| |
|
| |
|
| |
|
Total revenues
|
|
$ |
54,627 |
|
|
$ |
56,563 |
|
|
$ |
58,902 |
|
|
$ |
50,292 |
|
|
Loss attributable to common shareholders before discontinued
operations
|
|
|
(1,546 |
) |
|
|
(910 |
) |
|
|
(191 |
) |
|
|
(4,798 |
) |
|
Discontinued operations, net of minority interest
|
|
|
(2,964 |
) |
|
|
543 |
|
|
|
4,912 |
|
|
|
43 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to common shareholders
|
|
|
(4,510 |
) |
|
|
(367 |
) |
|
|
4,721 |
|
|
|
(4,755 |
) |
|
Loss attributable to common shareholders before discontinued
operations per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Basic
|
|
|
(0.09 |
) |
|
|
(0.05 |
) |
|
|
(0.01 |
) |
|
|
(0.28 |
) |
| |
Diluted
|
|
|
(0.09 |
) |
|
|
(0.05 |
) |
|
|
(0.01 |
) |
|
|
(0.28 |
) |
|
Net income (loss) attributable to common shareholders per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Basic
|
|
|
(0.26 |
) |
|
|
(0.02 |
) |
|
|
0.27 |
|
|
|
(0.27 |
) |
| |
Diluted
|
|
|
(0.26 |
) |
|
|
(0.02 |
) |
|
|
0.27 |
|
|
|
(0.27 |
) |
|
Weighted average number of common shares outstanding
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Basic
|
|
|
17,397 |
|
|
|
17,412 |
|
|
|
17,447 |
|
|
|
17,450 |
|
| |
Diluted
|
|
|
17,574 |
|
|
|
17,446 |
|
|
|
17,529 |
|
|
|
17,587 |
|
F-28
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
For the 2003 Quarter Ended | |
| |
|
March 31 | |
|
June 30 | |
|
September 30 | |
|
December 31 | |
| |
|
| |
|
| |
|
| |
|
| |
|
Total revenues
|
|
$ |
55,638 |
|
|
$ |
58,940 |
|
|
$ |
61,721 |
|
|
$ |
55,256 |
|
|
Loss attributable to common shareholders before discontinued
operations
|
|
|
(2,260 |
) |
|
|
(1,975 |
) |
|
|
(156 |
) |
|
|
(2,256 |
) |
|
Discontinued operations, net of minority interest
|
|
|
(466 |
) |
|
|
345 |
|
|
|
(21 |
) |
|
|
(1,388 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to common shareholders
|
|
|
(2,726 |
) |
|
|
(1,630 |
) |
|
|
(177 |
) |
|
|
(3,644 |
) |
|
Loss attributable to common shareholders before discontinued
operations per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Basic
|
|
|
(0.13 |
) |
|
|
(0.11 |
) |
|
|
(0.01 |
) |
|
|
(0.13 |
) |
| |
Diluted
|
|
|
(0.13 |
) |
|
|
(0.11 |
) |
|
|
(0.01 |
) |
|
|
(0.13 |
) |
|
Net loss attributable to common shareholders per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Basic
|
|
|
(0.16 |
) |
|
|
(0.09 |
) |
|
|
(0.01 |
) |
|
|
(0.21 |
) |
| |
Diluted
|
|
|
(0.16 |
) |
|
|
(0.09 |
) |
|
|
(0.01 |
) |
|
|
(0.21 |
) |
|
Weighted average number of common shares outstanding
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Basic
|
|
|
17,317 |
|
|
|
17,339 |
|
|
|
17,344 |
|
|
|
17,344 |
|
| |
Diluted
|
|
|
17,413 |
|
|
|
17,420 |
|
|
|
17,445 |
|
|
|
17,509 |
|
During February 2005, the two low-rise buildings at the Pink
Shell Beach Resort & Spa, were demolished to make way for
the new Captiva Villas tower.
F-29
BOYKIN LODGING COMPANY
SCHEDULE III – REAL ESTATE AND ACCUMULATED
DEPRECIATION
AS OF DECEMBER 31, 2004
(IN THOUSANDS)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Costs Capitalized | |
|
Gross Amounts at Which | |
| |
|
|
|
Initial Cost | |
|
Subsequent to Acquisition | |
|
Carried at Close of Period | |
| |
|
|
|
| |
|
| |
|
| |
| |
|
|
|
|
|
Buildings and | |
|
|
|
Building and | |
|
|
|
Building and | |
|
|
| Description |
|
Encumbrances | |
|
Land | |
|
Improvements | |
|
Land | |
|
Improvements | |
|
Land | |
|
Improvements | |
|
Total(f)(g) | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Corporate Offices
Cleveland, Ohio
|
|
|
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
35 |
|
|
$ |
— |
|
|
$ |
35 |
|
|
$ |
35 |
|
|
Doubletree Berkeley Marina
Berkeley, California
|
|
|
— |
(c) |
|
|
— |
|
|
|
10,807 |
|
|
|
— |
|
|
|
15,408 |
|
|
|
— |
|
|
|
26,215 |
|
|
|
26,215 |
|
|
Buffalo Marriott
Buffalo, New York
|
|
|
— |
(c) |
|
|
1,164 |
|
|
|
15,174 |
|
|
|
— |
|
|
|
4,002 |
|
|
|
1,164 |
|
|
|
19,176 |
|
|
|
20,340 |
|
|
Cleveland Airport Marriott
Cleveland, Ohio
|
|
|
— |
(c) |
|
|
1,175 |
|
|
|
11,441 |
|
|
|
— |
|
|
|
9,136 |
|
|
|
1,175 |
|
|
|
20,577 |
|
|
|
21,752 |
|
|
Columbus North Marriott
Columbus, Ohio
|
|
|
— |
(a) |
|
|
1,635 |
|
|
|
12,873 |
|
|
|
— |
|
|
|
2,920 |
|
|
|
1,635 |
|
|
|
15,793 |
|
|
|
17,428 |
|
|
Melbourne Quality Suites
Melbourne, Florida
|
|
|
— |
(a) |
|
|
3,092 |
|
|
|
7,819 |
|
|
|
— |
|
|
|
(1,866 |
) |
|
|
3,092 |
|
|
|
5,953 |
|
|
|
9,045 |
|
|
Best Western Fort Myers Island Gateway Hotel
Ft. Myers, Florida
|
|
|
— |
(c) |
|
|
718 |
|
|
|
2,686 |
|
|
|
— |
|
|
|
886 |
|
|
|
718 |
|
|
|
3,572 |
|
|
|
4,290 |
|
|
Holiday Inn Crabtree
Raleigh, North Carolina
|
|
|
— |
(c) |
|
|
725 |
|
|
|
6,542 |
|
|
|
— |
|
|
|
1,484 |
|
|
|
725 |
|
|
|
8,026 |
|
|
|
8,751 |
|
|
Melbourne Hilton Oceanfront
Melbourne, Florida
|
|
|
— |
(a) |
|
|
852 |
|
|
|
7,699 |
|
|
|
— |
|
|
|
(2,040 |
) |
|
|
852 |
|
|
|
5,659 |
|
|
|
6,511 |
|
|
French Lick Springs Resort and Spa
