Attached files
file | filename |
---|---|
EX-23.5 - EXHIBIT 23.5 - SUNRISE SENIOR LIVING INC | w77870exv23w5.htm |
EX-23.6 - EXHIBIT 23.6 - SUNRISE SENIOR LIVING INC | w77870exv23w6.htm |
EX-23.2 - EXHIBIT 23.2 - SUNRISE SENIOR LIVING INC | w77870exv23w2.htm |
EX-32.4 - EX-32.4 - SUNRISE SENIOR LIVING INC | w77870exv32w4.htm |
EX-31.3 - EX-31.3 - SUNRISE SENIOR LIVING INC | w77870exv31w3.htm |
EX-31.4 - EX-31.4 - SUNRISE SENIOR LIVING INC | w77870exv31w4.htm |
EX-23.3 - EXHIBIT 23.3 - SUNRISE SENIOR LIVING INC | w77870exv23w3.htm |
EX-23.4 - EXHIBIT 23.4 - SUNRISE SENIOR LIVING INC | w77870exv23w4.htm |
EX-32.3 - EX-32.3 - SUNRISE SENIOR LIVING INC | w77870exv32w3.htm |
OF THE SECURITIES EXCHANGE ACT OF 1934
Delaware | 54-1746596 | |
(State or other jurisdiction incorporation or organization) |
(I.R.S. Employer Identification No.) |
|
7900 Westpark Drive | ||
McLean, VA | 22102 | |
(Address of principal | (Zip Code) | |
executive offices) |
Title of Each Class | Name of Each Exchange on Which Registered | |
Common stock, $.01 par value per share | New York Stock Exchange |
Large accelerated filer o | Accelerated filer þ | Non-accelerated filer o | Smaller reporting company o | |||
(Do not check if a smaller reporting company) |
PS Germany Investment (Jersey) LP
AL US Development Venture, LLC
Sunrise Aston Gardens Venture, LLC
2
Page | ||||
Sunrise Senior Living, Inc. |
||||
4 | ||||
5 | ||||
6 | ||||
7 | ||||
8 | ||||
9 | ||||
PS UK Investment (Jersey) LP |
||||
64 | ||||
65 | ||||
66 | ||||
67 | ||||
68 | ||||
69 | ||||
70 | ||||
PS Germany Investment (Jersey) LP |
||||
101 | ||||
102 | ||||
103 | ||||
104 | ||||
105 | ||||
106 | ||||
AL US Development Venture, LLC |
||||
130 | ||||
131 | ||||
132 | ||||
133 | ||||
134 | ||||
135 | ||||
Sunrise Aston Gardens Venture, LLC |
||||
143 | ||||
144 | ||||
145 | ||||
146 | ||||
147 | ||||
148 |
3
4
(In thousands, except per share and share amounts) | December 31, | December 31, | ||||||
2009 | 2008 | |||||||
ASSETS
|
||||||||
Current Assets:
|
||||||||
Cash and cash equivalents
|
$ | 39,283 | $ | 29,513 | ||||
Accounts receivable, net
|
37,304 | 54,842 | ||||||
Income taxes receivable
|
5,371 | 30,351 | ||||||
Due from unconsolidated communities
|
19,673 | 45,255 | ||||||
Deferred income taxes, net
|
23,862 | 25,341 | ||||||
Restricted cash
|
39,365 | 37,392 | ||||||
Assets held for sale
|
40,658 | 49,076 | ||||||
German assets held for sale
|
104,720 | | ||||||
Prepaid expenses and other current assets
|
30,198 | 33,138 | ||||||
Total current assets
|
340,434 | 304,908 | ||||||
Property and equipment, net
|
288,056 | 681,352 | ||||||
Due from unconsolidated communities
|
13,178 | 31,693 | ||||||
Intangible assets, net
|
53,024 | 70,642 | ||||||
Goodwill
|
| 39,025 | ||||||
Investments in unconsolidated communities
|
64,971 | 66,852 | ||||||
Investments accounted for under the profit-sharing method
|
11,031 | 22,005 | ||||||
Restricted cash
|
110,402 | 123,772 | ||||||
Restricted investments in marketable securities
|
20,997 | 31,080 | ||||||
Other assets, net
|
8,496 | 10,228 | ||||||
Total assets
|
$ | 910,589 | $ | 1,381,557 | ||||
LIABILITIES AND EQUITY | ||||||||
Current Liabilities:
|
||||||||
Current maturities of debt
|
$ | 207,811 | $ | 377,449 | ||||
Outstanding draws on bank credit facility
|
33,728 | 95,000 | ||||||
Debt relating to German assets held for sale
|
198,680 | | ||||||
Accounts payable and accrued expenses
|
138,032 | 184,144 | ||||||
Liabilities associated with German assets held for sale
|
12,632 | | ||||||
Due to unconsolidated communities
|
2,180 | 914 | ||||||
Deferred revenue
|
5,364 | 7,327 | ||||||
Entrance fees
|
33,157 | 35,270 | ||||||
Self-insurance liabilities
|
41,975 | 35,317 | ||||||
Total current liabilities
|
673,559 | 735,421 | ||||||
Debt, less current maturities
|
| 163,682 | ||||||
Investment accounted for under the profit-sharing method
|
| 8,332 | ||||||
Guarantee liabilities
|
823 | 13,972 | ||||||
Self-insurance liabilities
|
58,225 | 68,858 | ||||||
Deferred gains on the sale of real estate and deferred revenues
|
21,865 | 88,706 | ||||||
Deferred income tax liabilities
|
23,862 | 28,129 | ||||||
Other long-term liabilities, net
|
106,021 | 126,543 | ||||||
Total liabilities
|
884,355 | 1,233,643 | ||||||
Equity:
|
||||||||
Preferred stock, $0.01 par value, 10,000,000 shares
authorized, no shares issued and outstanding
|
| | ||||||
Common stock, $0.01 par value, 120,000,000 shares
authorized, 55,752,217 and
|
||||||||
50,872,711 shares issued and outstanding, net of 401,353
and 342,525 treasury shares, at December 31, 2009 and 2008,
respectively
|
558 | 509 | ||||||
Additional paid-in capital
|
474,158 | 458,404 | ||||||
Retained loss
|
(460,971 | ) | (327,056 | ) | ||||
Accumulated other comprehensive income
|
8,302 | 6,671 | ||||||
Total stockholders equity
|
22,047 | 138,528 | ||||||
Noncontrolling interests
|
4,187 | 9,386 | ||||||
Total equity
|
26,234 | 147,914 | ||||||
Total liabilities and equity
|
$ | 910,589 | $ | 1,381,557 | ||||
5
Twelve Months Ended December 31, | ||||||||||||
(In thousands, except per share amounts) | 2009 | 2008 | 2007 | |||||||||
Operating revenue:
|
||||||||||||
Management fees
|
$ | 112,467 | $ | 131,586 | $ | 122,293 | ||||||
Resident fees for consolidated communities
|
350,278 | 340,975 | 323,007 | |||||||||
Ancillary fees
|
45,397 | 42,535 | 51,127 | |||||||||
Professional fees from development, marketing and other
|
13,193 | 44,447 | 29,546 | |||||||||
Reimbursed costs incurred on behalf of managed communities
|
942,809 | 1,011,431 | 956,047 | |||||||||
Total operating revenues
|
1,464,144 | 1,570,974 | 1,482,020 | |||||||||
Operating expenses:
|
||||||||||||
Community expense for consolidated communities
|
268,319 | 257,555 | 231,780 | |||||||||
Community lease expense
|
59,344 | 59,843 | 62,307 | |||||||||
Depreciation and amortization
|
46,629 | 39,497 | 42,601 | |||||||||
Ancillary expenses
|
42,457 | 40,202 | 53,294 | |||||||||
General and administrative
|
119,905 | 157,509 | 183,546 | |||||||||
Development expense
|
12,501 | 34,134 | 35,076 | |||||||||
Write-off of capitalized project costs
|
14,879 | 95,763 | 28,430 | |||||||||
Accounting Restatement, Special Independent Committee inquiry,
|
||||||||||||
SEC investigation and stockholder litigation
|
3,887 | 30,224 | 51,707 | |||||||||
Restructuring costs
|
33,313 | 24,178 | | |||||||||
Provision for doubtful accounts
|
13,625 | 20,077 | 7,709 | |||||||||
Loss on financial guarantees and other contracts
|
2,053 | 5,022 | 22,005 | |||||||||
Impairment of owned communities and land parcels
|
31,685 | 27,816 | 7,641 | |||||||||
Impairment of goodwill and intangible assets
|
| 121,828 | | |||||||||
Costs incurred on behalf of managed communities
|
947,566 | 1,004,974 | 956,047 | |||||||||
Total operating expenses
|
1,596,163 | 1,918,622 | 1,682,143 | |||||||||
Loss from operations
|
(132,019 | ) | (347,648 | ) | (200,123 | ) | ||||||
Other non-operating income (expense):
|
||||||||||||
Interest income
|
1,351 | 6,267 | 9,492 | |||||||||
Interest expense
|
(10,301 | ) | (6,709 | ) | (5,179 | ) | ||||||
Gain (loss) on investments
|
3,556 | (7,770 | ) | | ||||||||
Other income (expense)
|
5,773 | (20,066 | ) | (5,792 | ) | |||||||
Total other non-operating income (expense)
|
379 | (28,278 | ) | (1,479 | ) | |||||||
Gain on the sale and development of real estate and equity
interests
|
21,651 | 17,374 | 105,081 | |||||||||
Sunrises share of earnings (loss) and return on investment
|
||||||||||||
in unconsolidated communities
|
5,673 | (13,846 | ) | 107,347 | ||||||||
(Loss) income from investments accounted for under the
profit-sharing method
|
(12,808 | ) | (1,329 | ) | 22 | |||||||
(Loss) income before benefit from (provision for) income
|
||||||||||||
taxes and discontinued operations
|
(117,124 | ) | (373,727 | ) | 10,848 | |||||||
Benefit from (provision for) income taxes
|
3,880 | 47,137 | (13,323 | ) | ||||||||
Loss before discontinued operations
|
(113,244 | ) | (326,590 | ) | (2,475 | ) | ||||||
Discontinued operations, net of tax
|
(20,271 | ) | (117,516 | ) | (70,512 | ) | ||||||
Net loss
|
(133,515 | ) | (444,106 | ) | (72,987 | ) | ||||||
Less: (Income) loss attributable to noncontrolling interests,
net of tax
|
(400 | ) | 4,927 | 2,712 | ||||||||
Net loss attributable to common shareholders
|
$ | (133,915 | ) | $ | (439,179 | ) | $ | (70,275 | ) | |||
Earnings per share data:
|
||||||||||||
Basic net loss per common share
|
||||||||||||
Loss before discontinued operations
|
$ | (2.22 | ) | $ | (6.48 | ) | $ | (0.05 | ) | |||
Discontinued operations, net of tax
|
(0.39 | ) | (2.24 | ) | (1.36 | ) | ||||||
Net loss
|
$ | (2.61 | ) | $ | (8.72 | ) | $ | (1.41 | ) | |||
Diluted net loss per common share
|
||||||||||||
Loss before discontinued operations
|
$ | (2.22 | ) | $ | (6.48 | ) | $ | (0.05 | ) | |||
Discontinued operations, net of tax
|
(0.39 | ) | (2.24 | ) | (1.36 | ) | ||||||
Net loss
|
$ | (2.61 | ) | $ | (8.72 | ) | $ | (1.41 | ) | |||
6
Accumulated |
Equity |
|||||||||||||||||||||||
Shares of |
Common |
Additional |
Other |
Attributable |
||||||||||||||||||||
Common |
Stock |
Paid-in |
Retained |
Comprehensive |
to Noncontrolling |
|||||||||||||||||||
(In thousands) | Stock | Amount | Capital | Earnings/(Loss) | Income (Loss) | Interests | ||||||||||||||||||
Balance at January 1, 2007
|
50,572 | $ | 506 | $ | 445,275 | $ | 182,398 | $ | 2,529 | $ | 16,515 | |||||||||||||
Net loss
|
| | | (70,275 | ) | | (4,470 | ) | ||||||||||||||||
Foreign currency translation income, net of tax
|
| | | | 5,865 | | ||||||||||||||||||
Sunrises share of investees other comprehensive loss
|
| | | | (100 | ) | | |||||||||||||||||
Distributions to noncontrolling interests
|
| | | | | (5,825 | ) | |||||||||||||||||
Investment in noncontrolling interests
|
| | | | | 3,210 | ||||||||||||||||||
Deconsolidation of noncontrolling interests
|
| | | | | 778 | ||||||||||||||||||
Issuance of restricted stock
|
88 | 1 | | | | | ||||||||||||||||||
Forfeiture or surrender of restricted stock
|
(103 | ) | (1 | ) | (1,818 | ) | | | | |||||||||||||||
Stock-based compensation expense
|
| | 7,020 | | | | ||||||||||||||||||
Tax effect from stock-based compensation
|
| | 2,163 | | | | ||||||||||||||||||
Balance at December 31, 2007
|
50,557 | 506 | 452,640 | 112,123 | 8,294 | 10,208 | ||||||||||||||||||
Net loss
|
| | | (439,179 | ) | | (8,154 | ) | ||||||||||||||||
Foreign currency translation income, net of tax
|
| | | | 5,583 | | ||||||||||||||||||
Sunrises share of investees other comprehensive loss
|
| | | | (7,206 | ) | | |||||||||||||||||
Distributions to noncontrolling interests
|
| | | | | (1,343 | ) | |||||||||||||||||
Investment in noncontrolling interests
|
| | | | | 8,675 | ||||||||||||||||||
Issuance of restricted stock
|
165 | | (2 | ) | | | | |||||||||||||||||
Forfeiture or surrender of restricted or common stock
|
(211 | ) | (1 | ) | (1,025 | ) | | | | |||||||||||||||
Stock option exercises
|
361 | 4 | 4,162 | | | | ||||||||||||||||||
Stock-based compensation expense
|
| | 4,202 | | | | ||||||||||||||||||
Tax effect from stock-based compensation
|
| | (1,573 | ) | | | | |||||||||||||||||
Balance at December 31, 2008
|
50,872 | 509 | 458,404 | (327,056 | ) | 6,671 | 9,386 | |||||||||||||||||
Net (loss) income
|
| | | (133,915 | ) | | 662 | |||||||||||||||||
Foreign currency translation loss, net of tax
|
| | | | (4,813 | ) | | |||||||||||||||||
Sunrises share of investees other comprehensive
income
|
| | | | 6,324 | | ||||||||||||||||||
Distributions to noncontrolling interests
|
| | (142 | ) | | | (1,341 | ) | ||||||||||||||||
Sale of Greystone
|
| | | | | (6,633 | ) | |||||||||||||||||
Consolidation of a controlled entity
|
| | | | 120 | 2,113 | ||||||||||||||||||
Issuance of common stock
|
4,175 | 42 | 11,064 | | | | ||||||||||||||||||
Forfeiture or surrender of restricted or common stock
|
(59 | ) | (1 | ) | (116 | ) | | | | |||||||||||||||
Stock option exercises
|
764 | 8 | 1,020 | | | | ||||||||||||||||||
Stock-based compensation expense
|
| | 3,928 | | | | ||||||||||||||||||
Balance at December 31, 2009
|
55,752 | $ | 558 | $ | 474,158 | $ | (460,971 | ) | $ | 8,302 | $ | 4,187 | ||||||||||||
7
Year Ended December 31, | ||||||||||||
(In thousands) | 2009 | 2008 | 2007 | |||||||||
Operating activities
|
||||||||||||
Net loss
|
$ | (133,515 | ) | $ | (444,106 | ) | $ | (72,987 | ) | |||
Less: Net loss from discontinued operations
|
20,271 | 117,516 | 70,512 | |||||||||
Adjustments to reconcile net loss to net cash provided by (used
in) operating activities:
|
||||||||||||
Gain on the sale and development of real estate and equity
interests
|
(21,651 | ) | (17,374 | ) | (105,081 | ) | ||||||
Loss (income) from investments accounted for under the
profit-sharing method
|
12,808 | 1,329 | (22 | ) | ||||||||
(Gain) loss on investments
|
(3,556 | ) | 7,770 | | ||||||||
Impairment of long-lived assets, goodwill and intangibles
|
31,685 | 149,644 | 7,641 | |||||||||
Write-off of capitalized project costs
|
14,879 | 95,763 | 28,430 | |||||||||
Provision for doubtful accounts
|
13,625 | 20,077 | 7,709 | |||||||||
Benefit from deferred income taxes
|
(2,790 | ) | (46,250 | ) | (8,854 | ) | ||||||
Loss on financial guarantees and other contracts
|
2,053 | 5,022 | 22,005 | |||||||||
Sunrises share of (earnings) loss and return on investment
in unconsolidated communities
|
(5,673 | ) | 13,846 | (107,347 | ) | |||||||
Distributions of earnings from unconsolidated communities
|
18,998 | 32,736 | 166,722 | |||||||||
Depreciation and amortization
|
46,629 | 39,497 | 42,601 | |||||||||
Amortization of financing costs and debt discount
|
1,261 | 575 | 1,051 | |||||||||
Stock-based compensation
|
3,812 | 3,176 | 7,020 | |||||||||
Changes in operating assets and liabilities:
|
||||||||||||
(Increase) decrease in:
|
||||||||||||
Accounts receivable
|
13,268 | 12,599 | (10,365 | ) | ||||||||
Due from unconsolidated senior living communities
|
23,997 | (18,873 | ) | 24,237 | ||||||||
Prepaid expenses and other current assets
|
11,868 | 40,014 | (60,387 | ) | ||||||||
Captive insurance restricted cash
|
(722 | ) | 2,728 | (32,930 | ) | |||||||
Other assets
|
23,922 | 32,962 | (35,589 | ) | ||||||||
Increase (decrease) in:
|
||||||||||||
Accounts payable, accrued expenses and other liabilities
|
(35,608 | ) | (88,004 | ) | 114,977 | |||||||
Entrance fees
|
(2,113 | ) | 758 | (3,586 | ) | |||||||
Self-insurance liabilities
|
(3,714 | ) | (22,935 | ) | 12,866 | |||||||
Guarantee liabilities
|
(125 | ) | (21,625 | ) | (5,829 | ) | ||||||
Deferred revenue and gains on the sale of real estate
|
1,703 | (850 | ) | 1,613 | ||||||||
Net cash provided by (used in) discontinued operations
|
2,107 | (39,929 | ) | 64,079 | ||||||||
Net cash provided by (used in) operating activities
|
33,419 | (123,934 | ) | 128,486 | ||||||||
Investing activities
|
||||||||||||
Capital expenditures
|
(19,950 | ) | (173,545 | ) | (237,556 | ) | ||||||
Acquisitions of business assets
|
| | (49,917 | ) | ||||||||
Net funding for condominium projects
|
(4,963 | ) | (57,935 | ) | | |||||||
Dispositions of property
|
10,758 | 62,853 | 60,387 | |||||||||
Change in restricted cash
|
(14,549 | ) | 56,661 | (23,202 | ) | |||||||
Purchases of short-term investments
|
| (102,800 | ) | (448,900 | ) | |||||||
Proceeds from short-term investments
|
15,950 | 63,950 | 448,900 | |||||||||
Increase in investments and notes receivable
|
(89,473 | ) | (205,344 | ) | (183,314 | ) | ||||||
Proceeds from investments and notes receivable
|
94,968 | 223,424 | 220,312 | |||||||||
Investments in unconsolidated communities
|
(6,902 | ) | (22,929 | ) | (29,297 | ) | ||||||
Distributions of capital from unconsolidated communities
|
| | 601 | |||||||||
Consolidation of German venture
|
| 25,557 | | |||||||||
Net cash provided by (used in) discontinued operations
|
98,534 | (42,345 | ) | (6,557 | ) | |||||||
Net cash provided by (used in) investing activities
|
84,373 | (172,453 | ) | (248,543 | ) | |||||||
Financing activities
|
||||||||||||
Net proceeds from exercised options
|
1,028 | 4,162 | | |||||||||
Additional borrowings of long-term debt
|
4,969 | 101,952 | 129,231 | |||||||||
Repayment of long-term debt
|
(13,561 | ) | (17,131 | ) | (10,515 | ) | ||||||
Net (repayments) borrowings on Bank Credit Facility
|
(61,272 | ) | (5,000 | ) | 50,000 | |||||||
Distributions to minority interests
|
(1,341 | ) | (1,344 | ) | (1,180 | ) | ||||||
Financing costs paid
|
(590 | ) | (2,467 | ) | | |||||||
Net cash (used in) provided by discontinued operations
|
(37,255 | ) | 107,516 | 8,743 | ||||||||
Net cash (used in) provided by financing activities
|
(108,022 | ) | 187,688 | 176,279 | ||||||||
Net increase (decrease) in cash and cash equivalents
|
9,770 | (108,699 | ) | 56,222 | ||||||||
Cash and cash equivalents at beginning of period
|
29,513 | 138,212 | 81,990 | |||||||||
Cash and cash equivalents at end of period
|
$ | 39,283 | $ | 29,513 | $ | 138,212 | ||||||
8
1. | Organization and Presentation |
2. | Significant Accounting Policies |
9
10
| executive management has committed to a plan to sell the asset; | |
| the asset is available for immediate sale in its present condition; | |
| an active program to locate a buyer and other actions required to complete the sale have been initiated; | |
| the asset is actively being marketed; and | |
| the sale of the asset is probable and it is unlikely that significant changes to the sale plan will be made. |
11
12
13
14
15
16
17
18
3. | Fair Value Measurements |
Fair Value Measurements at Reporting Date Using | ||||||||||||||||
Quoted Prices in |
Significant Other |
Significant |
||||||||||||||
Active Markets for |
Observable |
Unobservable |
||||||||||||||
December 31, |
Identical Assets |
Inputs |
Inputs |
|||||||||||||
Asset
|
2009 | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
Auction rate securities
|
$ | 18,686 | $ | | $ | | $ | 18,686 | ||||||||
Marketable securities
|
2,311 | 2,311 | | | ||||||||||||
$ | 20,997 | $ | 2,311 | $ | | $ | 18,686 | |||||||||
19
Auction |
||||
Rate Securities | ||||
Beginning balance 1/1/09
|
$ | 31,080 | ||
Total gains
|
3,556 | |||
Sales
|
(7,200 | ) | ||
Redemptions
|
(8,750 | ) | ||
Ending balance 12/31/09
|
$ | 18,686 | ||
December 31, |
||||
2009 | ||||
Cash and cash equivalents
|
$ | 542 | ||
Accounts receivable, net
|
3,112 | |||
Property and equipment, net
|
100,937 | |||
Prepaid and other assets
|
129 | |||
German assets held for sale
|
$ | 104,720 | ||
Accounts payable and accrued expenses
|
$ | 12,632 | ||
December 31, |
December 31, |
|||||||
2009 | 2008 | |||||||
Land
|
$ | 33,801 | $ | 46,018 | ||||
Closed community
|
2,514 | | ||||||
Condominium units
|
4,343 | 3,058 | ||||||
Assets held for sale
|
$ | 40,658 | $ | 49,076 | ||||
20
Fair Value Measurements at Reporting Date Using | ||||||||||||||||||||
Quoted Prices in |
Significant Other |
Significant |
||||||||||||||||||
Active Markets for |
Observable |
Unobservable |
Total |
|||||||||||||||||
December 31, |
Identical Assets |
Inputs |
Inputs |
Impairment |
||||||||||||||||
Asset
|
2009 | (Level 1) | (Level 2) | (Level 3) | Losses | |||||||||||||||
German assets held for sale
|
$ | 83,309 | $ | | $ | | $ | 83,309 | $ | (49,885 | ) | |||||||||
Other assets held for sale
|
33,000 | | | 33,000 | (4,462 | ) | ||||||||||||||
Assets held and used
|
29,587 | | | 29,587 | (49,862 | ) | ||||||||||||||
$ | 145,896 | $ | | $ | | $ | 145,896 | $ | (104,209 | ) | ||||||||||
21
Fixed Rate |
Variable Rate |
|||||||
Debt | Debt | |||||||
Total Carrying Value
|
$ | 1,365 | $ | 438,854 | ||||
Average Interest Rate
|
6.67 | % | 2.85 | % | ||||
Estimated Fair Market Value
|
$ | 1,365 | $ | 375,614 | ||||
4. | Allowance for Doubtful Accounts |
Accounts |
Other |
|||||||||||
Receivable | Assets | Total | ||||||||||
Balance January 1, 2006
|
$ | 7,504 | $ | 8,000 | $ | 15,504 | ||||||
Provision for doubtful accounts(1)
|
9,564 | | 9,564 | |||||||||
Write-offs
|
(4,708 | ) | | (4,708 | ) | |||||||
Balance December 31, 2007
|
12,360 | 8,000 | 20,360 | |||||||||
Provision for doubtful accounts(1)
|
24,164 | | 24,164 | |||||||||
Write-offs
|
(1,491 | ) | | (1,491 | ) | |||||||
Balance December 31, 2008
|
35,033 | 8,000 | 43,033 | |||||||||
Provision for doubtful accounts(1)
|
14,931 | | 14,931 | |||||||||
Write-offs
|
(25,900 | ) | (8,000 | ) | (33,900 | ) | ||||||
Balance December 31, 2009(1)
|
$ | 24,064 | $ | | $ | 24,064 | ||||||
(1) | Includes provision associated with discontinued operations. |
5. | Property and Equipment |
December 31, | ||||||||||
Asset Lives | 2009 | 2008 | ||||||||
Land and land improvements
|
15 years | $ | 75,595 | $ | 130,806 | |||||
Building and building improvements
|
40 years | 217,764 | 473,732 | |||||||
Furniture and equipment
|
3-10 years | 140,024 | 179,635 | |||||||
433,383 | 784,173 | |||||||||
Less: Accumulated depreciation
|
(146,638 | ) | (191,718 | ) | ||||||
286,745 | 592,455 | |||||||||
Capitalized project costs
|
1,311 | 88,897 | ||||||||
Property and equipment, net
|
$ | 288,056 | $ | 681,352 | ||||||
22
6. | Sales of Real Estate |
December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Properties accounted for under basis of performance of services
|
$ | 10.5 | $ | 9.6 | $ | 3.6 | ||||||
Properties accounted for previously under financing method
|
| 0.5 | 32.8 | |||||||||
Properties accounted for previously under deposit method
|
3.4 | 0.9 | 52.4 | |||||||||
Properties accounted for under the profit-sharing method
|
8.9 | 6.7 | | |||||||||
Land and community sales
|
(0.4 | ) | (0.9 | ) | 5.7 | |||||||
Condominium sales
|
(1.0 | ) | 1.0 | | ||||||||
Sales of equity interests and other sales
|
0.3 | (0.4 | ) | 10.6 | ||||||||
Total gains on the sale and development of real estate and
equity interests
|
$ | 21.7 | $ | 17.4 | $ | 105.1 | ||||||
23
December 31, |
||||
2007 | ||||
Properties subject to sales contract, net
|
$ | | ||
Deposits related to properties
|
| |||
subject to a sales contract
|
| |||
Depreciation expense
|
4,876 | |||
Development fees received, net of costs
|
| |||
Management fees received
|
2,331 |
24
Year Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Revenue
|
$ | 14,219 | $ | 16,635 | $ | 23,791 | ||||||
Operating expenses
|
(18,849 | ) | (11,459 | ) | (15,301 | ) | ||||||
Interest expense
|
(6,195 | ) | (597 | ) | (2,149 | ) | ||||||
Impairment loss
|
(1,146 | ) | | | ||||||||
(Loss) income from operations before depreciation
|
(11,971 | ) | 4,579 | 6,341 | ||||||||
Depreciation expense
|
1,489 | | | |||||||||
Distributions to other investors
|
(2,326 | ) | (5,908 | ) | (6,319 | ) | ||||||
(Loss) income from investments accounted for
|
||||||||||||
under the profit-sharing method
|
$ | (12,808 | ) | $ | (1,329 | ) | $ | 22 | ||||
Investments accounted for under the
|
||||||||||||
profit-sharing method, net
|
$ | 11,031 | $ | 13,673 | $ | (51,377 | ) | |||||
Amortization expense on investments
|
||||||||||||
accounted for under the profit-sharing method
|
$ | 363 | $ | 987 | $ | 1,800 |
25
7. | Variable Interest Entities |
26
8. | Intangible Assets and Goodwill |
Estimated |
December 31, | |||||||||||
Useful Life | 2009 | 2008 | ||||||||||
Management contracts less accumulated amortization of $33,007
and $32,433
|
1-30 years | $ | 48,464 | $ | 65,532 | |||||||
Leaseholds less accumulated amortization of $4,407 and $3,992
|
10-29 years | 3,477 | 3,892 | |||||||||
Other intangibles less accumulated amoritization of $898 and $763
|
1-40 years | 1,083 | 1,218 | |||||||||
$ | 53,024 | $ | 70,642 | |||||||||
27
28
9. | Investments in Unconsolidated Communities |
Sunrise |
||||
Venture
|
Ownership | |||
Karrington of Findlay Ltd.
|
50.00 | % | ||
MorSun Tenant LP
|
50.00 | % | ||
Sunrise/Inova McLean Assisted Living, LLC
|
40.00 | % | ||
AU-HCU Holdings, LLC(1)
|
30.00 | % | ||
RCU Holdings, LLC(1)
|
30.00 | % | ||
SunVest, LLC
|
30.00 | % | ||
AL One Investments, LLC
|
25.36 | % | ||
Metropolitan Senior Housing, LLC
|
25.00 | % | ||
Sunrise at Gardner Park, LP
|
25.00 | % | ||
Sunrise Floral Vale Senior Living, LP
|
25.00 | % | ||
Cheswick & Cranberry, LLC
|
25.00 | % | ||
BG Loan Acquisition LP
|
25.00 | % | ||
Master MorSun, LP
|
20.00 | % | ||
Master MetSun, LP
|
20.00 | % | ||
Master MetSun Two, LP
|
20.00 | % | ||
Master MetSun Three, LP
|
20.00 | % | ||
Sunrise First Assisted Living Holdings, LLC
|
20.00 | % | ||
Sunrise Second Assisted Living Holdings, LLC
|
20.00 | % | ||
Sunrise Beach Cities Assisted Living, LP
|
20.00 | % | ||
AL U.S. Development Venture, LLC
|
20.00 | % | ||
Sunrise HBLR, LLC
|
20.00 | % | ||
COPSUN Clayton MO, LLC
|
20.00 | % | ||
Sunrise of Aurora, LP
|
20.00 | % | ||
Sunrise of Erin Mills, LP
|
20.00 | % | ||
Sunrise of North York, LP
|
20.00 | % | ||
PS UK Investment (Jersey) LP
|
20.00 | % | ||
PS UK Investment II (Jersey) LP
|
20.00 | % | ||
Sunrise First Euro Properties LP
|
20.00 | % | ||
Master CNL Sun Dev I, LLC
|
20.00 | % | ||
Sunrise Bloomfield Senior Living, LLC
|
20.00 | % | ||
Sunrise Hillcrest Senior Living, LLC
|
20.00 | % | ||
Sunrise New Seasons Venture, LLC
|
20.00 | % | ||
Sunrise Rocklin Senior Living LLC
|
20.00 | % | ||
Sunrise Sandy Senior Living LLC
|
20.00 | % | ||
Sunrise Staten Island SL LLC
|
20.00 | % | ||
Sunrise US UPREIT, LLC
|
15.40 | % | ||
Santa Monica AL, LLC
|
15.00 | % | ||
Sunrise Third Senior Living Holdings, LLC
|
10.00 | % | ||
Cortland House, LP
|
10.00 | % | ||
Dawn Limited Partnership
|
10.00 | % |
(1) | Investments are accounted for under the profit-sharing method of accounting. See Note 6. |
29
December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Assets, principally property and equipment
|
$ | 3,989,387 | $ | 4,704,052 | $ | 5,183,922 | ||||||
Long-term debt
|
3,569,246 | 3,933,188 | 4,075,993 | |||||||||
Liabilities excluding long-term debt
|
226,678 | 378,988 | 549,628 | |||||||||
Equity
|
193,463 | 391,876 | 558,301 | |||||||||
Revenue
|
854,552 | 1,120,877 | 1,021,112 | |||||||||
Net loss
|
(25,084 | ) | (94,327 | ) | (15,487 | ) |
December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Sunrises share of earnings (loss) in unconsolidated
communities
|
$ | 3,708 | $ | (31,133 | ) | $ | 60,700 | |||||
Return on investment in unconsolidated communities
|
10,612 | 33,483 | 71,110 | |||||||||
Impairment of equity investments
|
(8,647 | ) | (16,196 | ) | (24,463 | ) | ||||||
Sunrises share of earning (losses) and return on
investment in unconsolidated communities
|
$ | 5,673 | $ | (13,846 | ) | $ | 107,347 | |||||
30
31
32
| Transferred our 20-percent ownership interest in the Fountains joint venture to our joint venture partner; | |
| Contributed vacant land parcels adjacent to six of the Fountains communities and owned by us to the Fountains venture; | |
| Agreed to transfer management of the 16 Fountains communities as soon as the transition closing conditions are met and the new manager has obtained the regulatory approvals necessary to assume control of the facilities; and | |
| Repaid the venture the management fee we had earned to date in 2009 of $1.8 million. |
10. | Debt and Bank Credit Facility |
December 31, |
December 31, |
|||||||
2009 | 2008 | |||||||
Community mortgages
|
$ | 112,660 | $ | 241,851 | ||||
German communities(1)
|
198,680 | 185,901 | ||||||
Bank Credit Facility
|
33,728 | 95,000 | ||||||
Land loans
|
33,327 | 37,407 | ||||||
Other
|
25,557 | 30,655 | ||||||
Variable interest entity
|
23,225 | 23,905 | ||||||
Margin loan (auction rate securities)
|
13,042 | 21,412 | ||||||
$ | 440,219 | $ | 636,131 | |||||
(1) | The face amount of the debt related to the German communities was $215.2 million at December 31, 2009. Excludes $10.5 million of accrued interest on the German debt as of December 31, 2009 which is reflected in Liabilities associated with German assets held for sale on our consolidated balance sheet. |
33
Mortgages, |
Variable |
Germany |
||||||||||||||||||||||||||
Bank Credit |
Wholly-Owned |
Land |
Interest |
Venture |
||||||||||||||||||||||||
Facility | Properties | Loans | Entity Debt | Debt(1) | Other | Total | ||||||||||||||||||||||
Past due
|
$ | | $ | 1,398 | $ | 27,107 | $ | 1,365 | $ | 1,723 | $ | | $ | 31,593 | ||||||||||||||
2010
|
33,728 | 76,278 | 6,220 | 715 | 71,655 | 38,599 | 227,195 | |||||||||||||||||||||
2011
|
| 34,984 | | 740 | 95,590 | | 131,314 | |||||||||||||||||||||
2012
|
| | | 775 | 29,712 | | 30,487 | |||||||||||||||||||||
2013
|
| | | 810 | | | 810 | |||||||||||||||||||||
2014
|
| | | 840 | | | 840 | |||||||||||||||||||||
Thereafter
|
| | | 17,980 | | | 17,980 | |||||||||||||||||||||
$ | 33,728 | $ | 112,660 | $ | 33,327 | $ | 23,225 | $ | 198,680 | $ | 38,599 | $ | 440,219 | |||||||||||||||
December 31, |
||||
2009 | ||||
German communities
|
$ | 198,680 | ||
Community mortgages
|
36,382 | |||
Variable interest entity
|
23,225 | |||
Land loans
|
33,327 | |||
Other
|
25,557 | |||
$ | 317,171 | |||
1st Qtr. |
2nd Qtr. |
3rd Qtr. |
4th Qtr. |
|||||||||||||||||||||
2010 | 2010 | 2010 | 2010 | Thereafter | Total | |||||||||||||||||||
Bank Credit Facility
|
$ | | $ | | $ | | $ | 33,728 | $ | | $ | 33,728 | ||||||||||||
Community mortgages
|
| 41,773 | | 34,505 | 76,278 | |||||||||||||||||||
Margin loan (auction rate securities)
|
| | | 13,042 | | 13,042 | ||||||||||||||||||
$ | | $ | 41,773 | $ | | $ | 81,275 | $ | | $ | 123,048 | |||||||||||||
34
35
| extended the maturity date to December 2, 2010; | |
| removed all existing financial covenants other than the minimum liquidity covenant; | |
| renewed existing letters of credit; | |
| modified the minimum liquidity covenant to not less than $10.0 million of unrestricted cash on hand the last day of the month; | |
| modified the restriction on the disposal of assets to include disposition of certain assets as long as 50% of the net sale proceeds are allocated to the lenders; and | |
| permanently reduced the commitment after future principal repayments or cancellation of letters of credit. |
36
37
11. | Income Taxes |
December 31, | ||||||||
2009 | 2008 | |||||||
Deferred tax assets:
|
||||||||
Sunrise operating loss carryforwards federal
|
$ | 93,591 | $ | 54,006 | ||||
Sunrise operating loss carryforwards state
|
23,474 | 25,827 | ||||||
Sunrise operating loss carryforwards foreign
|
14,684 | 19,657 | ||||||
Financial guarantees
|
28,490 | 30,226 | ||||||
Accrued health insurance
|
10,186 | 8,203 | ||||||
Self-insurance liabilities
|
9,027 | 8,123 | ||||||
Stock-based compensation
|
5,153 | 6,672 | ||||||
Deferred development fees
|
6,638 | 35,085 | ||||||
Allowance for doubtful accounts
|
5,236 | 9,007 | ||||||
Tax credits
|
2,812 | 7,562 | ||||||
Accrued expenses and reserves
|
38,838 | 28,442 | ||||||
Basis difference in property and equipment and intangibles
|
25,470 | | ||||||
Entrance fees
|
16,604 | 15,939 | ||||||
Other
|
4,176 | 3,034 | ||||||
Gross deferred tax assets
|
284,379 | 251,783 | ||||||
U.S. federal and state valuation allowance
|
(128,441 | ) | (110,297 | ) | ||||
German valuation allowance
|
(26,649 | ) | (19,322 | ) | ||||
Canadian valuation allowance
|
(10,994 | ) | (8,332 | ) | ||||
U.K. valuation allowance
|
(1,114 | ) | (889 | ) | ||||
Net deferred tax assets
|
117,181 | 112,943 | ||||||
Deferred tax liabilities:
|
||||||||
Investments in ventures
|
(114,058 | ) | (105,573 | ) | ||||
Basis difference in property and equipment and intangibles
|
| (1,264 | ) | |||||
Prepaid expenses
|
| (2,519 | ) | |||||
Other
|
(3,123 | ) | (6,375 | ) | ||||
Total deferred tax liabilities
|
(117,181 | ) | (115,731 | ) | ||||
Net deferred tax liabilities
|
$ | | $ | (2,788 | ) | |||
38
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Current:
|
||||||||||||
Federal
|
$ | (952 | ) | $ | (679 | ) | $ | 18,934 | ||||
State
|
799 | 3,019 | 2,903 | |||||||||
Foreign
|
(1,201 | ) | | 2,098 | ||||||||
Total current expense
|
(1,354 | ) | 2,340 | 23,935 | ||||||||
Deferred:
|
||||||||||||
Federal
|
(5,350 | ) | (49,555 | ) | (12,927 | ) | ||||||
State
|
2,824 | 1,240 | 1,089 | |||||||||
Foreign
|
| (1,162 | ) | 1,226 | ||||||||
Total deferred benefit
|
(2,526 | ) | (49,477 | ) | (10,612 | ) | ||||||
(Benefit from) provision for income taxes
|
$ | (3,880 | ) | $ | (47,137 | ) | $ | 13,323 | ||||
39
Years Ended December 31, | ||||||||||||
(In thousands) | 2009 | 2008 | 2007 | |||||||||
(Loss) income before tax benefit (expense) taxed in the
U.S.
