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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2002
------------------------------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
-------------------- -------------------
Commission file number
000-32607
------------------------------
CNL Retirement Properties, Inc.
------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 59-3491443
------------------------------------ ------------------------------------
(State of other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
450 South Orange Avenue
Orlando, Florida 32801
------------------------------------- ------------------------------------
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number,
including area code) (407) 650-1000
------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
35,682,785 shares of common stock, $.01 par value, outstanding as of November 7,
2002.
CONTENTS
Part I: Financial Information
Page
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets 1
Condensed Consolidated Statements of Earnings 2
Condensed Consolidated Statements of Stockholders' Equity 3
Condensed Consolidated Statements of Cash Flows 4
Notes to Condensed Consolidated Financial Statements 5-18
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 19-28
Item 3. Quantitative and Qualitative Disclosures about Market Risk 29
Item 4. Controls and Procedures 30
Part II: Other Information
Item 1. Legal Proceedings 31
Item 2. Changes in Securities and Use of Proceeds 31
Item 3. Defaults Upon Senior Securities 31
Item 4. Submission of Matters to a Vote of Security Holders 31
Item 5. Other Information 31
Item 6. Exhibits and Reports on Form 8-K 31-35
Signatures 36
Certifications 37-40
CNL RETIREMENT PROPERTIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30, December 31,
2002 2001
----------------- -----------------
ASSETS
Land, buildings and equipment on operating leases, net $ 146,590,466 $ 35,232,568
Net investment in direct financing leases 115,629,495 -
Mortgage loan receivable 1,893,472 -
Cash and cash equivalents 48,844,522 26,721,107
Restricted cash 797,970 35,109
Notes and other receivables 2,970,417 180,163
Investment in unconsolidated subsidiary 293,456 -
Loan costs, less accumulated amortization of $99,639 and
$18,981, respectively 840,981 36,936
Accrued rental income 862,444 97,793
Other assets 4,772,961 2,143,213
------------------- ------------------
$ 323,496,184 $ 64,446,889
=================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgages payable $ 45,409,216 $ -
Due to related parties 1,142,202 1,772,807
Accounts payable and accrued expenses 1,499,998 294,839
Security deposits 3,204,875 1,363,986
Rents paid in advance 27,907 105,215
------------------- ------------------
Total liabilities 51,284,198 3,536,847
------------------- ------------------
Minority interest 8,550,981 -
------------------- ------------------
Commitments and Contingencies (Note 14)
Stockholders' equity:
Preferred stock, without par value.
Authorized and unissued 3,000,000 shares - -
Excess shares, $.01 par value per share.
Authorized and unissued 103,000,000 shares - -
Common stock, $.01 par value per share.
Authorized 100,000,000 shares, issued 30,247,269 and
7,141,131 shares, respectively, outstanding 30,224,077
and 7,134,400 shares, respectively 302,241 71,344
Capital in excess of par value 267,503,103 61,786,149
Accumulated distributions in excess of net earnings (4,144,339) (947,451)
------------------- ------------------
Total stockholders' equity 263,661,005 60,910,042
------------------- ------------------
$ 323,496,184 $ 64,446,889
=================== ==================
See accompanying notes to condensed consolidated financial statements.
CNL RETIREMENT PROPERTIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
Quarter Nine Months
Ended September 30, Ended September 30,
2002 2001 2002 2001
-------------- ------------ ------------- ------------
Revenues:
Rental income from operating leases $ 3,814,026 $ 344,940 $ 8,191,823 $ 1,034,820
Earned income from direct financing leases 38,473 - 38,473 -
Interest income from mortgage loan receivable 23,472 - 23,472 -
Contingent rent 4,464 - 4,464 -
FF&E reserve income 68,496 12,304 102,234 29,830
Interest and other income 777,785 25,520 1,339,680 30,812
-------------- ------------- ------------- -------------
4,726,716 382,764 9,700,146 1,095,462
-------------- ------------- ------------- -------------
Expenses:
Interest 474,793 1,262 846,953 105,055
General operating and administrative 328,604 76,885 878,062 286,766
Property expenses 20,604 - 20,604 -
Asset management fees to related party 189,699 20,773 397,674 62,320
Reimbursement of operating expenses
from related party - - - (145,015)
Depreciation and amortization 1,038,769 112,002 2,251,018 335,201
-------------- ------------- ------------- -------------
2,052,469 210,922 4,394,311 644,327
-------------- ------------- ------------- -------------
Earnings Before Share in Equity in Earning of
Unconsolidated Subsidiary and Minority
Interest in Earning of Consolidated Joint
Venture 2,674,247 171,842 5,305,835 451,135
Share in Equity in Earnings of Unconsolidated
Subsidiary 7,965 - 5,729 -
Minority Interest in Earnings of Consolidated
Joint Venture (173,686) - (272,096) -
-------------- ------------- ------------- -------------
Net Earnings $ 2,508,526 $ 171,842 $ 5,039,468 $ 451,135
============== ============= ============= =============
Net Earnings Per Share of Common Stock
(Basic and Diluted) $ 0.10 $ 0.09 $ 0.30 $ 0.29
============== ============= ============= =============
Weighted Average Number of Shares of
Common Stock Outstanding (Basic and
Diluted) 24,999,196 1,950,496 16,932,082 1,561,409
============== ============= ============= =============
See accompanying notes to condensed consolidated financial statements.
CNL RETIREMENT PROPERTIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)
Nine Months Ended September 30, 2002 and Year Ended December 31, 2001
Common stock Accumulated
------------------------------- Capital in distributions
Number Par excess of in excess of
of shares value par value net earnings Total
-------------- ------------ ---------------- ---------------- ----------------
Balance at December 31, 2000 1,185,840 $ 11,858 $ 9,547,784 $ (356,094) $ 9,203,548
Subscriptions received for common
stock through public offering and
distribution reinvestment plan 5,951,975 59,520 59,460,231 - 59,519,751
Retirement of common stock (3,415) (34) (31,386) - (31,420)
Stock issuance costs - - (7,190,480) - (7,190,480)
Net earnings - - - 915,965 915,965
Distributions declared and paid
($0.6996 per share) - - - (1,507,322) (1,507,322)
-------------- ------------ ----------------- ---------------- ----------------
Balance at December 31, 2001 7,134,400 71,344 61,786,149 (947,451) 60,910,042
Subscriptions received for common
stock through public offering and
distribution reinvestment plan 23,106,137 231,061 230,830,312 - 231,061,373
Retirement of common stock (16,460) (164) (151,274) - (151,438)
Stock issuance costs - - (24,962,084) - (24,962,084)
Net earnings - - - 5,039,468 5,039,468
Distributions declared and paid
($0.5247 per share) - - - (8,236,356) (8,236,356)
--------------- ------------ --------------- ---------------- ----------------
Balance at September 30, 2002 30,224,077 $ 302,241 $ 267,503,103 $ (4,144,339) $ 263,661,005
=============== ============ =============== ================ ================
See accompanying notes to condensed consolidated financial statements.
CNL RETIREMENT PROPERTIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
September 30,
2002 2001
------------------ -------------------
Increases (Decreases) in Cash and Cash Equivalents:
Net Cash Provided by Operating Activities $ 9,180,977 $ 770,454
------------------ -------------------
Net Cash Provided by (Used in) Investing Activities:
Additions to land, buildings and equipment on
operating leases (93,622,816) (15,671)
Investment in direct financing leases (109,720,000) -
Investment in mortgage loan receivable (1,870,000) -
Investment in notes receivable (2,383,675) -
Investment in unconsolidated subsidiary (371,800) -
Distributions received from unconsolidated subsidiaries 73,479 -
Payment of acquisition fees and costs (15,295,647) (668,308)
Increase in restricted cash (762,861) (9,825)
------------------- -------------------
Net cash used in investing activities (223,953,320) (693,804)
------------------- -------------------
Net Cash Provided by (Used in) Financing Activities:
Repayment of borrowings on line of credit - (3,795,000)
Proceeds from borrowings on mortgages payable 32,620,000 -
Principal payments on mortgages payable (185,181) -
Payment of loan costs (884,703) -
Subscriptions received from stockholders 231,061,373 15,453,958
Distributions to stockholders (8,236,356) (780,392)
Retirement of common stock (30,187) (5,226)
Payment of stock issuance costs (25,728,073) (1,566,304)
Contributions by minority interest 8,500,000 -
Distributions to minority interest (221,115) -
------------------- -------------------
Net cash provided by financing activities 236,895,758 9,307,036
------------------- -------------------
Net Increase in Cash and Cash Equivalents 22,123,415 9,383,686
Cash and Cash Equivalents at Beginning of Period 26,721,107 177,884
------------------- -------------------
Cash and Cash Equivalents at End of Period $ 48,844,522 $ 9,561,570
=================== ===================
Supplemental Schedule of Non-Cash
Investing and Financing Activities:
Mortgage assumed on property purchase $ 12,974,397 $ -
=================== ===================
See accompanying notes to condensed consolidated financial statements.
CNL RETIREMENT PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Quarters and Nine Months Ended September 30, 2002 and 2001
1. Organization and Nature of Business:
CNL Retirement Properties, Inc. was organized pursuant to the laws of the
State of Maryland on December 22, 1997 to invest in real estate properties
(the "Property" or "Properties") related to health care and seniors' housing
facilities ("Retirement Facilities") located across the United States. The
term "Company" includes, unless the context otherwise requires, CNL
Retirement Properties, Inc. and its subsidiaries.
The Retirement Facilities may include congregate living, assisted living and
skilled nursing facilities, continuing care retirement communities and life
care communities, and medical office buildings and walk-in clinics. The
Company may provide mortgage financing ("Mortgage Loans") to operators of
Retirement Facilities in the aggregate principal amount of approximately 5
to 10 percent of the Company's total assets. The Company also may offer
furniture, fixture and equipment financing ("Secured Equipment Leases") to
operators of Retirement Facilities. Any Secured Equipment Leases will be
funded from the proceeds of a loan in an amount up to 10 percent of the
Company's total assets.
2. Summary of Significant Accounting Policies:
Basis of Presentation - The accompanying unaudited condensed consolidated
financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America for interim
financial information and with the instructions to Form 10-Q. Accordingly,
they do not include all of the information and note disclosures required by
accounting principles generally accepted in the United States for complete
financial statements. The condensed consolidated financial statements
reflect all adjustments, consisting of normal recurring adjustments, which
are, in the opinion of management, necessary for a fair statement of the
results for the interim periods presented. Operating results for the quarter
and nine months ended September 30, 2002, may not be indicative of the
results that may be expected for the year ending December 31, 2002. Amounts
included in the financial statements as of December 31, 2001, have been
derived from audited financial statements as of that date.
These unaudited financial statements should be read in conjunction with the
financial statements and notes thereto included in the Report on Form 10-K
of CNL Retirement Properties, Inc. and its subsidiaries for the year ended
December 31, 2001.
Principles of Consolidation - The accompanying unaudited condensed
consolidated financial statements include the accounts of CNL Retirement
Properties, Inc. and its majority owned subsidiaries. All significant
intercompany balances and transactions have been eliminated in
consolidation. Interests of unaffiliated third parties are reflected as
minority interest for less than 100 percent owned and majority controlled
entities.
CNL RETIREMENT PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
Quarters and Nine Months Ended September 30, 2002 and 2001
2. Summary of Significant Accounting Policies - Continued:
Real Estate and Lease Accounting - The Properties are leased on a long-term,
triple-net basis to unrelated third parties, whereby the tenants are
generally responsible for all operating expenses relating to the Property,
including property taxes, insurance, maintenance and repairs. The leases are
accounted for using either the direct financing or the operating method.
Direct financing method - For leases accounted for as direct financing
leases, future minimum lease payments have been recorded as a
receivable. The difference between the receivable and the estimated
residual values less the cost of the Properties has been recorded as
unearned income. The unearned income is deferred and amortized to
income over the lease terms to provide a constant rate of return. The
investment in direct financing leases is presented net of the
unamortized unearned income.
Operating method - Under the operating method, land, buildings and
equipment are recorded at cost, including acquisition and closing
costs. Revenue is recognized as rents are earned and depreciation is
charged to operations as incurred. Buildings and equipment are
depreciated on the straight-line method over their estimated useful
lives of 40 years and three years to seven years, respectively. Income
is recognized on a straight-line basis so as to produce a constant
periodic rent over the lease term commencing on the date the Property
is placed in service. Accrued rental income is the aggregate difference
between scheduled rental payments which vary during the lease term and
minimum rental revenue recognized on a straight-line basis.