French Lick, Indiana
|
|
|
— |
|
|
|
2,000 |
|
|
|
16,000 |
|
|
|
(3 |
) |
|
|
1,843 |
|
|
|
1,997 |
|
|
|
17,843 |
|
|
|
19,840 |
|
|
Hampton Inn San Diego Airport/Sea World
San Diego, California
|
|
|
— |
(c) |
|
|
1,000 |
|
|
|
7,400 |
|
|
|
— |
|
|
|
702 |
|
|
|
1,000 |
|
|
|
8,102 |
|
|
|
9,102 |
|
|
Doubletree Kansas City
Kansas City, Missouri
|
|
|
— |
(d) |
|
|
1,500 |
|
|
|
20,958 |
|
|
|
3,664 |
|
|
|
(5,717 |
) |
|
|
5,164 |
|
|
|
15,241 |
|
|
|
20,405 |
|
|
High Point Radisson
High Point, North Carolina
|
|
|
— |
(a) |
|
|
450 |
|
|
|
25,057 |
|
|
|
— |
|
|
|
(1,944 |
) |
|
|
450 |
|
|
|
23,113 |
|
|
|
23,563 |
|
|
Pink Shell Beach Resort & Spa
Ft. Myers, Florida
|
|
|
— |
(e) |
|
|
6,000 |
|
|
|
13,445 |
|
|
|
(1,800 |
) |
|
|
(9,596 |
) |
|
|
4,200 |
|
|
|
3,849 |
|
|
|
8,049 |
|
|
Radisson Suite Beach Resort
Marco Island, Florida
|
|
|
— |
|
|
|
14,570 |
|
|
|
12,605 |
|
|
|
— |
|
|
|
33 |
|
|
|
14,570 |
|
|
|
12,638 |
|
|
|
27,208 |
|
|
Doubletree Sacramento
Sacramento, California
|
|
|
— |
(b) |
|
|
4,400 |
|
|
|
41,884 |
|
|
|
— |
|
|
|
4,952 |
|
|
|
4,400 |
|
|
|
46,836 |
|
|
|
51,236 |
|
|
Doubletree Colorado Springs
Colorado Springs, Colorado
|
|
|
— |
(b) |
|
|
3,340 |
|
|
|
31,296 |
|
|
|
— |
|
|
|
1,831 |
|
|
|
3,340 |
|
|
|
33,127 |
|
|
|
36,467 |
|
|
Doubletree Boise
Boise, Idaho
|
|
|
— |
(b) |
|
|
2,470 |
|
|
|
23,998 |
|
|
|
— |
|
|
|
4,292 |
|
|
|
2,470 |
|
|
|
28,290 |
|
|
|
30,760 |
|
|
Doubletree Omaha
Omaha, Nebraska
|
|
|
— |
(b) |
|
|
1,100 |
|
|
|
19,690 |
|
|
|
— |
|
|
|
9,571 |
|
|
|
1,100 |
|
|
|
29,261 |
|
|
|
30,361 |
|
|
Doubletree Portland, Lloyd Center
Portland, Oregon
|
|
|
— |
(b) |
|
|
3,900 |
|
|
|
61,633 |
|
|
|
— |
|
|
|
5,673 |
|
|
|
3,900 |
|
|
|
67,306 |
|
|
|
71,206 |
|
|
Clarion Hotel & Conference Center
Yakima, Washington
|
|
|
— |
|
|
|
1,140 |
|
|
|
6,188 |
|
|
|
— |
|
|
|
(3,023 |
) |
|
|
1,140 |
|
|
|
3,165 |
|
|
|
4,305 |
|
|
Embassy Suites Southfield
Southfield, Michigan
|
|
|
— |
(a) |
|
|
777 |
|
|
|
7,639 |
|
|
|
— |
|
|
|
3,374 |
|
|
|
777 |
|
|
|
11,013 |
|
|
|
11,790 |
|
|
Doubletree Hotel San Antonio
San Antonio, Texas
|
|
|
— |
(b) |
|
|
1,140 |
|
|
|
11,203 |
|
|
|
— |
|
|
|
570 |
|
|
|
1,140 |
|
|
|
11,773 |
|
|
|
12,913 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Total
|
|
|
|
|
|
$ |
53,148 |
|
|
$ |
374,037 |
|
|
$ |
1,861 |
|
|
$ |
42,526 |
|
|
$ |
55,009 |
|
|
$ |
416,563 |
|
|
$ |
471,572 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
[Additional columns below]
[Continued from above table, first column(s) repeated]
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Life on Which | |
| |
|
Accumulated | |
|
Net Book | |
|
|
|
|
|
Depreciation in | |
| |
|
Depreciation | |
|
Value Land and | |
|
|
|
|
|
Statement of | |
| |
|
Buildings and | |
|
Buildings and | |
|
Date of | |
|
Date of | |
|
Operations is | |
| Description |
|
Improvements(h) | |
|
Improvements | |
|
Construction | |
|
Acquisition | |
|
Computed | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Corporate Offices
Cleveland, Ohio
|
|
$ |
24 |
|
|
$ |
11 |
|
|
|
|
|
|
|
1998 |
|
|
|
10 years |
|
|
Doubletree Berkeley Marina
Berkeley, California
|
|
|
6,434 |
|
|
|
19,781 |
|
|
|
1972 |
|
|
|
1996 |
|
|
|
20 years |
|
|
Buffalo Marriott
Buffalo, New York
|
|
|
5,510 |
|
|
|
14,830 |
|
|
|
1981 |
|
|
|
1996 |
|
|
|
25 years |
|
|
Cleveland Airport Marriott
Cleveland, Ohio
|
|
|
7,691 |
|
|
|
14,061 |
|
|
|
1970 |
|
|
|
1996 |
|
|
|
20 years |
|
|
Columbus North Marriott
Columbus, Ohio
|
|
|
4,850 |
|
|
|
12,578 |
|
|
|
1981 |
|
|
|
1996 |
|
|
|
25 years |
|
|
Melbourne Quality Suites
Melbourne, Florida
|
|
|
1,592 |
|
|
|
7,453 |
|
|
|
1986 |
|
|
|
1996 |
|
|
|
30 years |
|
|
Best Western Fort Myers Island Gateway Hotel
Ft. Myers, Florida
|
|
|
865 |
|
|
|
3,425 |
|
|
|
1986 |
|
|
|
1996 |
|
|
|
30 years |
|
|
Holiday Inn Crabtree
Raleigh, North Carolina
|
|
|
2,190 |
|
|
|
6,561 |
|
|
|
1974 |
|
|
|
1997 |
|
|
|
30 years |
|
|
Melbourne Hilton Oceanfront
Melbourne, Florida
|
|
|
1,251 |
|
|
|
5,260 |
|
|
|
1986 |
|
|
|
1997 |
|
|
|
35 years |
|
|
French Lick Springs Resort and Spa
French Lick, Indiana
|
|
|
4,669 |
|
|
|
15,171 |
|
|
|
1903 |
|
|
|
1997 |
|
|
|
30 years |
|
|
Hampton Inn San Diego Airport/Sea World
San Diego, California
|
|
|
1,844 |
|
|
|
7,258 |
|
|
|
1989 |
|
|
|
1997 |
|
|
|
30 years |
|
|
Doubletree Kansas City
Kansas City, Missouri
|
|
|
4,920 |
|
|
|
15,485 |
|
|
|
1969 |
|
|
|
1997 |
|
|
|
30 years |
|
|
High Point Radisson
High Point, North Carolina
|
|
|
5,531 |
|
|
|
18,032 |
|
|
|
1982 |
|
|
|
1998 |
|
|
|
30 years |
|
|
Pink Shell Beach Resort & Spa
Ft. Myers, Florida
|
|
|
576 |
|
|
|
7,473 |
|
|
|
1989 |
|
|
|
1998 |
|
|
|
30 years |
|
|
Radisson Suite Beach Resort
Marco Island, Florida
|
|
|
561 |
|
|
|
26,647 |
|
|
|
1986 |
|
|
|
2003 |
|
|
|
30 years |
|
|
Doubletree Sacramento
Sacramento, California
|
|
|
9,757 |
|
|
|
41,479 |
|
|
|
1974 |
|