|
$ | (105,637 | ) | $ | (341,339 | ) | $ | 2,673 | ||||
(Loss) income before tax benefit (expense) taxed in foreign
jurisdictions
|
(11,487 | ) | (32,388 | ) | 8,175 | |||||||
(Loss) income from continuing operations before tax benefit
(expense)
|
$ | (117,124 | ) | $ | (373,727 | ) | $ | 10,848 | ||||
Tax at US federal statutory rate
|
(35.0 | )% | (35.0 | )% | 35.0 | % | ||||||
State taxes, net
|
2.7 | % | (5.8 | )% | 4.3 | % | ||||||
Work opportunity credits
|
0.0 | % | (0.3 | )% | (4.2 | %) | ||||||
Change in valuation allowance
|
40.4 | % | 34.7 | % | 28.8 | % | ||||||
Tax exempt interest
|
(0.2 | )% | (0.3 | )% | (16.2 | )% | ||||||
Tax contingencies
|
(1.7 | )% | 0.4 | % | 17.0 | % | ||||||
Write-off of non-deductible goodwill
|
(8.5 | )% | 4.2 | % | 0.0 | % | ||||||
Foreign rate differential
|
0.2 | % | 1.0 | % | (3.1 | )% | ||||||
Unremitted foreign earnings
|
0.3 | % | (0.5 | )% | 31.9 | % | ||||||
Transfer pricing
|
1.9 | % | 0.6 | % | 24.9 | % | ||||||
Income tax refunds received
|
(4.3 | )% | 0.0 | % | 0.0 | % | ||||||
Other
|
0.9 | % | (11.6 | )% | 4.4 | % | ||||||
(3.3 | )% | (12.6 | )% | 122.8 | % | |||||||
(In thousands) |
2009
|
2008 | 2007 | |||||||||
Gross unrecognized tax benefit at beginning of year
|
$ | 17,817 | $ | 31,343 | $ | 30,158 | ||||||
Additions based on tax positions taken during a prior period
|
1,439 | | | |||||||||
Reductions based on tax positions taken during a prior period
|
(3,897 | ) | (14,196 | ) | | |||||||
Additions based on tax positions taken during the current period
|
| 670 | 1,545 | |||||||||
Reductions based on tax positions taken during the current period
|
| | | |||||||||
Reductions related to settlement of tax matters
|
| | | |||||||||
Reductions related to a lapse of applicable statute of
limitations
|
| | (360 | ) | ||||||||
Gross unrecognized tax benefit at end of year
|
$ | 15,359 | $ | 17,817 | $ | 31,343 | ||||||
40
12. | Stockholders Equity |
41
2009 | 2008 | 2007 | ||||
Risk free interest rate
|
3.0% - 3.7% | 0.4% - 3.8% | 3.6% | |||
Expected dividend yield
|
| | | |||
Expected term (years)
|
6.5 | 0.1 - 8.1 | 1.0 | |||
Expected volatility
|
81.8% - 92.0% | 27.8% - 79.3% | 25.5% |
Weighted |
Remaining |
|||||||||||
Average |
Contractual |
|||||||||||
Shares | Exercise Price | Term | ||||||||||
Outstanding beginning of year
|
7,807 | $ | 6.72 | |||||||||
Granted
|
890 | 2.58 | ||||||||||
Exercised
|
(763 | ) | 1.37 | |||||||||
Forfeited
|
(397 | ) | 1.25 | |||||||||
Expired
|
(865 | ) | 15.67 | |||||||||
Outstanding end of year
|
6,672 | 6.45 | 6.9 | |||||||||
Vested and expected to vest end of year
|
5,458 | 6.45 | 6.9 | |||||||||
Exercisable end of year
|
3,300 | 10.46 | 4.8 | |||||||||
42
Weighted Average |
||||||||
Grant Date |
||||||||
Shares | Fair Value | |||||||
Nonvested, January 1, 2007
|
834 | $ | 20.34 | |||||
Granted
|
88 | 33.87 | ||||||
Vested
|
(288 | ) | 14.01 | |||||
Canceled
|
(108 | ) | 27.38 | |||||
Nonvested, December 31, 2007
|
526 | 24.64 | ||||||
Granted
|
164 | 18.25 | ||||||
Vested
|
(315 | ) | 20.55 | |||||
Canceled
|
(51 | ) | 27.64 | |||||
Nonvested, December 31, 2008
|
324 | 24.91 | ||||||
Granted
|
| | ||||||
Vested
|
(138 | ) | 28.77 | |||||
Canceled
|
(43 | ) | 32.38 | |||||
Nonvested, December 31, 2009
|
143 | 19.05 | ||||||
43
44
13. | Net Loss Per Common Share |
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Numerator for basic and diluted loss per share:
|
||||||||||||
Loss from continuing operations
|
$ | (113,830 | ) | $ | (326,425 | ) | $ | (2,412 | ) | |||
Loss from discontinued operations
|
(20,085 | ) | (112,754 | ) | (67,863 | ) | ||||||
Net loss
|
$ | (133,915 | ) | $ | (439,179 | ) | $ | (70,275 | ) | |||
Denominator:
|
||||||||||||
Denominator for basic net (loss) income per common
share weighted average shares
|
51,391 | 50,345 | 49,851 | |||||||||
Basic and diluted net loss per common share
|
||||||||||||
Loss from continuing operations
|
$ | (2.22 | ) | $ | (6.48 | ) | $ | (0.05 | ) | |||
Loss from discontinued operations
|
(0.39 | ) | (2.24 | ) | (1.36 | ) | ||||||
Total net loss
|
$ | (2.61 | ) | $ | (8.72 | ) | $ | (1.41 | ) | |||
14. | Commitments and Contingencies |
45
2010
|
$ | 59,569 | ||
2011
|
56,546 | |||
2012
|
56,228 | |||
2013
|
52,913 | |||
2014
|
21,746 | |||
Thereafter
|
147,520 | |||
$ | 394,522 | |||
46
ASC |
ASC |
|||||||||||||||||||
Guarantee |
Contingencies |
|||||||||||||||||||
Topic |
Topic |
Total |
Fundings from |
|||||||||||||||||
Liability |
Liability |
Liability |
January 1, |
|||||||||||||||||
Maximum |
for Future |
for Future |
for Future |
2009 |
||||||||||||||||
Potential Amount |
Fundings at |
Fundings at |
Fundings at |
through |
||||||||||||||||
of Future |
December 31, |
December 31, |
December 31, |
December 31, |
||||||||||||||||
Guarantee Type
|
Fundings | 2009 | 2009 | 2009 | 2009 | |||||||||||||||
Operating deficit
|
Uncapped | $ | 323 | $ | 500 | $ | 823 | $ | | |||||||||||
Other
|
| | | | 125 | |||||||||||||||
Total
|
$ | 323 | $ | 500 | $ | 823 | $ | 125 | ||||||||||||
47
48
49
50
15. | Related-Party Transactions |
51
Twelve Months |
||||
Ended |
||||
December 31, |
||||
2007 | ||||
Management fees
|
$ | 5,518 | ||
Reimbursed contract services
|
77,277 | |||
Gain on sale and development of real estate
|
8,854 | |||
Interest income received from Sunrise REIT convertible debentures
|
| |||
Interest incurred on borrowings from Sunrise REIT
|
414 | |||
Sunrises share of earnings and return on investment in
unconsolidated communities
|
180 |
52
53
16. | Employee Benefit Plans |
54
17. | Discontinued Operations |
For the Years Ended December 31, | ||||||||||||
(In thousands) | 2009 | 2008 | 2007 | |||||||||
Revenue
|
$ | 107,644 | $ | 170,430 | $ | 170,530 | ||||||
Expenses
|
(113,644 | ) | (231,834 | ) | (208,884 | ) | ||||||
Impairments
|
(72,524 | ) | (18,748 | ) | (56,729 | ) | ||||||
Other (expense) income
|
(15,871 | ) | (15,900 | ) | 231 | |||||||
Gain on sale of real estate or business
|
74,124 | 1,094 | | |||||||||
Income taxes
|
| (427 | ) | 24,340 | ||||||||
Extraordinary loss, net of tax
|
| (22,131 | ) | | ||||||||
Loss from discontinued operations
|
$ | (20,271 | ) | $ | (117,516 | ) | $ | (70,512 | ) | |||
18. | Information about Sunrises Segments |
55
56
For the Year Ended December 31, 2009 | ||||||||||||||||||||||||||||||||
Consolidated |
Unallocated |
|||||||||||||||||||||||||||||||
North |
North |
Equity |
(Wholly |
Germany |
Corporate |
|||||||||||||||||||||||||||
American |
American |
Method |
Owned/ |
United |
Management |
and |
||||||||||||||||||||||||||
Management | Development | Investments | Leased) | Kingdom | Company | Eliminations | Total | |||||||||||||||||||||||||
Revenues
|
$ | 1,105,974 | $ | 6,637 | $ | 2,151 | $ | 350,165 | $ | 27,597 | $ | 1,717 | $ | (30,097 | ) | $ | 1,464,144 | |||||||||||||||
Community expense
|
2,170 | 214 | 42 | 287,719 | | 158 | (21,984 | ) | 268,319 | |||||||||||||||||||||||
Development expense
|
25 | 9,347 | 606 | 312 | 1,682 | 128 | 401 | 12,501 | ||||||||||||||||||||||||
Depreciation and amortization
|
11,925 | 1,927 | | 17,550 | 382 | 114 | 14,731 | 46,629 | ||||||||||||||||||||||||
Other operating expenses
|
1,058,795 | 25,285 | 6,306 | 61,198 | 25,009 | 4,672 | 55,764 | 1,237,029 | ||||||||||||||||||||||||
Impairment of owned communities, land parcels, goodwill and
intangibles
|
| 28,897 | | 2,953 | | | (165 | ) | 31,685 | |||||||||||||||||||||||
Income (loss) from operations
|
33,059 | (59,033 | ) | (4,803 | ) | (19,567 | ) | 524 | (3,355 | ) | (78,844 | ) | (132,019 | ) | ||||||||||||||||||
Interest income
|
413 | 869 | 7 | 225 | (10 | ) | 11 | (164 | ) | 1,351 | ||||||||||||||||||||||
Interest expense
|
(169 | ) | (926 | ) | | (4,866 | ) | | (29 | ) | (4,311 | ) | (10,301 | ) | ||||||||||||||||||
Foreign exchange gain/(loss)
|
| | | 7,989 | (632 | ) | (645 | ) | | 6,712 | ||||||||||||||||||||||
Sunrises share of earnings (losses) and return on
investment in unconsolidated communities
|
| | 5,872 | | | | (199 | ) | 5,673 | |||||||||||||||||||||||
Income (loss) before income taxes, discontinued operations, and
noncontrolling interests
|
37,080 | (53,678 | ) | 1,076 | (16,707 | ) | (913 | ) | (4,146 | ) | (79,836 | ) | (117,124 | ) | ||||||||||||||||||
Investments in unconsolidated communities
|
| | 64,971 | | | | | 64,971 | ||||||||||||||||||||||||
Segment assets
|
141,389 | 71,061 | 71,124 | 295,062 | 13,862 | 105,763 | 212,328 | 910,589 | ||||||||||||||||||||||||
Expenditures for long-lived assets
|
| 9,794 | | 10,111 | 45 | | | 19,950 | ||||||||||||||||||||||||
Deferred gains on the sale of real estate and deferred revenue
|
| 16,865 | | | | | 5,000 | 21,865 |
57
For the Year Ended December 31, 2008 | ||||||||||||||||||||||||||||||||
Consolidated |
Unallocated |
|||||||||||||||||||||||||||||||
North |
North |
Equity |
(Wholly |
Germany |
Corporate |
|||||||||||||||||||||||||||
American |
American |
Method |
Owned/ |
United |
Management |
and |
||||||||||||||||||||||||||
Management | Development | Investments | Leased) | Kingdom | Company | Eliminations | Total | |||||||||||||||||||||||||
Revenues
|
$ | 1,189,971 | $ | 27,425 | $ | 2,303 | $ | 340,834 | $ | 32,803 | $ | 11,104 | $ | (33,466 | ) | $ | 1,570,974 | |||||||||||||||
Community expense
|
(535 | ) | 774 | 122 | 282,051 | | 60 | (24,917 | ) | 257,555 | ||||||||||||||||||||||
Development expense
|
5,065 | 21,405 | 3,121 | 15 | 4,335 | 16 | 177 | 34,134 | ||||||||||||||||||||||||
Depreciation and amortization
|
6,969 | 1,132 | 88 | 15,491 | 331 | 114 | 15,372 | 39,497 | ||||||||||||||||||||||||
Other operating expenses
|
1,130,122 | 113,672 | 19,556 | 60,480 | 22,749 | 15,322 | 75,891 | 1,437,792 | ||||||||||||||||||||||||
Impairment of owned communities, land parcels, goodwill and
intangibles
|
121,553 | 5,870 | 6,350 | 15,871 | | | | 149,644 | ||||||||||||||||||||||||
Income (loss) from operations
|
(73,203 | ) | (115,428 | ) | (26,934 | ) | (33,074 | ) | 5,388 | (4,408 | ) | (99,989 | ) | (347,648 | ) | |||||||||||||||||
Interest income
|
825 | 425 | 836 | 289 | 621 | 265 | 3,006 | 6,267 | ||||||||||||||||||||||||
Interest expense
|
(287 | ) | (1,260 | ) | (366 | ) | (4,471 | ) | | (94 | ) | (231 | ) | (6,709 | ) | |||||||||||||||||
Foreign exchange gain/(loss)
|
| (9,796 | ) | | (4,399 | ) | (3,075 | ) | 2,620 | | (14,650 | ) | ||||||||||||||||||||
Sunrises share of losses and return on investment in
unconsolidated communities
|
| | (13,816 | ) | | | | (30 | ) | (13,846 | ) | |||||||||||||||||||||
Income (loss) before income taxes, discontinued operations, and
noncontrolling interests
|
(72,282 | ) | (112,091 | ) | (39,996 | ) | (40,670 | ) | 2,936 | (2,218 | ) | (109,406 | ) | (373,727 | ) | |||||||||||||||||
Investments in unconsolidated communities
|
| | 66,852 | | | | | 66,852 | ||||||||||||||||||||||||
Goodwill
|
| | | | | | 39,025 | 39,025 | ||||||||||||||||||||||||
Segment assets
|
192,079 | 184,786 | 80,836 | 422,980 | 21,929 | 152,094 | 326,853 | 1,381,557 | ||||||||||||||||||||||||
Expenditures for long-lived assets
|
| 137,449 | | 16,723 | 19,270 | 103 | | 173,545 | ||||||||||||||||||||||||
Deferred gains on the sale of real estate and deferred revenue
|
| 26,291 | | | | | 62,415 | 88,706 |
For the Year Ended and as of December 31, 2007 | ||||||||||||||||
North |
||||||||||||||||
America | International | Germany | Total | |||||||||||||
Revenues
|
$ | 1,431,983 | $ | 39,710 | $ | 10,327 | $ | 1,482,020 | ||||||||
Interest income
|
8,329 | 1,014 | 149 | 9,492 | ||||||||||||
Interest expense
|
4,056 | 1,118 | 5 | 5,179 | ||||||||||||
Foreign exchange (loss) gain
|
| 3,966 | (6,280 | ) | (2,314 | ) | ||||||||||
Sunrises share of earnings and return on investment in
unconsolidated communities
|
31,812 | 75,535 | | 107,347 | ||||||||||||
Depreciation and amortization
|
41,715 | 750 | 136 | 42,601 | ||||||||||||
(Loss) income from continuing operations
|
(33,718 | ) | 54,847 | (23,604 | ) | (2,475 | ) | |||||||||
Investments in unconsolidated communities
|
80,423 | 16,750 | | 97,173 | ||||||||||||
Goodwill
|
169,736 | | | 169,736 | ||||||||||||
Segment assets
|
1,551,098 | 213,538 | 33,961 | 1,798,597 | ||||||||||||
Expenditures for long-lived assets
|
188,509 | 48,908 | 139 | 237,556 | ||||||||||||
Deferred gains on the sale of real estate and deferred revenue
|
74,367 | | | 74,367 |
58
59
19. | Accounts Payable and Accrued Expenses |
December 31, | ||||||||
2009 | 2008 | |||||||
Accounts payable and accrued expenses
|
$ | 40,034 | $ | 66,760 | ||||
Accrued salaries and bonuses
|
24,738 | 30,123 | ||||||
Accrued employee health and other benefits
|
41,340 | 47,685 | ||||||
Accrued legal, audit and professional fees
|
3,999 | 8,933 | ||||||
Other accrued expenses
|
27,921 | 30,643 | ||||||
$ | 138,032 | $ | 184,144 | |||||
20. | Severance and Restructuring Plan |
60
| annual payments for three years, beginning on the first anniversary of the date of termination, equal to Mr. Klaassens annual salary ($0.5 million) and bonus ($0) for the year of termination; | |
| continuation of the medical insurance and supplemental coverage provided to Mr. Klaassen and his family until Mr. Klaassen attains or, in the case of his death, would have attained, age of 65 (but to his children only through their attainment of age 22); and | |
| continued participation in his deferred compensation plan in accordance with the terms of his employment agreement. |
Liability at |
Cash Payments |
Liability at |
||||||||||||||||||
January 1, |
Additional |
and Other |
December 31, |
|||||||||||||||||
(In thousands) | 2009 | Charges | Adjustments | Settlements | 2009 | |||||||||||||||
Voluntary severance
|
$ | 3,312 | $ | 1,067 | $ | (253 | ) | $ | (4,126 | ) | $ | | ||||||||
Involuntary severance
|
1,518 | 10,956 | (367 | ) | (10,154 | ) | 1,953 | |||||||||||||
CEO retirement compensation
|
1,523 | 55 | | (500 | ) | 1,078 | ||||||||||||||
Professional fees
|
| 18,647 | | (18,647 | ) | | ||||||||||||||
Lease termination costs
|
2,394 | 3,208 | 591 | (2,637 | ) | 3,556 | ||||||||||||||
$ | 8,747 | $ | 33,933 | $ | (29 | ) | $ | (36,064 | ) | $ | 6,587 | |||||||||
61
21. | Comprehensive Loss |
2009 | 2008 | 2007 | ||||||||||
Net loss attributable to common shareholders
|
$ | (133,915 | ) | $ | (439,179 | ) | $ | (70,275 | ) | |||
Foreign currency translation adjustment
|
(4,813 | ) | 5,583 | 5,865 | ||||||||
Equity interest in investees other comprehensive income
(loss)
|
6,324 | (7,206 | ) | (100 | ) | |||||||
Unrealized gain on investments
|
120 | | | |||||||||
Comprehensive loss
|
(132,284 | ) | (440,802 | ) | (64,510 | ) | ||||||
Comprehensive loss attributable to noncontrolling interest -
|
||||||||||||
Unrealized gain on investments
|
(120 | ) | | | ||||||||
Comprehensive loss attributable to common shareholders
|
$ | (132,404 | ) | $ | (440,802 | ) | $ | (64,510 | ) | |||
22. | Quarterly Results of Operations (Unaudited) |
Q1 | Q2 | Q3 | Q4(2) | Total | ||||||||||||||||
2009
|
||||||||||||||||||||
Operating revenue
|
$ | 376,054 | $ | 360,965 | $ | 362,790 | $ | 364,335 | $ | 1,464,144 | ||||||||||
Loss from continuing operations
|
(28,207 | ) | (19,164 | ) | (36,220 | ) | (30,239 | ) | (113,830 | ) | ||||||||||
Income (loss) from discontinued operations
|
10,046 | (62,624 | ) | (8,182 | ) | 40,675 | (20,085 | ) | ||||||||||||
Net (loss) income
|
(18,161 | ) | (81,788 | ) | (44,402 | ) | 10,436 | (133,915 | ) | |||||||||||
Basic net (loss) income per common share(1)
|
||||||||||||||||||||
Continuing operations
|
$ | (0.56 | ) | $ | (0.38 | ) | $ | (0.72 | ) | $ | (0.57 | ) | $ | (2.22 | ) | |||||
Discontinued operations
|
0.20 | (1.24 | ) | (0.16 | ) | 0.76 | (0.39 | ) | ||||||||||||
Net (loss) income
|
(0.36 | ) | (1.62 | ) | (0.88 | ) | 0.19 | (2.61 | ) | |||||||||||
Diluted net (loss) income per common share(1)
|
||||||||||||||||||||
Continuing operations
|
$ | (0.56 | ) | $ | (0.38 | ) | $ | (0.72 | ) | $ | (0.57 | ) | $ | (2.22 | ) | |||||
Discontinued operations
|
0.20 | (1.24 | ) | (0.16 | ) | 0.76 | (0.39 | ) | ||||||||||||
Net (loss) income
|
(0.36 | ) | (1.62 | ) | (0.88 | ) | 0.19 | (2.61 | ) | |||||||||||
2008
|
||||||||||||||||||||
Operating revenue
|
$ | 389,388 | $ | 390,981 | $ | 392,186 | $ | 398,419 | $ | 1,570,974 | ||||||||||
Loss from continuing operations
|
(25,192 | ) | (20,524 | ) | (40,956 | ) | (234,991 | ) | (321,663 | ) | ||||||||||
Loss from discontinued operations
|
(7,933 | ) | (11,252 | ) | (27,710 | ) | (70,621 | ) | (117,516 | ) | ||||||||||
Net loss
|
(33,125 | ) | (31,776 | ) | (68,666 | ) | (305,612 | ) | (439,179 | ) | ||||||||||
Basic and diluted net loss per common share(1)
|
||||||||||||||||||||
Continuing operations
|
$ | (0.52 | ) | $ | (0.43 | ) | $ | (0.84 | ) | $ | (4.69 | ) | $ | (6.48 | ) | |||||
Discontinued operations
|
(0.14 | ) | (0.20 | ) | (0.52 | ) | (1.38 | ) | (2.24 | ) | ||||||||||
Net loss
|
(0.66 | ) | (0.63 | ) | (1.36 | ) | (6.07 | ) | (8.72 | ) |
62
(1) | The sum of per share amounts for the quarters may not equal the per share amount for the year due to a variance in shares used in the calculations or rounding. | |
(2) | During the fourth quarter of 2009, we sold 21 properties and recognized a gain of $48.9 million which is included in discontinued operations. During the fourth quarter of 2008, we recorded an impairment charge of $121.8 million related to all of the goodwill for our North American business segment. Also, we determined that a valuation allowance on the net deferred tax assets was required. Because of this, we reversed the tax benefit associated with our extraordinary loss recorded in the third quarter. |
23. | Subsequent Events |
63
30 July 2008
64
Unaudited | Unaudited | |||||||||||||||
2009 | 2008 | 2007 | ||||||||||||||
Notes | £ | £ | £ | |||||||||||||
Operating revenue: |
||||||||||||||||
Resident fees |
10,124,725 | 9,788,455 | 14,176,377 | |||||||||||||
Total operating revenue |
10,124,725 | 9,788,455 | 14,176,377 | |||||||||||||
Operating expenses: |
||||||||||||||||
Facility operating expenses |
9,066,289 | 11,135,347 | 12,191,116 | |||||||||||||
Facility development and pre-rental expenses |
3,429,144 | 3,597,483 | 6,394,516 | |||||||||||||
General and administrative expenses |
309,922 | 165,905 | 247,968 | |||||||||||||
Facility lease expenses |
| 6,868 | 26,042 | |||||||||||||
Management fees |
7 | 550,473 | 489,154 | 775,441 | ||||||||||||
Depreciation |
3 | 3,803,770 | 3,137,723 | 3,324,095 | ||||||||||||
Total operating expenses |
17,159,598 | 18,532,480 | 22,959,178 | |||||||||||||
Net operating loss |
(7,034,873 | ) | (8,744,025 | ) | (8,782,801 | ) | ||||||||||
Other income/(expense): |
||||||||||||||||
Interest income |
361,418 | 1,419,935 | 973,715 | |||||||||||||
Interest expense |
(9,262,388 | ) | (11,440,469 | ) | (11,459,235 | ) | ||||||||||
Loss on extinguishment of debt |
(42,448 | ) | (130,305 | ) | (238,122 | ) | ||||||||||
Foreign exchange gain/(loss) |
1,760 | (6,605 | ) | 5,808 | ||||||||||||
Gain on sale of subsidiaries |
5 | 30,765,498 | 26,233,275 | 114,437,152 | ||||||||||||
(Loss)/gain on financial asset |
5 | (14,293,209 | ) | 15,552,515 | | |||||||||||
Total other income |
7,530,631 | 31,628,346 | 103,719,318 | |||||||||||||
Profit before tax |
495,758 | 22,884,321 | 94,936,517 | |||||||||||||
Income tax expense |
10 | (595,674 | ) | (205,632 | ) | (350,000 | ) | |||||||||
(Loss)/profit for the year |
11 | (99,916 | ) | 22,678,689 | 94,586,517 | |||||||||||
65
Unaudited | Unaudited | Unaudited | ||||||||||||||
2009 | 2008 | 2007 | ||||||||||||||
Notes | £ | £ | £ | |||||||||||||
(Loss)/profit for the year |
(99,916 | ) | 22,678,689 | 94,586,517 | ||||||||||||
Other comprehensive income/(expense): |
||||||||||||||||
Net movement on cash flow hedges |
1,874,678 | (3,665,418 | ) | (529,885 | ) | |||||||||||
Income tax effect |
| | | |||||||||||||
1,874,678 | (3,665,418 | ) | (529,885 | ) | ||||||||||||
Revaluation of property and equipment |
26,318,388 | 32,066,606 | 39,079,729 | |||||||||||||
Income tax effect |
| | | |||||||||||||
26,318,388 | 32,066,606 | 39,079,729 | ||||||||||||||
Other comprehensive income for the year, net of tax |
28,193,066 | 28,401,188 | 38,549,844 | |||||||||||||
Total comprehensive income for the year, net of tax |
28,093,150 | 51,079,877 | 133,136,361 | |||||||||||||
66
Unaudited | Unaudited | |||||||||||
2009 | 2008 | |||||||||||
Notes | £ | £ | ||||||||||
Assets |
||||||||||||
Current assets: |
||||||||||||
Cash and cash equivalents at banks |
15,606,634 | 14,857,587 | ||||||||||
Accounts receivable |
432,476 | 467,268 | ||||||||||
Financial asset |
5 | 1,259,306 | 15,552,515 | |||||||||
Prepaid expenses and other current assets |
78,513 | 5,872,401 | ||||||||||
Total current assets |
17,376,929 | 36,749,771 | ||||||||||
Non current assets |
||||||||||||
Property and equipment |
3 | 143,329,763 | 212,124,077 | |||||||||
Restricted cash |
6 | 12,788,815 | 14,169,887 | |||||||||
Total non current assets |
156,118,578 | 226,293,964 | ||||||||||
Total assets |
173,495,507 | 263,043,735 | ||||||||||
Liabilities and partners capital |
||||||||||||
Current liabilities |
||||||||||||
Trade payables |
53,817 | 67,498 | ||||||||||
Accrued expenses |
8 | 5,023,381 | 7,273,775 | |||||||||
Deferred revenue |
248,193 | 334,840 | ||||||||||
Net payables due to affiliates |
7 | 2,674,826 | 5,423,676 | |||||||||
Current maturities of long-term debt, net of finance costs |
9 | 54,406,504 | 22,894,514 | |||||||||
Deferred tax liability |
10 | 79,795 | | |||||||||
Total current liabilities |
62,486,516 | 35,994,303 | ||||||||||
Non current liabilities |
||||||||||||
Contractor retention |
| 1,536,911 | ||||||||||
Long-term debt, net of finance costs |
9 | 59,404,476 | 169,872,879 | |||||||||
Derivative financial instruments |
2,320,625 | 4,195,303 | ||||||||||
Deferred tax liability |
10 | 446,174 | | |||||||||
Total non-current liabilities |
62,171,275 | 175,605,093 | ||||||||||
Partners capital |
11 | 48,837,716 | 51,444,339 | |||||||||
Total non current liabilities and partners capital |
111,008,991 | 227,049,432 | ||||||||||
Total liabilities and partners capital |
173,495,507 | 263,043,735 | ||||||||||
67
Partners | Accumulated | Foreign | Total | |||||||||||||||||||||
capital | surplus/ | Other | currency | Distribution | partners | |||||||||||||||||||
contributions | (deficit) | reserves | translation | to partners | capital | |||||||||||||||||||
£ | £ | £ | £ | £ | £ | |||||||||||||||||||
At 1 January 2007 |
61,589,388 | (16,184,069 | ) | 70,636,697 | (484 | ) | | 116,041,532 | ||||||||||||||||
Profit for the year |
| 94,586,517 | | | | 94,586,517 | ||||||||||||||||||
Cash flow hedge (note 12) |
| | (529,885 | ) | | | (529,885 | ) | ||||||||||||||||
Revaluation of property
and equipment |
| | 39,079,729 | | | 39,079,729 | ||||||||||||||||||
Total comprehensive
income |
| 94,586,517 | 38,549,844 | | | 133,136,361 | ||||||||||||||||||
Disposal of property and
equipment revaluation |
| | (70,636,697 | ) | | | (70,636,697 | ) | ||||||||||||||||
Partner contributions |
26,237,256 | | | | | 26,237,256 | ||||||||||||||||||
Distribution to partners |
| | | | (159,675,550 | ) | (159,675,550 | ) | ||||||||||||||||
At 31 December 2007 |
87,826,644 | 78,402,448 | 38,549,844 | (484 | ) | (159,675,550 | ) | 45,102,902 | ||||||||||||||||
Profit for the year* |
| 22,678,689 | | | | 22,678,689 | ||||||||||||||||||
Cash flow hedge (note 12)* |
| | (3,665,418 | ) | | | (3,665,418 | ) | ||||||||||||||||
Revaluation of property
and equipment* |
| | 32,066,606 | | | 32,066,606 | ||||||||||||||||||
Total comprehensive
income* |
| 22,678,689 | 28,401,188 | | | 51,079,877 | ||||||||||||||||||
Disposal of property and
equipment revaluation* |
| | (39,079,729 | ) | | | (39,079,729 | ) | ||||||||||||||||
Partner contributions* |
11,702,156 | | | | | 11,702,156 | ||||||||||||||||||
Distribution to partners* |
| | | | (17,360,867 | ) | (17,360,867 | ) | ||||||||||||||||
At 31 December 2008* |
99,528,800 | 101,081,137 | 27,871,303 | (484 | ) | (177,036,417 | ) | 51,444,339 | ||||||||||||||||
Loss for the year* |
| (99,916 | ) | | | | (99,916 | ) | ||||||||||||||||
Cash flow hedge (note 12)* |
| | 1,874,678 | | | 1,874,678 | ||||||||||||||||||
Revaluation of property
and equipment* |
| | 26,318,388 | | | 26,318,388 | ||||||||||||||||||
Total comprehensive
Income/(expense)* |
| (99,916 | ) | 28,193,066 | | | 28,093,150 | |||||||||||||||||
Disposal of property and
equipment revaluation* |
| | (32,066,606 | ) | | | (32,066,606 | ) | ||||||||||||||||
Foreign currency translation* |
| | | 484 | | 484 | ||||||||||||||||||
Partner contributions* |
8,724,898 | | | | | 8,724,898 | ||||||||||||||||||
Distribution to partners* |
| | | | (7,358,549 | ) | (7,358,549 | ) | ||||||||||||||||
At 31 December 2009 |
108,253,698 | 100,981,221 | 23,997,763 | | (184,394,966 | ) | 48,837,716 | |||||||||||||||||
* | unaudited |
68
Unaudited | Unaudited | |||||||||||
2009 | 2008 | 2007 | ||||||||||
£ | £ | £ | ||||||||||
Operating activities |
||||||||||||
(Loss)/profit for the year after tax |
(99,916 | ) | 22,678,689 | 94,586,517 | ||||||||
Adjustments to reconcile (loss)/profit for the year after
tax to net cash flows from operating activities: |
||||||||||||
Net finance costs |
8,941,658 | 10,157,444 | 10,717,833 | |||||||||
Depreciation |
3,803,770 | 3,137,723 | 3,324,095 | |||||||||
Provision for bad debt |
37,891 | 21,980 | 29,819 | |||||||||
Gain on sale of subsidiaries |
(30,765,498 | ) | (26,233,275 | ) | (114,437,152 | ) | ||||||
Loss/(gain) on financial asset |
14,293,209 | (15,552,515 | ) | | ||||||||
Loss on extinguishment of debt |
(42,448 | ) | (130,305 | ) | (238,122 | ) | ||||||
Tax on continuing operations |
595,674 | 205,632 | 350,000 | |||||||||
Changes in assets and liabilities: |
||||||||||||
Accounts receivable |
(3,099 | ) | (145,099 | ) | 157,745 | |||||||
Prepaid expenses and other current assets |
5,793,889 | (3,311,519 | ) | (1,056,246 | ) | |||||||
Trade payables and accrued expenses |
(3,870,691 | ) | (906,484 | ) | 499,712 | |||||||
Deferred revenue |
(86,667 | ) | 25,242 | 88,880 | ||||||||
Other current liabilities |
| (4,487,885 | ) | 4,487,885 | ||||||||
Net cash flows used in operating activities |
(1,402,228 | ) | (14,540,372 | ) | (1,489,034 | ) | ||||||
Investing activities |
||||||||||||
Decrease/(increase) in restricted cash |
1,380,259 | (2,581,668 | ) | (11,588,218 | ) | |||||||
Purchase of property and equipment |
(29,590,405 | ) | (74,678,504 | ) | (89,329,492 | ) | ||||||
Proceeds from sale of subsidiaries, after costs of disposal |
120,536,617 | 97,802,551 | 245,381,485 | |||||||||
Interest paid and capitalised |
(1,840,133 | ) | (3,324,135 | ) | (4,695,605 | ) | ||||||
Interest received |
361,418 | 1,419,935 | 973,715 | |||||||||
Net cash flows from investing activities |
90,847,756 | 18,638,179 | 140,741,885 | |||||||||
Financing activities |
||||||||||||
Contributions by partners |
8,724,898 | 11,702,156 | 26,237,256 | |||||||||
Distributions to partners |
(7,358,549 | ) | (17,360,867 | ) | (159,675,550 | ) | ||||||
Net (repayments to)/borrowings from affiliates |
(2,746,190 | ) | 5,753,282 | (4,415,153 | ) | |||||||
Net repayments to partners |
| | (1,275,000 | ) | ||||||||
Borrowings of long-term debt |
29,278,970 | 92,067,675 | 148,153,886 | |||||||||
Repayments of long-term debt |
(108,423,378 | ) | (91,754,860 | ) | (126,918,499 | ) | ||||||
Interest paid and expensed |
(8,172,649 | ) | (10,070,012 | ) | (9,785,802 | ) | ||||||
Net cash flows used in financing activities |
(88,696,898 | ) | (9,662,626 | ) | (127,678,862 | ) | ||||||
Net increase/(decrease) in cash and cash equivalents before
effect of exchange rate on |
748,630 | (5,564,819 | ) | 11,573,989 | ||||||||
Effect of exchange rate on cash |
417 | 715 | (421 | ) | ||||||||
Net increase/(decrease) in cash and cash equivalents |
749,047 | (5,564,104 | ) | 11,573,568 | ||||||||
Cash and cash equivalents at beginning of year |
14,857,587 | 20,421,691 | 8,848,123 | |||||||||
Cash and cash equivalents at end of year |
15,606,634 | 14,857,587 | 20,421,691 | |||||||||
69
1. | Organization |
PS UK Investment (Jersey) Limited Partnership (the Partnership), was formed under the laws of Jersey, Channel Islands on 31 May 2002, between Sunrise Assisted Living Investment, Inc. (SALII), a wholly owned subsidiary of Sunrise Senior Living, Inc. (Sunrise), Senior Housing UK Investment Limited Partnership (SHIP) and SunCo LLC (SunCo), a wholly owned subsidiary of Sunrise and PS UK (Jersey) GP Limited (General Partner). On 29 January 2003, SALII transferred its entire interest in the Partnership to Sunrise Senior Living International L.P. (Sunrise LP), a wholly owned subsidiary of Sunrise. The Partnership was established for the purpose of acquiring land and buildings in order to construct, develop, market, operate, finance and sell assisted living facilities in the United Kingdom. As of 31 December 2009, the Partnership has five operating properties, one property under active development and one site in pre-development in the United Kingdom. The facilities will offer accommodation and organise the provision of non-complex medical care services to elderly residents for a monthly fee. The Partnerships services will generally not be covered by health insurance so the monthly fees will be payable by the residents, their family, or another responsible party. The Partnership shall be dissolved on 31 December 2012 unless extended or terminated earlier in accordance with the terms and provisions of the Partnership Agreement. |
2.1 | Basis of preparation |
The consolidated financial statements have been prepared on an historical cost basis, except for property and equipment relating to properties operating at year end and derivative financial instruments, which have been measured at fair value. The consolidated financial statements are presented in Sterling. | ||
Going Concern (unaudited) | ||
The consolidated financial statements have been prepared on a going concern basis. As at 31, December 2009, the Partnership had net current liabilities of approximately £45 million. This amount includes debt due to third party lenders of £53.5 million that has been repaid after the year end as discussed in note 14. The directors have a reasonable expectation that the Partnership has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements. | ||
Statement of compliance | ||
The consolidated financial statements of PS UK Investment (Jersey) Limited Partnership and its subsidiaries have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the International Accounting Standards Board as they apply to the financial statements of the limited partnership and its subsidiaries for the year ended 31 December 2009. | ||
Principles of consolidation | ||
The consolidated financial statements include the accounts of the Partnership and its wholly owned subsidiaries that will develop, own and operate assisted living facilities. All significant intercompany accounts and transactions eliminate upon consolidation. |
2.2 | Changes in accounting policies |
The accounting policies adopted are consistent with those of the previous financial year, except that the Partnership has adopted the following new and amended IFRSs as of 1 January 2009: |
| IAS 1 Presentation of Financial Statements (Revised) | ||
| Amendment to IFRS 7 Financial Instruments: Disclosures |
In addition to the above, IAS 23 has been revised to require capitalisation of borrowing costs when such costs relate to a qualifying asset. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale. The group already capitalises borrowing costs in certain circumstances as disclosed in the accounting policies. |
70
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
2.2 | Changes in accounting policy and disclosures (continued) |
The principal effects of the changes to IAS 1 and IFRS 7
are as follows: IAS 1 Presentation of Financial Statements (Revised) |
||
The standard separates owner and non-owner changes in equity. The consolidated statement of changes in partners capital is not affected by this change. The standard also introduces the statement of comprehensive income: it presents all items of recognised income and expense, either in one single statement, or in two linked statements. The Partnership has taken the option of presenting an income statement complemented by the statement of comprehensive income. | ||
Amendment to IFRS 7 Financial Instruments: Disclosures | ||
The amendment to the standard requires an entity to provide a quantitative and qualitative analysis of those instruments recognised at fair value based on a three-level measurement hierarchy. In addition, a reconciliation between the beginning and ending balance for level 3 fair value measurements is now required, as well as significant transfers between levels in the fair value hierarchy. The amendments also clarify the requirements for liquidity risk disclosures with respect to derivative transactions and assets used for liquidity management. Entities are required to apply this amendment for annual periods beginning on or after 1 January 2009, with no requirement to provide comparatives on transition. |
2.3 | Significant accounting judgements, estimates and assumptions |
Judgements | ||
The preparation of financial statements in conformity with International Financial Reporting Standards requires management to make judgements, estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carry amount of the asset or liability affected. | ||
Financial asset | ||
The Partnership has recorded a financial asset representing its contractual right to receive a variable amount of future cash related to prior sales of its subsidiary companies (note 5). Significant management judgement is required to determine the amount of the financial asset that will be recognised, based on forecasted operating results of communities it has sold. | ||
Deferred tax assets | ||
Deferred tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profits will be available against which the losses can be utilised. Significant management judgment is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies. The carrying value of recognised gross tax losses at 31 December 2009 was £nil (unaudited) (2008 £nil) (unaudited) and the unrecognised gross tax losses carried forward at 31 December 2009 were £5,843,804 (unaudited) (2008 £7,121,467) (unaudited). Further details are contained in note 10. | ||
Revaluation of property, plant and equipment | ||
The Partnership measures land and buildings at revalued amounts with revaluation surpluses recognised in partners capital and revaluation deficits recognised in the income statement. The Partnership engaged an independent valuer to determine fair value as at 31 December 2009. |
2.4 | Summary of significant accounting policies |
Cash and cash equivalents | ||
On the balance sheet and for purposes of the statement of cash flows, cash and cash equivalents consist of balances held by financial institutions. The Partnership considers all highly liquid temporary cash investments with an original maturity of three months or less when purchased to be cash equivalents. |
71
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
2.4 | Summary of significant accounting policies (continued) | |
Property and equipment | ||
Property and equipment is initially recorded at cost and includes interest and property taxes capitalised on long-term construction projects during the construction period, as well as pre-acquisition and other costs directly related to the acquisition, development and construction of facilities. Costs that do not directly relate to acquisition, development and construction of the facility are expensed as incurred. If a project is abandoned any costs previously capitalised are expensed. Maintenance and repairs are charged to expenses as incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets. Buildings are depreciated over 40 years. Furniture and equipment is depreciated over 3 to 10 years. | ||
Following initial recognition at cost, land and buildings are carried at a revalued amount, which is the fair value at the date of the revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Valuations are performed frequently enough to ensure that the fair value of a revalued asset does not differ materially from its carrying amount. | ||
Any revaluation surplus is credited to the individual partners capital account included in the partners capital section of the balance sheet, except to the extent that it reverses a revaluation decrease of the same asset previously recognised in profit or loss, in which case the increase is recognised in profit or loss. A revaluation deficit is recognised in profit or loss, except that a deficit directly offsetting a previous surplus on the same asset is directly offset against the surplus in the asset revaluation reserve. | ||
Accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset which is restated to the revalued amount of the asset. Upon disposal, any revaluation reserve relating to the particular asset being sold is transferred to accumulated deficit. | ||
Impairment of assets | ||
Property and equipment is reviewed for impairment whenever events or circumstances indicate that the assets discounted expected cash flows are not sufficient to recover its carrying amount. The Partnership measures an impairment loss by comparing the fair value of the asset to its carrying amount. Fair value of an asset is calculated as the present value of expected future cash flows. Based on managements estimation process, no impairment losses were recorded as of 31 December 2009 (unaudited) or 31 December 2008 (unaudited). | ||
Restricted cash | ||
Cash that is pledged or is subject to withdrawal restrictions has been separately identified on the balance sheet as restricted cash. | ||
Revenue recognition | ||
Operating revenue consists of community fee revenue and resident fee revenue. Community fees are received from potential residents prior to or upon occupancy and are refundable if the prospective resident does not move into the facility or moves out of the facility within thirty days. Community fee revenue is recognised thirty days after the resident moves in. Resident fee revenue is recognised monthly as services are rendered. Agreements with residents are generally for a term of one year and are cancellable by residents with thirty days notice. | ||
Interest income is recognised as interest accrues. |
72
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
2.4 | Summary of significant accounting policies (continued) | |
Operating expenses | ||
Operating expenses consists of: |
| Facility operating expenses including labour, food, marketing and other direct costs of operating the communities. | ||
| Facility development and pre-rental expenses associated with the development and marketing of communities prior to opening. | ||
| General and administrative expense related to costs of the Partnership itself. | ||
| Management fees paid to subsidiaries of Sunrise for managing the communities (note 7). |
Taxes | ||
Income and corporation taxes | ||
No provision for income or corporation taxes has been included in respect to the partnership in the accompanying financial statements, as all attributes of income and loss pass through pro rata to the partners on their respective income tax returns in accordance with the Partnership Agreement. Details of income and corporation taxes in respect of the subsidiary companies of the Partnership are disclosed in note 10. | ||
Sales taxes | ||
Revenue, expenses and assets are recognised net of the amount of sales tax except: |
| where the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and | ||
| receivables and payables that are stated with the amount of sales tax included. |
The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet. | ||
Deferred income tax | ||
Deferred income tax is provided using the liability method on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. However, as note 10 indicates, the deferred tax assets have not been recognised, because there is no assurance that enough profits will be generated in the future to be able to utilise the losses and expenditures carried forward. | ||
Deferred income tax liabilities are recognised for all taxable temporary differences, except: |
| where the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and | ||
| in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. |
73
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
2.4 | Summary of significant accounting policies (continued) | |
Taxes (continued) | ||
Deferred income tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised except: |
| where the deferred income tax asset relating to the deductible temporary differences arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and | ||
| in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred income tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised. |
The carrying amount of deferred income tax assets is reviewed each balance sheet date. Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. | ||
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on the tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. | ||
Deferred income tax relating to items recognised directly in equity is recognised in equity and not in the income statement. | ||
Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the same taxation authority. | ||
Derivative financial instruments and hedging | ||
The Partnership uses derivative financial instruments such as an interest rate swap to hedge its risks associated with the interest rate fluctuations. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative. | ||
Any gains or losses arising from changes in fair value on derivatives during the year that do not qualify for hedge accounting are taken directly to profit and loss. | ||
The fair value of interest rate swap contracts is determined by reference to market values for similar instruments. | ||
For the purpose of hedge accounting, hedges are classified as: |
| fair value hedges when hedging the exposure to changes in the fair value of a recognised asset or liability or an unrecognised firm commitment (except for foreign currency risk); or | ||