When a Property is sold, the related costs and accumulated depreciation,
plus any accrued rental income, will be removed from the accounts and any
gain or loss from sale will be reflected in income. Management reviews its
assets for impairment whenever events or changes in circumstances indicate
that the carrying amount of the assets may not be recoverable through
operations. Management determines whether impairment in value has occurred
by comparing the estimated future undiscounted cash flows, including the
residual value of the Property, with the carrying cost of the Property. If
an impairment is indicated, the assets are adjusted to their fair value.
Mortgage Loans Receivable - The Company originates Mortgage Loans to
operators of Retirement Facilities that are secured by real estate and
equipment. The loans are expected to be held until maturity and are recorded
at cost.
Loan Costs - Loan costs incurred in connection with the Company's mortgages
payable and line of credit have been capitalized and are being amortized
over the terms of the loans using the straight-line method, which
approximates the effective interest method.
CNL RETIREMENT PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
Quarters and Nine Months Ended September 30, 2002 and 2001
2. Summary of Significant Accounting Policies - Continued:
Recent Accounting Pronouncements - In April 2002, the Financial Accounting
Standards Board ("FASB") issued FASB Statement No. 145, "Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and
Technical Corrections." This statement rescinds FASB Statement No. 4,
"Reporting Gains and Losses from Extinguishment of Debt," and an amendment
of that Statement, FASB Statement No. 64, "Extinguishments of Debt Made to
Satisfy Sinking-Fund Requirements." This statement also rescinds FASB
Statement No. 44, "Accounting for Intangible Assets of Motor Carriers." This
statement amends FASB Statement No. 13, "Accounting for Leases," to
eliminate an inconsistency between the required accounting for
sale-leaseback transactions and the required accounting for certain lease
modifications that have economic effects that are similar to sale-leaseback
transactions. This statement also amends other existing authoritative
pronouncements to make various technical corrections, clarify meanings, or
describe their applicability under changed conditions. The provisions of
this statement related to the rescission of FASB Statement No. 4 are
applicable in fiscal years beginning after May 15, 2002. The provisions of
this statement related to FASB Statement No. 13 are effective for
transactions occurring after May 15, 2002. All other provisions of this
statement are effective for financial statements issued on or after May 15,
2002. The provisions of this statement are not expected to have a
significant impact on the financial position or results of operations of the
Company.
In July 2002, the FASB issued FASB Statement No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." The statement requires
companies to recognize costs associated with exit or disposal activities
when they are incurred rather than at the date of a commitment for an exit
or disposal plan. Examples of costs covered by the statement include lease
termination costs and certain employee severance costs that are associated
with a restructuring, discontinued operations, plant closing, or other exit
or disposal activity. The statement is to be applied prospectively to exit
or disposal activities initiated after December 31, 2002. The adoption of
this statement is not expected to have a significant impact on the financial
position or results of operations of the Company.
Reclassification - Certain items in the prior year's financial statements
have been reclassified to conform to the 2002 presentation. These
reclassifications had no effect on stockholders' equity or net earnings.
3. Public Offerings:
On May 24, 2002, the Company completed its offering of up to 15,500,000
shares of common stock ($155,000,000) (the "2000 Offering"), which included
up to 500,000 shares ($5,000,000) available to stockholders who elected to
participate in the Company's reinvestment plan. In connection with the 2000
Offering, the Company received subscription proceeds of $155,000,000
(15,500,000 shares), including $418,670 (41,867 shares) through the
reinvestment plan.
CNL RETIREMENT PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
Quarters and Nine Months Ended September 30, 2002 and 2001
3. Public Offerings - Continued:
Immediately following the completion of the 2000 Offering, the Company
commenced an offering of up to 45,000,000 shares of common stock
($450,000,000) (the "2002 Offering"). Of the 45,000,000 shares of common
stock offered, up to 5,000,000 are available to stockholders purchasing
shares through the Company's reinvestment plan. The price per share and
other terms of the 2002 Offering, including the percentage of gross proceeds
payable (i) to the managing dealer for selling commissions and expenses in
connection with the offering and (ii) to CNL Retirement Corp. (the
"Advisor") for acquisition fees, are substantially the same as for the
Company's 2000 Offering. As of September 30, 2002, the Company had received
total subscription proceeds from its initial public offering, the 2000
Offering and the 2002 Offering of $302,272,717 (30,227,269 shares),
including $820,108 (82,011 shares) through the reinvestment plan.
On October 4, 2002, the Company filed a registration statement on Form S-11
with the Securities and Exchange Commission in connection with the proposed
sale by the Company of up to 175,000,000 additional shares of common stock
($1,750,000,000) in an offering expected to commence immediately following
the completion of the Company's 2002 Offering (the "2003 Offering"). Of the
175,000,000 shares of common stock to be offered, up to 25,000,000 will be
available to stockholders purchasing shares through the reinvestment plan.
4. Land, Buildings and Equipment on Operating Leases:
During the nine months ended September 30, 2002, the Company acquired eight
Properties throughout the United States that are subject to operating leases
resulting in the Company owning a total of 11 Properties that have been
classified as land, buildings and equipment on operating leases. Land,
buildings and equipment on operating leases consisted of the following at:
September 30, December 31,
2002 2001
--------------- ---------------
Land $ 16,317,346 $ 4,649,497
Buildings 127,585,376 29,209,418
Equipment 5,680,366 2,200,780
--------------- ---------------
149,583,088 36,059,695
Less accumulated
depreciation (2,992,622) (827,127)
--------------- ---------------
$ 146,590,466 $ 35,232,568
================== =================
The operating leases have initial terms of 15 years and provide for minimum
and contingent rent. All of the operating leases provide options that allow
the tenants to renew the leases from 5 to 20 successive years subject to the
same terms and conditions as the initial leases.
CNL RETIREMENT PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
Quarters and Nine Months Ended September 30, 2002 and 2001
4. Land, Buildings and Equipment on Operating Leases:
The leases provide for increases in the minimum annual rents commencing at
predetermined intervals during the lease terms. Such amounts are recognized
on a straight-line basis over the terms of the leases commencing on the date
the Properties were placed in service. For the quarter and nine months ended
September 30, 2002, the Company recognized $410,655 and $764,652,
respectively, of such rental income. These amounts are included in rental
income from operating leases in the accompanying consolidated statements of
earnings.
The following is a schedule of future minimum lease payments to be received
on the noncancellable operating leases at September 30, 2002:
2002 $ 3,415,759
2003 13,755,237
2004 13,875,844
2005 13,998,676
2006 14,123,776
Thereafter 156,620,076
-------------------
$ 215,789,368
===================
Since the operating leases are renewable at the option of the tenants, the
above table only presents future minimum lease payments due during the
initial lease terms. In addition, this table does not include any amounts
for contingent rents, which may be received on the leases based on a
percentage of the tenants' gross revenues.
5. Net Investment in Direct Financing Leases:
During the nine months ended September 30, 2002, the Company acquired 11
Properties located in seven states that have been classified as direct
financing leases. The components of net investment in direct financing
leases consisted of the following at September 30, 2002:
Minimum lease payments receivable $ 629,017,580
Estimated residual values 109,720,000
Less unearned income (623,108,085)
-------------------
Net investment in direct financing leases $ 115,629,495
===================
The direct financing leases have initial terms of 35 years and provide for
minimum and contingent rent. The leases contain provisions that allow the
lessee to elect to purchase the Properties at the end of the term for the
Company's initial investment amount of $109,720,000. The leases also permit
the Company to require the lessees to purchase the Properties at the end of
the lease term for the same amount.
CNL RETIREMENT PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
Quarters and Nine Months Ended September 30, 2002 and 2001
5. Net Investment in Direct Financing Leases - Continued:
The following is a schedule of future minimum lease payments to be received
on direct financing leases at September 30, 2002:
2002 $ 2,880,150
2003 11,520,600
2004 11,808,615
2005 12,103,830
2006 12,406,426
Thereafter 578,297,959
----------------
$ 629,017,580
================
The above table does not include any amounts for future rents which may be
received on the leases based on a percentage of the tenants' gross sales.
6. Mortgage Loan Receivable:
On August 12, 2002, the Company originated a Mortgage Loan in the principal
amount of $1,870,000 secured by a mortgage on a parcel of land containing
approximately 39.8 gross acres located in Vero Beach, Florida. The loan
bears interest at 9.35 percent per annum and requires monthly payments of
interest only. The loan matures on December 31, 2006, at which time all
unpaid principal and interest is due. Mortgage Loan receivable consisted of
the following at September 30, 2002:
Outstanding principal $ 1,870,000
Accrued interest income 23,472
--------------
$ 1,893,472
==============
7. Notes and Other Receivables:
Notes and other receivables include the following at:
September 30, December 31,
2002 2001
---------------- ----------------
Rental revenues receivable $ 425,845 $ 180,163
Notes receivable 2,383,675 -
Due from joint venture partner 136,025 -
Accrued interest receivable 24,872 -
---------------- ----------------
$ 2,970,417 $ 180,163
================ ================
CNL RETIREMENT PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
Quarters and Nine Months Ended September 30, 2002 and 2001
7. Notes and Other Receivables - Continued:
Notes receivable is comprised of loans to affiliates of two of the Company's
tenants related to the anticipated acquisition of additional Properties. As
of September 30, 2002, the Company had an initial commitment to purchase two
additional Properties located in Maryland for approximately $22,600,000 as
described in Note 14. In connection with this anticipated purchase, the
Company loaned the seller $2,000,000 to pay off debt at a discounted amount
making the purchase of the Properties economically viable. The note bears
interest at 15 percent per annum and matures December 31, 2002. As security
for this note, the seller has pledged a membership interest in its company.
Additionally, certain members of the seller's company guarantee the note.
The Company has a Mortgage Loan on a parcel of land located in Vero Beach,
Florida as described in Note 6. The land will be developed into a retirement
community and the borrower is seeking third-party construction financing.
Upon completion of the development, the Company anticipates that it will
purchase the Retirement Facility. The Company has advanced $383,675 to the
borrower to fund pre-development costs in order to expedite the development
of the Property. The note bears interest at 5 percent per annum and matures
December 31, 2002.
8. Investment in Unconsolidated Subsidiary:
On May 30, 2002, the Company acquired a 10 percent interest in a limited
partnership, CNL Plaza, Ltd., that owns an office building located in
Orlando, Florida, in which the Advisor and its affiliates lease office
space. The Company's investment in the partnership is accounted for using
the equity method as the Company has significant influence. The remaining
interest in the limited partnership is owned by several affiliates of the
Advisor. During the quarter and nine months ended September 30, 2002, the
Company received $79,208 in distributions from the partnership. The
following presents unaudited condensed financial information for CNL Plaza,
Ltd. as of September 30, 2002 and for the period May 30, 2002 through
September 30, 2002:
Balance Sheet:
Land, building and equipment, net $54,930,253
Other assets 10,954,404
Notes and mortgages payable 64,326,187
Other liabilities 1,150,947
Partners' capital 407,523
Income Statement:
Revenues 3,591,038
Expenses 3,533,748
Net income 57,290
CNL RETIREMENT PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
Quarters and Nine Months Ended September 30, 2002 and 2001
9. Indebtedness:
In February 2002, the Company assumed a mortgage of $12,974,397 that matures
on October 2, 2003, in conjunction with the purchase of a Property located
in Oak Park, Illinois. The mortgage bears interest at a floating rate of (i)
350 basis points over the 30-day LIBOR if LIBOR is over 2.6 percent or (ii)
440 basis points over the 30-day LIBOR if LIBOR is under 2.6 percent not to
exceed 8 percent. As of September 30, 2002, the interest rate was 6.22
percent. In accordance with the provisions of the mortgage, the Company has
placed $277,821 in an escrow reserve account that represents three months of
debt service related to the mortgage. This escrow reserve is included in
restricted cash at September 30, 2002.
On June 7, 2002, a consolidated joint venture in which the Company owns a
76.75 percent interest borrowed $23,520,000 in the form of a commercial
paper backed loan secured by certain Properties. The loan is funded from
proceeds received from the sale of 30-day commercial paper. The commercial
paper is re-marketed every 30 days upon maturity. The joint venture has a
liquidity facility in place in the event that the re-marketing effort is
unsuccessful. The liquidity agent has provided a liquidity facility for up
to 102 percent of the outstanding loan balance. In the event the liquidity
provider defaults, a participating liquidity agent will provide up to
$20,000,000 and the Company has agreed to provide liquidity for any amount
in excess of $20,000,000 not to exceed $3,520,000. Interest is payable
monthly with principal due when the commercial paper loan matures on June 6,
2007. The commercial paper loan bears interest at the commercial paper rate
as determined by market demand (1.90 percent as of September 30, 2002) plus
a margin of 1.86 percent, which is inclusive of liquidity fees and
administrative costs. As of September 30, 2002, the commercial paper loan
interest rate was 3.76 percent.