|
|
1998 |
|
|
|
30 years |
|
|
Doubletree Colorado Springs
Colorado Springs, Colorado
|
|
|
7,151 |
|
|
|
29,316 |
|
|
|
1986 |
|
|
|
1998 |
|
|
|
30 years |
|
|
Doubletree Boise
Boise, Idaho
|
|
|
5,674 |
|
|
|
25,086 |
|
|
|
1968 |
|
|
|
1998 |
|
|
|
30 years |
|
|
Doubletree Omaha
Omaha, Nebraska
|
|
|
5,336 |
|
|
|
25,025 |
|
|
|
1970/81 |
|
|
|
1998 |
|
|
|
30 years |
|
|
Doubletree Portland, Lloyd Center
Portland, Oregon
|
|
|
13,999 |
|
|
|
57,207 |
|
|
|
1964/81 |
|
|
|
1998 |
|
|
|
30 years |
|
|
Clarion Hotel & Conference Center
Yakima, Washington
|
|
|
1,088 |
|
|
|
3,217 |
|
|
|
1968 |
|
|
|
1998 |
|
|
|
30 years |
|
|
Embassy Suites Southfield
Southfield, Michigan
|
|
|
1,458 |
|
|
|
10,332 |
|
|
|
1978 |
|
|
|
2000 |
|
|
|
30 years |
|
|
Doubletree Hotel San Antonio
San Antonio, Texas
|
|
|
1,693 |
|
|
|
11,220 |
|
|
|
1987 |
|
|
|
2000 |
|
|
|
30 years |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Total
|
|
$ |
94,664 |
|
|
$ |
376,908 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
These hotels are collateral for the line of credit. |
| |
|
(b) |
|
These hotels are collateral for the $130,000 term note payable. |
F-30
|
|
|
|
(c) |
|
These hotels are collateral for the $108,000 term note payable. |
| |
|
(d) |
|
Effective November 30, 2001, Interstate assigned their 20%
minority interest in the joint venture which owns the hotel to
the Partnership. The elimination of the minority interest in the
hotel ($5,129) was accounted for as a reduction in the value of
the building as of November 30, 2001. The hotel serves as
collateral for certain obligations of Boykin Kansas City LLC
related to a tax increment financing. |
| |
|
(e) |
|
This activity includes the reclassification of the net book
value of the Sanibel View Villas to other assets for their
eventual sales, the disposal of cottages at the Pink Shell Beach
Resort to make way for the construction of White Sand Villas,
both of which occurred in 2002, and the 2003 transfer of certain
land underlying the Captiva and Useppa buildings at the Pink
Shell to other assets as the land will eventually be sold with
the new Captiva Villas condominium units. |
| |
|
(f) |
|
Aggregate cost for federal income tax reporting purposes at
December 31, 2004 is as follows: |
| |
|
|
|
|
|
Land
|
|
$ |
51,763 |
|
|
Buildings and improvements
|
|
|
441,746 |
|
| |
|
|
|
| |
|
$ |
493,509 |
|
| |
|
|
|
|
|
|
|
(g) |
|
Reconciliation of Gross Amounts of Land, Buildings and
Improvements |
| |
|
|
|
|
|
Balance as of December 31, 2003
|
|
$ |
558,036 |
|
|
Disposals
|
|
|
(107,926 |
) |
|
Improvements and other additions
|
|
|
21,462 |
|
| |
|
|
|
|
Balance as of December 31, 2004
|
|
$ |
471,572 |
|
| |
|
|
|
|
|
|
|
(h) |
|
Reconciliation of Accumulated Depreciation of Buildings and
Improvements |
| |
|
|
|
|
|
Balance at December 31, 2003
|
|
$ |
102,915 |
|
|
Disposals
|
|
|
(24,790 |
) |
|
Depreciation expense
|
|
|
16,539 |
|
| |
|
|
|
|
Balance at December 31, 2004
|
|
$ |
94,664 |
|
| |
|
|
|
F-31
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Members of
Boykin/AEW, LLC and Subsidiaries
We have audited the accompanying consolidated balance sheet of
Boykin/AEW, LLC and Subsidiaries (“Boykin/AEW”) as of
December 31, 2004, and the related consolidated statements
of operations, members’ equity and cash flows for the year
then ended. These financial statements are the responsibility of
the Company’s management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of Boykin/AEW as of December 31, 2004, and the
results of their operations and their cash flows for the year
then ended in conformity with accounting principles generally
accepted in the United States of America.
Our audit was conducted for the purpose of forming an opinion on
the basic financial statements taken as a whole.
Schedule III is presented for purposes of additional
analysis and is not a required part of the basic financial
statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial
statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as
a whole.
/s/ Grant Thornton LLP
Cleveland, Ohio
March 1, 2005
F-32
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Members of
Boykin/AEW, LLC and Subsidiaries
We have audited the accompanying consolidated balance sheet of
Boykin/AEW, LLC and Subsidiaries (“Boykin/AEW”) as of
December 31, 2003, and the related consolidated statements
of operations, members’ equity, and cash flows for each of
the two years in the period ended December 31, 2003. These
financial statements are the responsibility of the
Company’s management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all
material respects, the financial position of Boykin/AEW as of
December 31, 2003, and the results of their operations and
their cash flows for each of the two years in the period ended
December 31, 2003, in conformity with accounting principles
generally accepted in the United States of America.