| cash flow hedges when hedging exposure to variability in cash flows that is either attributable to a particular risk associated with a recognised asset or liability or a highly probably forecast transaction or the foreign currency risk in a unrecognised firm commitment; or | ||
| hedges of a net investment in a foreign operation. |
74
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
2.4 | Summary of significant accounting policies (continued) | |
Derivative financial instruments and hedging (continued) | ||
At the inception of a hedge relationship, the Partnership formally designates and documents the hedge relationship to which the Partnership wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the hedging instruments effectiveness in offsetting the exposure to changes in the hedged items fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated. | ||
Hedges which meet the strict criteria for hedge accounting are accounted for as follows: | ||
Cash flow hedges | ||
The effective portion of the gain or loss on the hedging instrument is recognised directly in equity, while any ineffective portion is recognised immediately in profit or loss. | ||
Amounts taken to equity are transferred to profit or loss when the hedged transaction affects profit or loss, such as when the hedged financial income or financial expense is recognised. | ||
If the forecast transaction or firm commitment is no longer expected to occur, amounts previously recognised in equity are transferred to profit or loss. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked, amounts previously recognised in equity remain in equity until the forecast transaction or firm commitment occurs. | ||
Foreign currency translation | ||
The consolidated financial statements are presented in Sterling, which is the Partnerships functional and presentational currency. The financial statements of foreign subsidiaries, where the local currency is the functional currency, are translated into Sterling using exchange rates in effect at period end for assets and liabilities and average exchange rates during each reporting period for results of operations. Adjustments resulting from translation of financial statements are reflected as a separate component of partners capital. | ||
Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the balance sheet date. All differences are taken to the income statement. Non monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transaction. | ||
Borrowing costs | ||
Borrowing costs are generally expensed as incurred. Borrowing costs which are directly attributable to the construction of an asset are capitalised while the asset is being constructed and form part of the cost of the asset. Capitalisation of borrowing costs commences when: |
| Expenditure for the asset and borrowing costs are being incurred; and | ||
| Activities necessary to prepare the asset for its intended use are in progress. |
Capitalisation ceases when the asset is substantially ready for use. If active development is interrupted for an extended period, capitalisation of borrowing costs is suspended. | ||
For borrowing associated with a specific asset, the actual rate on that borrowing is used. Otherwise, a weighted average cost of borrowing is used. |
75
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
2.4 | Summary of significant accounting policies (continued) | |
New standards and interpretations not applied | ||
The International Accounting Standards Board (IASB) and International Financial Reporting International Committee (IFRIC) have issued a number of standards and interpretations with an effective date after the date of these financial statements that have not yet been adopted by the Partnership. Set out below are only those which may have a material impact on the financial statements in future periods: | ||
Amendment to IAS 17 Leases | ||
This amendment is effective for financial periods beginning on or after 1 January 2010 | ||
This amendment deletes much of the existing wording in the standard to the effect all leases of land (where title does not pass) were operating leases. The amendment requires that in determining whether the lease of land (either separately or in combinations with other property) is an operating lease or a finance lease, the same criteria are applied as for any other asset. This may have the impact in future that leases of land will be treated as finance leases rather than operating leases. | ||
Amendment to IAS 24 Related parties | ||
The amendment is expected to be effective for accounting periods beginning after 1 January 2011. | ||
This amendment provides an exemption from disclosure requirements for transactions between entities controlled, jointly controlled or significantly influenced by the same state (state-controlled entities). It also amends the definitions of a related party and of a related party transaction to clarify the intended meaning and remove some inconsistencies. | ||
Amendment to IAS 39 Financial Instruments: Recognition and Measurement eligible hedged items | ||
This amendment was issued in July 2008 and is effective for financial years beginning on or after 1 July 2009. | ||
The amendment addresses the designation of a one-sided risk in a hedged item, and the designation of inflation as a hedged risk or portion in particular situations. The Directors of the General Partner are assessing the impact of this amendment on the Partnership. | ||
Amendment to IAS 39 Financial Instruments: Recognition and Measurement put and call options over subsidiaries | ||
The amendment is expected to be effective for accounting periods beginning after 1 January 2010. | ||
The amendment no longer exempts the recognition of put and call options over subsidiaries. In future periods any open put and call options will be required to be recorded and disclosed. As described in note 12, the Partnerships subsidiaries held under put and call options were disposed of on 1 February 2010 so this amendment will only have an effect if new subsidiaries are subject to put and call options. |
76
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
3. | Property and equipment |
Property and equipment consists of the following at 31 December 2009 (unaudited): |
Furniture | ||||||||||||||||
Land and | and | Construction | ||||||||||||||
buildings | equipment | in progress | Total | |||||||||||||
£ | £ | £ | £ | |||||||||||||
As at 1 January 2009, net of accumulated
depreciation and exchange adjustment |
119,312,733 | 2,811,932 | 89,999,412 | 212,124,077 | ||||||||||||
Additions, including interest capitalised |
1,590,634 | 331,572 | 29,508,332 | 31,403,538 | ||||||||||||
Disposals, net of revaluations
and accumulated depreciation |
(119,292,069 | ) | (2,545,657 | ) | | (121,837,726 | ) | |||||||||
Revaluations |
26,318,388 | | | 26,318,388 | ||||||||||||
Depreciation charge for the year |
(2,543,187 | ) | (1,260,583 | ) | | (3,803,770 | ) | |||||||||
Transfer of net deferred financing costs
to long-term debt* |
| | (901,744 | ) | (901,744 | ) | ||||||||||
Transfer of completed assets |
107,255,397 | 4,639,967 | (111,895,364 | ) | | |||||||||||
As at 31 December 2009, net of accumulated
depreciation and exchange adjustment |
132,641,896 | 3,977,231 | 6,710,636 | 143,329,763 | ||||||||||||
As at 1 January 2009
Cost or fair value |
119,312,733 | 3,280,474 | 89,999,412 | 212,592,619 | ||||||||||||
Accumulated depreciation |
| (468,542 | ) | | (468,542 | ) | ||||||||||
Net carrying amount |
119,312,733 | 2,811,932 | 89,999,412 | 212,124,077 | ||||||||||||
As at 31 December 2009
Cost or fair value |
132,641,896 | 4,974,292 | 6,710,636 | 144,326,824 | ||||||||||||
Accumulated depreciation |
| (997,061 | ) | | (997,061 | ) | ||||||||||
Net carrying amount |
132,641,896 | 3,977,231 | 6,710,636 | 143,329,763 | ||||||||||||
* | Costs incurred in connection with obtaining permanent financing are deferred and amortised over the term of the financing. These costs are capitalised while the asset is being constructed and form part of the costs of the asset. Once the asset is completed and ready for its intended use, the unamortised potion of the deferred financing costs is transferred to long-term debt. |
Construction in progress represents pre-development costs for two communities. Costs to complete construction of two facilities are estimated to be £30 million. |
77
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
3. | Property and equipment (continued) | |
The Partnership engaged Savills Commercial Ltd., an accredited independent valuer, to provide an opinion of the fair value of each of the communities, which were operating as at 31 December 2009, on a freehold basis as a fully equipped operational entity having regard to trading potential in existing use and present condition subject to the management contract in place. Fair value was determined using a discounted cash flow method of valuation assuming reasonable trade build up to future stabilization. Stabilization is generally considered to be the date at which a community is 95% occupied. The directors of the General Partner have also taken into account other market information of which they were aware at the balance sheet date and, consequently, the current fair value of the communities has been based on an internal appraisal, which took account of the valuation provided to the partnership by Savills Commercial Limited, together with observable prices in the market, where these were available. | ||
The date of the valuation was 31 December 2009. | ||
If property and equipment were measured using the cost model, the carrying amounts would be as follows at 31 December 2009 (unaudited): |
Furniture | ||||||||||||
Land and | and | |||||||||||
buildings | equipment | Total | ||||||||||
£ | £ | £ | ||||||||||
Cost |
108,296,792 | 4,974,292 | 113,271,084 | |||||||||
Accumulated depreciation |
(1,973,283 | ) | (997,061 | ) | (2,970,344 | ) | ||||||
Net carrying amount |
106,323,509 | 3,977,231 | 110,300,740 | |||||||||
Five operating facilities with a total carrying amount of £136,619,127 are subject to a first charge to secure the Partnerships long-term debt (note 9). |
78
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
3. | Property and equipment (continued) | |
Property and equipment consists of the following at 31 December 2008 (unaudited): |
Furniture | ||||||||||||||||
Land and | and | Construction | ||||||||||||||
buildings | equipment | in progress | Total | |||||||||||||
£ | £ | £ | £ | |||||||||||||
As at 1 January 2008, net of accumulated
depreciation and exchange adjustment |
109,744,362 | 2,615,795 | 104,344,697 | 216,704,854 | ||||||||||||
Additions, including interest capitalised** |
19,982 | 18,235 | 77,964,422 | 78,002,639 | ||||||||||||
Disposals, net of revaluations
and accumulated depreciation |
(108,442,422 | ) | (2,206,583 | ) | | (110,649,005 | ) | |||||||||
Revaluations* |
32,066,606 | | | 32,066,606 | ||||||||||||
Depreciation charge for the year |
(2,262,721 | ) | (875,002 | ) | | (3,137,723 | ) | |||||||||
Transfer of net deferred financing costs
to long-term debt** |
| | (863,294 | ) | (863,294 | ) | ||||||||||
Transfer of completed assets** |
88,186,926 | 3,259,487 | (91,446,413 | ) | | |||||||||||
As at 31 December 2008, net of accumulated
depreciation and exchange adjustment |
119,312,733 | 2,811,932 | 89,999,412 | 212,124,077 | ||||||||||||
As at 1 January 2008
Cost or fair value |
109,744,362 | 2,973,915 | 104,344,697 | 217,062,974 | ||||||||||||
Accumulated depreciation |
| (358,120 | ) | | (358,120 | ) | ||||||||||
Net carrying amount |
109,744,362 | 2,615,795 | 104,344,697 | 216,704,854 | ||||||||||||
As at 31 December 2008
Cost or fair value |
119,312,733 | 3,280,474 | 89,999,412 | 212,592,619 | ||||||||||||
Accumulated depreciation |
| (468,542 | ) | | (468,542 | ) | ||||||||||
Net carrying amount |
119,312,733 | 2,811,932 | 89,999,412 | 212,124,077 | ||||||||||||
* | In previous years, revaluation surpluses were allocated amongst all categories of property and equipment and transfers of completed assets were included in additions. The net carrying amount of property and equipment remains unchanged. | |
** | Costs incurred in connection with obtaining permanent financing are deferred and amortised over the term of the financing. These costs are capitalised while the asset is being constructed and form part of the costs of the asset. Once the asset is completed and ready for its intended use, the unamortised potion of the deferred financing costs is transferred to long-term debt. |
Construction in progress represents pre-development costs for two communities. Costs to complete construction of six facilities are estimated to be £75 million. |
79
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
3. | Property and equipment (continued) | |
The Partnership engaged Savills Commercial Ltd., an accredited independent valuer, to provide an opinion of the fair value of each of the communities that were operating as at 31 December 2008, on a freehold basis as a fully equipped operational entity having regard to trading potential in existing use and present condition subject to the management contract in place. Fair value was determined using a discounted cash flow method of valuation assuming reasonable trade build up to future stabilization. Stabilization is generally considered to be the date at which a community is 95% occupied. The directors of the General Partner have also taken into account other market information of which they were aware at the balance sheet date and, consequently, the current fair value of the communities has been based on an internal appraisal, which took account of the valuation provided to the partnership by Savills Commercial Limited, together with observable prices in the market, where these were available. | ||
If property and equipment were measured using the cost model, the carrying amounts would be as follows at 31 December 2008 (unaudited): |
Furniture | ||||||||||||
Land and | and | |||||||||||
buildings | equipment | Total | ||||||||||
£ | £ | £ | ||||||||||
Cost |
88,485,233 | 3,280,474 | 91,765,707 | |||||||||
Accumulated depreciation |
(1,239,107 | ) | (468,542 | ) | (1,707,649 | ) | ||||||
Net carrying amount |
87,246,126 | 2,811,932 | 90,058,058 | |||||||||
Nine facilities, four operating and five under development, with a total carrying amount of £210,868,188 are subject to a first charge to secure the Partnerships long-term debt (note 9). |
80
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
3. | Property and equipment (continued) | |
Property and equipment consists of the following at 31 December 2007: |
Furniture | ||||||||||||||||
Land and | and | Construction | ||||||||||||||
Buildings | equipment | in progress | Total | |||||||||||||
£ | £ | £ | £ | |||||||||||||
As at 1 January 2007, net of accumulated
depreciation and exchange adjustment |
194,366,662 | 4,274,093 | 86,644,771 | 285,285,526 | ||||||||||||
Additions, including interest capitalised** |
1,246,318 | 3,017 | 92,775,763 | 94,025,098 | ||||||||||||
Disposals, net of revaluations
and accumulated depreciation |
(193,773,915 | ) | (3,622,963 | ) | | (197,396,878 | ) | |||||||||
Revaluations* |
39,079,729 | | | 39,079,729 | ||||||||||||
Depreciation charge for the year |
(2,317,598 | ) | (1,006,497 | ) | | (3,324,095 | ) | |||||||||
Transfer of net deferred financing costs
to long-term debt** |
| | (964,526 | ) | (964,526 | ) | ||||||||||
Transfer of completed assets** |
71,143,166 | 2,968,145 | (74,111,311 | ) | | |||||||||||
As at 31 December 2007, net of accumulated
depreciation and exchange adjustment |
109,744,362 | 2,615,795 | 104,344,697 | 216,704,854 | ||||||||||||
As at 1 January 2007 Cost or fair value |
194,366,662 | 4,916,153 | 86,644,771 | 285,927,586 | ||||||||||||
Accumulated depreciation |
| (641,985 | ) | | (641,985 | ) | ||||||||||
Exchange adjustment |
| (75 | ) | | (75 | ) | ||||||||||
Net carrying amount |
194,366,662 | 4,274,093 | 86,644,771 | 285,285,526 | ||||||||||||
As at 31 December 2007 Cost or fair value |
109,744,362 | 2,973,915 | 104,344,697 | 217,062,974 | ||||||||||||
Accumulated depreciation |
| (358,120 | ) | | (358,120 | ) | ||||||||||
Net carrying amount |
109,744,362 | 2,615,795 | 104,344,697 | 216,704,854 | ||||||||||||
* | In previous years, revaluation surpluses were allocated amongst all categories of property and equipment and transfers of completed assets were included in additions. The net carrying amount of property and equipment remains unchanged. | |
** | Costs incurred in connection with obtaining permanent financing are deferred and amortised over the term of the financing. These costs are capitalised while the asset is being constructed and form part of the costs of the asset. Once the asset is completed and ready for its intended use, the unamortised potion of the deferred financing costs is transferred to long-term debt. |
Construction in progress represents costs incurred in construction of ten facilities in development or pre-development. Costs to complete construction of these ten facilities are estimated to be £151 million. | ||
The Partnership engaged Savills Commercial Ltd, an accredited independent valuer, to provide an opinion of the fair value of each of the four Communities that were operating as at 31 December 2007, on a freehold basis as a fully equipped operational entity having regard to trading potential in existing use and present condition subject to the management contract in place. Fair value was determined using a discounted cash flow method of valuation assuming reasonable trade build up to future stabilization. Stabilization is generally considered to be the date at which a community is 95% occupied. The date of the valuation was 31 December 2007. |
81
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
3. | Property and equipment (continued) | |
If property and equipment were measured using the cost model, the carrying amounts would be as follows at 31 December 2007: |
Furniture | ||||||||||||
Land and | and | |||||||||||
buildings | equipment | Total | ||||||||||
£ | £ | £ | ||||||||||
Cost |
71,477,319 | 2,973,916 | 74,451,235 | |||||||||
Accumulated depreciation |
(832,008 | ) | (358,120 | ) | (1,190,128 | ) | ||||||
Net carrying amount |
70,645,311 | 2,615,796 | 73,261,107 | |||||||||
In 2006, approximately £3.7 million of land was held under a long-term lease with a term of 125 years and is treated as a capitalised lease. The lease was amortised over 125 years. The land was sold in 2007. |
4. | Assets held for sale |
During 2007, the Partnership sold a parcel of undeveloped land as the Partnership was unable to obtain the required zoning for the development of the land. As at 31 December 2006, the land was classified as assets held for sale with a book value of £4,184,152. The land was subject to a land loan of £1,862,000 with an original maturity date of January 2007 which was extended to May 2007. The Partnership sold the land in May 2007. The Partnership recorded a net loss on this sale of £34,840. |
5. | Sale of subsidiaries |
On 31 July 2007, a subsidiary of the Partnership entered into a Purchase and Sale Agreement with a third party buyer (the Buyer) for the sale of a portfolio of subsidiary companies that own and operate fifteen senior living communities, divided into the Initial Portfolio Members and the Pipeline Portfolio Members. The Initial Portfolio Members included the subsidiary companies that own and operate the senior living communities known as Sunrise of Bassett, Sunrise of Edgbaston, Sunrise of Esher, Sunrise of Fleet, Sunrise of Guildford and Sunrise of Westbourne. The Pipeline Portfolio Members included the subsidiary companies that own and operate the senior living communities known as Sunrise of Bramhall II, Sunrise of Cardiff, Sunrise of Chorleywood, Sunrise of Eastbourne, Sunrise of Mobberley, Sunrise of Solihull, Sunrise of Southbourne, Sunrise of Tettenhall and Sunrise of Weybridge. The sale of the Initial Portfolio Members was completed concurrent with the execution of the Purchase and Sale Agreement for the purchase price of £224.8 million, of which £96.1 million was used to repay long-term debt. The Partnership recorded a net gain on the sale of the Initial Portfolios Members of £106.6 million. The Partnership placed £6.0 million in an escrow account to be used for income support to the Buyer if the net operating income of the six initial communities does not meet specified targets. The Buyer is eligible to receive income support for each of the six communities until each community reaches stabilization, as defined in the Purchase and Sale Agreement. The Partnerships liability to provide income support does not exceed the £6.0 million. At 31 December 2008, the balance in the escrow account for income support was £nil (unaudited) (2007 £4.5 million), which is reflected on the balance sheet in restricted cash and other current liabilities. The remaining net proceeds from the sale of the Initial Portfolio Members were distributed to SHIP and Sunrise LP, with the exception of £4.2 million (unaudited) (2007 £7.1 million) representing a portion of SunCos distribution which is held in a restricted cash account until the termination of the Partnership. | ||
The Purchase and Sale Agreement sets out the Target Completion Date for each Pipeline Portfolio Member. The sale of the first Pipeline Portfolio Members, the subsidiary companies that owned and operated Sunrise of Mobberley, was completed on 31 December 2007 for the purchase price of £30.8 million, of which £20.6 million was used to repay long-term debt. The Partnership recorded a net gain on this sale of £7.9 million during 2007. |
82
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
5. | Sale of Subsidiaries (continued) | |
The Target Completion Dates for the remaining Pipeline Portfolio Members range from January 2009 until January 2010. A Floor Price has been established within the first and second Purchase and Sale Agreement for each of the Pipeline Portfolio Members and this is the consideration received at settlement. A Final Price based on the performance of the communities, is determined at a date subsequent to the sale of each of the Pipeline Portfolio Members based upon specific provisions within the Purchase and Sale Agreement. The Buyer has the right to buy, and the Partnership has the right to require the Buyer to buy, each of the remaining Pipeline Portfolio Members until a date which is 540 days after the Target Completion Date for the specific Pipeline Portfolio Members. At that point, either the Partnership or the Buyer may terminate their rights. If all sales have not been completed by 31 October 2011, then the Partnerships and the Buyers rights under the Purchase and Sale Agreement will terminate. | ||
The results of the subsidiary companies sold in 2007 are presented below: |
2007 | ||||
£ | ||||
Revenue |
18,561,984 | |||
Expenses |
(19,321,416 | ) | ||
Net operating loss |
(759,432 | ) | ||
Other expenses |
(7,137,281 | ) | ||
Book loss before taxes |
(7,896,713 | ) | ||
Taxes payable related to book income: |
||||
Related to pre-tax profit/(loss) |
| |||
Related to gain on disposal |
| |||
Total taxes on book income for the subsidiaries sold |
| |||
The net cash flows incurred by subsidiary companies sold in 2007 are as follows: |
2007 | ||||
£ | ||||
Operating |
(1,182,337 | ) | ||
Investing |
146,018,109 | |||
Financing |
(149,412,223 | ) | ||
Net cash outflow |
(4,576,451 | ) | ||
83
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
5.1 | Sale of Subsidiaries (unaudited) |
On 30 May 2008, the Partnership and the Buyer executed a second purchase and sale agreement to add the subsidiary companies that own and operate Sunrise of Sonning and Sunrise of Beaconsfield to the Pipeline Members. | ||
The remaining net proceeds from the sale of the Mobberley Portfolio Members and additional proceeds from the sale of the Initial Portfolio Members were distributed in 2008 to SHIP and Sunrise LP, with the exception of £1.7 million representing a portion of Sunrise LPs and SunCos distributions which are held in a restricted cash account until the termination of the Partnership or earlier as discussed in note 6. | ||
Four additional Pipeline Members were sold in 2008. On 30 April 2008, the subsidiary companies that owned and operated Sunrise of Solihull were purchased for £22.9 million with £21.1 million of the proceeds being used to repay £15.4 million of outstanding mortgage debt and £5.7 million of the Partnerships unsecured bank debt. On 30 May 2008, the subsidiary companies that owned and operated Sunrise of Cardiff and Sunrise of Chorleywood were purchased for £53.3 million with £49.6 million of the proceeds being used to repay £35.3 million of outstanding mortgage debt and £14.3 million of the Partnerships unsecured bank debt. On 31 October 2008, the subsidiary companies that owned and operated Sunrise of Tettenhall were purchased for £23.0 million with £21.1 million of the proceeds being used to repay £15.4 million of outstanding mortgage debt and £5.7 million of the Partnerships unsecured bank debt. During 2008, the Partnership recorded a net gain on the sale of these four additional Pipeline Members of £26.2 million after paying closing costs of £1.4 million. | ||
The remaining net proceeds from the sale of the Solihull, Cardiff and Chorleywood Pipeline Portfolio Members were distributed to SHIP with the exception of £0.1 million representing a portion of SunCos distribution which is held in a restricted cash account until the termination of the Partnership. | ||
Four additional Pipeline Members were sold in 2009. On 2 January 2009, the subsidiary companies that owned and operated Sunrise of Southbourne were purchased for £29.5 million with £27.4 million of the proceeds being used to repay £20.0 million of outstanding mortgage debt including accrued interest of £0.4 million and £7.4 million of the Partnerships unsecured bank debt including accrued interest of £0.7 million. On 31 March 2009, the subsidiary companies that owned and operated Sunrise of Eastbourne and Sunrise of Weybridge were purchased for £61.1 million with £56.3 million of the proceeds being used to repay £41.1 million of outstanding mortgage debt including accrued interest of £0.4 million and £15.2 million of the Partnerships unsecured bank debt including accrued interest of £1.5 million. On 13 November 2009, the subsidiary companies that owned and operated Sunrise of Bramhall were purchased for £31.6 million with £28.9 million of the proceeds being used to repay £21.0 million of outstanding mortgage debt and £7.9 million of the Partnerships unsecured bank debt including accrued interest of £1.2 million. During 2009, the Partnership recorded a net gain on the sale of these four additional Pipeline Members of £30.8 million after paying closing costs of £1.7 million. The remaining net proceeds from the sale of the Southbourne, Eastbourne and Weybridge Pipeline Portfolio Members were distributed to SHIP and SunCo with the exception of £0.2 million representing a portion of SunCos distribution which is held in a restricted cash account until the termination of the Partnership. |
84
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
5.1 | Sale of Subsidiaries (unaudited) (continued) | |
As described in note 14, the remaining Pipeline Portfolio Members were sold on 1 February 2010. A Floor Price has been established within the first and second Purchase and Sale Agreement for each of the Pipeline Portfolio Members and this is the consideration received at settlement. A Final Price based on the performance of the communities, is determined at a date subsequent to the sale of each of the Pipeline Portfolio Members based upon specific provisions within the Purchase and Sale Agreement. A percentage of the excess (if any) of the Final Price over the Floor Price (Top Up Payment) is to be received by the Partnership. This Top Up Payment is to be reduced by 1) a maximum of £5 million representing additional income support (as defined in the Purchase and Sale Agreement) for the Initial Portfolio Members and 2) a percentage of any potential shortfall between the Final Price and Floor Price (Clawback) specific to two communities in the first Purchase and Sale Agreement only. At 31 December 2008, the Partnership had recorded a financial asset of £15.6 million and corresponding gain for the expected Top Up Payment for the sold Pipeline Portfolio Members. At 31 December 2009, the Partnership decreased the financial asset to £1.3 million and recorded a corresponding loss during the year of £14.3 million. The decrease of the financial asset is a result of under-performance of the communities during 2009 compared to managements forecast at 31 December 2008 and decreases in future forecasted performance of the communities thus reducing the Final Price coupled with an increase in the amount of clawback recognised of £8.7 million now that this can be reliably determined. This financial asset has been recorded at fair value at 31 December 2009 based on managements forecast of future operating results for the communities. | ||
The following table provides the gain recorded from the sale of subsidiaries in the relevant financial year. |
Unaudited | Unaudited | |||||||||||
2009 | 2008 | 2007 | ||||||||||
£ | £ | £ | ||||||||||
Subsidiary companies that owned and operated: | ||||||||||||
Sunrise of Solihull |
1,250 | 5,812,976 | | |||||||||
Sunrise of Cardiff |
3,533 | 6,476,605 | | |||||||||
Sunrise of Chorleywood |
33,456 | 7,136,518 | | |||||||||
Sunrise of Tettenhall |
169,377 | 6,144,089 | | |||||||||
Sunrise of Southbourne |
7,381,414 | | | |||||||||
Sunrise of Weybridge |
8,364,235 | | | |||||||||
Sunrise of Eastbourne |
6,798,994 | | | |||||||||
Sunrise of Bramhall |
7,952,654 | | | |||||||||
Sunrise of Mobberley |
| 366,818 | 7,862,099 | |||||||||
Sunrise of Bristol Leigh Woods |
| | (34,840 | ) | ||||||||
Initial portfolio members |
60,585 | 296,269 | 106,609,893 | |||||||||
Net gain on sale |
30,765,498 | 26,233,275 | 114,437,152 | |||||||||
Any unused accruals estimated at the time of sale are released typically one year after the sale is completed. |
85
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
5.1 | Sale of Subsidiaries (unaudited) (continued) | |
The results of the subsidiary companies sold in 2009 are presented below: |
Unaudited | Unaudited | Unaudited | ||||||||||
2009 | 2008 | 2007 | ||||||||||
£ | £ | £ | ||||||||||
Revenue |
5,223,579 | 11,586,768 | | |||||||||
Expenses |
(6,562,060 | ) | (15,196,193 | ) | (1,896,302 | ) | ||||||
Net operating loss |
(1,338,481 | ) | (3,609,425 | ) | (1,896,302 | ) | ||||||
Other expense |
(1,663,603 | ) | (3,795,197 | ) | (7,064 | ) | ||||||
Book loss before taxes |
(3,002,084 | ) | (7,404,622 | ) | (1,903,366 | ) | ||||||
Taxes payable related to book income: |
||||||||||||
Related to pre-tax profit/(loss) |
| | | |||||||||
Related to gain on disposal |
| | | |||||||||
Total taxes on book income
for the subsidiaries sold |
| | | |||||||||
The net cash flows incurred by the subsidiary companies sold in 2009 are as follows: |
Unaudited | Unaudited | Unaudited | ||||||||||
2009 | 2008 | 2007 | ||||||||||
£ | £ | £ | ||||||||||
Operating |
(3,742,817 | ) | (2,146,447 | ) | 2,580,724 | |||||||
Investing |
101,512,026 | (16,198,750 | ) | (53,863,285 | ) | |||||||
Financing |
(105,672,284 | ) | 23,861,579 | 51,435,225 | ||||||||
Net cash (outflow)/inflow |
(7,903,075 | ) | 5,516,382 | 152,664 | ||||||||
The results of the subsidiary companies sold in 2008 are presented below: |
Unaudited | Unaudited | |||||||
2008 | 2007 | |||||||
£ | £ | |||||||
Revenue |
7,547,877 | 8,045,671 | ||||||
Expenses |
(10,377,255 | ) | (11,236,920 | ) | ||||
Net operating loss |
(2,829,378 | ) | (3,191,249 | ) | ||||
Other expense |
(3,017,506 | ) | (3,016,854 | ) | ||||
Book income/(loss) before taxes |
(5,846,884 | ) | (6,208,103 | ) | ||||
Taxes payable related to book income: |
||||||||
Related to pre-tax profit/(loss) |
| | ||||||
Related to gain on disposal |
| | ||||||
Total taxes on book income for the subsidiaries sold |
| | ||||||
86
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
5.1 | Sale of Subsidiaries (unaudited) (continued) | |
The net cash flows incurred by the subsidiary companies sold in 2008 are as follows: |
Unaudited | Unaudited | |||||||
2008 | 2007 | |||||||
£ | £ | |||||||
Operating |
(3,172,567 | ) | (4,247,679 | ) | ||||
Investing |
85,202,096 | (14,299,095 | ) | |||||
Financing |
(85,079,166 | ) | 20,509,140 | |||||
Net cash (outflow)/inflow |
(3,049,637 | ) | 1,962,366 | |||||
6. | Restricted cash |
The Partnership is holding £6.2 million (unaudited) in restricted cash accounts on behalf of Sunrise LP and SunCo representing undistributed proceeds from sale transactions. In addition, a subsidiary of the Partnership entered into an unsecured debt arrangement in 2007. Proceeds from drawings on the unsecured bank loan (note 9) were distributed to SHIP and partially to Sunrise LP and SunCo. The remaining unsecured debt arrangement proceeds of £8.4 million (unaudited) due to Sunrise LP and SunCo were placed in their respective restricted cash accounts. During 2009, Sunrise LP received distributions of £1.7 million (unaudited) (2008 £0.9 million) (unaudited) from its restricted cash account as permitted by the Partnership Agreement. Interest of £0.2 million (unaudited) was earned on the restricted cash accounts in 2009 (2008 £0.6 million) (unaudited). |
87
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
7. | Affiliate transactions |
The consolidated financial statements include the financial statements of the Partnership and the subsidiaries listed in the following table all drawn up to 31 December 2009 (unaudited) or the date of disposal: |
% equity interest | ||||||||||||
Country of | Unaudited | Unaudited | ||||||||||
Name | incorporation | 2009 | 2008 | |||||||||
PS UK SARL |
Luxembourg | 100 | 100 | |||||||||
Property Companies: |
||||||||||||
Sunrise of Weybridge Limited |
Jersey | 0 | 100 | |||||||||
Sunrise of Bristol Leigh Woods Limited |
Jersey | 100 | 100 | |||||||||
Sunrise of Brooklands Limited |
Jersey | 100 | 100 | |||||||||
Sunrise of Chichester Limited |
Jersey | 100 | 100 | |||||||||
Sunrise of Morningside Limited |
Jersey | 100 | 100 | |||||||||
Sunrise of Sonning Limited |
Jersey | 100 | 100 | |||||||||
Sunrise of Sevenoaks Limited |
Jersey | 100 | 100 | |||||||||
Sunrise of Southbourne Limited |
Jersey | 0 | 100 | |||||||||
Sunrise of Eastbourne Limited |
Jersey | 0 | 100 | |||||||||
Sunrise of Surbiton Limited |
Jersey | 100 | 100 | |||||||||
Sunrise of Winchester Limited |
Jersey | 100 | 100 | |||||||||
Sunrise of Bramhall II Limited |
Jersey | 0 | 100 | |||||||||
Sunrise of Beaconsfield Limited |
Jersey | 100 | 100 | |||||||||
Sunrise of Bagshot II Limited |
Jersey | 100 | 100 | |||||||||
Sunrise of Brighton Limited |
Jersey | 100 | 100 | |||||||||
Operating Companies: |
||||||||||||
Sunrise Operations Weybridge Limited |
England and Wales | 0 | 100 | |||||||||
Sunrise Operations Morningside Limited |
England and Wales | 100 | 100 | |||||||||
Sunrise Operations Sonning Limited |
England and Wales | 100 | 100 | |||||||||
Sunrise Operations Sevenoaks Limited |
England and Wales | 100 | 100 | |||||||||
Sunrise Operations Southbourne Limited |
England and Wales | 0 | 100 | |||||||||
Sunrise Operations Eastbourne Limited |
England and Wales | 0 | 100 | |||||||||
Sunrise Operations Winchester Limited |
England and Wales | 100 | 100 | |||||||||
Sunrise Operations Bramhall II Limited |
England and Wales | 0 | 100 | |||||||||
Sunrise Operations Beaconsfield Limited |
England and Wales | 100 | 100 | |||||||||
Sunrise Operations Bagshot II Limited |
England and Wales | 100 | 100 |
PS UK (Jersey) GP Limited is the ultimate controlling party of the Partnership through the governance of the Board of Directors and Executive Committee. The Board of Directors is appointed by SHIP and Sunrise. The Board of Directors appoints the Executive Committee. All actions of the Executive Committee require the unanimous approval of all members. |
88
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
7. | Affiliate transactions (continued) | |
Other related parties | ||
The following table provides the closing balances for transactions which have been entered into with related parties for the relevant financial year. |
Unaudited | Unaudited | |||||||
2009 | 2008 | |||||||
£ | £ | |||||||
Amounts due to/(from) other related parties: |
||||||||
Sunrise and its wholly owned subsidiaries |
2,671,526 | 5,440,083 | ||||||
General Partner |
| (40,801 | ) | |||||
Home Help Companies: |
||||||||
Sunrise Home Help Bramhall II Limited |
1,150 | 36 | ||||||
Sunrise Home Help Beaconsfield Limited |
| 1,382 | ||||||
Sunrise Home Help Weybridge Limited |
| 4,472 | ||||||
Sunrise Home Help Bagshot II Limited |
1,000 | 1,382 | ||||||
Sunrise Home Help Sonning Limited |
1,150 | 1,382 | ||||||
Sunrise Home Help Southbourne Limited |
| 7,299 | ||||||
Sunrise Home Help Eastbourne Limited |
| 8,441 | ||||||
2,674,826 | 5,423,676 | |||||||
Sunrise and its wholly owned subsidiaries | ||
Subsidiaries of the Partnership have entered into management and development agreements with Sunrise Senior Living Limited (SSL Ltd.), a wholly owned subsidiary of Sunrise, to provide development, design, construction, management, and operational services relating to the facilities in the United Kingdom. The development agreements commenced during 2002 and have been or will be terminated when the facilities open. The management agreements begin when the facilities open and will terminate fifteen years after the facility opens. | ||
Under the development agreements, SSL Ltd., as developer of the properties, will receive development fees equal to 4% of total project costs for each facility and may be eligible to receive a performance fee equal to 1% of total project costs, if certain criteria are met. Total development fees incurred and capitalised by the Partnership in 2009 were £2,381,306 (unaudited) (2008 £4,912,938) (unaudited) (2007 £4,167,787). | ||
Under the management agreements, SSL Ltd., as manager of the properties, will receive management fees equal to 5% 7% of revenues based on facility occupancy levels. Total management fees incurred by the Partnership in 2009 were £550,473 (unaudited) (2008 £489,154) (unaudited) (2007 £775,441). | ||
The Partnership has an amount due to Sunrise and its wholly owned subsidiaries of £2,671,526 (unaudited) as at 31 December 2009 (2008 £5,440,083) (unaudited). This payable relates to the above described transactions as well as other development costs paid by Sunrise on behalf of the Partnership. This payable is due on demand and is non-interest bearing. | ||
General Partner | ||
The General Partner is responsible for managing the Partnership. The Partnership has an amount due from the General Partner of £nil as of 31 December 2009 (unaudited) (2008 £40,801) (unaudited). This receivable relates to costs paid by the Partnership on behalf of the General Partner. This receivable is due on demand and is non-interest bearing. |
89
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
7. | Affiliate transactions (continued) | |
Home Help Companies | ||
Upon opening of each facility, some of the UK Operating Companies have entered into a Domiciliary Care Agreement with their respective Home Help Company, wholly owned subsidiaries of Sunrise, whereby the Home Help Company will provide resident care services for the residents residing in the portion of the facility registered under the Care Standards Act of 2000. In return for this service, the Operating Company will pay the respective Home Help Company a fee equal to £45 per resident day in the first year and an amount to be agreed upon by both parties in the second and subsequent years. Total fees paid to the Home Help Companies in 2009 were £280,080 (unaudited) (2008 £908,419) (unaudited) (2007 £1,717,156). In addition under the terms of the Domiciliary Care Agreement the Operating Company is required to provide working capital to the Home Help Company to cover the service expenses of the community not otherwise collected from the residents. Total working capital reimbursed from the Home Help Companies in 2009 was £534,197 (unaudited) (2008 provided to £633,735) (unaudited) (2007 £468,425). |
8. | Accrued expenses |
Accrued expenses consist of the following: |
Unaudited | Unaudited | |||||||
2009 | 2008 | |||||||
£ | £ | |||||||
Contractor accruals including retainage |
2,143,128 | 5,200,015 | ||||||
Interest payable on mortgage debt |
578,901 | 1,227,288 | ||||||
Interest payable on cash flow hedge |
921,614 | | ||||||
Other accrued expenses |
1,379,738 | 846,472 | ||||||
5,023,381 | 7,273,775 | |||||||
9. | Long-term debt and commitments |
The Partnership has obtained commitments for land loans, construction loans and revolving loans of up to approximately £117.1 million to fund five facilities and future capital transactions (unaudited) (2008 £262.5 million to fund nine facilities and future capital transactions) (unaudited). The loans are for terms between eighteen months and five years and are secured by the facilities. There was £113,810,980 (unaudited) outstanding at 31 December 2009 (2008 £192,767,393) (unaudited). These amounts are net of finance costs of £859,672 (unaudited) at 31 December 2009 (2008 £1,037,973) (unaudited) and include accrued interest of £1,795,628 (unaudited) at 31 December 2009 (2008 £3,303,645) (unaudited). |
90
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
9. | Long-term debt and commitments (continued) | |
Principal maturities of long-term debt as of 31 December 2009 are as follows: |
Unaudited | Unaudited | ||||||||||||||||
Effective | 2009 | 2008 | |||||||||||||||
interest rate % | Maturity | £ | £ | ||||||||||||||
Current |
|||||||||||||||||
£79,282,382 bank loan |
7.87 to 8.25 | 2009-2010 | 15,163,787 | 22,219,514 | |||||||||||||
£21,428,205 bank loan |
LIBOR + 0.85 to LIBOR + 1.50 | 2009-2010 | 20,251,033 | | |||||||||||||
£18,451,680 bank loan |