On August 8, 2002, the Company entered into a commitment for $11,000,000 of
permanent financing secured by a mortgage on the Property located in
Greenwood Village, Colorado. On August 29, 2002, the Company obtained an
advance totaling $9,100,000 with a possible future advance in the amount of
$1,900,000 subject to certain operating performance thresholds being
achieved by this Property prior to February 27, 2004. The loan bears
interest at a variable rate based on 90-day LIBOR plus 3.90 percent per
annum, but in no event shall the interest rate be less than 6.50 percent. As
of September 30, 2002, the interest rate was 6.50 percent. The loan requires
monthly principal and interest payments through August 31, 2007, with all
unpaid principal and interest due at that time.
10. Redemption of Shares:
The Company has a redemption plan under which the Company may elect to
redeem shares, subject to certain conditions and limitations. Under the
redemption plan, prior to such time, if any, as listing occurs any
stockholder who has held shares for at least one year may present all or any
portion equal to at least 25 percent of their shares to the Company for
redemption in accordance with the procedures outlined in the redemption
plan. Upon presentation, the Company may, at its option, redeem the shares,
subject to certain conditions and limitations. However, at no time during a
12-month period may the number of shares redeemed by the Company exceed 5
percent of the number of shares of the Company's outstanding common stock at
the beginning of such 12-month period. During the nine months ended
September 30, 2002, 16,460 shares of common stock were redeemed for $151,438
($9.20 per share) and retired from shares outstanding of common stock.
CNL RETIREMENT PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
Quarters and Nine Months Ended September 30, 2002 and 2001
11. Stock Issuance Costs:
The Company has incurred certain expenses in connection with its offerings,
including commissions, marketing support fees, due diligence expense
reimbursements, filing fees, and legal, accounting, printing and escrow
fees, which have been deducted from the gross proceeds of the offerings.
During the nine months ended September 30, 2002, the Company incurred
$24,962,083 in stock issuance costs, including $18,656,852 in commissions,
marketing support fees and due diligence expense reimbursements (see Note
13). These amounts have been charged to stockholders' equity. In connection
with the 2000 Offering and the 2002 Offering, offering expenses paid by the
Company together with selling commissions, marketing support fees, due
diligence expense reimbursements and any soliciting dealer servicing fee
incurred by the Company will not exceed 13 percent of the proceeds raised in
each such offering.
12. Distributions:
For the nine months ended September 30, 2002, approximately 50 percent of
the distributions paid to stockholders were considered ordinary income and
approximately 50 percent were considered a return of capital for federal
income tax purposes. No amounts distributed to stockholders for the nine
months ended September 30, 2002, are required to be or have been treated by
the Company as a return of capital for purposes of calculating the
stockholders' return on their invested capital. The characterization for tax
purposes of distributions declared for the nine months ended September 30,
2002, may not be indicative of the characterization of distributions that
may be expected for the year ending December 31, 2002.
13. Related Party Arrangements:
Certain directors and officers of the Company hold similar positions with
CNL Retirement Corp. (the "Advisor") and the managing dealer of the
Company's public offerings, CNL Securities Corp. These affiliates are
entitled to receive fees and compensation in connection with the offerings
and the acquisition, management and sale of the assets of the Company.
CNL Securities Corp. is entitled to receive commissions amounting to 7.5
percent of the total amount raised from the sale of shares for services in
connection with the offerings, a substantial portion of which has been or
will be paid as commissions to other broker-dealers. During the nine months
ended September 30, 2002 and 2001, the Company incurred $17,329,603 and
$1,159,047, respectively, of such fees, of which $16,185,496 and $1,081,777,
respectively, has been or will be paid by CNL Securities Corp. as
commissions to other broker-dealers.
In addition, CNL Securities Corp. is entitled to receive a marketing support
and due diligence expense reimbursement fee equal to 0.5 percent of the
total amount raised from the sale of shares in the 2000 Offering, all or a
portion of which may be reallowed to other broker-dealers. Commencing with
the 2002 Offering, CNL Securities Corp. is entitled to receive marketing
support fees of 0.5 percent, and due diligence expense reimbursements of up
to 0.125 percent, of the total amount raised from the sale of shares in the
2002 Offering, all or a portion of which may be reallowed to other
broker-dealers. During the nine months ended September 30, 2002 and 2001,
the Company incurred $1,327,249 and $77,270, respectively, of such fees, the
majority of which were reallowed to other broker-dealers and from which all
bona fide due diligence expenses have been or will be paid.
CNL RETIREMENT PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
Quarters and Nine Months Ended September 30, 2002 and 2001
13. Related Party Arrangements - Continued:
The Advisor is entitled to receive acquisition fees for services in
identifying Properties and structuring the terms of the leases of the
Properties and Mortgage Loans equal to 4.5 percent of gross proceeds of the
offerings and loan proceeds from permanent financing, excluding that portion
of the permanent financing used to finance Secured Equipment Leases. The
Advisor is also entitled to receive acquisition fees equal to 4.5 percent of
amounts outstanding on the line of credit, if any, at the time Listing
occurs. During the nine months ended September 30, 2002 and 2001, the
Company incurred $12,441,867 and $693,469, respectively, of such fees,
including $2,051,748 of acquisition fees on permanent debt paid to the
Advisor during the nine months ended September 30, 2002. Such fees are
included in other assets prior to being allocated to individual Properties.
In addition to acquisition fees, the Advisor may pay miscellaneous
acquisition costs on behalf of the Company. Such costs are reimbursed to the
Advisor on a monthly basis.
The Company and the Advisor have entered into an advisory agreement pursuant
to which the Advisor receives a monthly asset management fee of one-twelfth
of 0.6 percent of the Company's real estate asset value and the outstanding
principal balance of any Mortgage Loan as of the end of the preceding month.
During the nine months ended September 30, 2002 and 2001, the Company
incurred $397,674 and $62,320, respectively, of such fees.
The Company incurs operating expenses which, in general, are expenses
relating to administration of the Company on an ongoing basis. Pursuant to
an advisory agreement, the Advisor is required to reimburse the Company the
amount by which the total operating expenses paid or incurred by the Company
exceed in any four consecutive fiscal quarters (the "Expense Year") the
greater of 2 percent of average invested assets or 25 percent of net income
(the "Expense Cap"). Operating expenses for the Expense Year ended June 30,
2001 exceeded the Expense Cap by $145,015; therefore, the Advisor reimbursed
the Company such amount in accordance with the advisory agreement. Operating
expenses for the Expense Year ended September 30, 2002 did not exceed the
Expense Cap.
CNL Capital Corp., an affiliate of the Advisor, is a non-voting Class C
member of Century Capital Markets, LLC ("CCM"). CCM made the arrangements
for the $23,520,000 commercial paper loan described in Note 9. CCM was paid
a 2 percent structuring fee ($470,400), which is included in the Company's
deferred loan costs as of September 30, 2002, and is being amortized over
the term of the loan. In addition, the monthly interest payment due under
the commercial paper loan includes a margin of 30 basis points payable to
CCM for the monthly services it provides related to the administration of
the commercial paper loan.
The Company maintains bank accounts in a bank in which certain officers and
directors of the Company serve as directors, and in which an affiliate of
the Advisor and certain executive officers of the Company are stockholders.
The amounts deposited with this bank were $3,762,382 and $3,000,000 at
September 30, 2002 and December 31, 2001, respectively.
CNL RETIREMENT PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
Quarters and Nine Months Ended September 30, 2002 and 2001
13. Related Party Arrangements - Continued:
On May 30, 2002, the Company acquired a 10 percent interest in a limited
partnership, CNL Plaza, Ltd., that owns an office building located in
Orlando, Florida, in which the Advisor and its affiliates lease office
space. The remaining interest in the limited partnership is owned by several
affiliates of the Advisor.
The Advisor and its affiliates provide various administrative services to
the Company, including services related to accounting; financial, tax and
regulatory compliance reporting; stockholder distributions and reporting;
due diligence and marketing; and investor relations (including
administrative services in connection with the offerings) on a day-to-day
basis. The expenses incurred for these services were classified as follows
for the nine months ended September 30:
2002 2001
----------------- ----------------
Stock issuance costs $ 2,067,648 $ 137,557
Land, buildings and equipment on operating leases
and other assets 19,972 12,758
General operating and administrative expenses 351,046 145,654
----------------- ----------------
$ 2,438,666 $ 295,969
================= ================
Amounts due to related parties consisted of the following at:
September 30, December 31,
2002 2001
----------------- ----------------
Due to the Advisor and its affiliates:
Expenditures incurred for offering expenses on
behalf of the Company $ 77,111 $ 1,328,123
Accounting and administrative services 63,068 62,313
Acquisition fees and miscellaneous acquisition
expenses 361,616 226,986
----------------- ----------------
501,795 1,617,422
----------------- ----------------
Due to CNL Securities Corp.:
Commissions 591,136 145,670
Marketing support fees and due diligence expense
reimbursements 49,271 9,715
----------------- -----------------
640,407 155,385
----------------- -----------------
$ 1,142,202 $ 1,772,807
================= =================
CNL RETIREMENT PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
Quarters and Nine Months Ended September 30, 2002 and 2001
14. Commitments and Contingencies:
In connection with the acquisition of four of its Properties, the Company
may be required to make additional payments (the "Earnout Amount") if
certain earnout provisions are achieved by the earnout date (the "Earnout
Date") for each Property. The calculation of the Earnout Amount generally
considers the net operating income for the Property, the Company's initial
investment in the Property and the fair value of the Property. In the event
an Earnout Amount becomes payable, the lease will be amended to increase the
basis by which annual minimum rent is calculated.
The Earnout Dates for each Property are as follows:
Property Earnout Dates
--------------------------------------------- ----------------------------------
Broadway Plaza, Arlington, Texas October 31, 2004
Homewood Residence, Boca Raton, Florida August 31, 2004
Homewood Residence, Coconut Creek, Florida March 31, 2005
Heritage Club, Greenwood Village, Colorado August 1, 2002 and April 15, 2005
During the quarter ended September 30, 2002, the Property located in
Greenwood Village, Colorado was performing at a level sufficient to satisfy
the requirements under the August 1, 2002 earnout provisions, and the
Company funded an additional payment of $1,775,000. The lease was amended to
increase the basis by which annual minimum rent is calculated.
In connection with the acquisition of a 10 percent limited partnership
interest in CNL Plaza, Ltd. (see Note 8), the Company has severally
guaranteed 16.67 percent or $2,583,333, of a $15,500,000 unsecured
promissory note of the limited partnership.
As of September 30, 2002, the Company had initial commitments to acquire two
additional Properties located in Maryland. The anticipated aggregate
purchase price of the two Properties is approximately $22,600,000, and the
acquisition of each of these Properties is subject to the fulfillment of
certain conditions. The Company plans to assume permanent financing of
approximately $20,600,000 in connection with the acquisition of these two
Properties.
15. Concentration of Credit Risk:
As of September 30, 2002, the Company owned 22 Properties. The lessees of
five of these Properties are wholly owned subsidiaries of American
Retirement Corporation ("ARC"). In addition, the five Properties are
operated under the ARC brand chains. These five Properties are located in
various states and the leases contain cross-default terms, meaning that if
any tenant of any of the Properties leased to ARC defaults on its
obligations under its lease, the Company will have the ability to pursue its
remedies under the lease with respect to any of the Properties leased to ARC
regardless of whether the tenant of any such Property is in default under
its lease. The ARC leases contributed 59 percent of the Company's total
rental income during the nine months ended September 30, 2002.
CNL RETIREMENT PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
Quarters and Nine Months Ended September 30, 2002 and 2001
15. Concentration of Credit Risk - Continued:
In May 2002, five Properties were acquired by a joint venture in which the
Company owns a 76.75 percent interest and Marriott Senior Living Services,
Inc. owns a 23.25 percent interest. The Company is accounting for its
interest in the joint venture using the consolidation method. The five
Properties, purchased for an aggregate price of $58,800,000, are leased to
HRA Management Corporation and are operated by Marriott Senior Living
Services, Inc., a subsidiary of Marriott International, Inc. These five
Properties are located in various states and the leases contain
cross-default terms. In addition, Marriott International, Inc. has, with
certain limitations, guaranteed the tenant's obligation to pay minimum rent
due under the leases up to a maximum of $5,880,000. The guaranty terminates
upon the earlier of (i) the five Retirement Facilities achieving certain
pooled minimum net operating income performance thresholds or (ii) the end
of the fifth lease year. As of September 30, 2002, $108,986 of the guaranty
had been used to pay rent leaving a remaining guaranty balance of
$5,771,014. The leases from these five Properties contributed approximately
28 percent of the Company's total rental income during the nine months ended
September 30, 2002. A former director and a former officer of the Company
are the principal shareholders of the tenant, HRA Management Corporation.