/s/ Deloitte & Touche
LLP
Cleveland, Ohio
March 12, 2004
F-33
BOYKIN/ AEW, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2004 AND 2003
(AMOUNTS IN THOUSANDS)
| |
|
|
|
|
|
|
|
|
|
| |
|
2004 | |
|
2003 | |
| |
|
| |
|
| |
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Investment in hotel property
|
|
$ |
75,160 |
|
|
$ |
75,042 |
|
| |
Accumulated depreciation
|
|
|
(11,489 |
) |
|
|
(8,882 |
) |
| |
|
|
|
|
|
|
|
Investment in hotel property – net
|
|
|
63,671 |
|
|
|
66,160 |
|
|
Cash and cash equivalents
|
|
|
1,646 |
|
|
|
1,145 |
|
|
Accounts receivable, net of allowance of $13 as of
December 31, 2003
|
|
|
404 |
|
|
|
882 |
|
|
Deferred expenses – net
|
|
|
33 |
|
|
|
69 |
|
|
Other assets
|
|
|
221 |
|
|
|
345 |
|
| |
|
|
|
|
|
|
| |
|
$ |
65,975 |
|
|
$ |
68,601 |
|
| |
|
|
|
|
|
|
|
LIABILITIES AND MEMBERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
Mortgage note payable
|
|
$ |
36,116 |
|
|
$ |
37,236 |
|
|
Accounts payable and accrued expenses
|
|
|
2,593 |
|
|
|
2,884 |
|
|
Minority interest in joint venture
|
|
|
6,781 |
|
|
|
7,081 |
|
| |
|
MEMBERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
Contributed capital
|
|
|
29,476 |
|
|
|
28,726 |
|
|
Distributions in excess of income
|
|
|
(8,991 |
) |
|
|
(7,326 |
) |
| |
|
|
|
|
|
|
|
Total members’ equity
|
|
|
20,485 |
|
|
|
21,400 |
|
| |
|
|
|
|
|
|
| |
|
$ |
65,975 |
|
|
$ |
68,601 |
|
| |
|
|
|
|
|
|
See notes to consolidated financial statements.
F-34
BOYKIN/ AEW, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
(AMOUNTS IN THOUSANDS)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
2004 | |
|
2003 | |
|
2002 | |
| |
|
| |
|
| |
|
| |
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Hotel revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Rooms
|
|
$ |
14,131 |
|
|
$ |
12,929 |
|
|
$ |
8,629 |
|
| |
|
Food and beverage
|
|
|
973 |
|
|
|
1,301 |
|
|
|
1,167 |
|
| |
|
Other
|
|
|
989 |
|
|
|
712 |
|
|
|
253 |
|
| |
|
|
|
|
|
|
|
|
|
| |
Total revenues
|
|
|
16,093 |
|
|
|
14,942 |
|
|
|
10,049 |
|
| |
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Hotel operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Rooms
|
|
|
4,129 |
|
|
|
3,475 |
|
|
|
2,562 |
|
| |
|
Food and beverage
|
|
|
894 |
|
|
|
1,378 |
|
|
|
1,329 |
|
| |
|
Other
|
|
|
387 |
|
|
|
338 |
|
|
|
213 |
|
| |
|
General and administrative
|
|
|
1,783 |
|
|
|
1,258 |
|
|
|
1,240 |
|
| |
|
Marketing and franchise
|
|
|
1,785 |
|
|
|
1,862 |
|
|
|
1,945 |
|
| |
|
Utilities and maintenance
|
|
|
1,720 |
|
|
|
1,525 |
|
|
|
1,463 |
|
| |
|
Management fees – related party
|
|
|
483 |
|
|
|
446 |
|
|
|
75 |
|
| |
|
|
|
|
|
|
|
|
|
| |
Total hotel operating expenses
|
|
|
11,181 |
|
|
|
10,282 |
|
|
|
8,827 |
|
| |
Property taxes and insurance and other
|
|
|
1,514 |
|
|
|
1,054 |
|
|
|
1,188 |
|
| |
Real estate related depreciation and amortization
|
|
|
3,102 |
|
|
|
3,099 |
|
|
|
1,938 |
|
| |
Asset management fees
|
|
|
196 |
|
|
|
191 |
|
|
|
172 |
|
| |
|
|
|
|
|
|
|
|
|
| |
|
Total operating expenses
|
|
|
15,993 |
|
|
|
14,626 |
|
|
|
12,125 |
|
| |
|
|
|
|
|
|
|
|
|
| |
|
Operating income (loss)
|
|
|
100 |
|
|
|
316 |
|
|
|
(2,076 |
) |
| |
Investment income and other
|
|
|
35 |
|
|
|
14 |
|
|
|
26 |
|
| |
Interest expense
|
|
|
(1,760 |
) |
|
|
(1,716 |
) |
|
|
(1,648 |
) |
| |
Amortization of deferred financing costs
|
|
|
(167 |
) |
|
|
(277 |
) |
|
|
(334 |
) |
| |
Other amortization
|
|
|
(122 |
) |
|
|
(5 |
) |
|
|
— |
|
| |
Minority interest in loss of joint venture
|
|
|
475 |
|
|
|
414 |
|
|
|
1,031 |
|
| |
|
|
|
|
|
|
|
|
|
|
Loss before loss on disposal of assets
|
|
|
(1,439 |
) |
|
|
(1,254 |
) |
|
|
(3,001 |
) |
| |
|
|
|
|
|
|
|
|
|
| |
Loss on disposal of assets
|
|
|
(1 |
) |
|
|
(5 |
) |
|
|
(107 |
) |
| |
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$ |
(1,440 |
) |
|
$ |
(1,259 |
) |
|
$ |
(3,108 |
) |
| |
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
F-35
BOYKIN/AEW, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF MEMBERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
(AMOUNTS IN THOUSANDS)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
Distributions | |
|
|
| |
|
Contributed | |
|
in Excess | |
|
|
| |
|
Capital | |
|
of Income | |
|
Total | |
| |
|
| |
|
| |
|
| |
|
Balance at January 1, 2002
|
|
$ |
20,390 |
|
|
$ |
(2,526 |
) |
|
$ |
17,864 |
|
| |
Capital contributions
|
|
|
7,511 |
|
|
|
— |
|
|
|
7,511 |
|
| |
Distributions paid to members
|
|
|
— |
|
|
|
(246 |
) |
|
|
(246 |
) |
| |
Net loss
|
|
|
— |
|
|
|
(3,108 |
) |
|
|
(3,108 |
) |
| |
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2002
|
|
|
27,901 |
|
|
|
(5,880 |
) |
|
|
22,021 |
|
| |
Capital contributions
|
|
|
825 |
|
|
|
— |
|
|
|
825 |
|
| |
Distributions paid to members
|
|
|
— |
|
|
|
(187 |
) |
|
|
(187 |
) |
| |
Net loss
|
|
|
— |
|
|
|
(1,259 |
) |
|
|
(1,259 |
) |
| |
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2003
|
|
|
28,726 |
|
|
|
(7,326 |
) |
|
|
21,400 |
|
| |
|
|
|
|
|
|
|
|
|
| |
Capital contributions
|
|
|
750 |
|
|
|
— |
|
|
|
750 |
|
| |
Distributions paid to members
|
|
|
— |
|
|
|
(225 |
) |
|
|
(225 |
) |
| |
Net loss
|
|
|
— |
|
|
|
(1,440 |
) |
|
|
(1,440 |
) |
| |
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2004
|
|
$ |
29,476 |
|
|
$ |
(8,991 |
) |
|
$ |
20,485 |
|
| |
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
F-36
BOYKIN/AEW, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
(AMOUNTS IN THOUSANDS)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
2004 | |
|
2003 | |
|
2002 | |
| |
|
| |
|
| |
|
| |
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Net loss
|
|
$ |
(1,440 |
) |
|
$ |
(1,259 |
) |
|
$ |
(3,108 |
) |
| |
Adjustments to reconcile net loss to net cash flow provided by
(used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Depreciation and amortization
|
|
|
3,391 |
|
|
|
3,381 |
|
|
|
2,272 |
|
| |
|
Loss on disposal of assets
|
|
|
1 |
|
|
|
5 |
|
|
|
107 |
|
| |
|
Minority interest
|
|
|
(475 |
) |
|
|
(414 |
) |
|
|
(1,031 |
) |
| |
|
Changes in operating assets and liabilities -
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
Accounts receivable
|
|
|
478 |
|
|
|