LIBOR + 1.25 to LIBOR + 1.75 | 2009-2011 | | 435,000 | |||||||||||||
£21,034,664 bank loan |
LIBOR + 1.25 to LIBOR + 1.75 | 2009-2012 | | 240,000 | |||||||||||||
£20,664,096 bank loan |
LIBOR + 1.25 to LIBOR + 1.50 | 2010-2012 | 475,428 | | |||||||||||||
£20,437,698 bank loan |
LIBOR + 1.40 to LIBOR + 1.65 | 2010-2013 | 238,290 | | |||||||||||||
£19,784,870 bank loan |
LIBOR + 2.00 to LIBOR + 2.25 | 2010-2013 | 222,688 | | |||||||||||||
£19,472,082 bank loan |
LIBOR + 0.85 to LIBOR + 1.50 | 2010 | 18,055,278 | | |||||||||||||
54,406,504 | 22,894,514 | ||||||||||||||||
Non-current |
|||||||||||||||||
£79,282,382 bank loan |
7.87 to 8.25 | 2009-2010 | | 21,226,995 | |||||||||||||
£21,428,205 bank loan |
LIBOR + 0.85 to LIBOR + 1.50 | 2009-2010 | | 19,142,573 | |||||||||||||
£18,451,680 bank loan |
LIBOR + 1.25 to LIBOR + 1.75 | 2009 - 2011 | | 17,834,307 | |||||||||||||
£21,034,664 bank loan |
LIBOR + 1.25 to LIBOR + 1.75 | 2009-2012 | | 20,536,964 | |||||||||||||
£20,664,096 bank loan |
LIBOR + 1.25 to LIBOR + 1.50 | 2010-2012 | 19,991,840 | 15,505,120 | |||||||||||||
£20,437,698 bank loan |
LIBOR + 1.40 to LIBOR + 1.65 | 2010-2013 | 20,053,769 | 9,318,827 | |||||||||||||
£19,784,870 bank loan |
LIBOR + 2.00 to LIBOR + 2.25 | 2010-2013 | 19,358,867 | 8,160,044 | |||||||||||||
£19,472,082 bank loan |
LIBOR + 0.85 to LIBOR + 1.50 | 2010 | | 16,490,783 | |||||||||||||
£19,677,500 bank loan |
LIBOR + 1.25 to LIBOR + 2.50 | 2011 | | 19,541,391 | |||||||||||||
£22,252,592 bank loan |
LIBOR + 1.35 to LIBOR + 1.75 | 2011 | | 22,115,875 | |||||||||||||
59,404,476 | 169,872,879 | ||||||||||||||||
£79,282,382 bank loan | ||
This loan is unsecured and has payments beginning May 2008 with the balance scheduled to be repaid in May 2010. As described in note 5, a subsidiary of the Partnership entered into a Purchase and Sale agreement with a third party buyer for the sale of a portfolio of subsidiary companies that own and operate senior living communities. This agreement has enabled the Partnership to draw down this facility which is repayable in tranches within 120 days of each future sale completion. The directors of the General Partner will manage cash flow such that the Partnerships unsecured bank debt and other liabilities are settled in preference to making further distributions, following the receipt of proceeds from future pipeline sales, which in turn trigger part repayment of the unsecured facility as described above. As described in note 14 (unaudited), £15.2 million plus additional accrued interest of £0.1 million of the Partnerships unsecured bank debt was repaid after the year end, following the Sonning and Beaconsfield sale. | ||
£21,428,205 bank loan | ||
This loan is secured by the facility and is repayable in full in November 2010. As described in note 14, this loan was fully repaid after the year end, following the Sonning and Beaconsfield sale. | ||
£18,451,680 bank loan | ||
This loan is secured by the facility and was fully repaid in March 2009. | ||
£21,034,664 bank loan | ||
This loan is secured by the facility and was fully repaid in November 2009. |
91
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
9. | Long-term debt and commitments (continued) | |
£20,664,096 bank loan | ||
This loan is secured by the facility and has bi-annual payments beginning May 2010 and the balance repayable in November 2012. | ||
£20,437,698 bank loan | ||
This loan is secured by the facility and has bi-annual payments beginning December 2010 and the balance repayable in June 2013. | ||
£19,784,870 bank loan | ||
This loan is secured by the facility and has bi-annual payments beginning December 2010 and the balance repayable in June 2013. | ||
£19,472,082 bank loan | ||
This loan is secured by the facility and is repayable in full in November 2010. As described in note 14, this loan was fully repaid after the year end, following the Sonning and Beaconsfield sale. | ||
£19,677,500 bank loan | ||
This loan is secured by the facility and was fully repaid in January 2009. | ||
£22,252,592 bank loan | ||
This loan is secured by the facility and was fully repaid in March 2009. | ||
Commitments | ||
Concurrent with the Partnership entering into the loan agreements with the lenders, Sunrise has also entered into certain guarantee agreements with the lenders related to construction cost overruns and operating deficits for which Sunrise has been paid a fee by the Partnership equal to a percentage of the loan amount. As of 31 December 2009, total annual fees paid and capitalised by the Partnership were £246,963 (unaudited) (2008 £640,890, (unaudited) (2007 £392,584). | ||
Commitments (unaudited) | ||
The Cost Overrun Guarantees commence when construction of the facility commences and terminate when all obligations related to the construction of the facility have been satisfied. Under the Cost Overrun Guarantees, Sunrise agrees to immediately make available to the Partnership funds to cover any cost overruns incurred during the period of construction. These funds are generally advanced to the Partnership as non-interest bearing and subordinate to the claims of the primary lender. | ||
The Operating Deficit Guarantees commence when the facility opens and may be terminated by the lender if the Interest Cover Ratio and Debt Service Cover Ratio (and in some cases the Occupancy level) equals or exceeds the benchmarks determined by the Guarantee Agreements for a specified period of time. Under the Operating Deficit Guarantees, Sunrise agrees to immediately make available to the Partnership funds to cover any operating deficits of the facility. These funds would generally be advanced to the Partnership as non-interest bearing and subordinate to the claims of the primary lender. |
10. | Income taxes |
The Partnership is not a taxable entity since attributes of income and loss pass through pro rata to the partners on their respective income tax returns in accordance with the Partnership Agreement. | ||
The Partnership directly holds the Luxembourg subsidiary, PS UK SARL. PS UK SARL directly holds a number of UK operating companies and Jersey property companies. | ||
For each financial year, PS UK SARL should generally be taxed on its accounting profit according to the general provisions of Luxembourg tax law. However, per the Advanced Taxation Agreement (ATA) agreed with the Luxembourg tax authorities, for each year PS UK SARL need only realise a taxable margin of 0.5% of the Profit Participating Loans principal amount. This amount is then taxed at the appropriate Luxembourg tax rate, 28.59% for 2009 (2008 29.63%) (2007 29.63%). The profit arising in PS UK SARL is attributed to the Partnership via the Profit Participating Loan. |
92
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
10. | Income taxes (continued) | |
Additionally, any capital gain derived from the disposal of the UK operating companies and Jersey property companies is tax exempt in the UK and Jersey. | ||
The UK operating companies are subject to UK corporation tax at 28% for 2009 (2008 28.5%) (2007 30%) on their net trading profits, and the Jersey property companies are subject to UK income tax at 20% for 2009 (reduced from 22% as of 1 April 2008) on profits generated by the Property business as a result of owning land in the UK. | ||
In prior years, the property companies were also subject to tax in Jersey (although double tax relief was available). As of 1 January 2009, Jersey has reduced its income tax rate to zero. | ||
Major components of income for the years ended 31 December are as follows: |
Unaudited | Unaudited | |||||||||||
2009 | 2008 | 2007 | ||||||||||
£ | £ | £ | ||||||||||
Partnership income |
11,940,882 | 9,487,381 | 88,569,571 | |||||||||
PS UK SARL (Luxembourg) (loss)/income |
(4,117,737 | ) | 22,332,797 | 14,774,091 | ||||||||
UK Operating and property companies loss |
(5,753,325 | ) | (6,004,680 | ) | (4,227,699 | ) | ||||||
Jersey Property companies loss |
(1,574,062 | ) | (2,931,177 | ) | (4,179,446 | ) | ||||||
Consolidated net profit before tax |
495,758 | 22,884,321 | 94,936,517 | |||||||||
Unaudited | Unaudited | |||||||||||
2009 | 2008 | 2007 | ||||||||||
£ | £ | £ | ||||||||||
Analysis of tax expense for the |
||||||||||||
Current tax: |
||||||||||||
UK corporation tax |
| | | |||||||||
UK income tax |
174,892 | | | |||||||||
Jersey income tax |
| 4,379 | | |||||||||
Luxembourg tax |
231,700 | 200,000 | 350,000 | |||||||||
Prior year adjustment Jersey income tax |
13 | 1,253 | | |||||||||
Prior year adjustment Luxembourg tax |
(336,900 | ) | | | ||||||||
Total current tax |
69,705 | 205,632 | 350,000 | |||||||||
Deferred tax: |
||||||||||||
UK corporation tax |
| | | |||||||||
UK income tax |
446,174 | | | |||||||||
Jersey income tax |
| | | |||||||||
Luxembourg tax |
79,795 | | | |||||||||
Total deferred tax |
525,969 | | | |||||||||
Income tax expense |
595,674 | 205,632 | 350,000 | |||||||||
As mentioned above, the Partnership is not a taxable entity and so there will be no tax due by the Partnership on this income. |
93
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
10. | Income taxes (continued) | |
The tax on the remaining individual components of profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable as follows: | ||
PS UK SARL (Luxembourg) | ||
The applicable 2009 statutory tax rate for Luxembourg tax on income arising in Luxembourg is 28.59% (2008 29.63%) (2007 29.63%). |
Unaudited | Unaudited | |||||||||||
2009 | 2008 | 2007 | ||||||||||
£ | £ | £ | ||||||||||
Accounting (loss)/profit before tax: |
(4,117,737 | ) | 22,332,797 | 14,774,091 | ||||||||
At statutory tax rate of 28.59% (2008 & 2007 29.63%) |
(1,177,261 | ) | 6,617,208 | 4,377,563 | ||||||||
Adjustments to book income: |
||||||||||||
Losses/(profits) not subject to tax (under ATA) |
1,408,961 | (6,417,208 | ) | (4,027,563 | ) | |||||||
Over provision in prior years |
(336,900 | ) | | | ||||||||
Recognised deferred tax |
79,795 | | | |||||||||
Total tax (credit)/charge |
(25,405 | ) | 200,000 | 350,000 | ||||||||
UK Operating companies | ||
In the UK, the applicable average statutory tax rate for corporation tax in 2009 is 28% (2008 28.5%) (2007 30%). |
Unaudited | Unaudited | |||||||||||
2009 | 2008 | 2007 | ||||||||||
£ | £ | £ | ||||||||||
Accounting loss before tax from property companies: |
(5,753,325 | ) | (6,004,680 | ) | (4,227,699 | ) | ||||||
At blended tax rate of 28% (2008 28.5%) (2007 30%) |
(1,610,931 | ) | (1,711,334 | ) | (1,268,310 | ) | ||||||
Adjustments to book income: |
||||||||||||
Non-deductible expenses |
| | | |||||||||
Under provision in prior years |
| | | |||||||||
Unrecognised tax losses |
1,610,931 | 1,711,334 | 1,268,310 | |||||||||
Total tax charge |
| | | |||||||||
94
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
10. | Income taxes (continued) |
Jersey Property companies |
The applicable 2009 statutory tax rate for income tax on rental income arising in the UK, to a non UK resident is 20% (pre 1 April 2008 the rate was 22%). |
Unaudited | Unaudited | |||||||||||
2009 | 2008 | 2007 | ||||||||||
£ | £ | £ | ||||||||||
Accounting loss before tax from property companies: |
(1,574,062 | ) | (2,931,177 | ) | (4,179,446 | ) | ||||||
At statutory tax rate of 20% (2007 22%) |
(314,812 | ) | (586,235 | ) | (919,478 | ) | ||||||
Adjustments to book income: |
||||||||||||
Non-deductible pre-rental expenses
(mainly project costs not capitalised) |
616,427 | 744,460 | 919,478 | |||||||||
Non-taxable income and gains |
(18,087 | ) | (26,194 | ) | | |||||||
Non-qualifying depreciation |
329,600 | (124,827 | ) | | ||||||||
Utilisation of brought forward pre rental expenses |
(3,607 | ) | (2,825 | ) | | |||||||
Under provision in prior years |
13 | 1,253 | | |||||||||
Unrecognised pre rental expenses carried forward |
11,545 | | | |||||||||
Total tax charge |
621,079 | 5,632 | | |||||||||
Deferred tax |
The operating and property companies had the following deferred tax assets and liabilities at 31 December: |
Unaudited | Unaudited | |||||||
2009 | 2008 | |||||||
£ | £ | |||||||
Deferred tax assets: |
||||||||
UK Operating companies |
||||||||
Tax loss carry-forward |
1,619,339 | 1,896,666 | ||||||
Jersey Property companies |
||||||||
Tax loss carry-forward |
| 5,557 | ||||||
Pre-rental expense carry-forward |
12,090 | 12,579 | ||||||
Total deferred tax assets |
1,631,429 | 1,914,802 | ||||||
Deferred tax liabilities: |
||||||||
UK Operating companies |
| | ||||||
Jersey Property companies |
||||||||
Capital allowances in advance of depreciation |
(446,174 | ) | (274,258 | ) | ||||
PS UK SARL |
||||||||
Minimum remaining taxable margin for 2009 |
(79,795 | ) | | |||||
Total deferred tax liabilities |
(525,969 | ) | (274,258 | ) | ||||
All the deferred tax liabilities have been recognised. |
95
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
10. | Income taxes (continued) |
The deferred tax assets have not been recognised because there is no assurance that adequate profits will be generated in the future to be able to utilise the losses and expenditures carried forward. |
The ending deferred tax balances do not include activity related to the Operating companies and Property companies that were sold into a new venture during 2009 and 2008. These related to Southbourne, Weybridge, Eastbourne, Bramhall, Solihull, Cardiff, Chorleywood, and Tettenhall. At the end of 2009 and 2008 each of the discontinued Operating companies and Property companies were in a tax loss position (see note 5). |
11. | Partners capital |
The Partnership consists of the General Partner, Sunrise LP (20%), SHIP (80%) and SunCo. The General Partner is responsible for the management and control of the business and affairs of the Partnership and has the right to transact business and sign documents in the Partnerships name. The General Partner must obtain the approval of its Board of Directors for certain major actions as defined in the General Partners Shareholders Agreement. |
The Partnership is arranged such that each partners capital account is increased by its proportionate share of net income or any additional capital contributions and is decreased by its proportionate share of net losses or the fair value of any property distributed to such partner. Cash distributed from operations and cash distributed from capital transactions shall be distributed to the partners and partnership interests in the order defined in the Partnership Agreement. |
The partners had initially agreed to contribute £42,500,000 to the Partnership and subsequently increased their commitment to £117,500,000 (unaudited) of which £108,253,698 (unaudited) has been funded through to 31 December 2009 (2008 £99,528,800) (unaudited). | ||
Activity in the individual partners capital accounts was as follows: |
Sunrise LP | SHIP | SunCo | Total | |||||||||||||
£ | £ | £ | £ | |||||||||||||
Balance at 1 January 2007 unaudited |
23,208,305 | 92,833,226 | 1 | 116,041,532 | ||||||||||||
Net profit for the year |
18,917,303 | 75,669,214 | | 94,586,517 | ||||||||||||
Other comprehensive income |
7,709,969 | 30,839,875 | | 38,549,844 | ||||||||||||
Other reserves |
(14,127,340 | ) | (56,509,357 | ) | | (70,636,697 | ) | |||||||||
Contributions |
5,247,452 | 20,989,804 | | 26,237,256 | ||||||||||||
Distributions |
(37,638,798 | ) | (113,064,757 | ) | (8,971,995 | ) | (159,675,550 | ) | ||||||||
Balance at 31 December 2007 |
3,316,891 | 50,758,005 | (8,971,994 | ) | 45,102,902 | |||||||||||
Net profit for the year unaudited |
4,535,738 | 18,142,951 | | 22,678,689 | ||||||||||||
Other comprehensive income unaudited |
5,680,238 | 22,720,950 | | 28,401,188 | ||||||||||||
Other reserves unaudited |
(7,815,946 | ) | (31,263,783 | ) | | (39,079,729 | ) | |||||||||
Contributions unaudited |
2,340,432 | 9,361,724 | | 11,702,156 | ||||||||||||
Distributions unaudited |
(2,178,290 | ) | (14,670,351 | ) | (512,226 | ) | (17,360,867 | ) | ||||||||
Balance at 31 December 2008 unaudited |
5,879,063 | 55,049,496 | (9,484,220 | ) | 51,444,339 | |||||||||||
Net loss for the year unaudited |
(19,983 | ) | (79,933 | ) | | (99,916 | ) | |||||||||
Other comprehensive income unaudited |
5,638,613 | 22,554,453 | | 28,193,066 | ||||||||||||
Other reserves unaudited |
(6,413,224 | ) | (25,652,898 | ) | | (32,066,122 | ) | |||||||||
Contributions unaudited |
1,744,979 | 6,979,919 | | 8,724,898 | ||||||||||||
Distributions unaudited |
(2,036,367 | ) | (4,850,176 | ) | (472,006 | ) | (7,358,549 | ) | ||||||||
Balance at 31 December 2009 unaudited |
4,793,081 | 54,000,861 | (9,956,226 | ) | 48,837,716 | |||||||||||
96
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
12. | Financial risk management objectives and policies |
Interest rate risk |
The main risk arising from the Partnerships long-term debt with floating interest rates is cash flow interest rate risk. The interest rates on these loans are all LIBOR based plus a margin. The margin tends to be the highest during the construction phase, then is reduced during the lease-up phase and is reduced further once a facility reaches stabilization, as defined in the loan documents. |
The Partnership estimates that the fair value of its long-term floating rate debt is approximately equal to its carrying value at 31 December 2009 (unaudited) and 31 December 2008 (unaudited). |
At 31 December 2009, the Partnership had approximately £9 million (unaudited) (2008 £58 million) (unaudited) of floating-rate debt that has not been hedged. Debt incurred in the future also may bear interest at floating rates. Therefore, increases in prevailing interest rates could increase our interest payment obligations, which would negatively impact earnings. For example, a one-percent change in interest rates would increase or decrease annual interest expense by approximately £90,000 (unaudited) (2008 £580,000) (unaudited) based on the amount of floating-rate debt that was not hedged at 31 December 2009. |
Liquidity risk |
The Partnership manages liquidity risk by maintaining flexibility and continuity of funding through the use of bank loans and capital transactions. Following the receipt of proceeds from future pipeline sales (note 5), the directors of the General Partner will manage cash flow such that the Partnerships bank debt and other liabilities are settled in preference to making further distributions. £54.4 million (unaudited) of the Partnerships debt will mature in less than one year at 31 December 2009 (2008 £22.9 million) (unaudited) of which £54.2 million (unaudited) was repaid after the year end, following the Sonning and Beaconsfield sale (note 14). |
The table below summarises the Partnerships financial liabilities at 31 December based on contractual undiscounted payments, including interest. |
As at 31 December 2009 (unaudited) |
Less | Three | |||||||||||||||||||||||
On | than three | to twelve | One to | More than | ||||||||||||||||||||
demand | months | months | five years | five years | Total | |||||||||||||||||||
£ | £ | £ | £ | £ | £ | |||||||||||||||||||
Interest bearing
loans and borrowings |
| 1,015,026 | 55,052,270 | 63,114,611 | | 119,181,907 | ||||||||||||||||||
Trade payables |
53,817 | | | | | 53,817 | ||||||||||||||||||
Accrued expenses |
| 3,483,343 | | | | 3,483,343 | ||||||||||||||||||
Contractor retention |
| 903,299 | 636,739 | | | 1,540,038 | ||||||||||||||||||
53,817 | 5,401,668 | 55,689,009 | 63,114,611 | | 124,259,105 | |||||||||||||||||||
As at 31 December 2008 (unaudited) |
Less | Three | |||||||||||||||||||||||
On | than three | to twelve | One to | More than | ||||||||||||||||||||
demand | months | months | five years | five years | Total | |||||||||||||||||||
£ | £ | £ | £ | £ | £ | |||||||||||||||||||
Interest bearing
loans and borrowings |
| 1,648,546 | 30,791,239 | 186,913,855 | | 219,353,640 | ||||||||||||||||||
Trade payables |
67,498 | | | | | 67,498 | ||||||||||||||||||
Accrued expenses |
| 6,039,089 | | | | 6,039,089 | ||||||||||||||||||
Contractor retention |
| 928,987 | 305,699 | 1,536,911 | | 2,771,597 | ||||||||||||||||||
67,498 | 8,616,622 | 31,096,938 | 188,450,766 | | 228,231,824 | |||||||||||||||||||
97
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
12. | Financial risk management objectives and policies (continued) |
Hedging activities |
Cash flow hedges |
The Partnership manages its exposure to interest rate risk by entering into interest rate swap agreements, in which it exchanges the periodic payments, based on a notional amount and agreed upon fixed interest and variable interest rates. |
At 31 December 2009 (unaudited) and 31 December 2008 (unaudited), the Partnership had an interest rate swap agreement in place with a notional amount of £90,000,000 whereby it pays a fixed rate of interest of 5.36% and receives a variable rate equal to 3-month LIBOR on the notional amount. The swap agreement has a maturity date of 15 January 2011. The swap is being used to hedge the exposure to changes in the variable interest rate on the Partnerships long-term debt. As at 31 December 2009, the fair value of the interest rate swap was £2,320,625 (unaudited) (2008 £4,195,303) (unaudited). |
Foreign currency risk |
Foreign currency risk is the risk that future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Partnerships exposure to the risk of changes in foreign exchange rates relates primarily to the Partnerships foreign cash accounts and payables to related parties. The balances in these foreign currency denominated accounts are minimal. Therefore the Partnerships exposure to foreign currency risk is low and it has not engaged in foreign currency hedging activities. |
Credit risk |
The Partnership has recorded a contingent financial asset representing its contractual right to receive future cash for the previous sales of certain of its subsidiary entities. The future cash is receivable from the counterparty to the Purchase and Sale Agreement as discussed in note 5. The maximum exposure should the counterparty be unable to pay would be the amount of the financial asset recorded of £1,259,306 (unaudited) (2008 £15,552,515) (unaudited). |
There are no other significant concentrations of credit risk within the Partnership. With respect to credit risk arising from cash and restricted cash, the Partnerships exposure to credit risk arises from the default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments. |
Fair value hierarchy (unaudited) |
The Partnership uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique: |
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities |
Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly |
Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data. |
As at 31 December 2009, the Partnership held an interest rate swap with a fair value of £2,320,625 (unaudited) (2008 £4,195,303) (unaudited). The fair value of this interest rate swap is determined using a level 2 technique. |
98
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
12. | Financial risk management objectives and policies (continued) |
Capital management |
The primary objective of the Partnerships capital management is to permit the acquisition and development, construction and operation of approximately twenty-six facilities. As at 31 December 2009, twenty facilities have been fully developed. The Partnership has incurred pre-construction costs on two communities and currently intends to develop these communities when construction financing is available. The Partnership will not pursue developing the four remaining facilities. |
To maintain the capital structure, the Partnership will require additional capital contributions from Sunrise LP and SHIP in accordance with the Limited Partnership agreement to fund the development of the two remaining facilities. Capital contributions for initial investment approval projects are made pursuant to the initial investment proposal approved budget. Capital contributions for final investment approved projects are made pursuant to the approved development budget. Capital contributions are also made for initial site investigation costs as well as other expenses, fees and liabilities that the Partnership may occur. No changes were made in the objectives, policies or processes during the year ended 31 December 2009. | ||
The following table provides the detail of the capital contributions made for the relevant financial year: |
Unaudited | Unaudited | |||||||
2009 | 2008 | |||||||
£ | £ | |||||||
General partnership expenses |
(54,683 | ) | (250,000 | ) | ||||
Initial site investigation costs |
| |||||||
Initial investment approved projects: |
||||||||
Sunrise of Brooklands Limited |
| (77,646 | ) | |||||
Sunrise of Brighton |
5,183,399 | 1,315,706 | ||||||
Sunrise of Surbiton |
160,176 | (53,627 | ) | |||||
Final investment approved projects: |
||||||||
Sunrise of Bramhall II Limited |
56,669 | | ||||||
Sunrise of Cardiff Limited |
| 250,000 | ||||||
Sunrise of Eastbourne Limited |
| 585,439 | ||||||
Sunrise of Sevenoaks Limited |
963,002 | 3,024,593 | ||||||
Sunrise of Solihull Limited |
| 369,231 | ||||||
Sunrise of Southbourne Limited |
| 1,398,049 | ||||||
Sunrise of Tettenhall Limited |
| 1,047,585 | ||||||
Sunrise of Weybridge Limited |
| 501,592 | ||||||
Sunrise of Winchester Limited |
2,416,335 | 3,591,234 | ||||||
8,724,898 | 11,702,156 | |||||||
13. | Pensions and other post-employment benefit plans |
Eligible employees of some of the United Kingdom subsidiaries of the Partnership can participate in a Group Personal Pension Plan (the Plan), which is a money purchase pension plan to help save for retirement. Eligible employees are those who have completed the probationary period, as defined in each employees contract, and have reached age 18. The Plan contains three elements employer-based contributions, equalling a minimum of 3% of eligible pensionable salary; optional member contributions; and mandatory employer matching contributions for managers and senior managers. During 2007, the Partnership contributed £30,069 to the Plan. As at 31 December 2007, all of the subsidiaries that offered the Plan had been sold. |
99
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
14. | Subsequent events after the balance sheet date of 31 December 2009 (unaudited) |
On 15 January 2010, the notional amount of the Partnerships interest rate swap was reduced to £50,000,000. The swap is being used to hedge the exposure to changes in the variable interest rate on the Partnerships long-term debt. The notional amount was reduced in anticipation of £38.3 million of the Partnerships long-term debt being repaid following the Sonning and Beaconsfield sale. |
On 1 February 2010, the subsidiary companies that owned and operated Sunrise of Sonning and Sunrise of Beaconsfield were sold for £61.3 million with £54.2 million of the proceeds being used to repay £38.9 million of outstanding mortgage debt and £15.3 million of the Partnerships unsecured bank debt. A gain of approximately £13.9 million will arise on this sale. |
100
To the Partners of PS Germany Investment (Jersey) Limited Partnership
10 September 2008
101
eight months ended 31 August 2008 (unaudited) and year ended 31 December 2007
Unaudited | ||||||||||||
8 months ended | Year ended | |||||||||||
31 August | 31 December | |||||||||||
2008 | 2007 | |||||||||||
Notes | | | ||||||||||
Operating revenue: |
||||||||||||
Resident fees |
7,580,322 | 6,321,192 | ||||||||||
Rental income |
5 | 4,231,552 | 4,673,335 | |||||||||
Total operating revenue |
11,811,874 | 10,994,527 | ||||||||||
Operating expenses: |
||||||||||||
Facility operating expenses |
13,755,243 | 13,860,525 | ||||||||||
Facility development and pre-rental expenses |
619,524 | 2,707,130 | ||||||||||
General and administrative expenses |
8,044 | 209,777 | ||||||||||
Management fees |
5 | 353,683 | 313,560 | |||||||||
Depreciation |
4 | 3,730,872 | 4,560,805 | |||||||||
Negative fair value movement on property and equipment |
4 | 12,146,724 | 63,613,081 | |||||||||
Total operating expenses |
30,614,090 | 85,264,878 | ||||||||||
Net operating loss |
(18,802,216 | ) | (74,270,351 | ) | ||||||||
Other income/(expenses): |
||||||||||||
Interest income |
130,292 | 2,999 | ||||||||||
Interest expense |
(9,438,235 | ) | (11,265,789 | ) | ||||||||
Foreign exchange loss |
| (712 | ) | |||||||||
Total other income/(expenses) |
(9,307,943 | ) | (11,263,502 | ) | ||||||||
Loss before tax and minority interests |
(28,110,159 | ) | (85,533,853 | ) | ||||||||
Income tax expense |
8 | | | |||||||||
Loss for the period after tax before minority interests |
(28,110,159 | ) | (85,533,853 | ) | ||||||||
Minority interests |
427,944 | 1,544,885 | ||||||||||
Net loss for the period after minority interests |
9 | (27,682,215 | ) | (83,988,968 | ) | |||||||
The accompanying notes form an integral part of these financial statements |
102
at 31 August 2008 (unaudited)
Unaudited | ||||||||
31 August | ||||||||
2008 | ||||||||
Notes | | |||||||
Assets |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
3 | 2,454,693 | ||||||
Accounts receivable |
912,362 | |||||||
Prepaid expenses and other current assets |
268,889 | |||||||
Receivables due from affiliates |
5 | 460,945 | ||||||
Total current assets |
4,096,889 | |||||||
Non current assets |
||||||||
Property and equipment |
4 | 110,473,901 | ||||||
Restricted cash |
7 | 5,863,645 | ||||||
Rent receivable |
5 | 5,772,630 | ||||||
Total non current assets |
122,110,176 | |||||||
Total assets |
126,207,065 | |||||||
Liabilities and partners capital |
||||||||
Current liabilities |
||||||||
Trade payables |
302,821 | |||||||
Accrued expenses |
6 | 1,683,499 | ||||||
Payables due to affiliates |
5 | 19,269,476 | ||||||
Partner loan |
5 | 2,010,000 | ||||||
Current maturities of long-term debt |
7 | 7,845,988 | ||||||
Total current liabilities |
31,111,784 | |||||||
Non current liabilities |
||||||||
Notes payable to affiliates |
5 | 11,070,710 | ||||||
Long-term debt, net of finance costs |
7 | 177,122,051 | ||||||
Total non current liabilities |
188,192,761 | |||||||
Minority interest |
38,844 | |||||||
Partners capital |
9 | (93,136,324 | ) | |||||
Total partners capital |
(93,097,480 | ) | ||||||
Total liabilities and partners capital |
126,207,065 | |||||||
The accompanying notes form an integral part of these financial statements |
103
eight months ended 31 August 2008 (unaudited) and year ended 31 December 2007
Partners | Asset | Foreign | Total | |||||||||||||||||||||||||
capital | Accumulated | revaluation | currency | Partners | Minority | partners | ||||||||||||||||||||||
contributions | deficit | reserve | translation | capital | interests | capital | ||||||||||||||||||||||
| | | | | | | ||||||||||||||||||||||
At 1 January 2007 |
50,409,173 | (31,414,747 | ) | | | 18,994,426 | 2,065,673 | 21,060,099 | ||||||||||||||||||||
Foreign currency
translation |
| | | (545,405 | ) | (545,405 | ) | | (545,405 | ) | ||||||||||||||||||
Total income and expense
for the year recognised
directly in equity |
| | | (545,405 | ) | (545,405 | ) | | (545,405 | ) | ||||||||||||||||||
Loss for the year |
| (83,988,968 | ) | | | (83,988,968 | ) | (1,544,885 | ) | (85,533,853 | ) | |||||||||||||||||
Total income and
expense for the year |
| (83,988,968 | ) | | (545,405 | ) | (84,534,373 | ) | (1,544,885 | ) | (86,079,258 | ) | ||||||||||||||||
Partner contributions |
54,000 | | | | 54,000 | (54,000 | ) | | ||||||||||||||||||||
At 31 December 2007 |
50,463,173 | (115,403,715 | ) | | (545,405 | ) | (65,485,947 | ) | 466,788 | (65,019,159 | ) | |||||||||||||||||
Foreign currency
translation (unaudited) |
| | | 31,838 | 31,838 | | 31,838 | |||||||||||||||||||||
Total income and expense for the period recognised directly in equity (unaudited) |
| | | 31,838 | 31,838 | | 31,838 | |||||||||||||||||||||
Loss for the period (unaudited) |
| (27,682,215 | ) | | | (27,682,215 | ) | (427,944 | ) | (28,110,159 | ) | |||||||||||||||||
Total income and
expense for the period (unaudited) |
| (27,682,215 | ) | | 31,838 | (27,650,377 | ) | (427,944 | ) | (28,078,321 | ) | |||||||||||||||||
Partner contributions (unaudited) |
| | | | | | | |||||||||||||||||||||
At 31 August 2008 (unaudited) |
50,463,173 | (143,085,930 | ) | | (513,567 | ) | (93,136,324 | ) | 38,844 | (93,097,480 | ) | |||||||||||||||||
The accompanying notes form an integral part of these financial statements |
104
eight months ended 31 August 2008 (unaudited) and year ended 31 December 2007
Unaudited | ||||||||||||
8 months ended | Year ended | |||||||||||
31 August | 31 December | |||||||||||
2008 | 2007 | |||||||||||
Notes | | | ||||||||||
Operating activities |
||||||||||||
Loss for the period after tax before minority interests |
(28,110,159 | ) | (85,533,853 | ) | ||||||||
Adjustments to reconcile loss for the period after tax
before minority interests to net cash flows
from operating activities: |
||||||||||||
Net finance costs |
9,307,943 | 11,263,502 | ||||||||||
Negative fair value movement on property and equipment |
12,146,724 | 63,613,081 | ||||||||||
Depreciation |
3,730,872 | 4,560,805 | ||||||||||
Provision for bad debt |
| 31,583 | ||||||||||
Changes in assets and liabilities: |
||||||||||||
Accounts receivable |
(266,778 | ) | (360,651 | ) | ||||||||
Prepaid expenses and other current assets |
(87,947 | ) | 73,048 | |||||||||
Trade payables and accrued expenses |
(291,705 | ) | 130,707 | |||||||||
Rent receivable |
(1,317,735 | ) | (2,156,573 | ) | ||||||||
Net cash flows used in operating activities |
(4,888,785 | ) | (8,378,351 | ) | ||||||||
Investing activities |
||||||||||||
Increase in restricted cash |
(126,372 | ) | (5,737,273 | ) | ||||||||
Purchase of property and equipment |
(2,327,599 | ) | (43,755,464 | ) | ||||||||
Interest paid and capitalised |
(93,281 | ) | (1,235,851 | ) | ||||||||
Repayment/(purchase) of participation rights |
900,000 | (100,000 | ) | |||||||||
Interest received |
130,292 | 2,999 | ||||||||||
Net cash flows used in investing activities |
(1,516,960 | ) | (50,825,589 | ) | ||||||||
Financing activities |
||||||||||||
Contributions by partners |
| 54,000 | ||||||||||
Contributions by minority interests |
| (54,000 | ) | |||||||||
Financing cost paid |
| (430,159 | ) | |||||||||
Net borrowings from/(repayments to) affiliates |
6,802,174 | (3,810,859 | ) | |||||||||
Notes payable to affiliates |
601,414 | 6,808,090 | ||||||||||
Borrowings of long-term debt |
11,012,604 | 143,550,913 | ||||||||||
Repayments of long-term debt |
(2,193,975 | ) | (77,713,608 | ) | ||||||||
Interest paid and expensed |
(8,886,942 | ) | (8,688,172 | ) | ||||||||
Net cash flows from financing activities |
7,335,275 | 59,716,205 | ||||||||||
Net increase/(decrease) in cash and cash equivalents before
effect of exchange rate on cash |
929,530 | 512,265 | ||||||||||
Effect of exchange rate on cash |
(1,100 | ) | (586 | ) | ||||||||
Net increase/(decrease) in cash and cash equivalents |
928,430 | 511,679 | ||||||||||
Cash and cash equivalents at beginning of period |
1,526,263 | 1,014,584 | ||||||||||
Cash and cash equivalents at end of period |
3 | 2,454,693 | 1,526,263 | |||||||||
The accompanying notes form an integral part of these financial statements |
105
for the eight months ended 31 August 2008 (unaudited) and year ended 31 December 2007
1. | Organization |
PS Germany Investment (Jersey) Limited Partnership (the Partnership) was formed under the laws of Jersey, Channel Islands on 31 May 2002, between Sunrise Assisted Living Investment, Inc. (SALII), a wholly owned subsidiary of Sunrise Senior Living, Inc. (Sunrise), Senior Housing Germany Investment Limited Partnership (SHIP), SunCo LLC (SunCo), a wholly owned subsidiary of Sunrise and PS Germany (Jersey) GP Limited (General Partner). On 29 January 2003, SALII transferred its entire interest in the Partnership to Sunrise Senior Living International L.P. (Sunrise LP), a subsidiary of Sunrise. The Partnership was established for the purpose of acquiring land and buildings in order to construct, develop, market, operate, finance and sell assisted living facilities in Germany. As of 31 August 2008, the Partnership has nine operating properties and one parcel of undeveloped land. The facilities will offer accommodation and organize the provision of non-complex medical care services to elderly residents for a monthly fee. The Partnerships services will generally not be covered by health insurance so the monthly fees will be payable by the residents, their family, or another responsible party. The Partnership shall be dissolved on 31 May 2010 unless extended or terminated earlier in accordance with the terms and provisions of the Partnership Agreement. |
On 1 September 2008, Sunrise paid 3,000,000 to SHIP for an option to purchase their entire interest in the Partnership through a two-step transaction. Sunrise exercised its option in January 2009. Also on 1 September 2008, Sunrise entered into an agreement with SHIP whereby Sunrise obtained the sole right to control certain major decisions of the Partnership, including potential restructuring of loans with lenders and pursuing potential sales of the nine communities and the one parcel of undeveloped land in the Partnership. Based on FIN46 of the US Accounting Standards and the transfer of control, the Partnership has been consolidated within the Sunrise Senior Living, Inc. group effective from 1 September 2008. |
These financial statements are as of and from the period ended 31 August 2008 which is the day immediately before the consolidation of the Partnership by Sunrise for financial reporting purposes. |
2.1 | Basis of preparation |
The consolidated financial statements have been prepared on an historical cost basis, except for property and equipment relating to properties operating at the year end, which have been measured at fair value. The consolidated financial statements are presented in Euros. |
Statement of compliance |
The consolidated financial statements of PS Germany Investment (Jersey) Limited Partnership and its subsidiaries have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the International Accounting Standards Board as they apply to the financial statements of the Limited Partnership and its subsidiaries for the eight months ended 31 August 2008. |
Principles of consolidation |
The consolidated financial statements include the financial statements of the Partnership and its wholly owned subsidiary undertakings. The Partnership wholly owns thirteen (unaudited) (2007 thirteen) General Partnerships that in turn own twelve non-wholly owned limited partnerships which the General Partnerships control with the unilateral right and obligation to manage and represent the limited partnerships. These twelve non-wholly owned limited partnerships are also included in the consolidated financial statements of the Partnership as it is the Partnerships policy to consolidate non-wholly owned interests when it holds the unilateral ability to conduct the ordinary course of business of the non-wholly owned interests. The Partnerships wholly owned and non-wholly owned subsidiaries will develop, own and operate assisted living facilities. All significant intercompany accounts and transactions eliminate upon consolidation. |
2.1.1 | Going concern related to the year ended 31 December 2007 |
The consolidated financial statements have been prepared on a going concern basis. As of 31 December 2007, partners capital had a deficit balance of approximately 65 million. This deficit is the result of accumulated operating losses of the Partnership and negative fair value charges related to the property owned by the Partnership. As discussed in notes 5 and 7, Sunrise has provided loans to the Partnership to |
106
for the eight months ended 31 August 2008 (unaudited) and year ended 31 December 2007
2.1 | Basis of preparation (continued) |
2.1.1 | Going concern related to the year ended 31 December 2007 (continued) |
cover operating deficits. Sunrise has also provided guarantees to the third party lenders of the Partnership that they will continue to provide funding for the operating deficits of the Partnership. As of 30 September 2008, the amount of funding provided by Sunrise under these loans and guarantees was approximately 32 million. Sunrise has estimated that they will need to fund an additional 31 million through 2012 until the communities reach stabilization. The General Partner has made recent inquires of Sunrise as the Guarantor to the Partnership to ensure that any guarantees it has given can be met. Sunrise is taking the steps set out below to satisfy this obligation and continues to fund the Partnership as the need arises. |
Sunrise expects to breach certain loan covenants as of 31 December 2008, and accordingly, believes that on 1 January 2009 it will no longer be able to borrow under the existing Bank Credit Facility. |
In the event that Sunrise is unable to obtain revised terms and restructure its Bank Credit Facility by 31 January 2009, or Sunrise fails to comply with the new liquidity covenants included in the July 2008 amendment for any calendar month, the lenders under the amended Bank Credit Facility could, amongst other things, exercise their rights to accelerate the payment of all amounts then outstanding under the amended Bank Credit Facility, exercise remedies against the collateral securing the amended Bank Credit Facility, require Sunrise to replace or provide cash collateral for the outstanding letters of credit or pursue further modification with respect to the amended Bank Credit Facility. |
Sunrise is working with their lenders to revise and restructure their Bank Credit Facility and expect to achieve this restructuring prior to 30 March 2009. Sunrise is also seeking to refine their Bank Credit Facility through new lenders and is discussing their potential sources of capital with other third parties. However, no assurance can be given that Sunrises efforts will be successful. The financial statements have been prepared assuming that Sunrise continues as a going concern and do no include any adjustments that might result from our outcome of this uncertainty. Based on the guarantee of future funding from Sunrise, the General Partner believes it is appropriate to prepare the consolidated financial statements on a going concern basis as of 31 December 2007. |