One additional Property is leased to a wholly owned subsidiary of Marriott
International, Inc. and is also operated by Marriott Senior Living Services,
Inc. The lease from this Property contributed approximately 13 percent of
the Company's total rental income during the nine months ended September 30,
2002.
On September 30, 2002, the Company acquired 11 additional Properties located
in seven states through a direct financing transaction with two affiliates
of Prime Care Properties, LLC. The Properties are operated by Marriott
Senior Living Services, Inc. An affiliate of the tenants has guaranteed the
tenants' obligations to pay minimum rent due under the lease up to a maximum
of $2,000,000. As of September 30, 2002, no amounts were drawn under the
guaranty.
Although the Company acquires Properties located in various states and
regions and carefully screens its tenants in order to reduce risks of
default, failure of these lessees, American Retirement Corporation or
Marriott International, Inc. would significantly impact the results of
operations of the Company. Management believes that the risk of such a
default is reduced due to the Company requiring security deposits on certain
Properties, or in some cases, obtaining a guaranty from the tenant's or
operator's parent company or requiring an additional cash reserve account to
be held at the tenant level. It is expected that the percentage of total
rental income contributed by these lessees will decrease as additional
Properties are acquired and leased to diversified tenants during subsequent
periods.
16. Subsequent Events:
During the period October 1, 2002 through November 7, 2002, the Company
received subscription proceeds for an additional 5,458,708 shares
($54,587,082) of common stock. As of November 7, 2002, the Company had
received total subscription proceeds of $356,846,432.
CNL RETIREMENT PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
Quarters and Nine Months Ended September 30, 2002 and 2001
16. Subsequent Events - Continued:
On October 1, 2002 and November 1, 2002, the Company declared distributions
totaling $1,774,618 and $2,040,979, respectively, or $0.0583 per share of
common stock, payable by December 2002, to stockholders of record on October
1, 2002 and November 1, 2002, respectively.
On October 10, 2002, the Company used net offering proceeds to purchase a
parcel of land located in Peabody, Massachusetts, for $17,383,784 and
entered into a long-term, triple-net lease agreement relating to the land.
On November 1, 2002, the Company used net offering proceeds to purchase a
Property located in Nashville, Tennessee, for $8,957,850 and entered in to a
long-term, triple-net lease agreement related to the Property.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company
CNL Retirement Properties, Inc. was organized pursuant to the laws of the
State of Maryland on December 22, 1997. Various other majority owned
subsidiaries have been or will be formed by the Company for the purpose of
acquiring health care properties and seniors' housing facilities (the
"Properties"). The terms "Company" or "Registrant" include CNL Retirement
Properties, Inc. and its majority owned subsidiaries. The Company operates for
federal income tax purposes as a real estate investment trust (a "REIT").
Liquidity and Capital Resources
Common Stock Offerings
On May 24, 2002, the Company completed its offering of up to 15,500,000
shares of common stock ($155,000,000) (the "2000 Offering"), which included up
to 500,000 shares ($5,000,000) available to stockholders who elected to
participate in the Company's reinvestment plan. In connection with the 2000
Offering, the Company received subscription proceeds of $155,000,000 (15,500,000
shares), including $418,670 (41,867 shares) through the reinvestment plan.
Immediately following the completion of the 2000 Offering, the Company
commenced an offering of up to an additional 45,000,000 shares of common stock
($450,000,000) (the "2002 Offering"). Of the 45,000,000 shares of common stock
offered in the 2002 Offering, up to 5,000,000 are available to stockholders
purchasing shares through the Company's reinvestment plan. Since its formation,
the Company has received an initial $200,000 contribution from CNL Retirement
Corp. (the "Advisor") and subscription proceeds of $302,272,717 (30,227,269
shares), including $820,108 (82,011 shares) through its reinvestment plan. As of
September 30, 2002, the Company had received net offering proceeds of
approximately $267,700,000 following the deduction of selling commissions,
marketing support fees, due diligence expense reimbursements, and organizational
and offering expenses. As of September 30, 2002, the Company had used
approximately $195,800,000 of net offering proceeds and approximately
$45,600,000 of loan proceeds to invest in 22 Properties located in 13 states
(see "Property Acquisitions and Investments" below) and approximately
$24,000,000 to pay acquisition fees and expenses, leaving approximately
$47,900,000 available for investment in Properties and mortgage loans.
On October 4, 2002, the Company filed a registration statement on Form S-11
with the Securities and Exchange Commission in connection with the proposed sale
by the Company of up to 175,000,000 additional shares of common stock
($1,750,000,000) in an offering expected to commence immediately following the
completion of the Company's 2002 Offering (the "2003 Offering"). Of the
175,000,000 shares of common stock to be offered, up to 25,000,000 will be
available to stockholders purchasing shares through the reinvestment plan.
Liquidity and Capital Resources - Continued:
During the period October 1 through November 7, 2002, the Company received
additional offering proceeds of approximately $54,587,082. The Company expects
to use any uninvested net offering proceeds, plus any additional net offering
proceeds from the 2002 Offering and the proposed 2003 Offering to purchase
additional Properties and to invest in mortgage loans. In addition, the Company
intends to borrow money to acquire assets and to pay certain related fees. The
Company intends to encumber assets in connection with such borrowing. The
Company has obtained a revolving $25,000,000 line of credit. The Company has
also obtained permanent financing in connection with certain Properties. The
aggregate amount of any permanent financing is not expected to exceed 30 percent
of the Company's total assets and the maximum amount the Company may borrow is
300 percent of the Company's net assets.
Property Acquisitions and Investments
On February 11, 2002, the Company acquired the Holley Court Terrace
independent living Property located in Oak Park, Illinois (the "Oak Park
Property") for $18,469,275 from American Retirement Corporation. The Company, as
lessor, has entered into a long-term, triple-net lease agreement relating to
this Property with ARC Holley Court, LLC. The initial term of the lease expires
on February 11, 2017. At the end of the initial lease term, the tenant will have
two consecutive renewal options of five years each. The lease requires minimum
annual rent of $1,846,928 for the first lease year with increases of 1 percent
each lease year thereafter. In addition to minimum rent, the lease requires
percentage rent. The Company assumed approximately $13,000,000 of permanent
financing relating to the Oak Park Property that is secured by a mortgage on
this Property (see "Borrowings" below).
In addition, on February 11, 2002, the Company acquired the Homewood
Residence of Coconut Creek assisted living Property located in Coconut Creek,
Florida (the "Coconut Creek Property") for $9,687,563 from American Retirement
Corporation. The Company, as lessor, has entered into a long-term, triple-net
lease agreement relating to this Property with ARC Coconut Creek, LLC. The
initial term of the lease expires on February 11, 2017. At the end of the
initial lease term, the tenant will have two consecutive renewal options of five
years each. The lease requires minimum annual rent of $968,756 for the first
lease year with increases of 2 percent each lease year thereafter. In addition
to minimum rent, the lease requires percentage rent.
On March 22, 2002, the Company acquired the Heritage Club at Greenwood
Village assisted living/skilled nursing Property located in Greenwood Village,
Colorado (the "Greenwood Village Property") for $17,865,375 from American
Retirement Corporation. The Company, as lessor, has entered into a long-term,
triple-net lease agreement relating to this Property with ARC Greenwood Village,
Inc. The initial term of the lease expires on March 31, 2017. At the end of the
initial lease term, the tenant will have two consecutive renewal options of five
years each. The lease requires minimum annual rent of $1,786,538 for the first
lease year with increases of 2 percent each lease year thereafter. In addition
to minimum rent, the lease requires percentage rent. During the quarter ended
September 30, 2002, the Greenwood Village Property was operating at a level
sufficient to satisfy the requirements of certain earnout provisions under the
lease, and the Company funded an additional payment of $1,775,000. The lease was
amended to increase the basis by which annual minimum rent is calculated.
Liquidity and Capital Resources - Continued:
In May 2002, a consolidated joint venture in which the Company owns a 76.75
percent interest and Marriott Senior Living Services, Inc., an affiliate of
Marriott International, Inc., owns a 23.25 percent interest was formed to
acquire five Properties located in Camarillo, California; Towson, Maryland;
Dartmouth, Massachusetts; Elk Grove, California and Clayton, Ohio (the "Marriott
Portfolio Properties") for an aggregate purchase price of $58,800,000. The joint
venture, as lessor, entered into five separate, long-term, triple-net lease
agreements relating to the Marriott Portfolio Properties with a third party
tenant, HRA Management Corporation. The five retirement facilities are operated
by Marriott Senior Living Services, Inc., a subsidiary of Marriott
International, Inc. The initial term of each lease expires in May 2017. At the
end of each initial lease term, the tenant will have two consecutive renewal
options of ten years each. Minimum annual rent for the first through fifth lease
years is adjustable based upon the cost of debt and minimum returns to the joint
venture. The rental rate will range from 9.0 percent to 10.5 percent of the
joint venture's total cost to purchase the Marriott Portfolio Properties, over
the term of the lease. Marriott International, Inc. has, with certain
limitations, guaranteed the tenant's obligation to pay minimum rent due under
the leases up to a maximum of $5,880,000. The limited guaranty terminates upon
the earlier of (i) the five retirement facilities achieving certain pooled
minimum net operating income performance thresholds or (ii) the end of the fifth
lease year. As of September 30, 2002, the remaining amount available under the
limited guaranty was $5,771,014.
On May 30, 2002, the Company acquired a 10 percent interest in a limited
partnership, CNL Plaza, Ltd., that owns an office building located in Orlando,
Florida, in which the Advisor and its affiliates lease office space. The
Company's equity investment in the partnership at September 30, 2002 was
$300,000. The Company's share in the limited partnership's distributions will be
equivalent to its equity interest in the limited partnership. During the quarter
and nine months ended September 30, 2002, the Company received $79,208 in
distributions from the partnership. The remaining interest in the limited
partnership is owned by several affiliates of the Advisor. In connection with
this investment, the Company has severally guaranteed 16.67 percent or
$2,583,333, of a $15,500,000 unsecured promissory note of the limited
partnership.
On August 12, 2002, the Company originated a mortgage loan in the principal
amount of $1,870,000 secured by a mortgage on a parcel of land containing
approximately 39.8 gross acres located in Vero Beach, Florida. The loan bears
interest at 9.35 percent per annum and requires monthly payments of interest
only. The loan matures on December 31, 2006, at which time all unpaid principal
and interest are due.
On September 30, 2002, the Company acquired 11 assisted living/skilled
nursing Properties located in seven states through a direct financing
transaction with two subsidiaries of Prime Care Properties, LLC for $105,250,000
plus closing costs. The Company, as lessor, has entered into a 35-year lease
agreement that requires minimum annual rent of $11,520,600 through December 31,
2003, and 2.5 percent annual increases thereafter. In addition to minimum rent,
the lease requires additional rent which is based on a percentage of the
tenants' gross revenues.
On October 10, 2002, the Company acquired a parcel of land located in
Peabody, Massachusetts, upon which the Brooksby Village Continuing Care
Retirement Community is being constructed. The purchase price of the land was
approximately $17,400,000. The Company entered into a long-term, triple-net
lease agreement with a third-party tenant, Peabody Campus, LLC, relating to the
land. The Company will not own the facility. The facility will be owned by a
subsidiary of Erickson Retirement Communities, LLC.
Liquidity and Capital Resources - Continued:
On November 1, 2002, the Company acquired an assisted living retirement
facility located in Nashville, Tennessee, for approximately $9,000,000. The
Company entered into a long-term, triple-net lease agreement with a third-party
tenant, a wholly owned subsidiary of American Retirement Corporation, relating
to this Property. The Property is operated and managed by American Retirement
Corporation.
Commitments
As of September 30, 2002, the Company had initial commitments to acquire two
additional Properties. The anticipated aggregate purchase price of the two
Properties is approximately $22,600,000. The acquisition of each of these
Properties is subject to the fulfillment of certain conditions. There can be no
assurance that any or all of the conditions will be satisfied or, if satisfied,
that one or both of these Properties will be acquired by the Company. The
Company plans to assume permanent financing of approximately $20,600,000 in
connection with the acquisition of these two Properties.