(59 |
) |
|
|
(168 |
) |
| |
|
|
Accounts payable and accrued expenses
|
|
|
(291 |
) |
|
|
(401 |
) |
|
|
273 |
|
| |
|
|
Other
|
|
|
2 |
|
|
|
21 |
|
|
|
(298 |
) |
| |
|
|
|
|
|
|
|
|
|
|
Net cash flow provided by (used in) operating activities
|
|
|
1,666 |
|
|
|
1,274 |
|
|
|
(1,953 |
) |
| |
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Improvements and additions to hotel property, net
|
|
|
(614 |
) |
|
|
(1,946 |
) |
|
|
(16,828 |
) |
| |
|
|
|
|
|
|
|
|
|
|
Net cash flow used in investing activities
|
|
|
(614 |
) |
|
|
(1,946 |
) |
|
|
(16,828 |
) |
| |
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Distributions to members
|
|
|
(225 |
) |
|
|
(187 |
) |
|
|
(246 |
) |
| |
Borrowings of term note
|
|
|
— |
|
|
|
1,344 |
|
|
|
6,656 |
|
| |
Payment of term note
|
|
|
(1,120 |
) |
|
|
(764 |
) |
|
|
— |
|
| |
Payment of deferred financing costs
|
|
|
(131 |
) |
|
|
— |
|
|
|
(100 |
) |
| |
Net contributions from joint venture partner
|
|
|
175 |
|
|
|
212 |
|
|
|
2,432 |
|
| |
Capital contributions
|
|
|
750 |
|
|
|
825 |
|
|
|
7,511 |
|
| |
|
|
|
|
|
|
|
|
|
|
Net cash flow provided by financing activities
|
|
|
(551 |
) |
|
|
1,430 |
|
|
|
16,253 |
|
| |
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents
|
|
|
501 |
|
|
|
758 |
|
|
|
(2,528 |
) |
|
Cash and cash equivalents, beginning of year
|
|
|
1,145 |
|
|
|
387 |
|
|
|
2,915 |
|
| |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of year
|
|
$ |
1,646 |
|
|
$ |
1,145 |
|
|
$ |
387 |
|
| |
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
F-37
BOYKIN/ AEW, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
(DOLLAR AMOUNTS IN THOUSANDS)
In February 1999, Boykin Lodging Company (“Boykin”), a
publicly held real estate investment trust (“REIT”),
through its operating partnership Boykin Hotel Properties, L.P.,
formed a joint venture with AEW Partners III, L.P.
(“AEW”), an investment partnership managed by AEW
Capital Management, L.P., a Boston-based real estate investment
firm. The joint venture, Boykin/ AEW, LLC (“Boykin/
AEW”), is owned 75% by AEW while Boykin owns the remaining
25% interest.
In August 1999, Boykin/ AEW partnered with a private investor
forming Boykin Chicago, L.L.C. (“Boykin Chicago”), in
which Boykin/ AEW has a 75% interest. Boykin Chicago purchased
the 421-room Executive Plaza hotel located in Chicago, Illinois
for cash consideration of $48,000. The acquisition was accounted
for as a purchase and was funded with proceeds from a $30,000
secured mortgage note (see Note 3) with the remainder in cash
contributions from the partners. In September 2000, Boykin
purchased the remaining 25% ownership interest in Boykin Chicago
from the private investor thereby increasing Boykin’s total
ownership interest in the hotel from 18.75% to 43.75%.
Boykin Chicago has entered into a management agreement with
Boykin Management Company Limited Liability Company
(“BMC”), an affiliated entity of Boykin, to manage the
property.
The hotel is located at 71 East Wacker Drive, one block from
Michigan Avenue in downtown Chicago and includes such amenities
as meeting space and banquet facilities. The hotel also offers
valet service, a health and fitness center and a business center.
In 2001, Boykin Chicago commenced a renovation of the
hotel’s guestrooms, meeting rooms and food and beverage
facilities. During 2002, Boykin Chicago completed the guestroom
portion of the renovation and renamed the property “Hotel
71” to reflect its new position in the market as a
four-star quality independent hotel. The renovation increased
the number of rooms at the property by 33 units, bringing the
total number of rooms to 454. The remaining portions of the
renovation were completed in 2003.
In 2004, Boykin Chicago entered into a contract to sell Hotel 71.
|
|
|
2. Summary of Significant Accounting Policies: |
Principles of Consolidation – The
accompanying consolidated financial statements of Boykin/ AEW
include Boykin/ AEW, Boykin Chicago and its wholly-owned TRS,
71 E. Wacker Leasing, Inc. All material intercompany
transactions and balances have been eliminated. The results of
operations contained within the consolidated financial
statements reflect all costs of Boykin/ AEW doing business.
Investment in Hotel Property – Hotel
property is stated at cost and is depreciated using the
straight-line method over estimated useful lives ranging from
ten to 30 years for building and improvements and three to
ten years for furniture and equipment.
Investment in the hotel property as of December 31, 2004
and 2003 consisted of the following:
| |
|
|
|
|
|
|
|
|
| |
|
2004 | |
|
2003 | |
| |
|
| |
|
| |
|
Land
|
|
$ |
9,100 |
|
|
$ |
9,100 |
|
|
Buildings and improvements
|
|
|
58,387 |
|
|
|
57,813 |
|
|
Furniture and equipment
|
|
|
7,423 |
|
|
|
7,863 |
|
|
Construction in progress
|
|
|
250 |
|
|
|
266 |
|
| |
|
|
|
|
|
|
| |
|
|
75,160 |
|
|
|
75,042 |
|
|
Less accumulated depreciation
|
|
|
(11,489 |
) |
|
|
(8,882 |
) |
| |
|
|
|
|
|
|
|
Total
|
|
$ |
63,671 |
|
|
$ |
66,160 |
|
| |
|
|
|
|
|
|
F-38
Boykin Chicago reviews the hotel property for impairment when
events or changes in circumstances indicate that the carrying
value of the hotel property may not be recoverable. Events or
circumstances that may cause a review include, but are not
limited to, adverse changes in the demand for lodging at the
property due to declining national or local economic conditions,
new hotel construction in the market where the hotel is located
or changes in the expected holding period of the property. When
such conditions exist, management performs an analysis to
determine if the estimated undiscounted future cash flows from
operations and the proceeds from the ultimate disposition of the
hotel property exceeds its carrying value. If the estimated
undiscounted future cash flows are less than the carrying amount
of the asset, an adjustment to reduce the carrying amount to the
hotel property’s estimated fair market value would be
recorded and an impairment loss would be recognized. Boykin
Chicago does not believe that there are any factors or
circumstances indicating impairment of its investment in the
hotel property at this time.