2.1.2 | Going concern related to the period ended 31 August 2008 (unaudited) |
The consolidated financial statements have been prepared on a going concern basis. As of 31 August 2008, partners capital had a deficit balance of approximately 93 million. This deficit is the result of accumulated operating losses of the Partnership and negative fair value charges related to the property owned by the Partnership. As discussed in notes 5 and 7, Sunrise has provided loans to the Partnership to cover operating deficits. Sunrise has also provided guarantees to the third party lenders of the Partnership. In January 2009, Sunrise disclosed to the General Partner that it would not honor these financial guarantees and would seek to compromise such liabilities. As of 30 September 2008, the amount of funding provided by Sunrise under these loans and guarantees was approximately 32 million. Without these loans and guarantees from Sunrise, the Partnership would not have been in compliance with certain of its debt covenants as of 31 August 2008. |
Sunrise breached certain loan covenants as of 31 December 2008. On 23 March 2009, Sunrise and the lenders under the Bank Credit Facility executed the Eleventh Amendment to the Bank Credit Facility. The purpose of the Amendment is to provide the parties with an additional period of time to negotiate the terms of a twelfth amendment to the Bank Credit Facility which would comprehensively address any remaining issues between the parties with respect to the Bank Credit Facility through the Bank Credit Facilitys current stated maturity date of 2 December 2009, with the desired objective of obtaining the execution of such twelfth amendment prior to the close of business on 30 April 2009. |
The Eleventh Amendment, among other matters, suspends until 1 May 2009 the obligation of the lenders under the Bank Credit Facility to (1) advance any additional proceeds of the loans to the borrowers under the Bank Credit Facility or (2) issue any new letters of credit. However, the lenders agreed to renew certain scheduled outstanding letters of credit in accordance with the annual renewal provisions of such letters of credit. The Amendment also waived compliance with certain financial covenants of the Bank |
107
for the eight months ended 31 August 2008 (unaudited) and year ended 31 December 2007
2.1 | Basis of preparation (continued) |
2.1.2 | Going concern related to the period ended 31 August 2008 (unaudited) (continued) |
Credit Facility through 29 April 2009 and the applicability of certain cross-default provisions through 30 April 2009. |
The Amendment also permanently reduces the aggregate commitments of the lenders under the Bank Credit Facility from $160 million to $118.0 million (outstanding borrowings of $93.5 million plus outstanding letters of credit of $24.5 million). |
Sunrise previously disclosed in its Form 10-K for the year ended 31 December 2008 that it believed its expected cash balances and expected cash flow would be sufficient to enable it to meet its obligations only through 31 March 2009. Based on revised cash flow forecasts as well as a result of the cash proceeds from the 18 March 2009 sale of Sunrises Greystone subsidiary, Sunrise currently expects that its cash balances and expected cash flow will be sufficient to operate and meet its obligations through 30 April 2009. However, Sunrise does not expect to be in compliance with the financial covenants in the Credit Agreement on 30 April 2009, which is the day following the date on which the waiver of certain financial covenants set forth in the Bank Credit Facility expires. Unless a subsequent waiver is granted, failure to comply with the financial covenants on 30 April 2009 would constitute an event of default under the Bank Credit Facility that would allow the lenders to exercise certain remedies after the expiration of any applicable grace period. In the event of an acceleration of the Bank Credit Facility, Sunrise may not be able to fully repay its outstanding borrowings. |
The financial statements have been prepared assuming that the Partnership and Sunrise continue as a going concern and do not include any adjustments that might result from the outcome of this uncertainty. The conditions described above raise substantial doubt about the Partnerships and Sunrises ability to continue as a going concern. |
2.2 | Changes in accounting policies |
During the eight month period ended 31 August 2008 the Partnership has not adopted any new accounting policies which were not in place as at 31 December 2007 and for the year then ended. |
2.3 | Significant accounting judgement and estimates |
Judgements |
In the process of applying the Partnerships accounting policies, management has made the following judgements, apart from those involving estimation, which have the most significant effect on the amounts recognised in the financial statements: |
Operating lease commitments partnership as lessor |
The Partnership has entered into commercial property leases on its property portfolio. The Partnership has determined that it retains all the significant risks and rewards of ownership of these properties, a portion of which are leased on operating sub-leases. |
Estimation uncertainty |
The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. |
Deferred tax assets |
Deferred tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgment is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies. The carrying value of recognised tax losses at 31 August 2008 was nil (unaudited) and the |
108
for the eight months ended 31 August 2008 (unaudited) and year ended 31 December 2007
unrecognised tax losses at 31 August 2008 was 90 million (unaudited). Further details are contained in note 8. |
2.4 | Summary of significant accounting policies |
Cash and cash equivalents |
On the balance sheet and for purposes of the statement of cash flows, cash and cash equivalents consist of balances held by financial institutions. The Partnership considers all highly liquid temporary cash investments with an original maturity of three months or less when purchased to be cash equivalents. |
Property and equipment |
Property and equipment is initially recorded at cost and includes interest and property taxes capitalised on long-term construction projects during the construction period, as well as pre-acquisition and other costs directly related to the acquisition, development and construction of facilities. Costs that do not directly relate to acquisition, development and construction of the facility are expensed as incurred. If a project is abandoned any costs previously capitalised are expensed. Maintenance and repairs are charged to expense as incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets. Buildings are depreciated over 40 years. Furniture and equipment is depreciated over 3 to 10 years. |
Following initial recognition at cost, property and equipment is carried at a revalued amount, which is the fair value at the date of the revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment losses. All categories of property and equipment are revalued simultaneously. Therefore, any fair value surplus or deficit has been apportioned between all categories in relation to cost or brought forward carrying amounts. |
Any revaluation surplus is credited to the individual partners capital account included in the partners capital section of the balance sheet, except to the extent that it reverses a revaluation decrease of the same asset previously recognised in profit or loss, in which case the increase is recognised in profit or loss. A revaluation deficit is recognised in profit or loss, except that a deficit directly offsetting a previous surplus on the same asset is directly offset against the surplus in the asset revaluation reserve. |
Accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. Upon disposal, any revaluation reserve relating to the particular asset being sold is transferred to accumulated deficit. |
Valuations are performed frequently enough to ensure that the fair value of a revalued asset does not differ materially from its carrying amount. |
Based on independent valuations, a negative fair value deficit was recorded as of 31 August 2008 and 31 December 2007. |
Impairment of non-financial assets |
Non-financial assets are reviewed for indications of impairment whenever events or circumstances indicate that the assets discounted expected cash flows are not sufficient to recover its carrying amount. The Partnership measures an impairment loss by comparing the fair value of the asset to its carrying amount. Fair value of an asset is calculated as the present value of expected future cash flows. |
Restricted cash |
Cash that is pledged or is subject to withdrawal restrictions has been separately identified on the balance sheet as restricted cash. |
Leases |
Leases where the Partnership retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. |
109
for the eight months ended 31 August 2008 (unaudited) and year ended 31 December 2007
2.4 | Summary of significant accounting policies (continued) |
Revenue recognition | ||
Operating revenue consists of resident fee revenue and rental income. Resident fee revenue is recognised monthly as services are rendered. Agreements with residents are generally for a term of one year and are cancellable by residents with thirty days notice. Rental income arising on the facilities is accounted for on a straight-line basis over the lease terms on ongoing leases (note 5). | ||
Interest income is recognised as interest accrues. | ||
Operating expenses | ||
Operating expenses consist of: |
| Facility operating expenses including labour, food, marketing and other direct costs of operating the communities. | ||
| Facility development and pre-rental expenses associated with the development and marketing of communities prior to opening. | ||
| General and administrative expenses related to costs of the Partnership itself. | ||
| Management fees paid to a subsidiary of Sunrise for managing the communities (note 5). |
Taxes | ||
Income and corporation taxes | ||
No provision for income or corporation taxes has been included in the accompanying financial statements, as all attributes of income and loss pass through pro rata to the partners on their respective income tax returns in accordance with the Partnership Agreement. | ||
Sales taxes | ||
Revenue, expenses and assets are recognised net of the amount of sales tax except: |
| where the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and | ||
| receivables and payables that are stated with the amount of sales tax included. |
The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet. | ||
Deferred income tax | ||
Deferred income tax is provided using the liability method on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. However, as note 8 indicates, the net deferred tax assets have not been recognised, because there is no assurance that enough profits will be generated in the future to be able to utilise the losses and expenditures carried forward. Accordingly, no provision for income taxes has been included in these financial statements, and there are no current or deferred income taxes. | ||
Deferred income tax liabilities are recognised for all taxable temporary differences, except: |
| where the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and |
110
for the eight months ended 31 August 2008 (unaudited) and year ended 31 December 2007
2.4 | Summary of significant accounting policies (continued) |
Deferred income taxes (continued) |
| in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. |
Deferred income tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised except: |
| where the deferred income tax asset relating to the deductible temporary differences arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and | ||
| in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred income tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised. |
The carrying amount of deferred income tax assets is reviewed each balance sheet date. Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. | ||
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on the tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. | ||
Deferred income tax relating to items recognised directly in equity is recognised in equity and not in the income statement. | ||
Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the same taxation authority. |
Foreign currency translation | ||
The consolidated financial statements are presented in Euros, which is the Partnerships functional and presentational currency. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the balance sheet date. All differences are taken to profit or loss. Non monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transaction. | ||
Borrowing costs | ||
Borrowing costs are generally expensed as incurred. Borrowing costs which are directly attributable to the construction of an asset are capitalised while the asset is being constructed and form part of the cost of the asset. Capitalisation of borrowing costs commences when: |
| Expenditure for the asset and borrowing costs are being incurred; and | ||
| Activities necessary to prepare the asset for its intended use are in progress. |
Capitalisation ceases when the asset is substantially ready for use. If active development is interrupted for an extended period, capitalisation of borrowing costs is suspended. |
111
for the eight months ended 31 August 2008 (unaudited) and year ended 31 December 2007
2.4 | Summary of significant accounting policies (continued) |
Borrowing costs (continued) | ||
For borrowing associated with a specific asset, the actual rate on that borrowing is used. Otherwise, a weighted average cost of borrowing is used. | ||
New standards and interpretations not applied | ||
The International Accounting Standards Board (IASB) and International Financial Reporting International Committee (IFRIC) have issued the following standards and interpretations with effective dates after the date of these financial statements that have not yet been adopted by the group: |
IASB (IAS / IFRSs) | Effective date | |
IFRS 1 and IAS 27 Amendment Cost of investment in a Subsidiary,
Jointly Controlled Entity or Associate
|
1 January 2009 | |
IFRS 2 Amendment to IFRS 2 Vesting Conditions and Cancellations
|
1 January 2009 | |
IFRS 3 Business Combinations (revised January 2008)
|
1 July 2009 | |
IFRS 8 Operating Segments
|
1 January 2009 | |
IAS 1 Presentation of Financial Statements (revised September 2007)
|
1 January 2009 | |
IAS 23 Borrowing Costs (revised March 2007)
|
1 January 2009 | |
IAS 27 Consolidated and Separate Financial Statements (revised January 2008)
|
1 July 2009 | |
IAS 32 and IAS 1 Financial Instruments Puttable at Fair Value
and Obligations arising on Liquidation
|
1 January 2009 | |
IAS 39 Eligible Hedged Items
|
1 January 2009 | |
Improvements to IFRS
|
Various dates |
IFRIC | Effective date | |
IFRIC 13 Customer Loyalty Programmes
|
1 July 2008 | |
IFRIC 15 Agreements for construction of real estate
|
1 January 2009 | |
IFRIC 16 Hedges of a net investment in a foreign operation
|
1 October 2008 | |
IFRIC 17 Distributions of Non-cash asset to Owners
|
1 July 2009 |
The Directors of the General Partner do not anticipate that the adoption of these standards and interpretations will have a material impact on the Partnerships financial statements in the period of initial application. | ||
IAS 23 has been revised to require capitalisation of borrowing costs when such costs relate to a qualifying asset. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale. The group already capitalizes borrowing costs in certain circumstances as disclosed in the accounting policies. | ||
Whilst the revised IAS 1 will have no impact on the measurement of the Partnerships results or net assets it may result in certain changes in the presentation of the Partnerships financial statements from 2009 onwards. |
112
for the eight months ended 31 August 2008 (unaudited) and year ended 31 December 2007
3. | Cash and cash equivalents |
Unaudited | ||||
31 August | ||||
2008 | ||||
| ||||
Cash at banks and on hand |
2,454,693 | |||
2,454,693 | ||||
Cash at banks earns interest at floating rates based on daily bank deposit rates. |
4. | Property and equipment |
Property and equipment consists of the following at 31 August 2008 (unaudited): |
Furniture | ||||||||||||||||
Land and | and | Construction | ||||||||||||||
buildings | equipment | in progress | Total | |||||||||||||
| | | | |||||||||||||
As at 1 January 2008, net of
accumulated depreciation |
91,311,548 | 7,258,702 | 25,725,642 | 124,295,892 | ||||||||||||
Additions, including interest capitalised |
22,052,409 | 1,912,847 | (21,544,376 | ) | 2,420,880 | |||||||||||
Revaluations |
(7,904,229 | ) | (426,504 | ) | (3,815,991 | ) | (12,146,724 | ) | ||||||||
Depreciation charge for the year |
(2,358,179 | ) | (1,372,693 | ) | | (3,730,872 | ) | |||||||||
Transfer of net deferred financing costs |
| | (365,275 | ) | (365,275 | ) | ||||||||||
As at 31 August 2008, net of
accumulated depreciation |
103,101,549 | 7,372,352 | | 110,473,901 | ||||||||||||
As at 1 January 2008 cost or fair value |
96,264,542 | 9,982,895 | 25,725,642 | 131,973,079 | ||||||||||||
Accumulated depreciation |
(4,952,994 | ) | (2,724,193 | ) | | (7,677,187 | ) | |||||||||
Net carrying amount |
91,311,548 | 7,258,702 | 25,725,642 | 124,295,892 | ||||||||||||
As at 31 August 2008 cost or fair value |
110,412,722 | 11,469,238 | | 121,881,960 | ||||||||||||
Accumulated depreciation |
(7,311,173 | ) | (4,096,886 | ) | | (11,408,059 | ) | |||||||||
Net carrying amount |
103,101,549 | 7,372,352 | | 110,473,901 | ||||||||||||
The Partnership has determined that the valuations prepared by Savills Commercial Ltd as of 31 December 2007 for seven of the eight operating properties continue to be representative of fair value as of 31 August 2008 as the operating results of the seven operating properties through 31 August 2008 have not significantly differed from the operating forecasts provided when the valuations were performed. The negative revaluation for the eight months ended 31 August 2008 results from the valuation of the ninth community that opened in February 2008, the updated valuation (prepared by Savills Commercial Ltd as of 30 September 2008) for one operating property and the valuation of a piece of land that the Partnership has decided it will not develop. The market value for the land was based on market-based evidence as of 31 August 2008. |
113
for the eight months ended 31 August 2008 (unaudited) and year ended 31 December 2007
4. | Property and equipment (continued) |
If property and equipment were measured using the cost model, the carrying amounts would be as follows at 31 August 2008 (unaudited): |
Furniture | ||||||||||||||||
Land and | and | Construction | ||||||||||||||
buildings | equipment | in progress | Total | |||||||||||||
| | | | |||||||||||||
Cost |
189,004,152 | 15,411,617 | 3,965,991 | 208,381,760 | ||||||||||||
Accumulated depreciation |
(7,311,173 | ) | (4,096,886 | ) | | (11,408,059 | ) | |||||||||
Net carrying amount |
181,692,979 | 11,314,731 | 3,965,991 | 196,973,701 | ||||||||||||
Nine facilities and one parcel of undeveloped land, with a total carrying amount, under the cost model, of 197 million are subject to a first charge to secure the Partnerships long-term debt (note 7). | ||
Property and equipment consists of the following at 31 December 2007: |
Furniture | ||||||||||||||||
Land and | and | Construction | ||||||||||||||
buildings | equipment | in progress | Total | |||||||||||||
| | | | |||||||||||||
As at 1 January 2007, net of
accumulated depreciation |
85,589,031 | 6,622,089 | 56,762,644 | 148,973,764 | ||||||||||||
Additions, including interest capitalised |
68,688,800 | 5,844,216 | (29,541,701 | ) | 44,991,315 | |||||||||||
Revaluations |
(60,014,126 | ) | (3,598,955 | ) | | (63,613,081 | ) | |||||||||
Depreciation charge for the year |
(2,952,157 | ) | (1,608,648 | ) | | (4,560,805 | ) | |||||||||
Transfer of net deferred financing costs |
| | (1,495,301 | ) | (1,495,301 | ) | ||||||||||
As at 31 December 2007, net of
accumulated depreciation |
91,311,548 | 7,258,702 | 25,725,642 | 124,295,892 | ||||||||||||
Construction in progress represents costs incurred in construction of two facilities in development or pre-development. Costs to complete construction of the two facilities are estimated to be 26 million. One of the facilities was completed in February 2008. The Partnership has not decided whether it intends to complete development of the remaining facility. |
114
for the eight months ended 31 August 2008 (unaudited) and year ended 31 December 2007
4. | Property and equipment (continued) |
The Partnership engaged Savills Commercial Ltd, an accredited independent valuer, to provide an opinion of the fair value of each of the eight communities that were operating as of 31 December 2007, on a freehold basis as a fully equipped operational entity having regard to trading potential in existing use and present condition subject to the management contract in place. Fair value was determined using a discounted cash flow method of valuation assuming reasonable trade build up to future stabilization. Stabilization is considered by the directors to be the date at which a community is 95% occupied which usually occurs 12 to 18 months after opening. The date of the revaluation was 31 December 2007. An independent valuation was also obtained for a parcel of undeveloped land. Fair value was determined by reference to market-based evidence. The date of the valuation was 31 December 2006. For 2007, management has determined the fair value of the undeveloped land has not materially differed from the valuation at 31 December 2006. |
115
for the eight months ended 31 August 2008 (unaudited) and year ended 31 December 2007
5. | Affiliate transactions |
The consolidated financial statements include the financial statements of the Partnership and the subsidiary undertakings listed in the following table, all drawn up to 31 August 2008: |
% equity interest | ||||||||||||
Unaudited | ||||||||||||
Country of | 31 Aug | 31 Dec | ||||||||||
Name | incorporation | 2008 | 2007 | |||||||||
PS Assisted Living SARL |
Luxembourg | 100 | 100 | |||||||||
Sunrise Properties Germany GmbH |
Germany | 100 | 100 | |||||||||
PSRZ (Germany) GP GmbH |
Germany | 100 | 100 | |||||||||
General Partners: |
||||||||||||
PSRZ Klein Flottbek GmbH |
Germany | 100 | 100 | |||||||||
PSRZ Reinbek GmbH |
Germany | 100 | 100 | |||||||||
PSRZ Villa Camphausen GmbH |
Germany | 100 | 100 | |||||||||
PSRZ Frankfurt-Westend GmbH |
Germany | 100 | 100 | |||||||||
PSRZ Oberursel GmbH |
Germany | 100 | 100 | |||||||||
PSRZ Wiesbaden GmbH |
Germany | 100 | 100 | |||||||||
PSRZ Hannover GmbH |
Germany | 100 | 100 | |||||||||
PSRZ Munchen-Thalkirchen GmbH |
Germany | 100 | 100 | |||||||||
PSRZ Konigstein GmbH |
Germany | 100 | 100 | |||||||||
PSRZ Meerbusch GmbH |
Germany | 100 | 100 | |||||||||
PSRZ Ratingen-Hosel GmbH |
Germany | 100 | 100 | |||||||||
PSRZ Bad Soden GmbH |
Germany | 100 | 100 | |||||||||
Property Companies: |
||||||||||||
Sunrise Klein Flottbek Senior Living GmbH & Co. KG |
Germany | 94 | 94 | |||||||||
Sunrise Reinbek Senior Living GmbH & Co. KG |
Germany | 94 | 94 | |||||||||
Sunrise Villa Camphausen Senior Living GmbH & Co. KG |
Germany | 94 | 94 | |||||||||
Sunrise Frankfurt-Westend Senior Living GmbH & Co. KG |
Germany | 94 | 94 | |||||||||
Sunrise Oberursel Senior Living GmbH & Co. KG |
Germany | 94 | 94 | |||||||||
Sunrise Wiesbaden Senior Living GmbH & Co. KG |
Germany | 94 | 94 | |||||||||
Sunrise Hannover Senior Living GmbH & Co. KG |
Germany | 94 | 94 | |||||||||
Sunrise Munchen-Thalkirchen Senior Living GmbH & Co. KG |
Germany | 94 | 94 | |||||||||
Sunrise Konigstein Senior Living GmbH & Co. KG |
Germany | 94 | 94 | |||||||||
Sunrise Meerbusch Senior Living GmbH & Co. KG |
Germany | 94 | 94 | |||||||||
Sunrise Ratingen-Hosel Senior Living GmbH & Co. KG |
Germany | 94 | 94 | |||||||||
Sunrise Bad Soden Senior Living GmbH & Co. KG |
Germany | 94 | 94 | |||||||||
Operating Companies: |
||||||||||||
Sunrise Klein Flottbek GmbH |
Germany | 100 | 100 | |||||||||
Sunrise Reinbek GmbH |
Germany | 100 | 100 | |||||||||
Sunrise Villa Camphausen GmbH |
Germany | 100 | 100 | |||||||||
Sunrise Frankfurt-Westend GmbH |
Germany | 100 | 100 | |||||||||
Sunrise Oberursel GmbH |
Germany | 100 | 100 | |||||||||
Sunrise Wiesbaden GmbH |
Germany | 100 | 100 | |||||||||
Sunrise Hannover GmbH |
Germany | 100 | 100 | |||||||||
Sunrise Munchen-Thalkirchen GmbH |
Germany | 100 | 100 | |||||||||
Sunrise Konigstein GmbH |
Germany | 100 | 100 |
PS Germany (Jersey) GP Limited is the ultimate controlling party of the Partnership through the governance of the Board of Directors and Executive Committee. The Board of Directors is appointed by SHIP and Sunrise. The Board of Directors appoints the Executive Committee. All actions of the Executive Committee require the unanimous approval of all members. |
116
for the eight months ended 31 August 2008 (unaudited) and year ended 31 December 2007
5. | Affiliate transactions (continued) |
Other related parties | ||
The following table provides the closing balances as at 31 August 2008 for transactions which have been entered into with related parties for the relevant financial period. |
Unaudited | ||||
31 August | ||||
2008 | ||||
| ||||
Amounts due from other related parties |
||||
General Partner |
||||
PS Germany (Jersey) GP Limited |
40,853 | |||
Care Companies: |
||||
Sunrise Klein Flottbek Pflege GmbH |
38,521 | |||
Sunrise Villa Camphausen Pflege GmbH |
29,114 | |||
Sunrise Frankfurt-Westend Pflege GmbH |
59,553 | |||
Sunrise Oberursel Pflege GmbH |
63,372 | |||
Sunrise Wiesbaden Pflege GmbH |
102,049 | |||
Sunrise Munchen-Thalkirchen Pflege GmbH |
110,492 | |||
Sunrise Hannover Pflege GmbH |
16,991 | |||
460,945 | ||||
Amounts due to other related parties |
||||
Sunrise and its wholly owned subsidiaries |
19,127,319 | |||
Care Companies: |
||||
Sunrise Reinbek Pflege GmbH |
12,244 | |||
Sunrise Konigstein Pflege GmbH |
129,913 | |||
19,269,476 | ||||
Sunrise and its wholly owned subsidiaries | ||
Subsidiaries of the Partnership have entered into management and development agreements with Sunrise Senior Living Germany GmbH (SSL Germany), a wholly owned subsidiary of Sunrise, to provide development, design, construction, management, and operational services relating to the facilities in Germany. The development agreements commenced during 2002 and have or will terminate when the facilities open. The management agreements begin when the facilities open and will terminate fifteen years after the facility opens. | ||
Under the development agreements, SSL Germany, as developer of the properties, will receive development fees equal to 4% of total project costs for each facility and may be eligible to receive a performance fee equal to 1% of total project costs, if certain criteria are met. Total development fees incurred and capitalised by the Partnership for the eight months ended 31 August 2008 were nil (unaudited) (year ended 31 December 2007 1,492,881). | ||
Under the management agreements, SSL Germany, as manager of the properties, will receive management fess equal to 5% 7% of revenues based on facility occupancy levels. Total management fees incurred by the Partnership for the eight months ended 31 August 2008 were 353,683 (unaudited) (year ended 31 December 2007 313,560). | ||
The Partnership has an amount due to Sunrise and its wholly owned subsidiaries of 19,127,319 as of 31 August 2008 (unaudited). This payable relates to the above described transactions as well as other development and operating costs paid by Sunrise on behalf of the Partnership. This payable is due on demand and is non-interest bearing. |
117
for the eight months ended 31 August 2008 (unaudited) and year ended 31 December 2007
5. | Affiliate transactions (continued) |
General Partner | ||
The General Partner is responsible for managing the Partnership. The Partnership has an amount due from the General Partner of 40,853 as of 31 August 2008 (unaudited). This receivable relates to costs paid by the Partnership on behalf of the General Partner. This receivable is due on demand and is non-interest bearing. | ||
Care Companies | ||
Upon opening of each facility, each of the German Operating Companies has entered into a Service Agreement with their respective Care Companies, wholly owned subsidiaries of Sunrise LP, whereby the Care Company will provide emergency resident care services for the residents residing in a portion of the facility. Total amounts paid to the Care Companies for the eight months ended 31 August 2008 were 478,479 (unaudited) (year ended 31 December 2007 401,414), representing the net profit on the services provided. In addition under a second Service Agreement the Operating Company will provide non-care resident services for the residents residing in a portion of the facility. Total fees received by the Operating Companies for the eight months ended 31 August 2008 were 1,576,759 (unaudited) (year ended 31 December 2007 1,033,587) representing the net profit on the services provided. | ||
Rent receivable and rental income | ||
Upon the opening of each facility, each of the Care Companies enters into subleases for a portion of each facility under a twenty-five year sublease with their respective Operating Company. Total rental income received by the Partnership for the eight months ended 31 August 2008 was 4,231,552 (unaudited) (year ended 31 December 2007 4,673,335). The subleases may include an abatement of all or a portion of the first years rent. The excess of rents accrued over the amounts contractually due pursuant to the underlying leases is recorded as rent receivable on the consolidated balance sheet. | ||
Future minimum lease payments to be received under nine subleases as of 31 August 2008 are as follows: |
Unaudited | ||||
31 August | ||||
2008 | ||||
| ||||
Within one year |
6,349,372 | |||
Within one to two years |
6,349,372 | |||
Within two to three years |
6,349,372 | |||
Within three to four years |
6,349,372 | |||
Within four to five years |
6,349,372 | |||
After five years |
114,639,600 | |||
146,386,460 | ||||
Further, rent receivable, which represents the excess of the rent income accrued over the amount contractually due, will be paid commencing from the second year of the lease and will be fully paid by the last year of the lease. As of 31 August 2008, 179,129 (unaudited) of the rent receivable will be received in the next 12 months. Total rent receivable for the eight months ended 31 August 2008 was 5,772,630 (unaudited) (year ended 31 December 2007 4,454,895). |
118
for the eight months ended 31 August 2008 (unaudited) and year ended 31 December 2007
5. | Affiliate transactions (continued) |
Participation rights | ||
A subsidiary of the Partnership entered into Participation Rights Agreements with nine of the Care Companies. These agreements grant the Partnership a share in the profits of the Care Companies. The Partnership paid nil (unaudited) in 2008 and 100,000 in 2007, the nominal value of the Participation Rights, which will be repaid at the end of the Participation Rights Agreement. These agreements will terminate in accordance with the terms of the Participation Rights Agreements. The share of profits received by the Partnership for the eight months ended 31 August 2008 was nil (unaudited) (year ended 31 December 2007 nil). In June 2008, the Participation Rights Agreements were terminated and the Participation Rights were repaid to the Partnership. | ||
Partner loan | ||
Under the terms of the Partnership Agreement, Sunrise LP and SHIP have provided loans to the Partnership. The loans are unsecured, non-interest bearing and are repayable from available cash from operations or capital transactions. In September 2008, these loans were repaid to Sunrise LP and SHIP. | ||
Notes payable to affiliates | ||
In December 2005, a subsidiary of the Partnership entered into a subordinate loan agreement with Sunrise LP to fund the operating deficits of the facilities up to 10 million. Interest accrues at EURIBOR plus 4.25% on the subordinated debt and the debt matures on the earlier of the date the construction loans terminate or five years from the date of the subordinate loan agreement. There was 11,070,710 (unaudited) outstanding at 31 August 2008 including accrued interest of 1,070,710 (unaudited). | ||
Key management personnel | ||
A director of certain subsidiaries of the Partnership is a partner in a law firm that provides legal services to the Partnership. During 2007, the Partnership paid fees to this law firm of 100,757. In December 2007, this director resigned from the Partnership. |
6. | Accrued expenses |
Accrued expenses consist of the following at 31 August 2008: |
Unaudited | ||||
2008 | ||||
| ||||
Professional fee accruals |
425,526 | |||
Interest payable on mortgage debt |
22,955 | |||
Other accrued expenses |
1,235,018 | |||
1,683,499 | ||||
119
for the eight months ended 31 August 2008 (unaudited) and year ended 31 December 2007
7. | Long-term debt and commitments |
The Partnership obtained commitments for land loans, construction loans and revolving loans of up to 193.9 million to fund nine facilities and one parcel of undeveloped land. The loans are for terms ranging from two to seven years and are secured by the facilities. Advances under the loans bear interest of EURIBOR plus 1.125% to EURIBOR plus 3.25%. There was 184,968,039 outstanding at 31 August 2008 (unaudited). This amount is net of finance costs of 2,032,210 at 31 August 2008 (unaudited). | ||
Principal maturities of long-term debt as of 31 August 2008: |
Calendar | Unaudited | |||||||||||
Effective | year of | 2008 | ||||||||||
interest rate% | maturity | | ||||||||||
Current |
||||||||||||
1,202,500 bank loan |
2.25 + EURIBOR | 2008 | 1,202,500 | |||||||||
2,358,100 bank loan |
3.25 + EURIBOR | 2008 | 1,165,220 | |||||||||
13,761,900 bank loan |
3.25 + EURIBOR | 2008 | 2,542,700 | |||||||||
3,317,603 bank loan |
1.125 - 2.00 + EURIBOR | 2008-2009 | 130,000 | |||||||||
3,380,292 bank loan |
1.125 - 2.00 + EURIBOR | 2009 | 90,000 | |||||||||
16,898,403 bank loan |
1.125 - 2.00 + EURIBOR | 2008-2009 | 660,000 | |||||||||
21,062,550 bank loan |
1.125 - 2.00 + EURIBOR | 2009 | 545,000 | |||||||||
21,613,301 bank loan |
1.35 - 2.25 + EURIBOR | 2008-2009 | 1,137,544 | |||||||||
2,992,567 bank loan |
1.35 - 2.25 + EURIBOR | 2008-2009 | 101,924 | |||||||||
4,289,330 bank loan |
1.125 - 2.00 + EURIBOR | 2009 | 53,100 | |||||||||
17,032,444 bank loan |
1.125 - 2.00 + EURIBOR | 2009 | 218,000 | |||||||||
7,845,988 | ||||||||||||
Non-current |
||||||||||||
13,761,900 bank loan |
3.25 + EURIBOR | 2008-2011 | 8,384,034 | |||||||||
3,317,603 bank loan |
1.125 - 2.00 + EURIBOR | 2008-2011 | 2,397,658 | |||||||||
3,380,292 bank loan |
1.125 - 2.00 + EURIBOR | 2009-2011 | 3,160,252 | |||||||||
16,898,403 bank loan |
1.125 - 2.00 + EURIBOR | 2008-2011 | 14,884,362 | |||||||||
21,062,550 bank loan |
1.125 - 2.00 + EURIBOR | 2009-2011 | 20,166,157 | |||||||||
21,613,301 bank loan |
1.35 - 2.25 + EURIBOR | 2008-2011 | 19,903,787 | |||||||||
2,992,567 bank loan |
1.35 - 2.25 + EURIBOR | 2008-2012 | 1,777,789 | |||||||||
3,961,848 bank loan |
2.75 + EURIBOR | 2012 | 3,947,486 | |||||||||
4,230,775 bank loan |
2.75 + EURIBOR | 2012 | 4,215,439 | |||||||||
4,239,762 bank loan |
2.75 + EURIBOR | 2012 | 4,224,393 | |||||||||
4,289,330 bank loan |
1.125 - 2.00 + EURIBOR | 2009-2012 | 4,236,239 | |||||||||
4,520,586 bank loan |
2.75 + EURIBOR | 2012 | 4,504,198 | |||||||||
15,223,829 bank loan |
2.75 + EURIBOR | 2012 | 15,168,643 | |||||||||
16,799,225 bank loan |
2.75 + EURIBOR | 2012 | 16,738,327 | |||||||||
17,032,444 bank loan |
1.125 - 2.00 + EURIBOR | 2009-2012 | 16,491,812 | |||||||||
18,399,642 bank loan |
2.75 + EURIBOR | 2012 | 18,332,944 | |||||||||
18,656,160 bank loan |
2.75 + EURIBOR | 2012 | 18,588,531 | |||||||||
177,122,051 | ||||||||||||
1,202,500 bank loan | ||
This loan is secured by land and is repayable in full in December 2008. In December 2007, the maturity date was extended to December 2008. As of March 2009, this loan remains unpaid. |
120
for the eight months ended 31 August 2008 (unaudited) and year ended 31 December 2007
7. | Long-term debt and commitments (continued) |
2,358,100 bank loan | ||
This loan is secured by the facility and has quarterly payments with the balance repayable in June 2009. | ||
13,761,900 bank loan | ||
This loan is secured by the facility and has quarterly payments beginning June 2009 and the balance repayable in March 2011. In accordance with the loan agreement, additional quarterly principal payments of 500,000 are made if the Debt to Net Operating Income ratio exceeds 8.25 beginning January 2007 or exceeds 8.0 beginning July 2007. Total principal payments made in 2007 were 1,000,000. The Partnership paid 1,000,000 through 31 August 2008 and it is anticipated the Partnership will be required to make the additional 500,000 quarterly principal payments through the remaining term of the loan. | ||
3,317,603 bank loan | ||
This loan is secured by the facility and is repayable in full in December 2011. | ||
3,380,292 bank loan | ||
This loan is secured by the facility and is repayable in full in November 2011. | ||
16,898,403 bank loan | ||
This loan is secured by the facility and is repayable in full in October 2011. | ||
21,062,550 bank loan | ||
This loan is secured by the facility and is repayable in full in December 2011. | ||
21,613,301 bank loan | ||
This loan is secured by the facility and is repayable in full in March 2011. | ||
2,992,567 bank loan | ||
This loan is secured by the facility and is repayable in full in March 2012. | ||
3,961,848 bank loan | ||
This loan is secured by the facility and is repayable in full in April 2012. | ||
4,230,775 bank loan | ||
This loan is secured by the facility and is repayable in full in April 2012. | ||
4,239,762 bank loan | ||
This loan is secured by the facility and is repayable in full in April 2012. | ||
4,289,330 bank loan | ||
This loan is secured by the facility and is repayable in full in July 2012. | ||
4,520,586 bank loan | ||
This loan is secured by the facility and is repayable in full in April 2012. | ||
15,223,829 bank loan | ||
This loan is secured by the facility and is repayable in full in April 2012. | ||
16,799,225 bank loan | ||
This loan is secured by the facility and is repayable in full in April 2012. | ||
17,032,444 bank loan | ||
This loan is secured by the facility and is repayable in full in July 2012. | ||
18,399,642 bank loan | ||
This loan is secured by the facility and is repayable in full in April 2012. | ||
18,656,160 bank loan | ||
This loan is secured by the facility and is repayable in full in April 2012. |
121
for the eight months ended 31 August 2008 (unaudited) and year ended 31 December 2007
7. | Long-term debt and commitments (continued) |
Debt Service Reserve | ||
In April 2007, the Partnership refinanced eight construction loans relating to four of the facilities. In accordance with the new loan agreements, the Partnership was required to open a Debt Service Reserve Account held by the Lender. These funds will be advanced to the Partnership when a debt service ratio of not less than 1.0 to 1.0 has been achieved as of 28 February 2009 and a debt service ratio of not less than 1.25 to 1.0 has been achieved as of 28 February 2010. If the debt service ratios are not achieved, the Partnership will be required to make principal payments. As of 31 August 2008, total funds in the Debt Service Reserve Account were 5,863,645 (unaudited) which is reflected as restricted cash on the balance sheet. In September 2008, the balance in the Debt Service Reserve Account was applied against the outstanding balance of the loans. | ||
Commitments | ||
Concurrent with the Partnership entering into the loan agreements with the lenders, Sunrise has also entered into certain guarantee agreements with the lenders related to construction cost overruns and operating deficits for which Sunrise has been paid a fee by the Partnership equal to a percentage of the loan amount. For the eight month period ended 31 August 2008, total fees paid and capitalized by the Partnership were nil (unaudited). | ||
The Cost Overrun Guarantees commence when construction of the facility commences and terminate when all obligations related to the construction of the facility have been satisfied. Under the Cost Overrun Guarantees, Sunrise agrees to immediately make available to the Partnership funds to cover any cost overruns incurred during the period of construction. These funds are generally advanced to the Partnership as non-interest bearing and subordinate to the claims of the primary lender. | ||
The Operating Deficit Guarantees commence when the facility opens and terminate when the third party debt is paid in full with the following exception. The Operating Deficit Guarantees for loans with principal balances of 85,953,624 (unaudited) may be terminated by the lender if the Interest Cover Ratio and Debt Service Cover Ratio equals or exceeds the benchmarks determined by the Guarantee Agreements for 12 consecutive months. Under the Operating Deficit Guarantees, Sunrise agrees to immediately make available to the Partnership funds to cover any operating deficits of the facility. These funds are generally advanced to the Partnership as non-interest bearing and subordinate to the claims of the primary lender. As discussed in note 5, Sunrise LP has entered into a subordinate loan agreement of up to 10.0 million for the funding of operating deficits of the facilities. All operating deficit funding in excess of 10.0 million has been recorded as part of the Payables due to affiliates balance as at 31 August 2008 (unaudited). | ||
Sunrise has also guaranteed 25% of the principal balance of the 1,202,500 land loan (unaudited). |