Borrowings
In conjunction with the purchase of the Oak Park Property, the Company
assumed a mortgage in the amount of $12,974,397, maturing October 2, 2003 (the
"Oak Park Mortgage"). The Oak Park Mortgage bears interest at a floating rate of
(i) 350 basis points over the 30-day London Interbank Offered Rate (LIBOR) if
LIBOR is over 2.6 percent or (ii) 440 basis points over the 30-day LIBOR if
LIBOR is under 2.6 percent, not to exceed 8 percent. In accordance with the
provisions of the mortgage, the Company has placed $277,821 in an escrow reserve
account that represents three months of debt service related to the Oak Park
Mortgage. In connection with the loan, the Company incurred assumption fees of
approximately $16,200. The Company anticipates refinancing the loan prior to its
maturity date.
On June 7, 2002, a consolidated joint venture in which the Company owns a
76.75 percent interest borrowed $23,520,000 in the form of a five-year
commercial paper backed loan secured by the Marriott Portfolio Properties. The
loan is funded from proceeds received from the sale of 30-day commercial paper.
The commercial paper is re-marketed every 30 days upon maturity. The joint
venture has a liquidity facility in place in the event that the re-marketing
effort is unsuccessful. The liquidity agent has provided a liquidity facility
for up to 102 percent of the outstanding loan balance. In the event the
liquidity provider defaults, a participating liquidity agent will provide up to
$20,000,000 and the Company has agreed to provide liquidity for any amount in
excess of $20,000,000, not to exceed $3,520,000. Interest is payable monthly
with principal due when the commercial paper loan matures. The commercial paper
loan bears interest at the commercial paper rate as determined by market demand
(1.90 percent as of September 30, 2002) plus a margin of 1.86 percent, which is
inclusive of liquidity fees and administrative costs. In connection with the
loan, the Company incurred loan closing fees and costs of $538,324.
On August 8, 2002, the Company entered into a commitment for $11,000,000 of
permanent financing secured by a mortgage on the Greenwood Village Property. On
August 29, 2002, the Company obtained an advance totaling $9,100,000 with a
possible future advance in the amount of $1,900,000 subject to certain operating
performance thresholds being achieved by the Greenwood Village Property prior to
February 27, 2004. The loan bears interest at a variable rate based on 90-day
LIBOR plus 3.90 percent per annum, but in no event shall the interest rate be
less than 6.50 percent. As of September 30, 2002, the interest rate was 6.50
percent. The loan requires monthly principal and interest payments through
August 31, 2007, with all unpaid principal and interest due at that time.
Liquidity and Capital Resources - Continued:
Cash and Cash Equivalents
Until Properties are acquired, or mortgage loans are entered into, net
offering proceeds are held in short-term (defined as investments with a maturity
of three months or less), highly liquid investments which management believes to
have appropriate safety of principal such as overnight repurchase agreements,
certificates of deposit and money market funds. This investment strategy
provides high liquidity in order to facilitate the Company's use of these funds
to acquire Properties at such time as Properties suitable for acquisition are
located or to fund mortgage loans. At September 30, 2002, the Company had
$45,974,995 invested in such short-term investments as compared to $26,721,107
at December 31, 2001. The increase in the amount invested in short-term
investments primarily reflects proceeds received from the sale of shares, offset
by the purchase of 19 Properties and the origination of one mortgage loan
described in "Property Acquisitions and Investments" above during the nine
months ended September 30, 2002. The funds remaining at September 30, 2002,
along with additional funds expected to be received from the sale of shares and
amounts received from tenants, will be used primarily to purchase additional
Properties, to make mortgage loans, to pay offering and acquisition expenses, to
pay distributions to stockholders, to meet other Company expenses and, in
management's discretion, to create cash reserves.
Notes and Other Receivables
The Company's notes and other receivables balance increased from $180,163 at
December 31, 2001 to $2,970,417 as of September 30, 2002. The increase is
primarily due to approximately $2,400,000 in loans to affiliates of two of the
Company's tenants related to the anticipated acquisition of additional
Properties. As of September 30, 2002, the Company had an initial commitment to
purchase two additional Properties located in Maryland for approximately
$22,600,000. In connection with this anticipated purchase, the Company loaned
the seller $2,000,000 to pay off debt at a discounted amount making the purchase
of the Properties economically viable. The note bears interest at 15 percent per
annum and matures December 31, 2002. As security for this note, the seller has
pledged a membership interest in its company. Additionally, certain members of
the seller's company guaranteed the note.
The Company has a Mortgage Loan on a parcel of land located in Vero Beach,
Florida. The land will be developed into a retirement community and the borrower
is seeking third-party construction financing. Upon completion of the
development, the Company anticipates that it will purchase the retirement
facility. The Company has advanced $383,675 to the borrower to fund
pre-development costs in order to expedite the development of the Property. The
note bears interest at 5 percent per annum and matures December 31, 2002.
Management believes notes and other receivables as of September 30, 2002, are
fully collectible.
Liquidity Requirements
During the nine months ended September 30, 2002 and 2001, the Company
generated cash from operating activities (which includes cash received from
tenants and interest, less cash paid for operating expenses) of $9,180,977 and
$770,454, respectively. For the nine months ended September 30, 2002, cash from
operating activities included security deposits of $1,840,889 that were received
from tenants. Management expects the Company to meet its short-term liquidity
requirements, other than for offering expenses, the acquisition and development
of Properties, and the investment in mortgage loans and secured equipment
leases, through cash flow provided by operating activities. To the extent that
the Company's cash flow provided by operating activities is not sufficient to
meet such short-term liquidity requirements as a result, for example, of
unforeseen expenses due to a tenant defaulting under the terms of its lease
agreement, the Company will use borrowings under its line of credit. Management
expects
Liquidity and Capital Resources - Continued:
the Company to meet its other short-term liquidity requirements, including
payment of offering expenses, the acquisition and development of Properties, and
the investment in mortgage loans and secured equipment leases, with proceeds
from its offerings, additional advances under its line of credit and permanent
financing.
Due to the fact that the Company's Properties are leased on a long-term,
triple-net basis, meaning the tenants are required to pay repairs and
maintenance, property taxes, insurance and utilities, management does not
believe that other working capital reserves are necessary at this time. However,
management may maintain additional cash required to meet the Company's working
capital needs.
Management believes that the Company's Properties are adequately covered by
insurance. In addition, the Advisor has obtained contingent liability and
property coverage for the Company. This insurance policy is intended to reduce
the Company's exposure in the unlikely event a tenant's insurance policy lapses
or is insufficient to cover a claim relating to the Property.
Distributions
The Company declared and paid distributions to its stockholders totaling
$8,236,356 and $780,392 during the nine months ended September 30, 2002 and
2001, respectively. On October 1 and November 1, 2002, the Company declared
distributions to stockholders of record on October 1 and November 1, 2002, of
$0.0583 per share of common stock. These distributions are payable by December
2002.
For the nine months ended September 30, 2002 and 2001, approximately 50
percent and 59 percent, respectively, of the distributions received by
stockholders were considered to be ordinary income and approximately 50 percent
and 41 percent, respectively, were considered a return of capital for federal
income tax purposes. No amounts distributed to stockholders for the nine months
ended September 30, 2002 and 2001, were required to be or have been treated by
the Company as a return of capital for purposes of calculating the stockholders'
return on their invested capital. The Company intends to continue to declare
distributions of cash available for such purpose to the stockholders on a
monthly basis, payable monthly or quarterly.
Due to Related Parties
During the nine months ended September 30, 2002 and 2001, affiliates
incurred on behalf of the Company $3,710,749 and $443,876, respectively, for
certain offering expenses. Affiliates also incur certain acquisition and
operating expenses on behalf of the Company. As of September 30, 2002 and
December 31, 2001, the Company owed affiliates $1,142,202 and $1,772,807,
respectively, for such amounts and unpaid fees and administrative expenses. In
connection with each of the 2000 Offering and the 2002 Offering, offering
expenses paid by the Company together with selling commissions, the marketing
support fees, due diligence expense reimbursements and any soliciting dealer
servicing fee incurred by the Company will not exceed 13 percent of the proceeds
raised in each such offering.
Pursuant to the advisory agreement, the Advisor is also required to
reimburse the Company the amount by which the total operating expenses paid or
incurred by the Company exceed in any four consecutive fiscal quarters (the
"Expense Year") the greater of 2 percent of average invested assets or 25
percent of net income (the "Expense Cap"). Operating expenses for the Expense
Year ended June 30, 2001, exceeded the Expense Cap by $145,015; therefore, the
Advisor reimbursed the Company such amounts in accordance with the advisory
agreement. During the Expense Year ended September 30, 2002, the Company's
operating expenses did not exceed the Expense Cap.
Results of Operations
Revenues
As of September 30, 2002, the Company owned 22 Properties consisting of
land, buildings and equipment, and had entered into long-term, triple-net lease
agreements relating to these Properties. The Property leases provide for minimum
annual base rent generally payable in monthly installments. The leases provide
that the annual base rent required under the leases will increase at
predetermined intervals. In addition to annual base rent, the leases require the
payment of contingent rent computed as a percentage of gross revenues of the
Property. For the nine months ended September 30, 2002 and 2001, the Company
earned $8,230,296 and $1,034,820, respectively, in rental income from its
Properties under operating leases and earned income from its Properties subject
to direct financing leases ($3,852,499 and $344,940 of which was earned during
the quarters ended September 30, 2002 and 2001, respectively). The Company also
earned $102,234 and $29,830 in FF&E Reserve income during the nine months ended
September 30, 2002 and 2001, respectively ($68,496 and $12,304 of which was
earned during the quarters ended September 30, 2002 and 2001, respectively). The
increase in rental income was due to the Company owning 22 Properties during the
nine months ended September 30, 2002, as compared to one Property during the
nine months ended September 30, 2001. In addition, the Company originated one
mortgage loan on August 12, 2002, and earned $23,472 of interest income related
to the loan during the quarter ended September 30, 2002. Because the Company has
not yet invested all of the equity proceeds previously raised and is continuing
to raise additional equity proceeds with which it will acquire additional
Properties, revenues for the nine months ended September 30, 2002, represent
only a portion of revenues that the Company is expected to earn in future
periods.
During the nine months ended September 30, 2002 and 2001, the Company earned
$1,314,524 and $30,812, respectively ($753,592 and $25,520 of which were earned
during the quarters ended September 30, 2002 and 2001, respectively), in
interest income from investments in money market accounts and other short-term,
highly liquid investments. Interest income increased during the nine months
ended September 30, 2002, as compared to the nine months ended September 30,
2001, due to the Company having a larger amount of offering proceeds temporarily
invested pending the acquisition of Properties. However, as net offering
proceeds are used to invest in Properties and make mortgage loans, the
percentage of the Company's total revenues earned from interest income from
investments in money market accounts or other short term, highly liquid
investments is expected to decrease. During the quarter and nine months ended
September 30, 2002, the Company also earned approximately $25,000 from interest
income related to notes receivable.
Expenses
Operating expenses were $4,394,311 and $644,327 for the nine months ended
September 30, 2002 and 2001, respectively ($2,052,469 and $210,922 of which were
incurred during the quarters ended September 30, 2002 and 2001, respectively).
Operating expenses for the nine months ended September 30, 2002 increased as a
result of the Company incurring asset management fees, greater general operating
and administrative expenses, and depreciation and amortization expense related
to the Company owning 21 additional Properties and one mortgage loan. The dollar
amount of operating expenses is expected to increase as the Company acquires
additional Properties and invests in additional mortgage loans. However, general
operating and administrative expenses, excluding interest expense, as a
percentage of total revenues are expected to decrease as the Company acquires
additional Properties and invests in mortgage loans.
Results of Operations - Continued:
Significant Tenants
During the nine months ended September 30, 2002, the Company owned 22
Properties. The lessees of five of these Properties are wholly owned
subsidiaries of American Retirement Corporation ("ARC") and are operated under
the ARC brand chains. Another five Properties are leased to HRA Management
Corporation and are operated by Marriott Senior Living Services, Inc., a
subsidiary of Marriott International, Inc. The lessees of eleven of the
Properties are subsidiaries of Prime Care Properties, LLC and are operated by
Marriott Senior Living Services, Inc. The remaining Property is leased to a
wholly owned subsidiary of Marriott International, Inc. and is also operated by
Marriott Senior Living Services, Inc. Although the Company intends to acquire
additional Properties located in various states and regions and to carefully
screen its tenants in order to reduce risks of default, failure of the lessees,
ARC or Marriott International, Inc. would significantly impact the results of
operations of the Company. The Company's leases generally have credit
enhancement provisions, such as guarantees or shortfall reserves provided by the
tenant or operator's parent company. It is anticipated that the percentage of
total rental income contributed by these lessees will decrease as additional
Properties are acquired and leased during subsequent periods.