Cash and Cash Equivalents – Cash and
cash equivalents are defined as cash on hand and in banks, plus
short-term investments with an original maturity of three months
or less.
Inventories – Inventories consisting
primarily of food and beverages and gift store merchandise are
stated at the lower of first-in, first-out cost or market.
Accounts Receivable – Accounts
receivable, consisting primarily of hotel guest receivables, is
stated at fair value. Bad debt expense for the years ended
December 31, 2004, 2003 and 2002 was $13, $12 and $2,
respectively.
Deferred Expenses — Net –
Included in deferred expenses at December 31, 2004 and 2003
are the following:
| |
|
|
|
|
|
|
|
|
| |
|
2004 | |
|
2003 | |
| |
|
| |
|
| |
|
Financing costs
|
|
$ |
130 |
|
|
$ |
986 |
|
|
Accumulated amortization
|
|
|
(97 |
) |
|
|
(917 |
) |
| |
|
|
|
|
|
|
|
Total
|
|
$ |
33 |
|
|
$ |
69 |
|
| |
|
|
|
|
|
|
Deferred financing costs of the mortgage note are being
amortized over the initial term of the related credit agreement,
excluding any available extension terms. In 2004, additional
financing costs amounted to $130 and write offs due to
maturities of underlying agreements amounted to $986.
Minority Interest – Minority interest in
joint venture represents Boykin’s direct 25% ownership in
Boykin Chicago. Income and losses are allocated to minority
interest based upon the joint venture partner’s percentage
ownership throughout the period as defined in the joint venture
agreement.
Hotel Revenues – Hotel revenues
including room, food, beverage and other hotel revenues are
recognized as the related services are delivered. Ongoing credit
evaluations are performed and an allowance for potential credit
losses is provided against the portion of accounts receivable
that is estimated to be uncollectible.
Fair Value of Financial Instruments –
Fair value is determined by using available market information
and appropriate valuation methodologies. Boykin Chicago’s
principal financial instruments are cash, cash equivalents,
accounts receivable and the mortgage note payable. Cash, cash
equivalents and accounts receivable, due to their short
maturities, are carried at amounts which reasonably approximate
fair value. The mortgage note payable (see Note 3) bears
interest at variable market rates and its carrying value
approximates market value at December 31, 2004.
Income Taxes – As Boykin/ AEW and Boykin
Chicago are limited liability companies, no related provision
has been made in the accompanying consolidated financial
statements for income taxes for these entities since these taxes
are the responsibility of the members. Upon formation on July 1,
2001, the TRS became subject to federal, state and local income
taxes. The TRS accounts for income taxes in accordance with the
provisions of Statement of Financial Accounting Standards
(“SFAS”) No. 109, Accounting for Income
Taxes. During 2004, the TRS recorded income as a result of
forgiveness of certain obligations in anticipation of the sale
of the hotel, resulting in taxable income. The TRS has a
deferred tax asset generated by net operating losses sufficient
to offset the current year income. The TRS had previously
recorded a 100% valuation allowance against the deferred tax
asset, and therefore, no provision or benefit from income taxes
is reflected in the accompanying consolidated statements of
operations.
New Accounting Pronouncements – In
November 2002, the FASB issued Interpretation No. 45,
Guarantor’s Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of
Others, which addresses the disclosure to be made by a guarantor
in its interim and annual financial statements
F-39
about its obligations under guarantees. Interpretation
No. 45 also requires the recognition of a liability by a
guarantor at the inception of certain guarantees. Interpretation
No. 45 requires the guarantor to recognize a liability for
the non-contingent component of the guarantee, this is the
obligation to stand ready to perform in the event that specified
triggering events or conditions occur. The initial measurement
of this liability is the fair value of the guarantee at
inception. The recognition of the liability is required even if
it is not probable that payments will be required under the
guarantee or if the guarantee was issued with a premium payment
or as part of a transaction with multiple elements. Boykin/ AEW
has adopted the disclosure requirements of Interpretation
No. 45 and will apply the recognition and measurement
provisions for all guarantees entered into or modified after
December 31, 2002. To date, Boykin/ AEW has not entered
into guarantees.
In January 2003, the FASB issued Interpretation No. 46,
“Consolidation of Variable Interest Entities,” which
addresses consolidation by business enterprises of variable
interest entities. In general, a variable interest entity is a
corporation, partnership, trust, or any other legal structure
used for business purposes that either (a) does not have
equity investors with voting rights or (b) has equity
investors that do not provide sufficient financial resources for
the entity to support its activities. Interpretation No. 46
requires a variable interest entity to be consolidated by a
company if that company is subject to a majority of the risk of
loss from the entity’s activities or is entitled to receive
a majority of the entity’s residual returns or both. In
December 2003, the FASB issued a revised Interpretation which
modified and clarifies various aspects of the original
Interpretation. The consolidation requirements of Interpretation
No. 46 apply immediately to variable interest entities
created after January 31, 2003 and apply to older entities
in the fourth quarter of 2003. Boykin/ AEW does not have any
unconsolidated variable interest entities as of
December 31, 2004.
In May 2003, the FASB issued Statement No. 150 (“SFAS
150”), “Accounting for Certain Financial Instruments
with Characteristics of Both Liabilities and Equity,” which
establishes standards for how an issuer classifies and measures
certain financial instruments with characteristics of both
liabilities and equity. It requires that an issuer classify a
financial instrument that is within its scope as a liability.
The effective date of a portion of the Statement has been
indefinitely postponed by the FASB. Based upon the FASB’s
deferral of this provision, the adoption of SFAS 150 did not
have an impact on the consolidated financial statements.
Use of Estimates – The preparation of
financial statements in conformity with accounting principles
generally accepted in the United States of America requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
those estimates.
|
|
|
3. Mortgage Note Payable: |
In 2001, Boykin Chicago obtained a $38,000 mortgage note from
Corus Bank, N.A. (“Corus”) to refinance the initial
$30,000 note obtained for the acquisition of the hotel and to
provide $8,000 of funding related to the renovation of the
hotel. Corus advanced $30,000 upon closing of the loan. An
additional $6,656 was advanced during 2002, and the remaining
$1,344 was funded in 2003. The loan had an original maturity
date of March 2004 and contained two one-year extension options.
In February 2004, Boykin Chicago exercised the first of the
available options to extend the maturity date by one year; the
loan is now scheduled to mature in March 2005. The loan is
secured by the hotel property and bears interest at a rate that
fluctuates at LIBOR plus 3.25% (5.27% at December 31,
2004). Principal payments commenced in April 2003 based upon a
twenty-two year amortization schedule from the origination of
the note. Principal payments of $1,120 and $764 were made in
2004 and 2003, respectively. The mortgage loan agreement
contains certain financial reporting covenants and Boykin
Chicago was in compliance with such covenants as of
December 31, 2004 and 2003.