8. | Income taxes |
The Partnership is not a taxable entity since attributes of income and loss pass through pro rata to the partners on their respective income tax returns in accordance with the Partnership Agreement. However, the operating companies and property companies are subject to German income tax. |
Major components of income for the eight months ended 31 August 2008 and year ended 31 December 2007 are as follows: |
Unaudited | ||||||||
2008 | 2007 | |||||||
| | |||||||
Partnership income |
2,404,747 | 4,819,612 | ||||||
Operating and property company loss |
(30,086,962 | ) | (88,808,580 | ) | ||||
Consolidated net loss |
(27,682,215 | ) | (83,988,968 | ) | ||||
122
for the eight months ended 31 August 2008 (unaudited) and year ended 31 December 2007
8. | Income taxes (continued) |
The operating and property companies had the following deferred tax assets and liabilities at 31 August 2008: |
Unaudited | ||||
2008 | ||||
| ||||
Deferred tax assets |
||||
Net operating losses for Operating and Property Companies |
14,225,605 | |||
Negative fair value movement on property and equipment |
13,666,968 | |||
Total deferred tax assets |
27,892,573 | |||
Deferred tax liabilities |
||||
Property and equipment |
(381,759 | ) | ||
Rent abatement |
(976,935 | ) | ||
Facility development and operating expense |
(2,784,715 | ) | ||
Deferred finance cost |
(473,051 | ) | ||
Total deferred tax liabilities |
(4,616,460 | ) | ||
Net deferred tax asset |
23,276,113 | |||
As at 31 August 2008 the operating companies and property companies had combined accumulated net operating losses of approximately 90,035,478 (unaudited) which according to German tax laws can be carried forward indefinitely for offset against future taxable profits of the companies in which the losses arose. At the applicable statutory tax rate of 15.8% for the eight months ended 31 August 2008 (unaudited) this would create a long-term deferred tax asset of 14,225,605 at 31 August 2008 (unaudited). | ||
Additionally, a negative fair value charge taken for accounting purposes for the eight months ended 31 August 2008 in the amount of 12,146,724 (unaudited) would create a deferred tax asset at 31 August 2008 of 13,666,968 (unaudited) at the above tax rates. | ||
The deferred tax liabilities outlined above (depreciation, rent abatement, development and operating expenses, and deferred finance cost) in the amount of 29,218,104 at 31 August 2008 (unaudited) at the applicable statutory tax rate of 15.8% would create a long-term deferred tax liability of 4,616,460 at 31 August 2008 (unaudited). This long-term deferred tax liability will reduce the long-term deferred tax asset mentioned above, thus the net long-term deferred tax asset is 23,276,113 at 31 August 2008 (unaudited). | ||
Deferred tax assets have not been recognised in respect of these losses as they may not be used to offset taxable profits that may arise elsewhere in the group and there can be no assurance that the subsidiary companies, in which the losses have arisen, will generate profits in future periods. |
123
for the eight months ended 31 August 2008 (unaudited) and year ended 31 December 2007
8. | Income taxes (continued) |
Furthermore, the German operating and property entities are trade tax exempt. However, the German holding company is subject to the trade tax, but does not generate trade taxable income. The trade tax applicable statutory tax rate is approximately 10.5% (after taking into consideration that the trade tax paid is a deduction of both the German corporate tax and trade tax base) for the eight months ended 31 August 2008 (unaudited) and the year ended 31 December 2007. The German holding company has a trade tax net operating loss as described above. However, due to the business model it is unlikely that these losses could be used in the future. | ||
Accordingly, no provision for income taxes has been included in these financial statements, and there are no current or deferred income taxes recognised in the financial statements. |
The Partnership consists of the General Partner, Sunrise LP (20%), SHIP (80%) and SunCo. The General Partner is responsible for the management and control of the business and affairs of the Partnership and has the right to transact business and sign documents in the Partnerships name. The General Partner must obtain the approval of its Board of Directors for certain major actions as defined in the Shareholders Agreement. | ||
A portion of Sunrise LPs contributions is made directly to companies owned by the Partnership. The Partnership is arranged such that each partners capital account is increased by its proportionate share of net income or any additional capital contributions and is decreased by its proportionate share of net losses or the fair value of any property distributed to such partner. Cash available from operations and cash available from capital transactions shall be distributed to the partners and partnership interests in the order defined in the Partnership Agreement. There is no obligation of the Partnership to return the partners capital contributions other than as specified in the Partnership Agreement. A portion of Sunrise LP contributions and profit share is disclosed as minority interest in the balance sheet. The total of this and the balance attributable to Sunrise LPs in the capital account is 20% of the Partnerships capital. | ||
The partners had originally agreed to contribute 67,000,000 to the Partnership, of which 50,463,173 has been funded through to 31 August 2008 (unaudited) and 31 December 2007. | ||
Activity in the individual partners capital accounts was as follows: |
Sunrise LP | SHIP | SunCo | Total | |||||||||||||
| | | | |||||||||||||
Balance at 1 January 2007 |
2,146,345 | 16,848,080 | 1 | 18,994,426 | ||||||||||||
Contributions |
54,000 | | | 54,000 | ||||||||||||
Net loss for the year |
(15,561,886 | ) | (68,427,082 | ) | | (83,988,968 | ) | |||||||||
Foreign currency translation |
(109,081 | ) | (436,324 | ) | | (545,405 | ) | |||||||||
Balance at 31 December 2007 |
(13,470,622 | ) | (52,015,326 | ) | 1 | (65,485,947 | ) | |||||||||
Contributions unaudited |
| | | | ||||||||||||
Net loss for the period unaudited |
(5,194,088 | ) | (22,488,127 | ) | | (27,682,215 | ) | |||||||||
Foreign currency translation unaudited |
6,368 | 25,470 | | 31,838 | ||||||||||||
At 31 August 2008 unaudited |
(18,658,342 | ) | (74,477,983 | ) | 1 | (93,136,324 | ) | |||||||||
124
for the eight months ended 31 August 2008 (unaudited) and year ended 31 December 2007
10. | Financial risk management objectives and policies |
Interest rate risk |
The main risk arising from the Partnerships long-term debt with floating interest rates is cash flow interest rate risk. The interest rates on these loans are all EURIBOR based plus a margin. The margin tends to be the highest during the construction phase, then is reduced during the lease-up phase and is reduced further once a facility reaches stabilization, as defined in the loan documents. The Partnership has not utilised hedging instruments to reduce its exposure to cash flow interest rate risk. | ||
The subordinate loan with Sunrise LP was used to fund operating deficits including interest expense on long-term debt. | ||
The Partnership estimates that the fair value of its long-term floating rate debt is approximately equal to 130 million at 31 August 2008 (unaudited). The fair value of the debt was determined giving consideration to the fair value of the of the underlying assets which are collateral for the debt and the operating deficit guarantees from Sunrise which guarantee to the lender the payment of monthly principal and interest. | ||
At 31 August 2008, the Partnership had approximately 187 million of floating-rate debt (unaudited). Debt incurred in the future also may bear interest at floating rates. Therefore, increases in prevailing interest rates could increase the Partnerships interest payment obligations, which would negatively impact earnings. For example, a one-percent change in interest rates would increase or decrease annual interest expense by approximately 1.87 million based on the amount of floating-rate debt at 31 August 2008 (unaudited). |
125
for the eight months ended 31 August 2008 (unaudited) and year ended 31 December 2007
10. | Financial risk management objectives and policies (continued) |
Interest rate risk (continued) | ||
The table below summarises the Partnerships financial liabilities at 31 August 2008 based on contractual undiscounted payments, including interest. | ||
As at 31 August 2008 (unaudited) |
Less | Three | |||||||||||||||||||||||
On | than three | to twelve | One to | More than | ||||||||||||||||||||
demand | months | months | five years | five years | Total | |||||||||||||||||||
| | | | | | |||||||||||||||||||
Interest bearing
loans and borrowings |
| 5,625,441 | 15,009,028 | 205,322,444 | | 225,956,913 | ||||||||||||||||||
Trade payables |
302,821 | | | | | 302,821 | ||||||||||||||||||
Accrued expenses |
| 1,683,499 | | | | 1,683,499 | ||||||||||||||||||
Partner loan |
| 2,010,000 | | | 2,010,000 | |||||||||||||||||||
302,821 | 9,318,940 | 15,009,028 | 205,322,444 | | 229,953,233 | |||||||||||||||||||
Credit risk | ||
There are no significant concentrations of credit risk within the Partnership. With respect to credit risk arising from cash and restricted cash, the Partnerships exposure to credit risk arises from the default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments. | ||
Capital management | ||
The primary objective of the Partnerships capital management was to permit the acquisition and development of senior living facilities. During 2008, the Partnership decided it would not develop any further facilities. | ||
Capital contributions for initial investment approval projects are made pursuant to the initial investment proposal approved budget. Capital contributions for final investment approved projects are made pursuant to the approved development budget. Capital contributions were also made for initial site investigation costs as well as other expenses, fees and liabilities that the Partnership incurred. No changes were made in the objectives, policies or processes during the eight months ended 31 August 2008. |
126
for the eight months ended 31 August 2008 (unaudited) and year ended 31 December 2007
10. | Financial risk management objectives and policies (continued) |
Capital management (continued) | ||
The following table provides the detail of the capital contributions made for the relevant financial period: |
Unaudited | ||||||||
Eight months ended | Year ended | |||||||
31 August | 31 December | |||||||
2008 | 2007 | |||||||
| | |||||||
Final investment approved projects: |
||||||||
Sunrise Frankfurt-Westend Senior Living GmbH & Co. KG. |
| 6,000 | ||||||
Sunrise Hannover Senior Living GmbH & Co. KG |
| 6,000 | ||||||
Sunrise Klein Flottbek Senior Living GmbH & Co. KG |
| 6,000 | ||||||
Sunrise Konigstein Senior Living GmbH & Co. KG |
| 6,000 | ||||||
Sunrise Munchen-Thalkirchen Senior Living GmbH & Co. KG |
| 6,000 | ||||||
Sunrise Oberursel Senior Living GmbH & Co. KG |
| 6,000 | ||||||
Sunrise Reinbek Senior Living GmbH & Co. KG |
| 6,000 | ||||||
Sunrise Villa Camphausen Senior Living GmbH & Co. KG |
| 6,000 | ||||||
Sunrise Wiesbaden Senior Living GmbH & Co. KG |
| 6,000 | ||||||
| 54,000 | |||||||
11. | Events after the balance sheet date of 31 August 2008 (unaudited) |
This note provides information and serves as an update to note 11.1 Events after the balance sheet date of 31 December 2007 which was previously approved by the directors of the General Partner on 23 December 2008. | ||
On 24 December 2008, related to the 11,224,376 demand discussed in note 11.1 below, Sunrise entered into a Pre-Negotiation and Standstill Agreement (the Hannover Standstill Agreement) by and among Sunrise and Natixis, London Branch. Pursuant to the terms of the Hannover Standstill Agreement, the Agent agreed, inter alia, to commence discussions and negotiations with Sunrise and the Borrower relating to certain obligations of Sunrise and the Borrower under the Loans and Funding Obligations, and to not commence or prosecute any action or proceeding to enforce its demand for payment by Sunrise of the Cash Flow Deficit prior to the occurrence of an event of default, as defined in the Hannover Standstill Agreement, or 31 March 2009. Sunrise Senior Living and Natixis also entered into a Standstill Agreement ( the Hannover Borrower Standstill Agreement) dated 23 December 2008, which agreement is governed by the laws of the Federal Republic of Germany, pursuant to which the Agent agreed, inter alia, not to enforce any of its acceleration and prepayment rights under the Loans prior to the occurrence of an event of default, as defined in the Hannover Borrower Standstill Agreement, and shall expire on 31 March 2009 (unless terminated earlier pursuant to the provisions of the Hannover Borrower Standstill Agreement). | ||
As of 31 December 2008, based on market-based evidence, the Partnership recorded an additional impairment charge of 4.1 million for two of its communities. | ||
As of 31 December 2008, 8 million of the amount due from the Partnership to Sunrise and its wholly owned subsidiaries was forgiven by Sunrise. | ||
On 1 January 2009 the Operating Companies of Konigstein and Munchen-Thalkirchen purchased the Care Companies of the same named location for 1 each. Subsequently, the Care Companies transferred their trade and assets into the Operating Companies and the current operations staff employed by the German Management Company, Sunrise Senior Living GmbH, were transferred to the Operating Companies. | ||
On 31 January 2009, the Partnership closed operations in the Hannover and Reinbek communities. |
127
for the eight months ended 31 August 2008 (unaudited) and year ended 31 December 2007
11. | Events after the balance sheet date of 31 August 2008 (unaudited)(continued) |
In January 2009 the German communities, which are now consolidated under Sunrise Senior Living, Inc. suspended payment of principal and interest on all loans, in spite of Sunrises operating deficit guarantees. As a result of the failure to make payments of principal and interest to the lenders of the German communities and Sunrises failure to pay the operating deficits, the German communities are in default under their loans and Sunrise is in default under its financial guarantees for the loans of the German communities and the Hoesel land. Sunrise informed the lenders to the German communities and the Hoesel land that it would seek a comprehensive restructuring of the loans and its operating deficit guarantees. | ||
On 13 February 2009, Natixis, London Branch, in its capacity as agent and security trustee for certain lenders under a loan agreement for our community in Munich, Germany, dated 24 March 2006, sent Sunrise a demand letter requesting that Sunrise pay an amount of 8,076,878 corresponding to the Cash Flow Deficit pursuant to the Funding Obligations under the loan. On 19 February 2009, Sunrise entered into a Pre-Negotiation and Standstill Agreement (the Munich Standstill Agreement) by and among Sunrise and Natixis, London Branch. Pursuant to the terms of the Munich Standstill Agreement, the Agent agreed, inter alia, to commence discussions and negotiations with Sunrise and the Borrower relating to certain obligations of Sunrise and the Borrower under the Loans and Funding Obligations, and to not commence or prosecute any action or proceeding to enforce its demand for payment by Sunrise of the Cash Flow Deficit prior to the occurrence of an event of default, as defined in the Munich Standstill Agreement, or 31 March 2009. Sunrise and Natixis also entered into a Standstill Agreement ( the Munich Borrower Standstill Agreement) dated 19 February 2009, which agreement is governed by the laws of the Federal Republic of Germany, pursuant to which the Agent agreed, inter alia, not to enforce any of its acceleration and prepayment rights under the Loans prior to the occurrence of an event of default, as defined in the Munich Borrower Standstill Agreement, and shall expire on 31 March 2009 (unless terminated earlier pursuant to the provisions of the Munich Borrower Standstill Agreement). | ||
In February 2009 Sunrise entered into additional standstill agreements with lenders to six of the nine German communities and the land at Hoesel. Total debt outstanding from the Partnership to these six lenders was 126 million as of 28 February 2009. Pursuant to the standstill agreements, such lenders have agreed, among other things, not to foreclose on the communities that are collateral for their loans or to commence or prosecute any action or proceeding to enforce their demand for payment by Sunrise pursuant to the operating deficit guarantees, and to commence discussions and negotiations with Sunrise relating to its and the German communities obligations. Such standstill agreements will generally remain in effect until the earliest of the occurrence of certain other events relating to the loans and 31 March 2009. | ||
On 6 March 2009, Sunrise did not make the 1,429,079 principal and interest payment due on the ninth German community. On 16 March 2009, Sunrise entered into a Standstill Agreement with this lender. Total debt outstanding from the Partnership to this lender was 12 million as of 28 February 2009. |
11.1 | Events after the balance sheet date of 31 December 2007 |
On 1 September 2008, Sunrise paid 3,000,000 to SHIP for an option to purchase their entire interest in the Partnership through a two-step transaction. Sunrise expects to exercise its option in 2009. Also on 1 September, Sunrise entered into an agreement with SHIP whereby Sunrise will have the sole right to control certain major decisions of the Partnership, including potential restructuring of loans with lenders and pursuing potential sales of the nine communities and the one parcel of undeveloped land in the Partnership. Based on FIN46 of the US Accounting Standards and the transfer of control, the Partnership has been consolidated within the Sunrise Senior Living, Inc. group as of 1 September 2008. | ||
On 1 October 2008 the Operating Companies of Oberusel, Villa Camphausen, Klein Flottbek, Wiesbaden, Frankfurt-Westend and Reinbek purchased the Care Companies of the same named location for 1 each. Subsequently, the Care Companies transferred their trade and assets into the Operating Companies and the current operations staff employed by the German Management Company, Sunrise Senior Living GmbH, were transferred to the Operating Companies. This change is estimated to result in annual cost savings of approximately 300,000 400,000. |
128
for the eight months ended 31 August 2008 (unaudited) and year ended 31 December 2007
11.1 | Events after the balance sheet date of 31 December 2007 (continued) |
On 9 October 2008, 700,000 was received as final settlement in respect of legal matters relating to a former contractor of the Konigstein property. | ||
On 7 November 2008 the joint shareholders and partners of the Hannover and Reinbek Care Companies, Operating Companies, Property Companies and Sunrise Properties Germany GmbH (HoldCo) resolved to close all operations in those locations. The final closing date is expected to occur on 31 January 2009. The financial effects are estimated at approximately 300,000 (166,000 in closing costs and 134,000 for discontinued operations) and include costs of closing down operations, assistance to relocate the residents, security of the buildings, employee salary payments and other charges that may arise. Bank valuations completed on 7 July 2008 for Reinbeck and 13 August 2008 for Hannover show that the estimated market value is higher than the current book values of both properties and therefore no additional write down is anticipated at this time. | ||
On 3 December 2008, Natixis, an agent for a group of lenders, issued a demand in respect of the Hannover PropCo and OpCo loans, claiming 11,224,376 as an amount due for a breach of the Loan to Value covenants. On 18 December 2008, Natixis issued a corresponding demand on Sunrise Senior Living, Inc. as guarantor of the loans. The Borrowers, Sunrise Hannover Senior Living GmbH & Co. KG and Sunrise Hannover GmbH, together with Sunrise are contesting the claim and have commenced negotiations with Natixis. A standstill agreement is under discussion with Natixis, which, when signed, will be effective for a period of 60 days from the date of signing. | ||
The General Partner is aware that some bank covenants, most notably related to NOI and Loan to Value, have not been met as the Partnership strives to reach stabilization of the facilities, but the Partnership continues to make timely payments. As of 23 December 2008, no additional bank or lender notices have been received other than the one disclosed above regarding Hannover. |
129
AL U.S. Development Venture, LLC:
130
AS OF DECEMBER 31, 2009 (unaudited), 2008 (unaudited)
2009 | 2008 | |||||||
(unaudited) | (unaudited) | |||||||
(restated) | ||||||||
ASSETS |
||||||||
PROPERTY AND EQUIPMENT |
$ | 47,842,923 | $ | 47,844,921 | ||||
Land and land improvements |
179,483,053 | 179,475,734 | ||||||
Building and building improvements |
14,518,631 | 13,656,404 | ||||||
Furniture and equipment |
241,844,607 | 240,977,059 | ||||||
Less accumulated depreciation |
(37,396,809 | ) | (30,432,217 | ) | ||||
Property and equipment- net |
204,447,798 | 210,544,842 | ||||||
CASH AND CASH EQUIVALENTS |
4,749,626 | 4,902,428 | ||||||
RESTRICTED CASH |
7,307,942 | 6,000,000 | ||||||
ACCOUNTS RECEIVABLE- Less allowance for doubtful
accounts of $343,609 and $317,704 in 2009 and 2008,
respectively |
794,151 | 879,732 | ||||||
RECEIVABLES FROM AFFILIATES- net |
34,746 | 526,301 | ||||||
PREPAID EXPENSES AND OTHER CURRENT ASSETS |
712,474 | 581,415 | ||||||
DEFERRED FINANCING COSTS- Less accumulated
amortization of $2,308,904 and $1,385,343 in 2009 and 2008,
respectively |
2,308,904 | 3,232,465 | ||||||
TOTAL |
$ | 220,355,641 | $ | 226,667,183 | ||||
LIABILITIES AND MEMBERS DEFICIT |
||||||||
LIABILITIES: |
||||||||
Long-term debt |
$ | 370,500,000 | $ | 370,500,000 | ||||
Derivative liability |
24,441,438 | 34,759,162 | ||||||
Accounts payable and accrued expenses |
2,720,880 | 2,526,180 | ||||||
Deferred revenue |
3,867,217 | 3,958,776 | ||||||
Security and reservation deposits |
28,250 | 35,000 | ||||||
Accrued interest |
947,197 | 997,797 | ||||||
Total liabilities |
402,504,982 | 412,776,915 | ||||||
MEMBERS DEFICIT |
(182,149,341 | ) | (186,109,732 | ) | ||||
TOTAL |
$ | 220,355,641 | $ | 226,667,183 | ||||
131
FOR THE YEARS ENDED DECEMBER 31, 2009 (unaudited), 2008 (unaudited) and 2007
2009 | 2008 | 2007 | ||||||||||
(unaudited) | (unaudited) | |||||||||||
(restated) | ||||||||||||
OPERATING REVENUE: |
||||||||||||
Resident fees |
$ | 79,854,913 | $ | 81,133,786 | $ | 76,325,155 | ||||||
Other income |
412,821 | 464,267 | 379,149 | |||||||||
Total operating revenue |
80,267,734 | 81,598,053 | 76,704,304 | |||||||||
OPERATING EXPENSES: |
||||||||||||
Labor |
29,965,998 | 28,982,119 | 27,361,910 | |||||||||
Depreciation |
6,964,592 | 6,930,723 | 6,766,201 | |||||||||
Management fees |
5,618,741 | 5,711,864 | 5,198,041 | |||||||||
General and administrative |
4,665,553 | 4,931,848 | 4,647,867 | |||||||||
Insurance |
3,962,102 | 3,707,937 | 2,526,045 | |||||||||
Taxes and license fees |
3,379,190 | 3,125,100 | 2,701,310 | |||||||||
Food |
2,747,991 | 2,995,409 | 2,722,483 | |||||||||
Utilities |
2,060,948 | 2,120,210 | 2,006,454 | |||||||||
Repairs and maintenance |
1,549,448 | 1,850,236 | 1,996,821 | |||||||||
Advertising and marketing |
636,317 | 928,410 | 994,128 | |||||||||
Ancillary expenses |
585,108 | 678,910 | 535,929 | |||||||||
Bad debt |
203,115 | 100,148 | 163,929 | |||||||||
Total operating expenses |
62,339,103 | 62,062,914 | 57,621,118 | |||||||||
INCOME FROM OPERATIONS |
17,928,631 | 19,535,139 | 19,083,186 | |||||||||
OTHER INCOME (EXPENSE): |
||||||||||||
Amortization of financing cost |
(923,561 | ) | (855,771 | ) | (914,656 | ) | ||||||
Loss on extinguishment of debt |
| | (1,188,688 | ) | ||||||||
Prepayment penalty |
| | (4,154,962 | ) | ||||||||
Change in fair value of interest rate hedge instruments |
10,317,724 | (17,719,819 | ) | (17,039,343 | ) | |||||||
Interest expense |
(20,788,811 | ) | (23,610,348 | ) | (20,637,838 | ) | ||||||
Interest income |
759 | 60,267 | 331,620 | |||||||||
Total other expense |
(11,393,889 | ) | (42,125,671 | ) | (43,603,867 | ) | ||||||
NET INCOME ( LOSS) |
$ | 6,534,742 | $ | (22,590,532 | ) | $ | (24,520,681 | ) | ||||
132
FOR THE YEARS ENDED DECEMBER 31, 2009 (unaudited), 2008 (unaudited), and 2007
SSLII | AEW Member | MS Senior Living | Total | |||||||||||||
MEMBERS CAPITAL |
||||||||||||||||
December 31, 2006
(unaudited) |
2,658,074 | 11,563,446 | | 14,221,520 | ||||||||||||
Contributions |
1,200,000 | | 4,800,000 | 6,000,000 | ||||||||||||
Distributions |
(30,746,046 | ) | 856,509 | (128,456,356 | ) | (158,345,893 | ) | |||||||||
Transfer of equity |
| (12,584,916 | ) | 12,584,916 | | |||||||||||
Net loss |
(4,904,136 | ) | 164,961 | (19,781,506 | ) | (24,520,681 | ) | |||||||||
MEMBERS DEFICIT |
(31,792,108 | ) | | (130,852,946 | ) | (162,645,054 | ) | |||||||||
December 31, 2007 |
||||||||||||||||
Distributions |
(477,036 | ) | 1,511,035 | (1,908,145 | ) | (874,146 | ) | |||||||||
Transfer of equity |
| (1,511,035 | ) | 1,511,035 | | |||||||||||
Net loss (restated) |
(4,518,107 | ) | | (18,072,425 | ) | (22,590,532 | ) | |||||||||
MEMBERS DEFICIT |
||||||||||||||||
December 31, 2008
(unaudited, restated) |
(36,787,251 | ) | | (149,322,481 | ) | (186,109,732 | ) | |||||||||
Distributions |
(514,870 | ) | (2,059,481 | ) | (2,574,351 | ) | ||||||||||
Transfer of equity |
||||||||||||||||
Net income |
1,306,948 | 5,227,794 | 6,534,742 | |||||||||||||
MEMBERS DEFICIT |
||||||||||||||||
December 31, 2009
(unaudited) |
$ | (35,995,173 | ) | $ | | $ | (146,154,168 | ) | $ | (182,149,341 | ) | |||||
133
FOR THE YEARS ENDED DECEMBER 31, 2009 (unaudited), 2008 (unaudited), and 2007
2009 | 2008 | 2007 | ||||||||||
(unaudited) | (unaudited) | |||||||||||
(restated) | ||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||||||
Net Income (loss) |
$ | 6,534,742 | $ | (22,590,532 | ) | $ | (24,520,681 | ) | ||||
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities: |
||||||||||||
Depreciation |
6,964,592 | 6,930,723 | 6,766,201 | |||||||||
Amortization and loss on extinguishment of debt |
923,561 | 855,771 | 2,103,344 | |||||||||
Provision for bad debts |
203,115 | 100,148 | 163,929 | |||||||||
Change in fair value of interest rate hedge instruments |
(10,317,724 | ) | 17,719,819 | 17,039,343 | ||||||||
Changes in assets and liabilities: |
||||||||||||
Change in cash held by AEW Member |
| | 3,416,771 | |||||||||
Accounts receivable |
(117,534 | ) | 99,294 | (18,448 | ) | |||||||
Prepaid expenses and other current assets |
(131,059 | ) | (16,736 | ) | 196,428 | |||||||
Accounts payable and accrued expenses |
194,700 | (202,251 | ) | (244,780 | ) | |||||||
Payable to/receivable from affiliates net |
491,555 | (3,724,038 | ) | (5,947,322 | ) | |||||||
Deferred revenue |
(91,559 | ) | 4,913 | 703,133 | ||||||||
Security and reservation deposits |
(6,750 | ) | (9,301 | ) | (41,040 | ) | ||||||
Accrued interest |
(50,600 | ) | (273,048 | ) | 640,508 | |||||||
Net cash provided (used in) by operating activities |
4,597,039 | (1,105,238 | ) | 257,386 | ||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||||||
Restricted cash |
(1,307,942 | ) | | (6,000,000 | ) | |||||||
Investment in property and equipment |
(867,548 | ) | (663,130 | ) | (299,607 | ) | ||||||
Net cash used in investing activities |
(2,175,490 | ) | (663,130 | ) | (6,299,607 | ) | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||||||
Payment of financing costs |
| (2,385 | ) | (4,616,438 | ) | |||||||
Proceeds from note to affiliate |
| | 47,708 | |||||||||
Repayment of note to affiliate |
| | (4,221,432 | ) | ||||||||
Proceeds from long-term debt |
| | 371,330,817 | |||||||||
Payment on long-term debt |
| | (203,144,398 | ) | ||||||||
Contributions |
| | 6,000,000 | |||||||||
Distributions |
(2,574,351 | ) | (874,146 | ) | (158,345,893 | ) | ||||||
Net cash (used in) provided by financing activities |
(2,574,351 | ) | (876,531 | ) | 7,050,364 | |||||||
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS |
(152,802 | ) | (2,644,899 | ) | 1,008,143 | |||||||
CASH AND CASH EQUIVALENTS Beginning of year |
4,902,428 | 7,547,327 | 6,539,184 | |||||||||
CASH AND CASH EQUIVALENTS End of year |
$ | 4,749,626 | $ | 4,902,428 | $ | 7,547,327 | ||||||
SUPPLEMENTAL DISCLOSURE OF NONCASH FLOW INFORMATION |
||||||||||||
Change in derivative valuation |
$ | (10,317,724 | ) | $ | 17,719,819 | $ | 17,039,343 | |||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION |
||||||||||||
Cash paid for interest (including $10,317,724, $6,682,000, $0 for
derivatives for 2009, 2008, and 2007 respectively) |
$ | 20,839,411 | $ | 23,883,396 | $ | 19,997,330 | ||||||
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AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2009
1. | ORGANIZATION | |
AL U.S. Development Venture, LLC (AL U.S..) was formed on December 23, 2002, as a limited liability company under the laws of the state of Delaware. The Company shall terminate on December 31, 2037, unless substantially all of its assets are sold or the members elect to dissolve the Company prior to this date. AEW Senior Housing Company, LLC (the AEW Member) held an 80% membership interest, and Sunrise Senior Living Investments, Inc. (SSLII), a wholly owned subsidiary of Sunrise Senior Living, Inc. (SSLI), is the managing member and held a 20% membership interest through June 14, 2007. On June 14, 2007 AEW Senior Housing Company, LLC transferred its 80% member interest to an unrelated third party, MS Senior Living, LLC, a Delaware limited liability company, pursuant to a Purchase and Sale Agreement dated April 9, 2007. As of December 31, 2009, MS Senior Living LLC held an 80% interest in the Company and SSLII held a 20% interest in the Company. | ||
The amended and restated limited liability agreement effective June 14, 2007 details the commitments of the members and provides the procedures for the return of capital to the members with defined priorities. All net cash flow from operations and capital proceeds is to be distributed according to the priorities pro rata as specified in the limited liability agreement. The managing member can request additional capital for operating shortfalls in the event that third party financing on terms acceptable to the executive committee cannot be procured. Contributions are made pro rata in proportion to the relative percentage interests of the member at the time of request. Net income is allocated to the members pro rata in proportion to the relative percentage interests of the members. | ||
AL U.S. wholly owns the following five single-purpose limited liability companies and ten single-purpose limited partnerships (the Operator Entities) that were organized to develop and own fifteen assisted living facilities (the Facilities) to provide assisted living services for seniors: |
Operator Entity | Location | Date Opened | ||
AL US/Bonita Senior Housing, LP
|
San Diego (Bonita), California | April 2003 | ||
Boulder Assisted Living, LLC
|
Boulder, Colorado | May 2003 | ||
AL US/Huntington Beach Senior Housing, LP
|
Huntington Beach, California | February 2004 | ||
AL US/La Jolla Senior Housing, LP
|
Chula Vista (La Jolla/Pacific Beach), California | May 2003 | ||
AL US/La Palma Senior Housing , LP
|
La Palma, California | July 2003 | ||
Newtown Square Assisted Living, LLC
|
Newton Square, Pennsylvania | March 2004 | ||
AL US/Sacramento Senior Housing, LP
|
Sacramento, California | December 2003 | ||
AL US/Seal Beach Senior Housing, LP
|
Seal Beach, California | February 2004 | ||
AL US/Studio City Senior Housing, LP
|
Los Angeles (Studio City), California | June 2004 | ||
Wilmington Assisted Living, LLC
|
Wilmington, Delaware | December 2003 | ||
AL US/Woodland Hills Senior Housing, LP
|
Woodland Hills, California | May 2005 | ||
AL US/Playa Vista Senior Housing, LP
|
La Playa Vista, California | June 2006 | ||
GP Woods Assisted Living, LLC
|
Grosse Point Woods, Michigan | January 2005 | ||
AL US/GP Woods II Senior Housing, LLC
|
Grosse Point Woods II, Michigan | June 2006 | ||
AL/US San Gabriel Senior Housing, LP
|
San Gabriel, California | February 2005 |
135
Senior living services include a residence, meals, and non-medical assistance to elderly residents for a monthly fee. The Facilities services are generally not covered by health insurance, and, therefore, monthly fees are generally payable by the residents, their family, or another responsible party. |
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Basis of Accounting The Companys financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. The accompanying financial statements include the consolidated accounts of AL U.S. and the Operator Entities (collectively, the Company) after elimination of significant intercompany accounts and transactions. In the third quarter of 2009, the Company adopted the Accounting Standards Codification (ASC) as the single source of authoritative nongovernmental generally accepted accounting principles. The adoption of the ASC did not have a material impact on our consolidated financial statements. | ||
The accompanying consolidated financial statements and related footnotes for the year ended December 31, 2009 and 2008 are unaudited. They have been prepared on a basis consistent with that used in preparing the 2007 consolidated financial statements and footnotes thereto, and in the opinion of management, include all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the Companys results of operations and cash flows for the year ended December 31, 2009. | ||
Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant estimates and assumptions have been made with respect to the useful lives of assets, recoverable amounts of receivables, amortization periods of deferred costs, and the fair value of financial instruments, including derivatives. Actual results could differ from those estimates. | ||
Property and Equipment Property and equipment are recorded at the lower of cost, or if impairment is indicated, at fair value. Maintenance and repairs are charged to expense as incurred. The Company capitalizes property taxes, insurance and interest during construction to the extent such assets qualify for capitalization. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets, as follows: |
Land improvements
|
1015 years | |
Building and improvements
|
40 years | |
Furniture, fixtures, and equipment
|
310 years |
Property and equipment are reviewed for impairment whenever events or circumstances indicate that the assets undiscounted expected cash flows are not sufficient to recover its carrying amount. The Company measures an impairment loss by comparing the fair value of the asset to its carrying amount. No impairment charge was recorded in 2009 (unaudited), 2008 (unaudited), or 2007. | ||
Cash and Cash Equivalents Cash and cash equivalents include all highly liquid investments with an original maturity of three months or less. Throughout the year, the Company may have cash balances in excess of federally insured amounts on deposit with various financial institutions. | ||
Restricted Cash Restricted cash balances represent amounts set aside for debt service charges as required by the loan agreement. | ||
Allowance for Doubtful Accounts The Company provides an allowance for doubtful accounts on its outstanding receivables balance based on its collection history and an estimate of uncollectible accounts. |
136
Deferred Financing Costs Costs incurred in conjunction with obtaining permanent financing for the Company have been deferred and are amortized using the straight-line method, which approximates the effective interest method, to interest expense over the remaining term of the financing. Amortization expense for the years ended December 31, 2009, 2008, and 2007 was $923,561 (unaudited), $855,771 (unaudited), and $914,656, respectively. | ||
Revenue Recognition and Deferred Revenue Operating revenue consists of resident fee revenue, including resident community fees. Generally, resident community fees approximating 30 to 60 times the daily residence fee are received from residents upon occupancy. Resident community fees are deferred and recognized as income over one year corresponding to the terms of agreements with residents. The agreements are cancelable by residents with 30 days notice. All other resident fee revenue is recognized when services are rendered. The Company bills the residents one month in advance of the services being rendered, and therefore, cash payments received for services are recorded as deferred revenue until the services are rendered and the revenue is earned. | ||
Income Taxes No provision has been made for federal and state income taxes, as the liability for such taxes, if any, is that of the members and not the Company. The Company is subject to franchise taxes in the states of California, Michigan and Pennsylvania, where the properties are located. These taxes are expensed as incurred and are included in taxes and license fees in the accompanying consolidated financial statements. | ||
In July 2006, the Financial Accounting Standards Board issued (FASB) Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes, which has principally been codified in ASC 740-10-25, Income Taxes, Overall Recognition (ASC 740-10-25). ASC 740-10-25 describes a comprehensive model for the measurement, recognition, presentation and disclosure of uncertain tax positions in the financial statements. Under the interpretation, the financial statements will reflect expected future tax consequences of such positions presuming the tax authorities have full knowledge of the position and all relevant facts, but without considering time values. The Company adopted the provisions of this statement on January 1, 2009. The adoption of this statement did not have any effect on the Companys financial position or results of operations. | ||
Accounting for Derivatives The Company accounts for its derivative instruments in accordance with the ASC Derivative and Hedging Topic, which establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. All derivatives, whether designated in hedging relationships or not, are required to be recorded on the consolidated balance sheets at fair value. The statement requires that changes in the derivative instruments fair value be recognized currently in earnings unless specific hedge accounting criteria are met. | ||
The Companys derivative instruments consist of an interest rate swap and an interest rate cap that it has entered into to manage its exposure to interest rate risk. The Companys interest rate instruments do not qualify for hedge accounting treatment in accordance with the ASC Derivative and Hedging Topic and, as a result, changes in the fair value of the derivative are recorded in net income. | ||
Fair Value of Financial Instruments Disclosures of estimated fair value are determined by management using available market information and appropriate valuation methodologies. Considerable judgment is necessary to interpret market data and develop estimated fair value. Accordingly, estimates presented are not necessarily indicative of the amounts the Company could realize on disposition of the financial instruments. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. |
137
Cash and cash equivalents, restricted cash, accounts receivable, accounts payable and other accrued assets and liabilities are carried at amounts which reasonably approximate their fair values. |
3. | FAIR VALUE MEASUREMENTS | |
The Company adopted the provisions of FASB ASC Fair Value Measurements Topic, as of January 1, 2008. Under ASC Fair Value Measurements Topic, fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In order to increase consistency and comparability in fair value measurements, ASC Fair Value Measurements Topic establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels. These levels, in order of highest priority to lowest priority, are described below: | ||
Level 1 Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. | ||
Level 2 Observable prices that are based on inputs not quoted on active markets, but corroborated by market data. | ||
Level 3 Unobservable inputs are used when little or no market data is available. | ||
In February 2008, the FASB issued provisions of the ASC Fair Value Measurements Topic for nonfinancial assets and liabilities, delaying the effective date for items such as nonfinancial assets and liabilities initially measured at fair value in a business combination (but not measured at fair value in subsequent periods) and nonfinancial long-lived asset groups measured at fair value for an impairment assessment. The Company is evaluating the impact the ASC will have on our nonfinancial assets and liabilities that are measured at fair value, but are recognized or disclosed at fair value on a nonrecurring basis. | ||
As of December 31, 2009 and 2008, the carrying amounts of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, and other liabilities were representative of their fair values because of the short-term maturity of these instruments. |
4. | TRANSACTIONS WITH AFFILIATES | |
For January 1, 2007 through June 13, 2007, the Company had management agreements with Sunrise Senior Living Management, Inc. (SSLMI), an affiliate of SSLII, to manage the facility. The agreements had terms of 23 to 35 years and expired during 2027 and 2037. On June 14, 2007 new management agreements were established with SSLMI as part of a recapitalization. The agreements have terms of 30 years and expire in 2037. For January 1, 2007 through June 14, 2007, the agreements provided for management fees to be paid monthly, based on net operating income (NOI) hurdles for each facility. During each of the first six months, the management fee was the greater of 5% of the gross revenue of the facility, as defined in the agreements, or $17,500. Thereafter, fees ranged between 5-7% of the facilitys annual gross revenues depending on the NOI hurdles met. From June 15, 2007 through December 31, 2008 management fees are equal to 7% of gross operating revenues. Total management fees incurred in 2009, 2008, and 2007 were $5,618,741 (unaudited), $5,711,864 (unaudited), and $5,198,041, respectively. |