Maturity of Debt Obligations of American Retirement Corporation
As of September 30, 2002, ARC was the parent company of the lessees to five
of the Company's 22 Properties. ARC also operates the Properties and is
obligated to fund certain shortfall reserves relating to the Properties.
According to its December 31, 2001 audited financial statements, ARC had
significant debt obligations that matured in 2002, as well as a net working
capital deficit as a result of such maturities and significant lease
obligations. At December 31, 2001, ARC's current cash balances and internally
developed cash were not sufficient to satisfy its scheduled debt maturities in
2002. According to an ARC press release issued September 30, 2002, ARC announced
that it had successfully completed the refinancing of all debt that was due in
2002 and 2003. As of November 7, 2002, ARC had met all of its obligations
relating to the five Properties.
Funds from Operations
Management considers funds from operations ("FFO"), as defined by the
National Association of Real Estate Investment Trusts, to be an indicative
measure of operating performance due to the significant effect of depreciation
of real estate assets on net earnings. (Net earnings determined in accordance
with generally accepted accounting principles ("GAAP") includes the noncash
effect of straight-lining rent increases throughout the lease term. This
straight-lining is a GAAP convention requiring real estate companies to report
rental revenue based on the average rent per year over the life of the lease.
During the nine months ended September 30, 2002 and 2001, net earnings included
$764,652 and $22,119, respectively, of these amounts.) This information is
presented to help stockholders better understand the Company's financial
performance and to compare the Company to other REITs. However, FFO as presented
may not be comparable to amounts calculated by other companies. This information
should not be considered as an alternative to net earnings, cash from
operations, or any other operating or liquidity performance measure prescribed
by accounting principles generally accepted in the United States of America.
The following is a reconciliation of net earnings to FFO:
Quarter Nine Months
Ended September 30, Ended September 30,
2002 2001 2002 2001
--------------- --------------- -------------- --------------
Net earnings $ 2,508,526 $ 171,842 $ 5,039,468 $ 451,135
Adjustments:
Effect of share in equity in
earnings of unconsolidated
subsidiary 63,868 - 85,798 -
Effect of minority interest in
earnings of consolidated
joint venture (93,734) - (140,481) -
Depreciation of real estate assets 999,633 109,206 2,165,496 326,814
--------------- --------------- -------------- --------------
FFO $ 3,478,293 $ 281,048 $ 7,150,281 $ 777,949
=============== =============== ============== ==============
Other
In April 2002, the Financial Accounting Standards Board ("FASB") issued FASB
Statement No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment
of FASB Statement No. 13, and Technical Corrections." This statement rescinds
FASB Statement No. 4, "Reporting Gains and Losses from Extinguishment of Debt,"
and an amendment of that Statement, FASB Statement No. 64, "Extinguishments of
Debt Made to Satisfy Sinking-Fund Requirements." This statement also rescinds
FASB Statement No. 44, "Accounting for Intangible Assets of Motor Carriers."
This statement amends FASB Statement No. 13, "Accounting for Leases," to
eliminate an inconsistency between the required accounting for sale-leaseback
transactions and the required accounting for certain lease modifications that
have economic effects that are similar to sale-leaseback transactions. This
statement also amends other existing authoritative pronouncements to make
various technical corrections, clarify meanings, or describe their applicability
under changed conditions. The provisions of this statement related to the
rescission of FASB Statement No. 4 are applicable in fiscal years beginning
after May 15, 2002. The provisions of this statement related to FASB Statement
No. 13 are effective for transactions occurring after May 15, 2002. All other
provisions of this statement are effective for financial statements issued on or
after May 15, 2002. The provisions of this statement are not expected to have a
significant impact on the financial position or results of operations of the
Company.
In July 2002, the FASB issued FASB Statement No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." The statement requires companies
to recognize costs associated with exit or disposal activities when they are
incurred rather than at the date of a commitment to an exit or disposal plan.
Examples of costs covered by the statement include lease termination costs and
certain employee severance costs that are associated with a restructuring,
discontinued operation, plant closing, or other exit or disposal activity. The
statement is to be applied prospectively to exit or disposal activities
initiated after December 31, 2002. The adoption of this statement is not
expected to have a significant impact on the financial position or results of
operations of the Company.
Statement Regarding Forward Looking Information
The preceeding information contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. These statements are
generally characterized by the use of terms such as "believe," "expect" and
"may." Although the Company believes that the expectations reflected in such
forward-looking statements are based upon reasonable assumptions, the Company's
actual results could differ materially from those set forth in the
forward-looking statements. Certain factors that might cause such a difference
include the following: changes in general economic conditions, changes in local
and national real estate conditions, availability of capital from borrowings
under the Company's line of credit, continued availability of proceeds from the
Company's current offering, the ability of the Company to obtain additional
permanent financing on satisfactory terms, the ability of the Company to
continue to identify suitable investments, the ability of the Company to
continue to locate suitable tenants for its Properties and borrowers for its
mortgage loans and secured equipment leases, and the ability of such tenants and
borrowers to make payments under their respective leases, mortgage loans or
secured equipment leases. Given these uncertainties, readers are cautioned not
to place undue reliance on such statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
The Company is exposed to market changes in interest rates through its
variable rate mortgages payable. To mitigate interest rate risk, the Company can
pay down the mortgages with offering proceeds should interest rates rise
substantially.
The Company has mitigated its exposure to variable interest rates on its
commercial paper loan by providing fluctuating lease payments under the leases
for the Properties securing the loan as a result of changes in periodic interest
rates due under the commercial paper loan.
The Company may also be subject to interest rate risk through outstanding
balances on its variable rate line of credit. The Company may mitigate this risk
by paying down its line of credit from offering proceeds should interest rates
rise substantially. There were no amounts outstanding on the variable rate line
of credit at September 30, 2002.
Management estimates that a one-percentage point increase in interest rates
for the nine months ended September 30, 2002, would have resulted in additional
interest costs of approximately $153,000. This sensitivity analysis contains
certain simplifying assumptions (for example, it does not consider the impact of
changes in prepayment risk or credit spread risk). Therefore, although it gives
an indication of the Company's exposure to interest rate change, it is not
intended to predict future results and the Company's actual results will likely
vary.
ITEM 4. CONTROLS AND PROCEDURES
As required by Rule 13a-15 under the Exchange Act, within the 90 days prior
to the filing date of this report, the Company carried out an evaluation of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures. This evaluation was carried out under the supervision and with
the participation of the Company's management, including the Company's Chief
Executive Officer along with the Company's Chief Financial Officer. Based upon
that evaluation, the Company's Chief Executive Officer along with the Company's
Chief Financial Officer concluded that the Company's disclosure controls and
procedures are effective. There have been no significant changes in the
Company's internal controls or in other factors, which could significantly
affect internal controls subsequent to the date the Company carried out its
evaluation.
Disclosure controls and procedures are controls and other procedures that
are designed to ensure that information required to be disclosed in Company
reports filed or submitted under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the Securities and
Exchange Commission's rules and forms. Disclosure controls and procedures
include, without limitation, controls and procedures designed to ensure that
information required to be disclosed in Company reports filed under the Exchange
Act is accumulated and communicated to management, including the Company's Chief
Executive Officer and Chief Financial Officer, as appropriate, to allow timely
decisions regarding required disclosure.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. Inapplicable.
Item 2. Changes in Securities and Use of Proceeds. Inapplicable.
Item 3. Defaults upon Senior Securities. Inapplicable.
Item 4. Submission of Matters to a Vote of Security Holders. Inapplicable.
Item 5. Other Information. Inapplicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
3.1 CNL Health Care Properties, Inc. Amended and Restated
Articles of Incorporation. (Included as Exhibit 3.1
to the Registrant's 1998 Report on Form 10-K filed
with the Securities and Exchange Commission on March
5, 1999, and incorporated herein by reference.)
3.2 CNL Health Care Properties, Inc. Bylaws. (Included as
Exhibit 3.2 to the Registrants 1998 Report on Form
10-K filed with the Securities and Exchange
Commission on March 5, 1999, and incorporated herein
by reference.)
3.3 CNL Health Care Properties, Inc. Articles of
Amendment to Amended and Restated Articles of
Incorporation dated June 27, 2000. (Included as
Exhibit 3.3 to the Registrant's June 30, 2000, Report
on Form 10-Q filed with the Securities and Exchange
Commission on August 1, 2000, and incorporated herein
by reference.)
3.4 Articles of Amendment to the Amended and Restated
Articles of Incorporation of CNL Health Care
Properties, Inc. dated August 24, 2000. (Included as
Exhibit 3.5 to Registration Statement No. 333-37480
on Form S-11 and incorporated herein by reference.)
3.5 Amendment No. 1 to the Bylaws of CNL Health Care
Properties, Inc. (Included as Exhibit 3.6 to
Registration Statement No. 333-37480 on Form S-11 and
incorporated herein by reference.)
4.1 Reinvestment Plan (Included as Exhibit 4.4 to
Registration Statement No. 333-37480 on Form S-11 and
incorporated herein by reference.)
10.1 Advisory Agreement, dated as of May 14, 2002, between
CNL Retirement Properties, Inc. and CNL Retirement
Corp. (Filed herewith.)
10.2 Indemnification Agreement between CNL Health Care
Properties, Inc. and Thomas J. Hutchison III dated
February 29, 2000. Each of the following directors
and/or officers has signed a substantially similar
agreement as follows: James M. Seneff, Jr., Robert A.
Bourne, David W. Dunbar, Timothy S. Smick, Edward A.
Moses, Jeanne A. Wall, and Lynn E. Rose dated
September 15, 1998, Phillip M. Anderson, Jr. dated
February 19, 1999, James W. Duncan dated February 22,
2002, and Stuart J. Beebe dated July 15, 2002.
(Included as Exhibit 10.2 to the March 31, 2000,
Report on Form 10-Q filed with the Securities and
Exchange Commission on May 3, 2000, and incorporated
herein by reference.)
10.3 Agreement of Limited Partnership of CNL Health Care
Partners, LP. (Included as Exhibit 10.10 to
Registration Statement No. 333-47411 on Form S-11 and
incorporated herein by reference.)
10.4 Purchase and Sale Agreement between CNL Health Care
Partners, LP and Marriott Senior Living Services,
Inc., relating to the Brighton Gardens by Marriott -
Orland Park, Illinois. (Included as Exhibit 10.4 to
the March 31, 2000, Report on Form 10-Q filed with
the Securities and Exchange Commission on May 3,
2000, and incorporated herein by reference.)
10.5 Lease Agreement between CNL Health Care Partners, LP
and BG Orland Park, LLC dated April 20, 2000,
relating to the Brighton Gardens by Marriott - Orland
Park, Illinois. (Included as Exhibit 10.5 to the
March 31, 2000, Report on Form 10-Q filed with the
Securities and Exchange Commission on May 3, 2000,
and incorporated herein by reference.)
10.6 Revolving Line of Credit Agreement with CNL Health
Care Properties, Inc., CNL Health Care Partners, LP
and Colonial Bank, dated April 20, 2000. (Included as
Exhibit 10.6 to the March 31, 2000, Report on Form
10-Q filed with the Securities and Exchange
Commission on May 3, 2000, and incorporated herein by
reference.)
10.7 Real Estate Purchase and Sale Contract between CNL
Retirement Corp. and American Retirement Corporation,
relating to the Broadway Plaza at Pecan Park -
Arlington, Texas. (Included as Exhibit 10.14 to
Registration Statement No. 333-37480 on Form S-11 and
incorporated herein by reference.)
10.8 Lease Agreement between CNL Retirement - AM/Texas, LP
and ARC Pecan Park, L.P. dated November 9, 2001,
relating to the Broadway Plaza at Pecan Park -
Arlington, Texas. (Included as Exhibit 10.15 to
Registration Statement No. 333-37480 on Form S-11 and
incorporated herein by reference.)
10.9 Real Estate Purchase and Sale Contract between CNL
Retirement Corp. and American Retirement Corporation,
relating to the Homewood Residence of Boca Raton -
Boca Raton, Florida. (Included as Exhibit 10.16 to
Registration Statement No. 333-37480 on Form S-11 and
incorporated herein by reference.) 10.10 Lease
Agreement between CNL Retirement - AM/Florida, LP and
ARC Boca Raton, Inc. dated November 9, 2001, relating
to the Homewood Residence of Boca Raton - Boca Raton,
Florida. (Included as Exhibit 10.17 to Registration
Statement No. 333-37480 on Form S-11 and incorporated
herein by reference.)