Subject to the provisions of the loan, additional funds of
$4,000 are required to be posted to support the loan. The loan
agreement allows for Boykin Chicago to defer this requirement to
the members of Boykin/ AEW.
|
|
|
4. Percentage Lease Agreements: |
Effective October 1, 2003, 71 E. Wacker Leasing, Inc.
subleased space to MRG Enterprises, L.L.C. (“MRG”) to
operate a restaurant within Hotel 71. The lease had an
initial term of five years with three five year options to
renew, subject to earlier termination in accordance with certain
provisions. The rent due under the percentage lease agreement is
the greater of minimum rent, as defined, or percentage rent.
Percentage rent applicable to banquet, catering and all other
gross sales is calculated by multiplying fixed percentages by
the total amounts of such revenues over specified threshold
amounts. Percentage lease revenues to 71 E. Wacker Leasing,
Inc. were $216 and $159 for the years ended December 31,
2004 and 2003, respectively, of which none was in excess of
F-40
minimum rent. The lease agreement also requires reimbursements
by MRG of certain expenses incurred by both 71 E. Wacker
Leasing, Inc. and Boykin Chicago. Reimbursements for expenses
received by Boykin Chicago and the hotel for the years ended
December 31, 2004 and 2003 were $119 and $26, respectively.
Percentage lease revenues and reimbursements for expenses were
included in other income.
MRG was obligated under the lease to complete a build-out of the
restaurant space. In September 20004, MRG filed for bankruptcy
protection. Several of the contractors and the architect for the
improvement of MRG’s leased premises were not paid in full
by MRG prior to its filing for bankruptcy; therefore, mechanics
liens were filed against the property. The total of the
mechanics liens outstanding as of December 31, 2004
approximated $1,800. As a result, if the liens prove valid, are
properly perfected, and are not corrected through MRG’s
bankruptcy proceedings, the ultimate responsibility for the
outstanding liens may be that of 71 E. Wacker Leasing, Inc. If
71 E. Wacker Leasing, Inc. were required to satisfy the
liens, it is anticipated that ownership of the related assets
would transfer to the hotel.
In May 2003, 71 E. Wacker Leasing, Inc. subleased space to
Ampco System Parking to operate a parking garage. The lease has
a term of five years. The rent due under the percentage lease
agreement is base rent plus percentage rent. Percentage rent
applicable to gross parking receipts, as defined, is calculated
by multiplying fixed percentages by the total amounts of such
revenues over specified threshold amounts. Percentage lease
revenues to 71 E. Wacker Leasing, Inc. was $141 and $73 for
the years ended December 31, 2004 and 2003, respectively,
of which none was in excess of minimum rent.
Percentage lease revenues are reflected within other hotel
revenues in the financial statements.
|
|
|
5. Related Party Transactions: |
BMC is owned 53.8% by the Chairman and Chief Executive Officer
of Boykin. Pursuant to the management agreement entered into
effective July 1, 2001, Boykin Chicago paid BMC management
fees of $483, $446 and $75 during 2004, 2003 and 2002,
respectively.
Pursuant to the operating agreements of Boykin/ AEW and Boykin
Chicago, asset management fees of $196, $191 and $172 were paid
to Boykin for the years ended December 31, 2004, 2003 and
2002, respectively, for its role as the operating member. These
fees are calculated based upon factors applied to aggregate
contributions made by the members, as defined in the agreements.
There were outstanding payables to Boykin of $16 at both
December 31, 2004 and 2003, primarily related to asset
management fees. At December 31, 2004 and 2003, 71 E.
Wacker Leasing, Inc. had outstanding payables to BMC of $5 and
$58, respectively primarily related to management fees and
reimbursements of expenses on behalf of the hotel.
|
|
|
6. Statements of Cash Flows, Supplemental
Disclosures: |
Interest paid during the years ended December 31, 2004,
2003 and 2002 was $1,902, $1,737 and $1,636 respectively.
F-41
BOYKIN/ AEW, LLC
SCHEDULE III – REAL ESTATE AND ACCUMULATED
DEPRECIATION
AS OF DECEMBER 31, 2004
(IN THOUSANDS)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
Costs Capitalized | |
|
Gross Amounts | |
| |
|
|
|
|
|
Subsequent to | |
|
at Which Carried | |
| |
|
|
|
Initial Cost | |
|
Acquisition | |
|
at Close of Period | |
| |
|
|
|
| |
|
| |
|
| |
| |
|
|
|
|
|
Buildings and | |
|
|
|
Building and | |
|
|
|
Building and | |
|
Total | |
| Description |
|
Encumbrances | |
|
Land | |
|
Improvements | |
|
Land |
|
Improvements | |
|
Land | |
|
Improvements | |
|
(b)(c) | |
| |
|
| |
|
| |
|
| |
|
|
|
| |
|
| |
|
| |
|
| |
|
Hotel 71, Chicago, Illinois
|
|
|
(a) |
|
|
$ |
9,100 |
|
|
$ |
40,392 |
|
|
$ |
— |
|
|
$ |
17,995 |
|
|
$ |
9,100 |
|
|
$ |
58,387 |
|
|
$ |
67,487 |
|
[Additional columns below]
[Continued from above table, first column(s) repeated]
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Accumulated | |
|
|
|
|
|
|
|
Life on Which | |
| |
|
Depreciation | |
|
Net Book | |
|
|
|
|
|
Depreciation in | |
| |
|
Buildings and | |
|
Value Land and | |
|
|
|
|
|
Statement of | |
| |
|
Improvements | |
|
Buildings and | |
|
Date of | |
|
Date of | |
|
Operations | |
| Description |
|
(d) | |
|
Improvements | |
|
Construction | |
|
Acquisition | |
|
is Computed | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Hotel 71, Chicago, Illinois
|
|
$ |
8,779 |
|
|
$ |
58,708 |
|
|
|
1958 |
|
|
|
1999 |
|
|
|
30 years |
|
|
|
|
(a)
|
|
This hotel is collateral for the $38,000 mortgage note payable. |
| |
(b)
|
|
Aggregate cost for federal income tax reporting purposes at
December 31, 2004 is as follows: |
| |
|
|
|
|
|
Land
|
|
$ |
9,100 |
|
|
Buildings and improvements
|
|
|
58,198 |
|
| |
|
|
|
| |
|
$ |
67,298 |
|
| |
|
|
|
|
|
|
(c)
|
|
Reconciliation of Gross Amounts of Land, Buildings and
Improvements |
| |
|
|
|
|
|
Balance as of December 31, 2003
|
|
$ |
66,913 |
|
|
Disposals
|
|
|
— |
|
|
Improvements and other additions
|
|
|
574 |
|
| |
|
|
|
|
Balance as of December 31, 2004
|
|
$ |
67,487 |
|
| |
|
|
|
|
|
|
(d)
|
|
Reconciliation of Accumulated Depreciation of Buildings and
Improvements |
| |
|
|
|
|
|
Balance at December 31, 2003
|
|
$ |
6,723 |
|
|
Disposals
|
|
|
— |
|
|
Depreciation expense
|
|
|
2,056 |
|
| |
|
|
|
|
Balance at December 31, 2004
|
|
$ |
8,779 |
|
| |
|
|
|
F-42
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
March 15, 2005
|
|
| |
|
| |
Robert W. Boykin |
| |
Chairman of the Board and |
| |
Chief Executive Officer |
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the dates indicated.
| |
|
|
| |
|
March 15, 2005 |
|
/s/ Robert W. Boykin
-----------------------------------------------
Robert W. Boykin
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer) |
| |
|
March 15, 2005 |
|
/s/ Shereen P. Jones
-----------------------------------------------
Shereen P. Jones
Executive Vice President, Chief Financial
and Investment Officer
(Principal Accounting Officer) |
| |
|
March 15, 2005 |
|
/s/ Ivan J. Winfield
-----------------------------------------------
Ivan J. Winfield
Director |
| |
|
March 15, 2005 |
|
/s/ Lee C. Howley, Jr.