138
The management agreement also provides for reimbursement to SSLMI for all direct costs of operation. Payments to SSLMI for direct operating expenses were $50,723,322 (unaudited), $53,986,269 (unaudited), and $50,731,687 in 2009, 2008, and 2007, respectively, in accordance with the terms of the management agreement. | ||
The Company obtains professional and general liability coverage through Sunrise Senior Living Insurance, Inc., an affiliate of SSLI. Related payments totaled $6,981,200 (unaudited), $4,690,282 (unaudited), and $4,096,932 in 2009, 2008, and 2007, respectively. Refunds of liability premiums of $0 (unaudited), $616,428 (unaudited), and $659,440 were given in 2009, 2008, and 2007 respectively. | ||
Pursuant to a purchase and sale agreement dated April 9, 2007, SSLII retained the liability for the uninsured loss layer for insured claims, including incurred but not reported claims, as of the closing date, for which SSLII was paid $1,058,575 by the AEW Member. The Company had previously recorded a liability and related expense of $1,109,023 relating to such claims, which was reversed during 2007. | ||
The Company had net receivables from SSLI of $34,746 (unaudited) and $526,301 (unaudited) as of December 31, 2009 and 2008, respectively, and net payables to SSLI of $3,197,737 at December 31, 2007. These transactions are subject to the right of offset, wherein any receivables from the affiliate can be offset by any payables to the affiliate, and therefore, the amounts have been presented net as a receivable and payable from/to affiliates in 2009, 2008, and 2007, respectively, in the accompanying consolidated financial statements. The amounts are non-interest bearing and due on demand. | ||
During 2002, the Company entered into a revolving loan agreement with SSLI to provide up to $20.0 million (the Note) to partially finance the initial development and construction of the Facilities. The Note generally accrued interest on its outstanding balance at a fixed rate of 10% non-compounding. The Note was due on December 23, 2010 but could be repaid earlier. On June 14, 2007, the Note was repaid, as part of a recapitalization. The payment represented $3,649,387 of principal and $183,332 of accrued interest through June 14, 2007. The Company did not capitalize interest related to the Note during the year ended December 31, 2007. |
5. | CONCENTRATIONS OF CREDIT RISK | |
The Company grants credit without collateral to its residents, most of whom are insured under third-party agreements. The mix of receivables from residents and third-party payors at December 31, 2009 (unaudited), 2008 (unaudited), and 2007 were 100% private pay. |
6. | LONG-TERM DEBT AND DERIVATIVE | |
On June 14, 2007, the Company refinanced its long-term debt. The previous debt, comprised of GE, Capmark and Guaranty loans was repaid and consisted of $202,757,095 of principal and $481,512 of accrued interest through June 14, 2007. Additionally, $4,154,962 of prepayment penalties were paid for the prepayment of the GE debt. No defeasance fees were required for any other loans. New debt was obtained from HSH Nordbank for $370,500,000 and is due on June 14, 2012. The loan bears interest on the one-month London Interbank Offered Rate (LIBOR) plus 1.50%. The LIBOR rate was .023% (unaudited), .044% (unaudited) and 4.60% as of December 31, 2009, 2008 and 2007, respectively. The loan is secured by the Facilities. | ||
The loan requires the Company to meet both liquidity and debt service coverage ratio requirements. As of December 31, 2008 (unaudited) and 2007, the Company was in compliance with these requirements. As of December 31, 2009, the Company was in compliance with liquidity ratio requirements. However, |
139
on September 20, 2009, and December 31, 2009, the Company failed to meet certain financial covenants with HSH Nordbank. Upon failure to achieve a debt service coverage ratio of 1.15:1 as of September 30, 2009, the Company implemented a monthly excess cash sweep, as defined, to an escrow account held by HSH Nordbank in accordance with the provisions of the loan documents. So long as the Company complies with the cash sweep requirements, the failure to be in compliance with the debt service coverage ratio requirements will not constitute a default, provided that the Company continues to achieve a debt service coverage ratio of at least 1.05:1. | ||
The fair value of the Companys long term debt has been estimated based on current rates offered for debt with the same remaining maturities and comparable collateralizing assets. Changes in assumptions or methodologies used to make estimates may have a material effect on the estimated fair value. In accordance with ASC Fair Value Measurements Topic, the Company has applied Level 2 type inputs to determine that the estimated fair value of the Companys long-term debt was $342,933,054 (unaudited) and $346,848,871 (unaudited) at December 31, 2009 and 2008 and approximated its carrying amount at December 31, 2007. | ||
On June 28, 2007, the Company entered into an interest rate swap and cap agreement with HSH Nordbank AG with terms extended to June 14, 2012 for the swap and June 14, 2010 for the cap. The interest rate swap limits LIBOR exposure to a maximum rate of 5.61% on a $259,350,000 notional amount, and the interest rate cap limits LIBOR exposure to a maximum rate of 6.25% on a notional amount of $111,150,000. In accordance with ASC Fair Value Measurements Topic, the Company has applied Level 2 inputs to determine the estimated fair value of the Companys interest rate swap and cap agreements. The fair market value of the Companys interest rate swap and cap agreements is mainly based on observable interest rate yield curves for similar instruments. As of December 31, 2009, 2008 and 2007, the fair market value of the interest rate swap and cap was a liability of $25,138,563 (unaudited), a liability of $35,300,289 (unaudited) and an asset of $346, respectively, and the net amount is included in the derivative liability on the 2009 and 2008 consolidated balance sheet. | ||
The Company utilizes these interest-rate related derivative instruments (interest rate swap and caps) to manage its exposure on its debt instruments. The Company does not enter into derivative instruments for any purpose other than to mitigate the impact of changes in interest rates on its cash flows. That is, the Company does not speculate using derivative instruments. | ||
The ASC Fair Value Measurements Topic requires that nonperformance risk be considered in measuring the fair value of assets and liabilities. For derivatives, nonperformance risk refers to the risk that one of the parties to a derivative transaction will be unable to perform under the contractual terms of that derivative, such as the risk that one party will be unable to make cash payments at periodic net settlement dates or upon termination. The Company has considered the counterpartys credit risk as well as the effect of its own credit standing in determining the fair value of its interest rate swap and cap agreements. The Company minimizes the credit risk in derivative instruments by entering into transactions with high-quality counterparties. |
7. | DISTRIBUTIONS | |
During 2007, a net distribution of $856,509 was recorded to the former AEW Member, which was composed of approximately $7,010,703 of cash distributions netted against the former AEW Member share of deal proceeds of $7,867,212. During 2008, the former AEW Member returned $1,511,035 (unaudited) to the venture after a postsale due diligence review of the 2007 transaction revealed that the Company had over distributed to the former AEW Member. This amount has been recorded in the accompanying consolidated statements of changes in members deficit as a negative distribution in 2008, along with a transfer of equity to increase MS Senior Living, LLCs equity balance. |
140
8. | CONTINGENCIES | |
Regulatory Violations The Company has received notices of multiple regulatory violations relating to a community in Pennsylvania. The violations resulted in the issuance of a letter from the Pennsylvania Department of Public Welfare (DPW) notifying the community that a.) its license was not being renewed, b.) no new admissions to the community could be taken as of December 31, 2009 and c.) a fine was to be imposed if the violations were not corrected within a specified time period. The Company is taking steps to remediate those violations and has been engaged in on-going discussions with DPW in an attempt to resolve them. In addition, the Company has filed an appeal of the decision not to renew the communitys license. The community continues to operate during the pendency of the appeal. If the Company is not successful in the remediation and settlement efforts, or in the appeal of the license non-renewal, the Company may be required to close the community or transfer operations to another operator. If the community is closed, the Company will be in default of its loan payable (see Note 4). Should the Company default on the loan payable, the Company may not have sufficient funds to satisfy its obligation under the loan payable. Due to the preliminary nature of this matter, the Company cannot reasonably estimate the amount of loss, if any, regarding resolution of the regulatory issues associated with this community. | ||
The Company is involved in claims and lawsuits incidental to the ordinary course of business. While the outcome of these claims and lawsuits cannot be predicted with certainty, management of the Company does not believe the ultimate resolution of these matters will have a material adverse effect on the Companys consolidated financial position. |
9. | RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS | |
The Company determined, in connection with the preparation of its 2009 consolidated financial statements, that its 2008 consolidated financial statements contained an immaterial error related to the determination of the fair value of its derivative liability and the related change in fair value reported in earnings. As a result of the error, the Company restated its consolidated financial statements for the year ended December 31, 2008 (unaudited). The restatement resulted in a decrease in net loss for the year ended December 31, 2008 of approximately $541,000 (unaudited). The cumulative effect of the restatement as of December 31, 2008 was a net decrease in members deficit and a decrease in the derivative liability of approximately $541,000 (unaudited). |
10. | NEW ACCOUNTING PRONOUNCEMENTS | |
In March 2008, the FASB issued new provisions for the ASC Derivative and Hedging Topic, which changes the disclosure requirements for derivative instruments and hedging activities. Pursuant to these new provisions entities are required to provide enhanced disclosures about (a) how and why an entity uses derivatives instruments, (b) how derivative instruments and hedged items are accounted for in accordance with the ASC Derivative and Hedging Topic, and (c) how derivative instruments and related hedged items affect an entitys financial position, financial performance, and cash flows. The adoption of these provisions of the ASC did not have a material impact on the reported consolidated balance sheets, statements of operations or cash flows. | ||
The Company adopted provisions of FASB ASC Fair Value Measurements Topic for non-financial assets and liabilities on January 1, 2009, which does not have a material impact on the reported consolidated balance sheets, statements of operations or cash flows. |
141
142
Sunrise Aston Gardens Venture, LLC:
McLean, Virginia
143
2009 | 2008 | |||||||
(Unaudited) | (Unaudited) | |||||||
ASSETS |
||||||||
PROPERTY AND EQUIPMENT: |
||||||||
Land and land improvements |
$ | 41,948,662 | $ | 41,949,662 | ||||
Building and building improvements |
399,557,358 | 398,824,751 | ||||||
Furniture and equipment |
10,092,794 | 10,011,742 | ||||||
Construction in progress |
341,015 | 340,949 | ||||||
Total property and equipment |
451,939,829 | 451,127,104 | ||||||
Less accumulated depreciation |
(30,599,487 | ) | (26,608,471 | ) | ||||
Property and equipment net |
421,340,342 | 424,518,633 | ||||||
CASH AND CASH EQUIVALENTS |
728,282 | 1,833,399 | ||||||
RESTRICTED CASH |
1,771,954 | 1,611,241 | ||||||
ACCOUNTS RECEIVABLE Less allowance for doubtful accounts
of $19,378 (unaudited) for 2008 |
| 352,023 | ||||||
PREPAID EXPENSES AND OTHER CURRENT ASSETS |
2,153,306 | 275,904 | ||||||
DEFERRED FINANCING COSTS Less accumulated amortization
of $2,899,609 (unaudited) and $2,524,447 (unaudited) for 2009 and
2008, respectively |
3,483,591 | 3,758,728 | ||||||
TOTAL |
$ | 429,477,475 | $ | 432,349,928 | ||||
LIABILITIES AND MEMBERS CAPITAL |
||||||||
LIABILITIES: |
||||||||
Notes payable |
$ | 298,528,033 | $ | 299,327,695 | ||||
Derivative liability |
15,739,480 | 16,289,596 | ||||||
Accounts payable and accrued expenses |
3,272,105 | 1,608,671 | ||||||
Loan payable to affiliates |
| 6,189,666 | ||||||
Payables to affiliates net |
317,772 | 44,808 | ||||||
Deferred revenue |
489,692 | 2,446,824 | ||||||
Security and reservation deposits |
187,251 | 210,831 | ||||||
Accrued interest |
1,013,230 | 1,734,005 | ||||||
Total liabilities |
319,547,563 | 327,852,096 | ||||||
MEMBERS CAPITAL |
109,929,912 | 104,497,832 | ||||||
TOTAL |
$ | 429,477,475 | $ | 432,349,928 | ||||
144
2009 | 2008 | 2007 | ||||||||||
(Unaudited) | (Unaudited) | |||||||||||
OPERATING REVENUE: |
||||||||||||
Resident fees |
$ | 22,140,816 | $ | 66,608,274 | $ | 67,592,971 | ||||||
Other income |
438,990 | 1,209,387 | 1,224,567 | |||||||||
Total operating revenue |
22,579,806 | 67,817,661 | 68,817,538 | |||||||||
OPERATING EXPENSES: |
||||||||||||
Labor |
6,464,887 | 18,869,879 | 18,003,624 | |||||||||
Depreciation and amortization |
3,991,016 | 14,683,726 | 15,547,904 | |||||||||
General and administrative |
2,131,922 | 5,922,153 | 7,150,525 | |||||||||
Utilities |
1,385,459 | 4,214,457 | 3,855,839 | |||||||||
Management fees |
1,357,241 | 4,063,301 | 3,729,740 | |||||||||
Taxes and license fees |
1,348,898 | 3,745,705 | 3,745,508 | |||||||||
Food |
1,306,854 | 3,957,410 | 3,826,512 | |||||||||
Insurance |
861,802 | 4,007,763 | 3,487,949 | |||||||||
Repairs and maintenance |
838,505 | 2,642,027 | 2,592,935 | |||||||||
Advertising and marketing |
251,612 | 925,835 | 735,047 | |||||||||
Ancillary expenses |
84,817 | 229,721 | 262,299 | |||||||||
Bad debt |
32,871 | 95,982 | 10,811 | |||||||||
Total operating expenses |
20,055,884 | 63,357,959 | 62,948,693 | |||||||||
INCOME FROM OPERATIONS |
2,523,922 | 4,459,702 | 5,868,845 | |||||||||
OTHER INCOME (EXPENSE): |
||||||||||||
Interest expense |
(6,297,556 | ) | (23,608,733 | ) | (21,322,708 | ) | ||||||
Change in fair value of interest rate hedge
instruments |
| (677,936 | ) | (6,073,558 | ) | |||||||
Interest income |
761 | 49,125 | 199,565 | |||||||||
Guarantee fee and other expenses |
(23,057 | ) | (67,095 | ) | | |||||||
NET INCOME (LOSS) |
$ | (3,795,930 | ) | $ | (19,844,937 | ) | $ | (21,327,856 | ) | |||
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SSLII | GE | Discovery | Total | |||||||||||||
MEMBERS CAPITAL |
||||||||||||||||
January 1, 2007 |
$ | 38,110,638 | $ | 114,331,915 | $ | | $ | 152,442,553 | ||||||||
Contributions |
500,000 | 1,500,000 | | 2,000,000 | ||||||||||||
Net loss |
(5,331,964 | ) | (15,995,892 | ) | | (21,327,856 | ) | |||||||||
MEMBERS CAPITAL |
||||||||||||||||
December 31, 2007 |
33,278,674 | 99,836,023 | | 133,114,697 | ||||||||||||
Net loss |
(4,961,234 | ) | (14,883,703 | ) | | (19,844,937 | ) | |||||||||
Other comprehensive loss loss on derivative held as cash flow hedge |
(2,192,982 | ) | (6,578,946 | ) | | (8,771,928 | ) | |||||||||
MEMBERS CAPITAL |
||||||||||||||||
December 31, 2008 (Unaudited) |
26,124,458 | 78,373,374 | | 104,497,832 | ||||||||||||
Contributions |
11,000 | 1,008,000 | 625,000 | 1,644,000 | ||||||||||||
Net income |
(948,982 | ) | (2,846,948 | ) | | (3,795,930 | ) | |||||||||
Cancellation
of Member debt |
7,033,894 | | | 7,033,894 | ||||||||||||
Other comprehensive income income on derivative held as cash flow hedge |
137,529 | 412,587 | | 550,116 | ||||||||||||
Transfer of Interest |
(32,357,899 | ) | | 32,357,899 | | |||||||||||
MEMBERS CAPITAL |
||||||||||||||||
April 30, 2009 (Unaudited) |
$ | | $ | 76,947,013 | $ | 32,982,899 | $ | 109,929,912 | ||||||||
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2009 | 2008 | 2007 | ||||||||||
(Unaudited) | (Unaudited) | |||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||||||
Net loss |
$ | (3,795,930 | ) | $ | (19,844,937 | ) | $ | (21,327,856 | ) | |||
Adjustments to reconcile net income (loss)
to net cash (used in) provided by
operating activities: |
||||||||||||
Depreciation and amortization |
4,366,178 | 15,806,956 | 15,664,800 | |||||||||
Change in fair value of interest rate hedge
instruments |
| 677,936 | 6,073,558 | |||||||||
Provision for bad debts |
32,871 | 95,982 | 10,811 | |||||||||
Changes in assets and liabilities: |
||||||||||||
Accounts receivable |
911,001 | (113,809 | ) | 1,309,885 | ||||||||
Prepaid expenses and other current assets |
(1,877,402 | ) | 10,694 | (16,893 | ) | |||||||
Accounts payable and other accrued expenses |
1,071,585 | (186,755 | ) | (203,421 | ) | |||||||
Payable to affiliates net |
272,964 | (1,929,195 | ) | (3,255,236 | ) | |||||||
Deferred revenue |
(1,957,132 | ) | (55,726 | ) | 1,882,833 | |||||||
Security and reservation deposits |
(23,580 | ) | (116,950 | ) | (90,160 | ) | ||||||
Accrued interest |
(720,775 | ) | 1,734,005 | | ||||||||
Net cash (used in) provided by by
operating activities |
(1,720,220 | ) | (3,921,799 | ) | 48,321 | |||||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||||||
Restricted cash |
(160,713 | ) | (100,044 | ) | (1,066,312 | ) | ||||||
Investment in property and equipment |
(812,725 | ) | (958,681 | ) | (1,160,931 | ) | ||||||
Net cash used in investing activities |
(973,438 | ) | (1,058,725 | ) | (2,227,243 | ) | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||||||
Payment of financing costs |
(100,025 | ) | (22,344 | ) | | |||||||
Payment on notes payable |
(799,662 | ) | (2,072,046 | ) | (2,142,465 | ) | ||||||
Funding on loan payable to affiliates |
844,228 | 6,189,666 | | |||||||||
Contributions |
1,644,000 | | 1,500,000 | |||||||||
Net cash provided by (used in)
financing activities |
1,588,541 | 4,095,276 | (642,465 | ) | ||||||||
NET DECREASE IN CASH AND CASH EQUIVALENTS |
(1,105,117 | ) | (885,248 | ) | (2,821,387 | ) | ||||||
CASH AND CASH EQUIVALENTS Beginning of year |
1,833,399 | 2,718,647 | 5,540,034 | |||||||||
CASH AND CASH EQUIVALENTS End of period |
$ | 728,282 | $ | 1,833,399 | $ | 2,718,647 | ||||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest |
$ | 6,643,170 | $ | 20,751,497 | $ | 20,478,433 | ||||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Noncash capital contribution |
$ | | $ | | $ | 500,000 | ||||||
Cancellation of Member debt |
$ | 7,033,894 | $ | | $ | | ||||||
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1. | ORGANIZATION |
Sunrise Aston Gardens Venture, LLC (the Company) was formed on June 27, 2006, as a limited liability company under the laws of the state of Delaware. The Company began operations on September 25, 2006. The Company shall terminate in 2021, unless substantially all of its assets are sold or the members elect to dissolve the Company prior to that date. The Company was funded by a capital contribution of approximately $39 million from Sunrise Senior Living Investments, Inc. (SSLII), which is a wholly owned subsidiary of Sunrise Senior Living, Inc. (SSLI), and a capital contribution of approximately $117 million from General Electric Credit Corporation of Tennessee (GE), a wholly owned subsidiary of General Electric Healthcare Financial Services (collectively, with SSLII, the Members), with the balance funded through financing obtained or assumed by the Company. SSLII held a 25% ownership interest in the Company and GE held a 75% ownership interest in the Company through April 30, 2009. SSLII was the managing member through April 30, 2009. | ||
On April 30, 2009, SSLII sold its 25% ownership interest in the Company to Discovery AG Investment LLC (Discovery) for a purchase price of $2,050,000. In addition, Discovery assumed SSLIs obligations under the guaranty of nonrecourse obligations and operating deficit agreement with HSH-Nordbank and reimbursed SSLI $3,150,000 for advances made to cover operating deficits. The loan payable to affiliates was forgiven by the members. As part of the transaction, SSLMI agreed to terminate all existing management contracts and Discovery has taken over management of the properties. On April 30, 2009, GE and Discovery contributed $970,000 (unaudited) and $625,000 (unaudited), respectively, to the Company. In addition, GE and SSLII contributed $33,000 (unaudited) and $11,000 (unaudited) to fund closing costs. | ||
The amended and restated limited liability agreement effective August 25, 2006 (the LLC Agreement), details the commitments of the Members and provides the procedures for the return of capital to the Members. All net cash flow from operations and capital proceeds is to be distributed according to the Members pro rata as specified in the LLC Agreement. Contributions are made in proportion to the percentage interests of the member at the time of request. Net income is allocated to the Members in proportion to the percentage interests of the Members. SSLI provided an operating deficit guarantee. | ||
On July 19, 2006, the Company formed six wholly owned subsidiaries (the Operator Entities) that were organized to own and operate independent and assisted senior living facilities (the Facilities), which provide services to seniors: |
Operator Entity | Location | Date Opened | ||
Sunrise AG Pelican Pointe, LLC
|
Venice, Florida | September 2006 | ||
Sunrise AG Tampa Bay, LLC
|
Tampa, Florida | September 2006 | ||
Sunrise AG Parkland Commons, LLC
|
Parkland, Florida | September 2006 | ||
Sunrise AG Pelican Marsh, LLC
|
Naples, Florida | September 2006 | ||
Sunrise AG Sun City Center, LLC
|
Sun City Center, Florida | September 2006 | ||
Sunrise AG Courtyards, LLC
|
Sun City Center, Florida | September 2006 |
Assisted living services provide a residence, meals, and nonmedical assistance to elderly residents for a monthly fee. These services are generally not covered by health insurance and, therefore, monthly fees are generally payable by the residents, their family, or another responsible party. |
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The Facilities were managed by an affiliate of SSLII through April 30, 2009 (see Note 4). |
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Basis of Accounting The Companys consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. The accompanying consolidated financial statements include the consolidated accounts of Sunrise Aston Gardens Venture, LLC and the Operator Entities (collectively, the Company) after elimination of significant intercompany accounts and transactions. In the third quarter of 2009, the Company adopted the Accounting Standards Codification (ASC) as the single source of authoritative nongovernmental generally accepted accounting principles. The adoption of the ASC did not have a material impact on our consolidated financial statements. |
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Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Significant estimates and assumptions have been made with respect to the useful lives of assets, impairment of long-lived assets, recoverable amounts of receivables, amortization periods of deferred costs, and the fair value of financial instruments, including derivatives. Actual results could differ from those estimates. | ||
Property and Equipment Property and equipment are recorded at the lower of cost, or if impairment is indicated, at fair value. Maintenance and repairs are charged to expense as incurred. The Company capitalizes property taxes, insurance, and interest during construction to the extent such assets qualify for capitalization. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets, as follows: |
Land improvements |
1015 years | |||
Building and improvements |
40 years | |||
Furniture, fixtures, and equipment |
310 years |
Property and equipment are reviewed for impairment whenever events or circumstances indicate that the assets undiscounted expected cash flows are not sufficient to recover its carrying amount. The Company measures an impairment loss for such assets by comparing the fair value of the asset to its carrying amount. The Company determines fair values using various commonly used methods, including estimated cash flow projections discounted at appropriate rates and capitalization rates based on available market information. No impairment charges were recorded in 2009 (unaudited), 2008 (unaudited) or 2007. |
In accordance with Financial Accounting Standards Board (FASB) ASC Business Combination Topic, upon acquisition of the Facilities, the Company allocated the total purchase price of $455,161,750, to identifiable tangible and intangible assets based upon their relative fair values. The Company determined fair values using various commonly used methods, including estimated cash flow projections discounted at appropriate rates and capitalization rates based on available market information. The purchase price was allocated to land, building and improvements, furniture and equipment, inventory, and residential leasing intangible assets. The fair value of land was based upon relevant and recent comparable sales. The fair value of land improvements and building and improvements was based upon replacement cost as if the building were vacant. |
Cash and Cash Equivalents Cash and cash equivalents include all liquid investments with an original maturity of three months or less. Throughout the year, the Company may have cash balances in excess of federally insured amounts on deposit with various financial institutions. |
Restricted Cash Restricted cash balances represent amounts set aside for debt service charges as required by the loan agreement. |
Allowance for Doubtful Accounts The Company provides an allowance for doubtful accounts on its outstanding receivables balance based on its collection history and an estimate of uncollectible accounts. |
Residential Leasing Intangible Assets The fair value of above and below market leases is based on the present value of the difference between the contractual amounts to be paid pursuant to the acquired leases and managements estimate of the market lease rates measured over a period equal to the remaining terms of the leases. The origination value of in-place leases is based on costs to execute |
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similar leases, including commissions and other related costs. The foregone value associated with acquiring a built-in expense reimbursement revenue stream on a leased building is based on assessments of common expenses, real estate taxes, insurance, and other operating expenses during the estimated time required to lease up the building from vacant to the occupancy level at the date of acquisition. The Company allocated $6,156,828 of the purchase price to residential leasing intangible assets at acquisition, consisting of $7,495,598 allocated to in-place leases and a net value of $(1,338,770) allocated to above and below market leases. |
Residential leasing intangible assets were amortized under the straight-line method over their respective estimated useful lives. Above and below market leases were amortized over a period of one year, based on the weighted-average remaining terms of the respective leases. For the four months ended April 30, 2009 (unaudited) and the years ended December 31, 2008 (unaudited) and 2007, the net amortization charge of above and below market leases was $0, $0 and $(1,004,078), respectively, which is reflected as an increase in resident fees in the accompanying consolidated statements of operations. Above and below market leases have been fully amortized as of December 31, 2007. In-place leases are amortized over a period of two years, based on managements estimate of the average length of stay. For the four months ended April 30, 2009 (unaudited) and the years ended December 31, 2008 (unaudited) and 2007, amortization of in-place leases was $0, $2,810,853 and $3,747,798, respectively, which has been included in depreciation and amortization expense in the accompanying consolidated statements of operations. Residential leasing intangible assets in the accompanying consolidated balance sheets were fully amortized as of December 31, 2008. |
Deferred Financing Costs Costs incurred in conjunction with obtaining permanent financing for the Company have been deferred and are amortized using the straight-line method, which approximates the effective interest method, to interest expense over the remaining term of the financing. Amortization expense for the four months ended April 30, 2009 (unaudited) and the years ended December 31, 2008 (unaudited) and 2007, was $375,162, $1,123,230 and $1,120,973, respectively. |
Revenue Recognition and Deferred Revenue Operating revenue consists of resident fee revenue, including resident community fees. Generally, resident community fees approximating 30 to 60 times the daily resident fee are received from residents upon occupancy. Resident community fees are deferred and recognized as income over one year corresponding to the terms of agreements with residents. The agreements are cancelable by residents with 30 days notice. All other resident fee revenue is recognized when services are rendered. The Company bills the residents one month in advance of the services being rendered, and, therefore, cash payments received for services are recorded as deferred revenue until the services are rendered and the revenue is earned. |
Income Taxes No provision has been made for federal and state income taxes, as the liability for such taxes, if any, is that of the members and not the Company. The Company is subject to franchise taxes in the states of California, Michigan and Pennsylvania, where the properties are located. These taxes are expensed as incurred and are included in taxes and license fees in the accompanying consolidated financial statements. | ||
In July 2006, the Financial Accounting Standards Board issued
(FASB) Interpretation No. 48 (FIN 48),
Accounting for Uncertainty in Income Taxes, which has principally
been codified in ASC 740-10-25, Income Taxes, Overall Recognition
(ASC 740-10-25). ASC 740-10-25 describes a comprehensive model for the measurement, recognition, presentation and disclosure of uncertain tax positions in the financial statements. Under the interpretation, the financial statements will reflect expected future tax consequences of such positions presuming the tax authorities have full knowledge of the position and all relevant facts, but without considering time values. The Company adopted the provisions of this statement on January 1, 2009. The adoption of this statement did not have any effect on the Companys financial position or results of operations. |
Accounting for Derivatives The Company accounts for its derivative instruments in accordance with ASC Derivative and Hedging Topic which establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. All derivatives, whether designated in hedging relationships or not, are required to be recorded in the consolidated balance sheets at fair value. The statement requires that changes in the derivative instruments fair value be recognized currently in earnings, unless specific hedge accounting criteria are met. |
The Companys derivative instruments consist of an interest rate swap that it has entered into to manage its exposure to interest rate risk. For the year ended December 31, 2007 and the nine months ended September 30, 2008 (unaudited), the Companys interest rate instruments did not qualify for hedge accounting treatment in accordance with ASC Derivative and Hedging Topic and, as a result, changes in the fair |
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value of the swap of $677,936 (unaudited) and $6,073,558 were recorded in net loss for the years ended December 31, 2008 and 2007. Beginning October 1, 2008, the Companys interest rate swap contract did qualify for hedge accounting treatment in accordance with ASC Derivative and Hedging Topic, and therefore, the Company recorded the (income)/loss from the change in the fair market value of the swap of ($550,116) and $8,771,928 for the four months ended April 30, 2009 (unaudited) and the year ended December 31, 2008 (unaudited), respectively, as an adjustment to accumulated other comprehensive loss in the consolidated financial statements. The total derivative liability recorded in the accompanying balance sheets is $15,739,480 (unaudited), $16,289,596 (unaudited) and $6,839,732 as of April 30, 2009, December 31, 2008 and December 31, 2007, respectively. |
Fair Value of Financial Instruments Disclosures of estimated fair value are determined by management using available market information and appropriate valuation methodologies. Considerable judgment is necessary to interpret market data and develop estimated fair value. Accordingly, estimates presented are not necessarily indicative of the amounts the Company could realize on disposition of the financial instruments. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. |
Cash and cash equivalents, restricted cash, accounts receivable, and accounts payable, are carried at amounts which reasonably approximate their fair values. |
3. | CONSIDERATION OF GOING CONCERN The accompanying consolidated financial statements have been prepared on the basis of Sunrise Aston Gardens Venture, LLC continuing as a going concern. The Facilities have been negatively impacted by adverse economic conditions in Florida during 2007, 2008 and continuing into 2009. The Company was unable to meet the required debt service coverage ratios for the loan agreement with HSH Nordbank AG (HSH-Nordbank) during 2007. As a result, at December 31, 2007, the Company was in default of certain financial covenants with the HSH-Nordbank loan agreement, which had an outstanding balance of $170,000,000 (see Note 7). The Company remained in default through December 22, 2008. Based on the restructured loan agreement, there was no requirement to meet a certain debt coverage ratio of reserves available for debt service to debt service requirement at December 31, 2008, and the Company was in compliance with other financial covenants for all loan agreements. |
|
In December 2008, GE, SSLI, and HSH-Nordbank executed an agreement whereby the $170,000,000 loan with HSH-Nordbank was severed into two separate tranches. The Tranche A note (Tranche A) continues to be held by HSH-Nordbank in the amount of $143,750,000 with a variable rate of LIBOR plus 1.95% per annum. GE HFS Holdings Inc. (GE HFS) purchased the Tranche B note (Tranche B) in the amount of $26,250,000. Tranche B is subordinated to Tranche A with a variable rate of LIBOR plus 10% per annum. The execution of this agreement and purchase of Tranche B by GE HFS cured all existing defaults with HSH-Nordbank. Additionally, the loan was modified to include an option to extend the maturity date subject to various conditions, including no events of default through the original maturity date. The extension option would allow the borrowers to extend the maturity date of the debt from September 25, 2011 to September 25, 2012. | ||
As described in a letter dated November 13, 2008 to SSLI, GE intends to hold its investment in the Company through December 1, 2017. Additionally, GE intends to take steps to refinance the Companys debt currently held by HSH-Nordbank when the debt becomes due in 2011 (or the extended maturity date of 2012). GE intends to accomplish this refinancing either through a third-party lender or by a GE entity acting as a lender. | ||
SSLI had executed an operating deficits agreement with HSH-Nordbank obligating SSLI to make operating deficit payments on the facilities securing the HSH-Nordbank loan. Operating deficits are defined to include interest and principal payments on the loan. Operating deficits of $844,228 (unaudited) and $6,189,666 were funded as of April 30, 2009 and December 31, 2008, respectively. As described in Note 1, SSLII sold its interest in the Company on April 30, 2009. Concurrent with the sale, the $7,033,894 that was funded in 2009 and 2008 was forgiven and the buyer has assumed SSLIIs obligation under the operating deficit agreement with HSH-Nordbank. | ||
The consolidated financial statements do not include any adjustments to reflect the possible effects on the recoverability of assets or the amounts of liabilities that may result from the resolution of the uncertainty about the Companys ability to continue as a going concern. |
4. | FAIR VALUE MEASUREMENTS |
Fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The ASC Fair Value Measurement Topic establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels. These levels, in order of highest priority to lowest priority, are described below: |
Level 1 Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities. |
Level 2 Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data. |
Level 3 Inputs are unobservable inputs which reflect the reporting entitys own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information. |
In February 2008, the FASB delayed the effective date of the new provisions of the ASC Fair Value Measurement Topic for items such as nonfinancial assets and liabilities initially measured at fair value in a business combination (but not measured at fair value in subsequent periods) and nonfinancial long-lived asset groups measured at fair value for an impairment assessment. |
As of April 30, 2009 and December 31, 2008, the carrying amounts (unaudited) of certain financial instruments, including cash and cash equivalents, accounts receivable, and accounts payable, were representative of their fair values because of the short-term maturity of these instruments. |
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5. | TRANSACTIONS WITH AFFILIATES |
The Facilities have entered into management agreements with Sunrise Senior Living Management, Inc. (SSLMI), a wholly owned subsidiary of SSLI, to manage each of the Facilities. The agreements were terminated on April 30, 2009 (see Note 1), and provided for management fees to be paid monthly based on a percentage of the Facilities gross revenues. Total management fees incurred were $1,357,241 (unaudited), $4,063,301 (unaudited), and $3,729,740 for the four months ended April 30, 2009 and the years ended December 31, 2008 and 2007, respectively. |
The management agreement also provides for reimbursement to SSLMI for all direct costs of operation. Payments to SSLMI for direct operating expenses were $12,084,745 (unaudited), $35,925,000 (unaudited) and $39,628,950 in 2009, 2008 and 2007, respectively. |
The Company obtains professional and general liability coverage through Sunrise Senior Living Insurance, Inc., an affiliate of SSLI. Related payments totaled $933,141 (unaudited), $3,095,168 (unaudited) and $2,692,281 in 2009, 2008 and 2007, respectively. Refunds of liability premiums of $177,902 (unaudited) and $188,072 were given in 2008 and 2007, respectively. |
The Company had net payables to SSLI of $317,772 (unaudited), $44,808 (unaudited) and $1,974,003 at April 30, 2009, and December 31, 2008 and 2007, respectively. These transactions are subject to the right of offset wherein any receivables from the affiliate can be offset by any payables to the affiliate, and, therefore, the amounts have been presented as a net payable to affiliates in 2009, 2008 and 2007, respectively, in the accompanying consolidated financial statements. The amounts are non-interest bearing and due on demand. |
6. | CONCENTRATIONS OF CREDIT RISK |
The Company grants credit without collateral to its residents, most of whom are insured under third-party agreements. The mix of receivables from residents and third-party payors at April 30, 2009 (unaudited) and December 31, 2008 (unaudited) and 2007, was 100% private pay. |
7. | NOTES PAYABLE |
As part of the purchase of the Facilities on September 25, 2006, the Company assumed loans for four of the Facilities in the aggregate amount of $133,955,485 and obtained new debt of $170,000,000 for two of the Facilities. Notes payable consist of the following at April 30, 2009 (unaudited) and December 31, 2008 (unaudited): |
On September 25, 2006, the Company assumed two notes payable of $19,282,670 and $7,013,511 for the Courtyards property in the original loan amounts of $19,875,000 and $7,100,000, respectively, payable to Capmark Financial, Inc. (Capmark). The notes are secured by a deed of trust on the facility, bear interest at fixed rates of 5.81% and 6.19% per annum, require monthly principal and interest payments, and mature on January 1, 2015. |
On September 25, 2006, the Company assumed a note payable of $23,500,000 for the Sun City Center property in the original amount of $24,966,000 payable to Capmark. The note is secured by a deed of trust on the facility, bears interest at a fixed rate of 6.24% per annum, due in monthly installments of interest only through November 2006, with monthly installments of principal and interest thereafter, with the remaining balance of the note maturing on November 1, 2015. |