10.10 Lease Agreement between CNL Retirement - AM/Florida,
LP and ARC Boca Raton, Inc. Dated November 9, 2001,
relating to the Homewood Residence of Boca Raton,
Florida. (Included as Exhibit 10.17 to Regestration
Statment No. 333-37480 on Form S-11 and incorporated
herein by reference.
10.11 Lease Agreement between CNL Retirement - AM/Illinois
LP and ARC Holley Court, LLC dated February 11, 2002,
relating to the Holley Court Terrace - Oak Park,
Illinois. (Included as Exhibit 10.18 to Registration
Statement No. 333-37480 on Form S-11 and incorporated
herein by reference.)
10.12 Real Estate Purchase and Sale Contract between CNL
Retirement Corp., as Buyer, and ARC Holley Court,
LLC, as Seller, relating to the Holley Court Terrace
- Oak Park, Illinois. (Included as Exhibit 10.19 to
Registration Statement No. 333-37480 on Form S-11 and
incorporated herein by reference.)
10.13 Lease Agreement between CNL Retirement - AM/Florida,
LP and ARC Coconut Creek, LLC dated February 11,
2002, relating to the Homewood Residence of Coconut
Creek - Coconut Creek, Florida. (Included as Exhibit
10.20 to Registration Statement No. 333-37480 on Form
S-11 and incorporated herein by reference.)
10.14 Real Estate Purchase and Sale Contract between CNL
Retirement Corp., as Buyer, and American Retirement
Corporation, as Seller, relating to the Homewood
Residence of Coconut Creek - Coconut Creek, Florida.
(Included as Exhibit 10.21 to Registration Statement
No. 333-37480 on Form S-11 and incorporated herein by
reference.)
10.15 Lease Agreement between CNL Retirement - AM/Colorado
LP and ARC Greenwood Village, Inc. dated March 21,
2002, relating to the Heritage Club at Greenwood
Village - Greenwood Village, Colorado. (Included as
Exhibit 10.22 to Registration Statement No. 333-76538
on Form S-11 and incorporated herein by reference.)
10.16 Real Estate Purchase and Sale Contract between CNL
Retirement Corp., as Buyer, and American Retirement
Corporation, as Seller, relating to the Heritage Club
at Greenwood Village - Greenwood Village, Colorado.
(Included as Exhibit 10.23 to Registration Statement
No. 333-76538 on Form S-11 and incorporated herein by
reference.)
10.17 Loan Agreement between ARC Holley Court, LLC, as
Borrower, and GMAC Commercial Mortgage Corporation,
as Lender, relating to the Holley Court Terrace - Oak
Park, Illinois. (Included as Exhibit 10.24 to
Registration Statement No. 333-76538 on Form S-11 and
incorporated herein by reference.)
10.18 Lease Agreement between CNL Retirement Camarillo CA,
LP and HRA Management Corporation dated May 16, 2002,
relating to the Brighton Gardens Senior Living
Community at Camarillo, California. (Included as
Exhibit 10.25 to Registration Statement No. 333-76538
on Form S-11 and incorporated herein by reference.)
10.19 Lease Agreement between CNL Retirement Towson MD, LP
and HRA Management Corporation dated May 16, 2002,
relating to the Brighton Gardens Senior Living
Community at Towson, Maryland. (Included as Exhibit
10.26 to Registration Statement No. 333-76538 on Form
S-11 and incorporated herein by reference.)
10.20 Lease Agreement between CNL Retirement Clayton OH, LP
and HRA Management Corporation dated May 17, 2002,
relating to the MapleRidge Senior Living Community at
Clayton, Ohio. (Included as Exhibit 10.27 to
Registration Statement No. 333-76538 on Form S-11 and
incorporated herein by reference.)
10.21 Lease Agreement between CNL Retirement Dartmouth MA,
LP and HRA Management Corporation dated May 16, 2002,
relating to the MapleRidge Senior Living Community at
Dartmouth, Massachusetts. (Included as Exhibit 10.28
to Registration Statement No. 333-76538 on Form S-11
and incorporated herein by reference.)
10.22 Lease Agreement between CNL Retirement Laguna Creek
CA, LP and HRA Management Corporation dated May 16,
2002, relating to the MapleRidge Senior Living
Community at Laguna Creek, Elk Grove, California.
(Included as Exhibit 10.29 to Registration Statement
No. 333-76538 on Form S-11 and incorporated herein by
reference.)
10.23 Purchase and Sale Agreement between Marriott Senior
Living Services, Inc., VCS, Inc. and MSLS -
MapleRidge, Inc., as Sellers, Marriott International,
Inc. and CNL Retirement MA1, LP, as Purchaser, and
HRA Management Corporation, as Tenant, relating to
the Brighton Gardens of Camarillo - Camarillo,
California; Brighton Gardens of Towson - Towson,
Maryland; Marriott MapleRidge of Clayton - Clayton,
Ohio; Marriott MapleRidge of Dartmouth - Dartmouth,
Massachusetts; and Marriott MapleRidge of Laguna
Creek - Elk Grove, California. (Included as Exhibit
10.30 to Registration Statement No. 333-76538 on Form
S-11 and incorporated herein by reference.)
10.24 Loan Agreement between Five Pack Retirement 2002,
LLC, Lender, and CNL Retirement Clayton OH, LP, CNL
Retirement Laguna Creek CA, LP, CNL Retirement
Camarillo CA, LP, CNL Retirement Dartmouth MA, LP,
CNL Retirement Towson MD, LP, Borrowers, and U.S.
Bank, National Association, Collateral Agent,
relating to the Brighton Gardens of Camarillo -
Camarillo, California; Brighton Gardens of Towson -
Towson, Maryland; Marriott MapleRidge of Clayton -
Clayton, Ohio; Marriott MapleRidge of Dartmouth -
Dartmouth, Massachusetts; and Marriott MapleRidge of
Laguna Creek - Elk Grove, California. (Included as
Exhibit 10.31 to Registration Statement No. 333-76538
on Form S-11 and incorporated herein by reference.)
10.25 Loan Agreement between General Electric Capital
Corporation, as Lender, and CNL Retirement -
AM/Colorado, LP, as Borrower, dated August 8, 2002,
related to the Heritage Club at Greenwood Village -
Greenwood Village, Colorado. (Filed herewith.)
10.26 Mortgage Loan Agreement between CNL Retirement
Properties, Inc., as Lender, and DSTS, LLC, as
Borrower, dated August 12, 2002, related to the Vero
Beach, Florida land. (Filed herewith.)
10.27 Refinancing and Acquisition Agreement dated September
30, 2002, between CNL Retirement Partners, LP, and
Prime Care Properties, LLC, PC1, LLC, PC2, LLC, Prime
Care One, LLC, Prime Care Two, LLC and Thomas E.
Phillippe, Jr., relating to the Brighton Gardens of
Venice - Venice, Florida; Brighton Gardens of
Mountainside - Mountainside, New Jersey; Brighton
Gardens of Friendship Heights - Chevy Chase,
Maryland; Brighton Gardens of Charlotte - Charlotte,
North Carolina; Brighton Gardens of Winston-Salem -
Winston Salem, North Carolina; Brighton Gardens of
Raleigh - Raleigh, North Carolina; Brighton Gardens
of Brentwood - Brentwood, Tennessee; Brighton Gardens
of Stamford - Stamford, Connecticut; Brighton Gardens
of Middleton - Middleton, New Jersey; Brighton
Gardens of Buckhead - Atlanta, Georgia; Brighton
Gardens of Naples - Naples, Florida. (Filed
herewith.)
10.28 Lease Agreement dated September 30, 2002, between CNL
Retirement PC1 Naples FL, LP, CNL Retirement PC1
Venice FL, LP, CNL Retirement PC1 New Jersey, LP, CNL
Retirement PC1 Friendship Heights MD, LP, CNL
Retirement PC1 North Carolina, LP, CNL Retirement PC1
Stamford CT, LP, CNL Retirement PC1 Buckhead GA, LP
and CNL Retirement PC1 Brentwood TN, LP, as Lessors,
Prime Care One, LLC and Prime Care Two, LLC, as
Lessees, relating to the Brighton Gardens of Venice -
Venice, Florida; Brighton Gardens of Mountainside -
Mountainside, New Jersey; Brighton Gardens of
Friendship Heights - Chevy Chase, Maryland; Brighton
Gardens of Charlotte - Charlotte, North Carolina;
Brighton Gardens of Winston-Salem - Winston Salem,
North Carolina; Brighton Gardens of Raleigh -
Raleigh, North Carolina; Brighton Gardens of
Brentwood - Brentwood, Tennessee; Brighton Gardens of
Stamford - Stamford, Connecticut; Brighton Gardens of
Middleton - Middleton, New Jersey; Brighton Gardens
of Buckhead - Atlanta, Georgia; Brighton Gardens of
Naples - Naples, Florida. (Filed herewith.)
99.1 Certification of the Chief Executive Officer,
Pursuant to 18 U.S.C. Section 1350 as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002. (Filed herewith.)
99.2 Certification of the Chief Financial Officer,
Pursuant to 18 U.S.C. Section 1350 as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002. (Filed herewith.)
b) The Company filed the following reports during the quarter
ended September 30, 2002, on Form 8-K: Form 8-K filed
September 19, 2002, disclosing 14 pending Property
acquisitions; Form 8-K/A filed September 24, 2002, to amend
and restate the Form 8-K filed on May 31, 2002, to provide
further disclosure regarding the Company's acquisition of
five Properties.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
DATED this 7th day of November, 2002
CNL RETIREMENT PROPERTIES, INC.
By: /s/ James M. Seneff, Jr.
--------------------------
JAMES M. SENEFF, JR.
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
By: /s/ Stuart J. Beebe
--------------------------
STUART J. BEEBE
Chief Financial Officer
(Principal Financial and
Accounting Officer)
CNL RETIREMENT PROPERTIES, INC.
CERTIFICATIONS
I, James M. Seneff, Jr., certify that:
1. I have reviewed this quarterly report on Form 10-Q of CNL Retirement
Properties, Inc. (the "Registrant");
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the Registrant as of, and for, the periods presented in
this quarterly report;
4. The Registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and
we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the Registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The Registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the Registrant's auditors and the
audit committee of the Registrant's board of directors:
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the Registrant's
ability to record, process, summarize and report financial data
and have identified for the Registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the Registrant's
internal controls; and
6. The Registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: November 12, 2002 By: /s/ James M. Seneff, Jr.
---------------------------
JAMES M. SENEFF, JR.
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
CNL RETIREMENT PROPERTIES, INC.
CERTIFICATIONS
I, Stuart J. Beebe, certify that:
1. I have reviewed this quarterly report on Form 10-Q of CNL Retirement
Properties, Inc. (the "Registrant");
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the Registrant as of, and for, the periods presented in
this quarterly report;
4. The Registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and
we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the Registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The Registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the Registrant's auditors and the
audit committee of the Registrant's board of directors:
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the Registrant's
ability to record, process, summarize and report financial data
and have identified for the Registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the Registrant's
internal controls; and
6. The Registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: November 12, 2002 By: /s/ Stuart J. Beebe
--------------------------
STUART J. BEEBE
Chief Financial Officer
(Principal and Financial
Accounting Officer)
EXHIBIT INDEX
Exhibit Index
3.1 CNL Health Care Properties, Inc. Amended and Restated Articles of
Incorporation. (Included as Exhibit 3.1 to the Registrant's 1998 Report
on Form 10-K filed with the Securities and Exchange Commission on March
5, 1999, and incorporated herein by reference.)
3.2 CNL Health Care Properties, Inc. Bylaws. (Included as Exhibit 3.2 to the
Registrant's 1998 Report on Form 10-K filed with the Securities and
Exchange Commission on March 5, 1999, and incorporated herein by
reference.)
3.3 CNL Health Care Properties, Inc. Articles of Amendment to Amended and
Restated Articles of Incorporation dated June 27, 2000. (Included as
Exhibit 3.3 to the Registrant's June 30, 2000, Report on Form 10-Q filed
with the Securities and Exchange Commission on August 1, 2000, and
incorporated herein by reference.)
3.4 Articles of Amendment to the Amended and Restated Articles of
Incorporation of CNL Health Care Properties, Inc. dated August 24, 2000.
(Included as Exhibit 3.5 to Registration Statement No. 333-37480 on Form
S-11 and incorporated herein by reference.)