-----------------------------------------------
Lee C. Howley, Jr.
Director |
| |
|
March 15, 2005 |
|
/s/ William H. Schecter
-----------------------------------------------
William H. Schecter
Director |
| |
|
March 15, 2005 |
|
/s/ Albert T. Adams
-----------------------------------------------
Albert T. Adams
Director |
| |
|
March 15, 2005 |
|
/s/ James B. Meathe
-----------------------------------------------
James B. Meathe
Director |
| |
|
March 15, 2005 |
|
/s/ Mark J. Nasca
-----------------------------------------------
Mark J. Nasca
Director |
EXHIBIT INDEX
| |
|
|
|
|
| |
3.1 |
(a) |
|
Amended and Restated Articles of Incorporation, as amended |
| |
3.2 |
(b) |
|
Code of Regulations |
| |
4.1 |
(b) |
|
Specimen Share Certificate |
| |
4.2 |
(a) |
|
Dividend Reinvestment and Optional Share Purchase Plan |
| |
4.3 |
(d) |
|
Shareholder Rights Agreement, dated as of May 25, 1999
between Boykin Lodging Company and National City Bank as rights
agent |
| |
4.3a |
(g) |
|
Amendment to Shareholder Rights Agreement, dated as of
December 31, 2001 |
| |
10.1 |
(i) |
|
Third Amended and Restated Agreement of Limited Partnership of
Boykin Hotel Properties, L.P. |
| |
10.2 |
(b) |
|
Form of Registration Rights Agreement |
| |
10.3 |
(b) |
|
Long-Term Incentive Plan* |
| |
10.4 |
(b) |
|
Directors’ Deferred Compensation Plan* |
| |
10.5 |
(b) |
|
Employment Agreement between the Company and Robert W. Boykin* |
| |
10.6 |
(b) |
|
Form of Percentage Lease |
| |
10.7 |
(b) |
|
Intercompany Convertible Note |
| |
10.8 |
(b) |
|
Agreements with General Partners of the Contributed Partnerships |
| |
10.9 |
(b) |
|
Form of Noncompetition Agreement |
| |
10.10 |
(b) |
|
Alignment of Interests Agreement |
| |
10.11 |
(c) |
|
Description of Employment Arrangement between the Company and
Richard C. Conti* |
| |
10.12 |
(d) |
|
Limited Liability Company Agreement of Boykin/ AEW LLC dated as
of February 1, 1999 |
| |
10.13 |
(e) |
|
Stock Purchase Option Agreement by and among Boykin Lodging
Company, Boykin Hotel Properties, L.P. and AEW Partners III,
L.P. dated as of February 1, 1999 |
| |
10.14 |
(e) |
|
Warrant to Purchase Class A Cumulative Preferred Stock,
Series 1999-A of Boykin Lodging Company dated as of
February 1, 1999 |
| |
10.15 |
(e) |
|
Registration Rights Agreement by and among Boykin Lodging
Company and AEW Partners III, L.P. dated as of February 1,
1999 |
| |
10.16 |
(f) |
|
Key Employee Severance Plan* |
| |
10.17 |
(f) |
|
Form of Severance Agreement* |
| |
10.18 |
(g) |
|
Master Contribution Agreement between BMC, JABO LLC, the Company
and the Partnership dated as of December 31, 2001 |
| |
10.19 |
(g) |
|
Form of Hotel Management Agreement* |
| |
10.20 |
(g) |
|
Registration Rights Agreement between the Company and JABO LLC
dated January 1, 2002 |
| |
10.21 |
(j) |
|
Description of Employment Arrangement between the Company and
Shereen P. Jones* |
| |
10.22 |
|
|
Hotel Purchase and Sale Agreement; Hotel 71 Chicago, Illinois,
By and Between Boykin Chicago L.L.C., as Seller and the Falor
Companies, Inc., as Purchaser |
| |
10.23 |
|
|
Modification Letter – Stock Purchase Option Agreement
by and among Boykin Lodging Company, Boykin Hotel Properties,
L.P. and AEW Partners III, L.P. dated as of February 1, 1999 |
| |
10.24 |
|
|
Modification of Employment Agreement between the Company and
Robert W. Boykin* |
| |
12 |
|
|
Statement re Computation of Ratios |
| |
16.1 |
(h) |
|
Letter of Deloitte & Touche LLP required by Item 304 of
Regulation S-K |
| |
21 |
|
|
Subsidiaries of the Registrant |
| |
23.1 |
|
|
Consent of Independent Registered Public Accounting Firm |
| |
23.2 |
|
|
Consent of Independent Registered Public Accounting Firm |
| |
31.1 |
|
|
Certification Pursuant to Rule 13a-14(a), in Accordance
with Section 302 of the Sarbanes-Oxley Act of 2002 |
| |
31.2 |
|
|
Certification Pursuant to Rule 13a-14(a), in Accordance
with Section 302 of the Sarbanes-Oxley Act of 2002 |
| |
32.1 |
|
|
Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 |
| |
32.2 |
|
|
Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 |
|
|
|
|
(a) |
|
Incorporated by reference from Boykin’s Form 10-Q for
the quarter ended June 30, 1999. |
| |
|
(b) |
|
Incorporated by reference from Amendment No. 3 to
Boykin’s Registration Statement on Form S-11
(Registration No. 333-6341) (the
“Form S-11”) filed on October 24, 1996. Each
of the above exhibits has the same exhibit number in the
Form S-11. |
| |
|
(c) |
|
Incorporated by reference from Boykin’s Form 10-Q for
the quarter ended June 30, 1998. |
| |
|
(d) |
|
Incorporated by reference from Boykin’s Form 10-Q for
the quarter ended March 31, 1999. |
| |
|
(e) |
|
Incorporated by reference from Boykin’s Form 10-Q for
the quarter ended March 31, 1999. |
| |
|
(f) |
|
Incorporated by reference from Boykin’s Form 10-K for
the year ended December 31, 1999. |
| |
|
(g) |
|
Incorporated by reference from Boykin’s Form 8-K filed
on January 14, 2002. |
| |
|
(h) |
|
Incorporated by reference from Boykin’s Form 8-K filed
on April 20, 2004. |
| |
|
(i) |
|
Incorporated by reference from Boykin’s Form 8-K filed
on October 4, 2002. |
| |
|
(j) |
|
Incorporated by reference from Boykin’s Form 10-K for
the year ended December 31, 2002. |
| |
|
* |
|
Management contract or compensatory plan or arrangement. |