On September 25, 2006, the Company assumed two notes payable of $25,828,556 and $8,950,679 for the Tampa Bay property, in the original amounts of $25,900,000 and $9,000,000, respectively, payable |
153
to Capmark. The notes are secured by a deed of trust on the facility, bear interest at fixed rates of 5.61% and 5.83% per annum, require monthly principal and interest payments, and mature on July 1, 2015. |
On September 25, 2006, the Company assumed a note payable of $49,586,631 for the Pelican Pointe property, in the original amount of $50,000,000 payable to Key Bank. The note is secured by a deed of trust on the facility, bears interest at a fixed rate of 6.11% per annum, requires monthly principal and interest payments, and matures on December 1, 2015. |
On September 25, 2006, the Company entered into a note payable of $170,000,000 for the Parkland Commons and Pelican Marsh properties payable to HSH-Nordbank. The note is secured by a deed of trust on both facilities, bears interest at the one-month London Interbank Offered Rate (LIBOR), plus 1.95%, due in monthly installments of interest only through September 2010 and monthly installments of principal and interest thereafter, with the remaining balance of the note maturing on September 25, 2011. The one-month LIBOR rate was 0.51% (unaudited), 0.44% (unaudited) and 4.60% as of April 30, 2009, December 31, 2008 and 2007, respectively. Additionally, the terms of the loan agreement include certain restrictions relating to the sale of the Courtyards facility, Sun City Center facility, Tampa Bay facility, and Pelican Pointe facility. |
In December 2008, GE, SSLI, and HSH-Nordbank executed an agreement whereby the $170,000,000 loan with HSH-Nordbank was severed into two separate tranches. Tranche A continues to be held by HSH-Nordbank in the amount of $143,750,000 (unaudited) with a variable rate of LIBOR, plus 1.95% (unaudited) per annum. GE HFS purchased Tranche B in the amount of $26,250,000. Tranche B is subordinated to Tranche A and carries an interest rate of LIBOR, plus 10% (unaudited) per annum. The execution of this agreement and purchase of Tranche B by GE HFS cured all existing defaults with HSH-Nordbank. Additionally, the loan was modified to include an option to extend the maturity date subject to various conditions, including no events of default through the original maturity date. The extension option would allow the borrowers to extend the maturity date of the debt from September 25, 2011 to September 25, 2012. |
Principal maturities of notes payable as of April 30, 2009 (unaudited), are as follows: |
5/1/2009-12/31/2009 |
$ | 1,605,184 | ||
2010 |
2,865,183 | |||
2011 |
172,401,334 | |||
2012 |
2,859,707 | |||
2013 |
3,058,235 | |||
Thereafter |
115,738,390 | |||
$ | 298,528,033 | |||
The Company is subject to certain debt service, occupancy, and other financial covenants pursuant to the note agreements. On December 31, 2007, and March 31, 2008, the Company failed to meet certain financial covenants with HSH-Nordbank. A failure to achieve a debt service coverage ratio of reserves available for debt service to debt service requirement of at least 1.05:1 constitutes an event of default. Upon an event of default, the lender has remedies ranging from a written waiver of default to requiring the setting up of a lockbox on cash receipts, and even acceleration of the debt obligation. As of March 2008, the Company implemented an excess cash sweep to escrow accounts held by HSH-Nordbank in accordance with provisions of the loan documents. Also, SSLMI began to subordinate 2% (unaudited) of management fees to be paid into the escrow accounts. In June 2008, HSH-Nordbank issued a notice of an event of default due to the failure of the Company to maintain the required debt service coverage ratio. As a result of this event of default, the Company immediately began accruing interest on the loan at the default rate as defined in the loan agreement, which is 3.5% (unaudited) higher than the |
154
LIBOR, plus 1.95% previously charged. Additionally, the default notice also required a principal payment to be made on the loan no later than July 31, 2008, in an amount sufficient to achieve compliance with the debt service coverage ratio requirement. As described above, the execution of the agreement and purchase of Tranche B by GE HFS cured all existing defaults with HSH-Nordbank. |
GE intends to hold its investment in the Company through December 1, 2017. Additionally, GE intends to take steps to refinance the Companys debt currently held by HSH-Nordbank when the debt becomes due in 2011 (or the extended maturity date of 2012). GE intends to accomplish this refinancing either through a third-party lender or by a GE entity acting as a lender. |
The HSH-Nordbank debt referred to above is guaranteed by the Company through a payment guaranty agreement between the Company and HSH-Nordbank. Additionally, SSLI had executed a guaranty of non-recourse obligations agreement and an operating deficit agreement with HSH-Nordbank. The balance due on the guaranty under this provision was $6,189,666 (unaudited) and $0 as of December 31, 2008 and 2007, respectively. An additional amount of $844,228 (unaudited) was funded in 2009. As discussed in Note 1, as part of the sale of SSLIs interest in the Company, SSLI and its affiliates received $3,150,000 (unaudited) in partial payment of the loan payable to affiliates and Discovery assumed SSLIs obligations under the guaranty of nonrecourse obligations and operating deficit agreement with HSH-Nordbank. The loan payable to affiliates was forgiven by the members. |
The fair value of the Companys notes payable has been estimated based on current rates offered for debt with the same remaining maturities and comparable collateralizing assets. Changes in assumptions or methodologies used to make estimates may have a material effect on the estimated fair value. For the $170,000,000 debt on the HSH-Nordbank properties of Parkland Commons and Pelican Marsh, which is LIBOR based, the estimated fair value of this debt was $170,000,000 (unaudited), $164,201,941 (unaudited), and $170,000,000 at April 30, 2009, December 31, 2008 and 2007, respectively. Per ASC Fair Value Measurements Topic, the Company has applied Level 2 type inputs to the Companys remaining fixed rate notes payable, and determined that notes payable with carrying values of $128,528,032 (unaudited), $129,327,695 (unaudited) and $131,399,741 at April 30, 2009 and December 31, 2008 and 2007, respectively, had fair values of $123,889,879 (unaudited), $126,228,168 (unaudited) and $129,717,926, respectively. |
On September 26, 2006, the Company entered into an interest rate swap agreement with HSH-Nordbank. The interest rate swap pays interest at a fixed rate of 5.075% in exchange for interest based on LIBOR, in order to eliminate the variability of cash flows in interest payments associated with the $170,000,000 note payable, the source of which is due to changes in LIBOR. Per ASC Fair Value Measurements Topic, the Company has applied Level 2 inputs to determine the estimated fair value of the Companys interest rate swap agreement. The fair market value of the interest rate swap at April 30, 2009 and December 31, 2008 and 2007, was a liability of $15,739,480 (unaudited), $16,289,596 (unaudited) and $6,839,732, respectively, and is included in the derivative liability on the consolidated balance sheet. |
The Company utilizes this interest rate-related derivative instrument (interest rate swap) to manage its exposure on its debt instrument. The Company does not enter into derivative instruments for any purpose other than to mitigate the impact of changes in interest rates on its cash flows. That is, the Company does not speculate using derivative instruments. |
The ASC Fair Value Measurements Topic requires that nonperformance risk be considered in measuring the fair value of assets and liabilities. For derivatives, nonperformance risk refers to the risk that one of the parties to a derivative transaction will be unable to perform under the contractual terms of that derivative, such as the risk that one party will be unable to make cash payments at periodic net settlement dates or upon termination. The Company has considered the counterpartys credit risk as well as the effect of its own credit standing in determining the fair value of its interest rate swap agreement. The Company |
155
minimizes the credit risk in derivative instruments by entering into transactions with high-quality counterparties. |
8. | CONTINGENCIES |
The Company is involved in claims and lawsuits incidental to the ordinary course of business. While the outcome of these claims and lawsuits cannot be predicted with certainty, management of the Company does not believe that the ultimate resolution of these matters will have a material adverse effect on the Companys financial position. |
In August 2006, a plaintiff filed suit against SSLI, claiming it was entitled to broker commissions in connection with the purchase of the Facilities. SSLIs request to dismiss this claim was granted and the plaintiff filed an amended complaint in 2007. Pursuant to the Companys LLC Agreement, the Company is obligated to reimburse SSLI and GE up to a maximum of $2,666,667 in connection with this litigation. As of November 16, 2007, the plaintiff and SSLI executed a settlement agreement whereby SSLI agreed to pay the plaintiff a total of $2 million in exchange for dismissal of any claims, with each party being responsible for its own legal costs. The $2 million was paid to the plaintiff in December 2007 through a $2 million capital contribution from SSLII and GE in proportion to their respective ownership percentages. SSLIIs contribution of $500,000 was reflected as a reduction of the payables to affiliates, net, balance in the consolidated balance sheets. Additionally, the Company has incurred a total of $906,353 in legal costs associated with this suit. In accordance with the Companys LLC Agreement, SSLII and GE are obligated to contribute capital totaling $666,667 in proportion to their respective ownership percentages. Per the LLC Agreement, the remaining amount of legal costs totaling $239,686 is the responsibility of SSLI and is included as a receivable from SSLI in the payables to affiliates, net, balance in the consolidated balance sheet as of December 31, 2007. This amount was paid in 2008. A total of $2,666,667 representing settlement and legal costs is included in general and administrative expenses in the consolidated statement of operations in 2007. There were no additional costs related to this settlement incurred in 2008. |
9. | NEW ACCOUNTING PRONOUNCEMENTS |
In March 2008, the FASB issued new provisions for the ASC Derivative and Hedging Topic, which changes the disclosure requirements for derivative instruments and hedging activities. Pursuant to these new provisions, entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and hedged items are accounted for in accordance with the ASC Derivative and Hedging Topic, and (c) how derivative instruments and related hedged items affect an entitys financial position, financial performance, and cash flows. The adoption of these provisions of the ASC did not have a material impact on the reported consolidated balance sheets, statements of operations or cash flows. | ||
The Company adopted provisions of FASB ASC Fair Value Measurements Topic for non-financial assets and liabilities on January 1, 2009. Adoption of these provisions of the ASC did not have a material impact on the reported consolidated balance sheets, statements of operations or cash flows. |
156
157
By:
|
/s/ Julie A. Pangelinan
|
|||
Chief Financial Officer |
158
INCORPORATED BY REFERENCE | ||||||||||
Exhibit | Exhibit | |||||||||
Number | Description | Form | Filing Date with SEC | Number | ||||||
2.1
|
Stock Purchase Agreement dated as of December 30, 2002 by and among Marriott International, Inc., Marriott Senior Holding Co., Marriott Magenta Holding Company, Inc. and Sunrise Assisted Living, Inc. | 10-K | March 27, 2003 | 2.3 | ||||||
2.2
|
Amendment No. 1 to Stock Purchase Agreement, dated as of March 28, 2003, by and among Marriott International, Inc., Marriott Senior Holding Co., Marriott Magenta Holding Company, Inc. and Sunrise Assisted Living, Inc. | 8-K | April 9, 2003 | 2.2 | ||||||
2.3
|
Master Agreement (CNL Q3 2003 Transaction) dated as of the 30th day of September, 2003 by and among (i) Sunrise Development, Inc., (ii) Sunrise Senior Living Management, Inc., (iii) Twenty Pack Management Corp., Sunrise Madison Senior Living, L.L.C. and Sunrise Development, Inc. (collectively, as the Tenant), (iv) CNL Retirement Sun1 Cresskill NJ, LP, CNL Retirement Edmonds WA, LP, CNL Retirement Sun1 Lilburn GA, LP and CNL Retirement Sun1 Madison NJ LP, and (v) Sunrise Senior Living, Inc. | 8-K | October 15, 2003 | 2.4 | ||||||
2.4
|
Securities Purchase Agreement by and among Sunrise Senior Living, Inc., Greystone Partners, Ltd., Concorde Senior Living, LLC, Mahalo Limited, Westport Advisors, Ltd., Greystone Development Company, LLC, Michael B. Lanahan, Paul F. Steinhoff, Jr., Mark P. Andrews and John C. Spooner, dated as of May 2, 2005. | 10-Q | August 9, 2005 | 2.1 | ||||||
2.5
|
Asset Purchase Agreement by and among Sunrise Senior Living Investments, Inc., Fountains Continuum of Care Inc. and various of its subsidiaries and affiliates, and George B. Kaiser, dated as of January 19, 2005. | 10-Q | May 10, 2005 | 10.1 | ||||||
2.6
|
Facilities Purchase and Sale Agreement by and among Sunrise Senior Living Investments, Inc., and Fountains Charitable Income Trust and various of its subsidiaries and affiliates, dated as of January 19, 2005. | 10-Q | May 10, 2005 | 10.2 | ||||||
2.7
|
Purchaser Replacement and Release Agreement by and among Sunrise Senior Living, Inc. and various of its subsidiaries and affiliates and Fountains Charitable Income Trust and various of its subsidiaries and affiliates, dated as of February 18, 2005. | 10-Q | May 10, 2005 | 10.3 | ||||||
2.8
|
Agreement and Plan of Merger, dated as of August 2, 2006, by and among Sunrise Senior Living, Inc., a newly-formed indirect wholly owned subsidiary of Sunrise and Trinity Hospice, Inc., American Capital Strategies, Ltd. and certain affiliates of KRG Capital Partners, LLC, as the principal stockholders of Trinity Hospice, Inc. | 10-K | March 24, 2008 | 2.8 | ||||||
2.9
|
Purchase and Sale Agreement, dated as of October 7, 2009, by and among various subsidiaries of Sunrise Senior Living, Inc. and BLC Acquisitions, Inc. | 10-Q | November 9, 2009 | 2.1 | ||||||
2.10
|
First Amendment to Purchase and Sale Agreement, dated as of October 7, 2009, by and among various subsidiaries of Sunrise Senior Living, Inc. and BLC Acquisitions, Inc. | 10-Q | November 9, 2009 | 2.2 | ||||||
2.11
|
Second Amendment to Purchase and Sale Agreement, dated as of October 7, 2009, by and among various subsidiaries of Sunrise Senior Living, Inc. and BLC Acquisitions, Inc. | 10-Q | November 9, 2009 | 2.3 | ||||||
3.1
|
Amended and Restated Certificate of Incorporation of Sunrise, effective as of November 14, 2008. | Def 14A | October 20, 2008 | A | ||||||
3.2
|
Amended and Restated Bylaws of Sunrise, effective as of November 14, 2008. | 8-K | November 19, 2008 | 3.1 | ||||||
4.1
|
Form of Common Stock Certificate. | 10-K | March 24, 2008 | 4.1 | ||||||
4.2
|
Rights Agreement between Sunrise Senior Living, Inc. and American Stock | 8-K | April 21, 2006 | 4.1 |
159
INCORPORATED BY REFERENCE | ||||||||||
Exhibit | Exhibit | |||||||||
Number | Description | Form | Filing Date with SEC | Number | ||||||
Transfer & Trust Company, as rights agent, dated April 24, 2006. | ||||||||||
4.3
|
First Amendment to the Rights Agreement, dated as of November 19, 2008, between Sunrise Senior Living, Inc. and American Stock Transfer & Trust Company, as rights agent. | 8-K | November 19, 2008 | 4.1 | ||||||
4.4
|
Second Amendment to the Rights Agreement, dated as of January 27, 2010, between Sunrise Senior Living, Inc. and American Stock Transfer & Trust Company, as rights agent. | 8-K | January 27, 2010 | 4.1 | ||||||
10.1
|
1995 Stock Option Plan, as amended.+ | 10-K | March 31, 1998 | 10.20 | ||||||
10.2
|
1996 Directors Stock Option Plan, as amended.+ | 10-K | March 31, 1999 | 10.36 | ||||||
10.3
|
1996 Non-Incentive Stock Option Plan, as amended.+ | 10-Q | May 15, 2000 | 10.8 | ||||||
10.4
|
1997 Stock Option Plan, as amended.+ | 10-K | March 31, 1998 | 10.25 | ||||||
10.5
|
1998 Stock Option Plan.+ | 10-K | March 31, 1999 | 10.41 | ||||||
10.6
|
1999 Stock Option Plan.+ | 10-Q | May 13, 1999 | 10.1 | ||||||
10.7
|
2000 Stock Option Plan.+ | 10-K | March 12, 2004 | 10.4 | ||||||
10.8
|
2001 Stock Option Plan.+ | 10-Q | August 14, 2001 | 10.15 | ||||||
10.9
|
2002 Stock Option and Restricted Stock Plan.+ | 10-Q | August 14, 2002 | 10.1 | ||||||
10.10
|
2003 Stock Option and Restricted Stock Plan.+ | 10-Q | August 13, 2002 | 10.1 | ||||||
10.11
|
Forms of equity plan amendment adopted on March 19, 2008 regarding determination of option exercise price. + | 10-K | July 31, 2008 | 10.11 | ||||||
10.12
|
2008 Omnibus Incentive Plan.+ | Def 14A | October 20, 2008 | B | ||||||
10.13
|
Form of Executive Restricted Stock Agreement.+ | 10-Q | May 10, 2005 | 10.4 | ||||||
10.14
|
Form of Restricted Stock Unit Agreement.+ | 8-K | March 14, 2006 | 10.1 | ||||||
10.15
|
Form of Director Stock Option Agreement.+ | 8-K | September 14, 2005 | 10.2 | ||||||
10.16
|
Form of Stock Option Certificate.+ | 10-K | March 24, 2008 | 10.14 | ||||||
10.17
|
Form of Non-Qualified Stock Option Agreement.+* | 10-K | March 2, 2009 | 10.17 | ||||||
10.18
|
Form of Incentive Stock Option Agreement.+* | 10-K | March 2, 2009 | 10.18 | ||||||
10.19
|
Form of Restricted Stock Agreement.+* | 10-K | March 2, 2009 | 10.19 | ||||||
10.20
|
Restricted Stock Agreement by and between Sunrise Senior Living, Inc. and Michael B. Lanahan, dated as of May 10, 2005.+ | 10-Q | August 9, 2005 | 10.2 | ||||||
10.21
|
Form of Sunrise Assisted Living Holdings, L.P. Class A Limited Partner Unit Agreement.+ | 10-K | March 29, 2002 | 10.89 | ||||||
10.22
|
Sunrise Employee Stock Purchase Plan, as amended.+ | Def 14A | April 7, 2005 | B | ||||||
10.23
|
Sunrise Executive Deferred Compensation Plan, effective January 1, 2009.+ | 10-K/A | March 31, 2009 | 10.23 | ||||||
10.24
|
Greystone Communities Nonqualified Deferred Compensation Plan.+ | 10-K | July 31, 2008 | 10.25 | ||||||
10.25
|
Bonus Deferral Programs for Certain Executive Officers.+ | 8-K | March 14, 2006 | 10.2 | ||||||
10.26
|
Sunrise Assisted Living, Inc. Long Term Incentive Cash Bonus Plan effective August 23, 2002.+ | 10-Q | November 13, 2002 | 10.1 | ||||||
10.27
|
Amendment 1 to the Sunrise Assisted Living, Inc. Long Term Incentive Cash Bonus Plan.+ | 10-K | March 16, 2005 | 10.32 | ||||||
10.28
|
Amendment 2 to the Sunrise Assisted Living, Inc. Long Term Incentive Cash Bonus Plan.+ | 10-K/A | March 31, 2009 | 10.28 | ||||||
10.29
|
Sunrise Senior Living, Inc. Senior Executive Severance Plan.+ | 10-K | March 16, 2006 | 10.53 | ||||||
10.30
|
Amendment to Sunrise Senior Living, Inc. Senior Executive Severance Plan.+ | 10-K/A | March 31, 2009 | 10.30 | ||||||
10.31
|
Form of Indemnification Agreement.+ | 10-K | March 16, 2006 | 10.54 |
160
INCORPORATED BY REFERENCE | ||||||||||
Exhibit | Exhibit | |||||||||
Number | Description | Form | Filing Date with SEC | Number | ||||||
10.32
|
Amended and Restated Employment Agreement dated as of November 13, 2003 by and between Sunrise and Paul J. Klaassen.+ | 10-K | March 12, 2004 | 10.1 | ||||||
10.33
|
Amendment No. 1 to Amended and Restated Employment Agreement by and between Sunrise and Paul J. Klaassen.+ | 10-K | March 24, 2008 | 10.30 | ||||||
10.34
|
Letter dated March 16, 2008 regarding surrender of bonus compensation | 10-K | March 24, 2008 | 10.65 | ||||||
10.35
|
Consulting Arrangement with Paul J. Klaassen. + | 10-Q | November 9, 2009 | 10.29 | ||||||
10.36
|
Employment Agreement by and between Sunrise Senior Living, Inc. and Michael B. Lanahan, dated as of May 10, 2005.+ | 10-Q | August 9, 2005 | 10.1 | ||||||
10.37
|
Employment Agreement between the Corporation and Mark S. Ordan, dated November 13, 2008.+ | 8-K | November 19, 2008 | 10.1 | ||||||
10.38
|
Letter Agreement between the Corporation and Julie Pangelinan, dated November 17, 2008.+ | 8-K | November 19, 2008 | 10.2 | ||||||
10.39
|
Separation Agreement and General Release between the Company and John F. Gaul, dated December 9, 2008.+ | 8-K | December 15, 2008 | 10.1 | ||||||
10.40
|
Employment Agreement between Sunrise Senior Living, Inc. and Julie A. Pangelinan, dated January 14, 2009.+ | 8-K | January 21, 2009 | 10.2 | ||||||
10.41
|
Employment Agreement between Sunrise Senior Living, Inc. and Daniel J. Schwartz, dated January 16, 2009.+ | 8-K | January 21, 2009 | 10.3 | ||||||
10.42
|
Employment Agreement between Sunrise Senior Living, Inc. and Greg Neeb, dated January 21, 2009.+ | 8-K | January 21, 2009 | 10.4 | ||||||
10.43
|
Employment Agreement between Sunrise Senior Living, Inc. and Richard J. Nadeau, dated February 25, 2009.+ | 8-K | February 26, 2009 | 10.1 | ||||||
10.44
|
Separation Agreement between the Company and Richard J. Nadeau, dated May 29, 2009. + | 8-K | June 4, 2009 | 10.1 | ||||||
10.45
|
2008 Non-Employee Director Fees and Other Compensation.+ | 10-K | March 2, 2009 | 10.45 | ||||||
10.46
|
2009 Annual Bonus Performance Metrics Applicable to Executive Officers.+ | 10-Q | November 9, 2009 | 10.28 | ||||||
10.47
|
2009 Special Bonus Payments to Executive Officers. + | 10-Q | November 9, 2009 | 10.30 | ||||||
10.48
|
2009 Partial Bonus Payments to Executive Officers. + | 10-Q | November 9, 2009 | 10.31 | ||||||
10.49
|
2009 Director Fees. + | 10-Q | November 9, 2009 | 10.32 | ||||||
10.50
|
Credit Agreement by and among Sunrise Senior Living, Inc. and certain subsidiaries, as the Borrowers, the subsidiaries of the Borrower as identified therein, as the Guarantors, Bank of America, N.A., as the Administrative Agent, Swing Line Lender and L/C Issuer, Wachovia Bank, National Association, as Syndication Agent, and other lender parties thereto, dated as of December 2, 2005. | 8-K | December 8, 2005 | 10.1 | ||||||
10.51
|
Pledge, Assignment and Security Agreement between Sunrise Senior Living, Inc. and Bank of America, N.A., as Administrative Agent, dated as of December 2, 2005. | 10-K | March 24, 2008 | 10.41 | ||||||
10.52
|
First Amendment to Credit Agreement by and among Sunrise Senior Living, Inc. and certain subsidiaries, as the Borrowers, the subsidiaries of the Borrower as identified therein, as the Guarantors, Bank of America, N.A., as the Administrative Agent, Swing Line Lender and L/C Issuer, and other lender parties thereto, dated as of March 6, 2006. | 10-K | March 24, 2008 | 10.42 | ||||||
10.53
|
Second Amendment to the Credit Agreement by and among Sunrise Senior Living, Inc. and certain subsidiaries, as the Borrowers, the subsidiaries of the Borrower as identified therein, as the Guarantors, Bank of America, N.A., as the Administrative Agent, Swing Line Lender and L/C Issuer, and other lender parties thereto, dated as of January 31, 2007. | 10-K | March 24, 2008 | 10.43 | ||||||
10.54
|
Third Amendment to Credit Agreement by and among Sunrise Senior Living, Inc. and certain subsidiaries, as the Borrowers, the subsidiaries of | 10-K | March 24, 2008 | 10.44 |
161
INCORPORATED BY REFERENCE | ||||||||||
Exhibit | Exhibit | |||||||||
Number | Description | Form | Filing Date with SEC | Number | ||||||
the Borrower as identified therein, as the Guarantors, Bank of America, N.A., as the Administrative Agent, Swing Line Lender and L/C Issuer, and other lender parties thereto, dated as of June 27, 2007. | ||||||||||
10.55
|
Fourth Amendment to Credit Agreement by and among Sunrise Senior Living, Inc. and certain subsidiaries, as the Borrowers, the subsidiaries of the Borrower as identified therein, as the Guarantors, Bank of America, N.A., as the Administrative Agent, Swing Line Lender and L/C Issuer, and other lender parties thereto, dated as of September 17, 2007. | 10-K | March 24, 2008 | 10.45 | ||||||
10.56
|
Fifth Amendment to Credit Agreement by and among Sunrise Senior Living, Inc. and certain subsidiaries, as the Borrowers, the subsidiaries of the Borrower as identified therein, as the Guarantors, Bank of America, N.A., as the Administrative Agent, Swing Line Lender and L/C Issuer, and other lender parties thereto, dated as of January 31, 2008. | 10-K | March 24, 2008 | 10.46 | ||||||
10.57
|
Sixth Amendment to Credit Agreement by and among Sunrise Senior Living, Inc. and certain subsidiaries, as the Borrowers, the subsidiaries of the Borrower as identified therein, as the Guarantors, Bank of America, N.A., as the Administrative Agent, Swing Line Lender and L/C Issuer, and other lender parties thereto, dated as of February 19, 2008. | 10-K | March 24, 2008 | 10.47 | ||||||
10.58
|
Pledge, Assignment and Security Agreement between Sunrise Senior Living, Inc. and Bank of America, N.A., as Administrative Agent, dated as of February 19, 2008. | 10-K | March 24, 2008 | 10.48 | ||||||
10.59
|
Seventh Amendment to Credit Agreement by and among Sunrise Senior Living, Inc. and certain subsidiaries, as the Borrowers, the subsidiaries of the Borrower as identified therein, as the Guarantors, Bank of America, N.A., as the Administrative Agent, Swing Line Lender and L/C Issuer, and other lender parties thereto, dated as of March 13, 2008. | 10-K | March 24, 2008 | 10.49 | ||||||
10.60
|
Security Agreement by and among Sunrise Senior Living, Inc. and certain subsidiaries, as the Loan Parties, and Bank of America, N.A., as the Administrative Agent, Swing Line Lender and L/C Issuer, and other lender parties thereto, dated as of March 13, 2008. | 10-K | March 24, 2008 | 10.50 | ||||||
10.61
|
Eighth Amendment to Credit Agreement by and among Sunrise Senior Living, Inc. and certain subsidiaries, as the Borrowers, the subsidiaries of the Borrower as identified therein, as the Guarantors, Bank of America, N.A., as the Administrative Agent, Swing Line Lender and L/C Issuer, and other lender parties thereto, dated as of July 23, 2008. | 10-K | July 31, 2008 | 10.48 | ||||||
10.62
|
Ninth Amendment to Credit Agreement by and among Sunrise Senior Living, Inc. and certain subsidiaries, as the Borrowers, the subsidiaries of the Borrower as identified therein, as the Guarantors, Bank of America, N.A., as the Administrative Agent, Swing Line Lender and L/C Issuer, and other lender parties thereto, dated as of November 6, 2008. | 10-Q | November 7, 2008 | 10.2 | ||||||
10.63
|
Tenth Amendment to Credit Agreement by and among Sunrise Senior Living, Inc. and certain subsidiaries, as the Borrowers, the subsidiaries of the Borrower as identified therein, as the Guarantors, Bank of America, N.A., as the Administrative Agent, Swing Line Lender and L/C Issuer, and other lender parties thereto, dated as of January 20, 2008. | 8-K | January 21, 2009 | 10.1 | ||||||
10.64
|
Eleventh Amendment to Credit Agreement by and among Sunrise Senior Living, Inc. and certain subsidiaries, as the Borrowers, the subsidiaries of the Borrower as identified therein, as the Guarantors, Bank of America, N.A., as the Administrative Agent, Swing Line Lender and L/C Issuer, and other lender parties thereto, dated as of January 20, 2008. | 8-K | March 23, 2009 | 10.1 | ||||||
10.65
|
Twelfth Amendment to the Credit Agreement, dated April 28, 2009, by and among Sunrise Senior Living, Inc., certain subsidiaries of Sunrise Senior Living, Inc. party thereto, the lenders from time to time party thereto and Bank of America, N.A. | 8-K | April 28, 2009 | 10.1 | ||||||
10.66
|
Thirteenth Amendment to the Credit Agreement, dated October 19, 2009, by and among Sunrise Senior Living, Inc., certain subsidiaries of Sunrise Senior Living, Inc. party thereto, the lenders from time to time party thereto and Bank of America, N.A. | 8-K | October 20, 2009 | 10.1 |
162
INCORPORATED BY REFERENCE | ||||||||||
Exhibit | Exhibit | |||||||||
Number | Description | Form | Filing Date with SEC | Number | ||||||
10.67
|
Assumption and Reimbursement Agreement made effective as of March 28, 2003, by and among Marriott International, Inc., Sunrise Assisted Living, Inc., Marriott Senior Living Services, Inc. and Marriott Continuing Care, LLC. | 10-Q | May 15, 2003 | 10.4 | ||||||
10.68
|
Assumption and Reimbursement Agreement (CNL) made effective as of March 28, 2003, by and among Marriott International, Inc., Marriott Continuing Care, LLC, CNL Retirement Properties, Inc., CNL Retirement MA3 Pennsylvania, LP, and CNL Retirement MA3 Virginia, LP. | 10-Q | May 15, 2003 | 10.5 | ||||||
10.69
|
Amended and Restated Ground Lease, dated August 29, 2003, by and between Sunrise Fairfax Assisted Living, L.L.C. and Paul J. Klaassen and Teresa M. Klaassen. | 10-K | March 24, 2008 | 10.62 | ||||||
10.70
|
Multifamily Mortgage, Assignment of Rents and Security Agreement. | 8-K | May 12, 2008 | 10.1 | ||||||
10.71
|
Discount MBS Multifamily Note. | 8-K | May 12, 2008 | 10.1 | ||||||
10.72
|
Pre-Negotiation and Standstill Agreement dated December 24, 2008, by and among Sunrise Senior Living, Inc., Sunrise Hannover Senior Living GmbH & Co. KG, Sunrise Hannover GmbH and Natixis, London Branch. | 8-K | December 24, 2008 | 10.1 | ||||||
10.73
|
Standstill Agreement, dated December 23, 2008, by and among Sunrise Senior Living, Inc., Sunrise Hannover Senior Living GmbH & Co. KG, Sunrise Hannover GmbH and Natixis, London Branch. | 8-K | December 24, 2008 | 10.2 | ||||||
10.74
|
Pre-Negotiation and Standstill Agreement, dated February 19, 2009, by and among Sunrise Senior Living, Inc., Sunrise München-Thalkirchen Senior Living GmbH & Co. KG, Sunrise München- Thalkirchen GmbH and Natixis, London Branch. | 8-K | February 20, 2009 | 10.1 | ||||||
10.75
|
Standstill Agreement, dated February 19, 2009, by and among Sunrise Senior Living, Inc., Sunrise München-Thalkirchen Senior Living GmbH & Co. KG, Sunrise München-Thalkirchen GmbH and Natixis, London Branch | 8-K | February 20, 2009 | 10.2 | ||||||
10.76
|
Letter Agreement, dated March 5, 2009, by and among Sunrise Senior Living, Inc., Sunrise Senior Living Development, Inc., Sunrise Senior Living Investments, Inc., and Greystone Partners II LP. | 8-K | March 11, 2009 | 10.1 | ||||||
10.77
|
First Amendment to Amended and Restated Pre-Negotiation and Standstill Agreement, dated March 31, 2009, by and among Sunrise Senior Living, Inc., Sunrise Hannover Senior Living GmbH & Co. KG, Sunrise Hannover GmbH and Natixis, London Branch | 8-K | April 6, 2009 | 10.1 | ||||||
10.78
|
Second German Standstill Agreement Hannover I, dated March 31, 2009, by and among Sunrise Senior Living, Inc., Sunrise Hannover Senior Living GmbH & Co. KG, Sunrise Hannover GmbH and Natixis, London Branch | 8-K | April 6, 2009 | 10.2 | ||||||
10.79
|
First Amendment to Pre-Negotiation and Standstill Agreement, dated March 31, 2009, by and among Sunrise Senior Living, Inc., Sunrise München-Thalkirchen Senior Living GmbH & Co. KG, Sunrise München-Thalkirchen GmbH and Natixis, London Branch | 8-K | April 6, 2009 | 10.3 | ||||||
10.80
|
Second German Standstill Agreement, dated March 31, 2009, by and among Sunrise Senior Living, Inc., Sunrise München-Thalkirchen Senior Living GmbH & Co. KG, Sunrise München-Thalkirchen GmbH and Natixis, London Branch | 8-K | April 6, 2009 | 10.4 | ||||||
10.81
|
Restructure Term Sheet, dated October 22, 2009, by and among Sunrise Senior Living, Inc. and the creditors party thereto. | 8-K | October 28, 2009 | 10.1 | ||||||
10.82
|
Settlement Agreement, dated as of October 26, 2009, by and among Sunrise Senior Living Investments, Inc., Senior Living Management, Inc., Sunrise Senior Living, Inc., US Senior Living Investments, LLC and Sunrise IV Senior Living Holdings, LLC. | 8-K | October 28, 2009 | 10.2 | ||||||
10.83
|
Settlement Agreement, dated as of October 26, 2009, by and among Sunrise Senior Living Investments, Inc., Sunrise Senior Living, Inc., Fountains Senior Living Holdings, LLC, Sunrise Senior Living Management, Inc., US | 8-K | October 28, 2009 | 10.2 |
163
INCORPORATED BY REFERENCE | ||||||||||
Exhibit | Exhibit | |||||||||
Number | Description | Form | Filing Date with SEC | Number | ||||||
Senior Living Investments, LLC, HSH Nordbank AG, New York Branch. | ||||||||||
10.84
|
Settlement Agreement, dated as of June 12, 2009, by and among Sunrise Senior Living, Inc. and the former majority stockholders of Trinity. | 10-Q | November 9, 2009 | 10.1 | ||||||
10.85
|
Loan Agreement, dated as of September 28, 2007, by and among Sunrise Pasadena CA Senior Living, LLC and Sunrise Pleasanton CA Senior Living, LP, as borrowers, and Wells Fargo Bank, National Association, as lender. | 10-Q | November 9, 2009 | 10.2 | ||||||
10.86
|
Letter Agreement, dated October 1, 2009, by and among Sunrise Pasadena CA Senior Living, LLC and Sunrise Pleasanton CA Senior Living, L.P., as borrowers, Sunrise Senior Living, Inc., as guarantor, and Wells Fargo Bank, National Association, as lender. | 10-Q | November 9, 2009 | 10.3 | ||||||
10.87
|
Loan and Security Agreement (Loan A), dated as of August 28, 2007, by and among Sunrise Connecticut Avenue Assisted Living, L.L.C., as borrower, and Chevy Chase Bank, F.S.B., as agent for the lenders party thereto. | 10-Q | November 9, 2009 | 10.4 | ||||||
10.88
|
Guaranty of Payment (Loan A), dated as of August 28, 2007, by and among Sunrise Senior Living, Inc. and Chevy Chase Bank, F.S.B. | 10-Q | November 9, 2009 | 10.5 | ||||||
10.89
|
Deed of Trust Note A, dated as of August 28, 2007, by Sunrise Connecticut Avenue Assisted Living, L.L.C., as borrower, to MB Financial Bank, N.A. | 10-Q | November 9, 2009 | 10.6 | ||||||
10.90
|
Deed of Trust Note A, dated as of August 28, 2007, by Sunrise Connecticut Avenue Assisted Living, L.L.C., as borrower, to Chevy Chase Bank, F.S.B. | 10-Q | November 9, 2009 | 10.7 | ||||||
10.91
|
Deed of Trust, Assignment, Security Agreement and Fixture Filing (Loan A), dated as of August 28, 2007, by Sunrise Connecticut Avenue Assisted Living, L.L.C., as grantor, Alexandra Johns and Ellen-Elizabeth Lee, as trustees, and Chevy Chase Bank, F.S.B., as agent. | 10-Q | November 9, 2009 | 10.8 | ||||||
10.92
|
Loan and Security Agreement (Loan B), dated as of August 28, 2007, by and among Sunrise Connecticut Avenue Assisted Living, L.L.C., as borrower, and Chevy Chase Bank, F.S.B., as lender. | 10-Q | November 9, 2009 | 10.9 | ||||||
10.93
|
Guaranty of Payment (Loan B), dated as of August 28, 2007, by and among Sunrise Senior Living, Inc. and Chevy Chase Bank, F.S.B. | 10-Q | November 9, 2009 | 10.10 | ||||||
10.94
|
Deed of Trust Note B, dated as of August 28, 2007, by Sunrise Connecticut Avenue Assisted Living, L.L.C., as borrower, to Chevy Chase Bank, F.S.B. | 10-Q | November 9, 2009 | 10.11 | ||||||
10.95
|
Deed of Trust, Assignment, Security Agreement and Fixture Filing (Loan B), dated as of August 28, 2007, by Sunrise Connecticut Avenue Assisted Living, L.L.C., as grantor, Alexandra Johns and Ellen-Elizabeth Lee, as trustees, and Chevy Chase Bank, F.S.B. | 10-Q | November 9, 2009 | 10.12 | ||||||
10.96
|
First Amendment to Loan Agreement (Loan A), dated as of April 15, 2008, by and among Sunrise Connecticut Avenue Assisted Living, L.L.C., as borrower, and Chevy Chase Bank, F.S.B., as agent to the lenders party thereto. | 10-Q | November 9, 2009 | 10.13 | ||||||
10.97
|
First Amendment to Guaranty of Payment (Loan A), dated as of September 2008, by and between Sunrise Senior Living, Inc. and Chevy Chase Bank, F.S.B. | 10-Q | November 9, 2009 | 10.14 | ||||||
10.98
|
First Amendment to Loan Agreement (Loan B), dated as of April 15, 2008, by and among Sunrise Connecticut Avenue Assisted Living, L.L.C., as borrower, and Chevy Chase Bank, F.S.B. as lender. | 10-Q | November 9, 2009 | 10.15 | ||||||
10.99
|
First Amendment to Guaranty of Payment (Loan B), dated as of September 2008, by and between Sunrise Senior Living, Inc. and Chevy Chase Bank, F.S.B. | 10-Q | November 9, 2009 | 10.16 | ||||||
10.100
|
Second Amendment to Loan Agreement (Loan A), dated as of August 28, 2009, by and among Sunrise Connecticut Avenue Assisted Living, L.L.C., as borrower, and Chevy Chase Bank, a division of Capital One, N.A., as agent for the lenders party thereto. | 10-Q | November 9, 2009 | 10.17 | ||||||
10.101
|
Second Amendment to Guaranty of Payment (Loan A), dated as of August 28, 2009, by and between Sunrise Senior Living, Inc. and Chevy Chase Bank, a division of Capital One, N.A. | 10-Q | November 9, 2009 | 10.18 |
164
INCORPORATED BY REFERENCE | ||||||||||
Exhibit | Exhibit | |||||||||
Number | Description | Form | Filing Date with SEC | Number | ||||||
10.102
|
First Amendment to Deed of Trust Note A (Loan A), dated as of August 28, 2009,by and between Sunrise Connecticut Avenue Assisted Living, L.L.C., as borrower, and MB Financial Bank, N.A., as lender. | 10-Q | November 9, 2009 | 10.19 | ||||||
10.103
|
First Amendment to Deed of Trust Note A (Loan A), dated as of August 28, 2009, by and between Sunrise Connecticut Avenue Assisted Living, L.L.C., as borrower, and Chevy Chase Bank, a division of Capital One, N.A., as lender. | 10-Q | November 9, 2009 | 10.20 | ||||||
10.104
|
Second Amendment to Loan Agreement (Loan B), dated as of August 28, 2009, by and among Sunrise Connecticut Avenue Assisted Living, L.L.C., as borrower, and Chevy Chase Bank, a division of Capital One, N.A., as lender. | 10-Q | November 9, 2009 | 10.21 | ||||||
10.105
|
Second Amendment to Guaranty of Payment (Loan B), dated as of August 28, 2009, by and between Sunrise Senior Living, Inc. and Chevy Chase Bank, a division of Capital One, N.A. | 10-Q | November 9, 2009 | 10.22 | ||||||
10.106
|
First Amendment to Deed of Trust Note A (Loan B), dated as of August 28, 2009, by and between Sunrise Connecticut Avenue Assisted Living, L.L.C., as borrower, and Chevy Chase Bank, a division of Capital One, N.A., as lender. | 10-Q | November 9, 2009 | 10.23 | ||||||
10.107
|
Letter Agreement, dated December 1, 2009, by and among Sunrise Pasadena CA Senior Living, LLC and Sunrise Pleasanton CA Senior Living, L.P., as borrowers, Sunrise Senior Living, Inc., as guarantor, and Wells Fargo Bank, National Association, as lender. | 8-K | December 7, 2009 | 10.1 | ||||||
10.108
|
Third Amendment to Loan Agreement and Settlement Agreement (Loan A), effective as of December 2, 2009, by and among Sunrise Connecticut Avenue Assisted Living, L.L.C., as borrower, and Chevy Chase Bank, a division of Capital One, N.A., as agent for the lenders party thereto. | 8-K | December 24, 2009 | 10.1 | ||||||
10.109
|
Third Amendment to Guaranty of Payment (Loan A), effective as of December 2, 2009, by and between Sunrise Senior Living, Inc. and Chevy Chase Bank, a division of Capital One, N.A. | 8-K | December 24, 2009 | 10.2 | ||||||
10.110
|
Second Amendment to Deed of Trust Note A (Loan A), effective as of December 2, 2009, by and between Sunrise Connecticut Avenue Assisted Living, L.L.C., as borrower, and MB Financial Bank, N.A., as lender. | 8-K | December 24, 2009 | 10.3 | ||||||
10.111
|
Second Amendment to Deed of Trust Note A (Loan A), effective as of December 2, 2009, by and between Sunrise Connecticut Avenue Assisted Living, L.L.C., as borrower, and Chevy Chase Bank, a division of Capital One, N.A., as lender. | 8-K | December 24, 2009 | 10.4 | ||||||
10.112
|
Third Amendment to Loan Agreement and Settlement Agreement (Loan B), effective as of December 2, 2009, by and among Sunrise Connecticut Avenue Assisted Living, L.L.C., as borrower, and Chevy Chase Bank, a division of Capital One, N.A., as lender. | 8-K | December 24, 2009 | 10.5 | ||||||
10.113
|
Third Amendment to Guaranty of Payment (Loan B), effective as of December 2, 2009, by and between Sunrise Senior Living, Inc. and Chevy Chase Bank, a division of Capital One, N.A. | 8-K | December 24, 2009 | 10.6 | ||||||
10.114
|
Second Amendment to Deed of Trust Note B (Loan B), effective as of December 2, 2009, by and between Sunrise Connecticut Avenue Assisted Living, L.L.C., as borrower, and Chevy Chase Bank, a division of Capital One, N.A., as lender. | 8-K | December 24, 2009 | 10.7 | ||||||
10.115
|
Amendment to Employment Agreement between Sunrise Senior Living, Inc. and Julie A. Pangelinan, dated July 9, 2009+ | 10-K | February 25, 2010 | 10.115 | ||||||
10.116
|
Separation Agreement between Sunrise Senior Living, Inc. and Daniel J. Schwartz, dated February 15, 2010+ | 10-K | February 25, 2010 | 10.116 | ||||||
21
|
Subsidiaries of the Registrant. | 10-K | February 25, 2010 | 21 | ||||||
23.1
|
Consent of Ernst & Young LLP | 10-K | February 25, 2010 | 23.1 |
165
INCORPORATED BY REFERENCE | ||||||||||
Exhibit | Exhibit | |||||||||
Number | Description | Form | Filing Date with SEC | Number | ||||||
23.2
|
Consent of Ernst & Young LLP* | N/A | N/A | N/A | ||||||
23.3
|
Consent of Deloitte & Touche LLP* | N/A | N/A | N/A | ||||||
23.4
|
Consent of Ernst & Young LLP* | N/A | N/A | N/A | ||||||
23.5
|
Consent of Ernst & Young LLP* | N/A | N/A | N/A | ||||||
23.6
|
Consent of Deloitte & Touche LLP* | N/A | N/A | N/A | ||||||
31.1
|
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | 10-K | February 25, 2010 | 31.1 | ||||||
31.2
|
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | 10-K | February 25, 2010 | 31.2 | ||||||
31.3
|
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* | N/A | N/A | N/A | ||||||
31.4
|
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* | N/A | N/A | N/A | ||||||
32.1
|
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | 10-K | February 25, 2010 | 31.3 | ||||||
32.2
|
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | 10-K | February 25, 2010 | 31.4 | ||||||
32.3
|
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* | N/A | N/A | N/A | ||||||
32.4
|
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* | N/A | N/A | N/A |
+ | Represents management contract or compensatory plan or arrangement. | |
* | Filed herewith. |
166