3.5 Amendment No. 1 to the Bylaws of CNL Health Care Properties, Inc.
(Included as Exhibit 3.6 to Registration Statement No. 333-37480 on Form
S-11 and incorporated herein by reference.)
4.1 Reinvestment Plan (Included as Exhibit 4.4 to Registration Statement No.
333-37480 on Form S-11 and incorporated herein by reference.)
10.1 Advisory Agreement, dated as of May 14, 2002, between CNL Retirement
Properties, Inc. and CNL Retirement Corp. (Filed herewith.)
10.2 Indemnification Agreement between CNL Health Care Properties, Inc. and
Thomas J. Hutchison III dated February 29, 2000. Each of the following
directors and/or officers has signed a substantially similar agreement as
follows: James M. Seneff, Jr., Robert A. Bourne, David W. Dunbar, Timothy
S. Smick, Edward A. Moses, Jeanne A. Wall, and Lynn E. Rose dated
September 15, 1998, Phillip M. Anderson, Jr. dated February 19, 1999,
James W. Duncan dated February 22, 2002, and Stuart J. Beebe dated July
15, 2002. (Included as Exhibit 10.2 to the March 31, 2000, Report on Form
10-Q filed with the Securities and Exchange Commission on May 3, 2000,
and incorporated herein by reference.)
10.3 Agreement of Limited Partnership of CNL Health Care Partners, LP.
(Included as Exhibit 10.10 to Registration Statement No. 333-47411 on
Form S-11 and incorporated herein by reference.)
10.4 Purchase and Sale Agreement between CNL Health Care Partners, LP and
Marriott Senior Living Services, Inc., relating to the Brighton Gardens
by Marriott - Orland Park, Illinois. (Included as Exhibit 10.4 to the
March 31, 2000, Report on Form 10-Q filed with the Securities and
Exchange Commission on May 3, 2000, and incorporated herein by
reference.)
10.5 Lease Agreement between CNL Health Care Partners, LP and BG Orland Park,
LLC dated April 20, 2000, relating to the Brighton Gardens by Marriott -
Orland Park, Illinois. (Included as Exhibit 10.5 to the March 31, 2000,
Report on Form 10-Q filed with the Securities and Exchange Commission on
May 3, 2000, and incorporated herein by reference.)
10.6 Revolving Line of Credit Agreement with CNL Health Care Properties, Inc.,
CNL Health Care Partners, LP and Colonial Bank, dated April 20, 2000.
(Included as Exhibit 10.6 to the March 31, 2000, Report on Form 10-Q
filed with the Securities and Exchange Commission on May 3, 2000, and
incorporated herein by reference.)
10.7 Real Estate Purchase and Sale Contract between CNL Retirement Corp. and
American Retirement Corporation, relating to the Broadway Plaza at Pecan
Park - Arlington, Texas. (Included as Exhibit 10.14 to Registration
Statement No. 333-37480 on Form S-11 and incorporated herein by
reference.)
10.8 Lease Agreement between CNL Retirement - AM/Texas, LP and ARC Pecan Park,
L.P. dated November 9, 2001, relating to the Broadway Plaza at Pecan Park
- Arlington, Texas. (Included as Exhibit 10.15 to Registration Statement
No. 333-37480 on Form S-11 and incorporated herein by reference.)
10.9 Real Estate Purchase and Sale Contract between CNL Retirement Corp. and
American Retirement Corporation, relating to the Homewood Residence of
Boca Raton - Boca Raton, Florida. (Included as Exhibit 10.16 to
Registration Statement No. 333-37480 on Form S-11 and incorporated herein
by reference.)
10.10 Lease Agreement between CNL Retirement - AM/Florida, LP and ARC Boca
Raton, Inc. dated November 9, 2001, relating to the Homewood Residence of
Boca Raton - Boca Raton, Florida. (Included as Exhibit 10.17 to
Registration Statement No. 333-37480 on Form S-11 and incorporated herein
by reference.)
10.11 Lease Agreement between CNL Retirement - AM/Illinois LP and ARC Holley
Court, LLC dated 11, 2002, relating to the Holley Court Terrace - Oak
Park, Illinois. (Included as Exhibit 10.18 to Registration Statement No.
333-37480 on Form S-11 and incorporated herein by reference.)
10.12 Real Estate Purchase and Sale Contract between CNL Retirement Corp., as
Buyer, and ARC Holley Court, LLC, as Seller, relating to the Holley Court
Terrace - Oak Park, Illinois. (Included as Exhibit 10.19 to Registration
Statement No. 333-37480 on Form S-11 and incorporated herein by
reference.)
10.13 Lease Agreement between CNL Retirement - AM/Florida, LP and ARC Coconut
Creek, LLC dated February 11, 2002, relating to the Homewood Residence of
Coconut Creek - Coconut Creek, Florida. (Included as Exhibit 10.20 to
Registration Statement No. 333-37480 on Form S-11 and incorporated herein
by reference.)
10.14 Real Estate Purchase and Sale Contract between CNL Retirement Corp., as
Buyer, and American Retirement Corporation, as Seller, relating to the
Homewood Residence of Coconut Creek - Coconut Creek, Florida. (Included
as Exhibit 10.21 to Registration Statement No. 333-37480 on Form S-11 and
incorporated herein by reference.)
10.15 Lease Agreement between CNL Retirement - AM/Colorado LP and ARC Greenwood
Village, Inc. dated March 21, 2002, relating to the Heritage Club at
Greenwood Village - Greenwood Village, Colorado. (Included as Exhibit
10.22 to Registration Statement No. 333-76538 on Form S-11 and
incorporated herein by reference.)
10.16 Real Estate Purchase and Sale Contract between CNL Retirement Corp., as
Buyer, and American Retirement Corporation, as Seller, relating to the
Heritage Club at Greenwood Village - Greenwood Village, Colorado.
(Included as Exhibit 10.23 to Registration Statement No. 333-76538 on
Form S-11 and incorporated herein by reference.)
10.17 Loan Agreement between ARC Holley Court, LLC, as Borrower, and GMAC
Commercial Mortgage Corporation, as Lender, relating to the Holley Court
Terrace - Oak Park, Illinois. (Included as Exhibit 10.24 to Registration
Statement No. 333-76538 on Form S-11 and incorporated herein by
reference.)
10.18 Lease Agreement between CNL Retirement Camarillo CA, LP and HRA
Management Corporation dated May 16, 2002, relating to the Brighton
Gardens Senior Living Community at Camarillo, California. (Included as
Exhibit 10.25 to Registration Statement No. 333-76538 on Form S-11 and
incorporated herein by reference.)
10.19 Lease Agreement between CNL Retirement Towson MD, LP and HRA Management
Corporation dated May 16, 2002, relating to the Brighton Gardens Senior
Living Community at Towson, Maryland. (Included as Exhibit 10.26 to
Registration Statement No. 333-76538 on Form S-11 and incorporated herein
by reference.)
10.20 Lease Agreement between CNL Retirement Clayton OH, LP and HRA Management
Corporation dated May 17, 2002, relating to the MapleRidge Senior Living
Community at Clayton, Ohio. (Included as Exhibit 10.27 to Registration
Statement No. 333-76538 on Form S-11 and incorporated herein by
reference.)
10.21 Lease Agreement between CNL Retirement Dartmouth MA, LP and HRA
Management Corporation dated May 16, 2002, relating to the MapleRidge
Senior Living Community at Dartmouth, Massachusetts. (Included as Exhibit
10.28 to Registration Statement No. 333-76538 on Form S-11 and
incorporated herein by reference.)
10.22 Lease Agreement between CNL Retirement Laguna Creek CA, LP and HRA
Management Corporation dated May 16, 2002, relating to the MapleRidge
Senior Living Community at Laguna Creek, Elk Grove, California. (Included
as Exhibit 10.29 to Registration Statement No. 333-76538 on Form S-11 and
incorporated herein by reference.)
10.23 Purchase and Sale Agreement between Marriott Senior Living Services,
Inc., VCS, Inc. and MSLS - MapleRidge, Inc., as Sellers, Marriott
International, Inc. and CNL Retirement MA1, LP, as Purchaser, and HRA
Management Corporation, as Tenant, relating to the Brighton Gardens of
Camarillo - Camarillo, California; Brighton Gardens of Towson - Towson,
Maryland; Marriott MapleRidge of Clayton - Clayton, Ohio; Marriott
MapleRidge of Dartmouth - Dartmouth, Massachusetts; and Marriott
MapleRidge of Laguna Creek - Elk Grove, California. (Included as Exhibit
10.30 to Registration Statement No. 333-76538 on Form S-11 and
incorporated herein by reference.)
10.24 Loan Agreement between Five Pack Retirement 2002, LLC, Lender, and CNL
Retirement Clayton OH, LP, CNL Retirement Laguna Creek CA, LP, CNL
Retirement Camarillo CA, LP, CNL Retirement Dartmouth MA, LP, CNL
Retirement Towson MD, LP, Borrowers, and U.S. Bank, National Association,
Collateral Agent, relating to the Brighton Gardens of Camarillo -
Camarillo, California; Brighton Gardens of Towson - Towson, Maryland;
Marriott MapleRidge of Clayton - Clayton, Ohio; Marriott MapleRidge of
Dartmouth - Dartmouth, Massachusetts; and Marriott MapleRidge of Laguna
Creek - Elk Grove, California. (Included as Exhibit 10.31 to Registration
Statement No. 333-76538 on Form S-11 and incorporated herein by
reference.)
10.25 Loan Agreement between General Electric Capital Corporation, as Lender,
and CNL Retirement - AM/Colorado, LP, as Borrower, dated August 8, 2002,
related to the Heritage Club at Greenwood Village - Greenwood Village,
Colorado. (Filed herewith.)
10.26 Mortgage Loan Agreement between CNL Retirement Properties, Inc., as
Lender, and DSTS, LLC, as Borrower, dated August 12, 2002, related to the
Vero Beach, Florida land. (Filed herewith.)
10.27 Refinancing and Acquisition Agreement dated September 30, 2002, between
CNL Retirement Partners, LP, and Prime Care Properties, LLC, PC1, LLC,
PC2, LLC, Prime Care One, LLC, Prime Care Two, LLC and Thomas E.
Phillippe, Jr., relating to the Brighton Gardens of Venice - Venice,
Florida; Brighton Gardens of Mountainside - Mountainside, New Jersey;
Brighton Gardens of Friendship Heights - Chevy Chase, Maryland; Brighton
Gardens of Charlotte - Charlotte, North Carolina; Brighton Gardens of
Winston-Salem - Winston Salem, North Carolina; Brighton Gardens of
Raleigh - Raleigh, North Carolina; Brighton Gardens of Brentwood -
Brentwood, Tennessee; Brighton Gardens of Stamford - Stamford,
Connecticut; Brighton Gardens of Middleton - Middleton, New Jersey;
Brighton Gardens of Buckhead - Atlanta, Georgia; Brighton Gardens of
Naples - Naples, Florida. (Filed herewith.)
10.28 Lease Agreement dated September 30, 2002, between CNL Retirement PC1
Naples FL, LP, CNL Retirement PC1 Venice FL, LP, CNL Retirement PC1 New
Jersey, LP, CNL Retirement PC1 Friendship Heights MD, LP, CNL Retirement
PC1 North Carolina, LP, CNL Retirement PC1 Stamford CT, LP, CNL
Retirement PC1 Buckhead GA, LP and CNL Retirement PC1 Brentwood TN, LP,
as Lessors, Prime Care One, LLC and Prime Care Two, LLC, as Lessees,
relating to the Brighton Gardens of Venice - Venice, Florida; Brighton
Gardens of Mountainside - Mountainside, New Jersey; Brighton Gardens of
Friendship Heights - Chevy Chase, Maryland; Brighton Gardens of Charlotte
- Charlotte, North Carolina; Brighton Gardens of Winston-Salem - Winston
Salem, North Carolina; Brighton Gardens of Raleigh - Raleigh, North
Carolina; Brighton Gardens of Brentwood - Brentwood, Tennessee; Brighton
Gardens of Stamford - Stamford, Connecticut; Brighton Gardens of
Middleton - Middleton, New Jersey; Brighton Gardens of Buckhead -
Atlanta, Georgia; Brighton Gardens of Naples - Naples, Florida. (Filed
herewith.)
99.1 Certification of the Chief Executive Officer, Pursuant to 18 U.S.C.
Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002. (Filed herewith.)
99.2 Certification of the Chief Financial Officer, Pursuant to 18 U.S.C.
Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002. (Filed herewith.)