SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K/A |
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AMENDMENT NO. 1 TO
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 1, 2011
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APPLE REIT TEN, INC. |
(Exact name of registrant as specified in its charter) |
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Virginia |
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333-168971 |
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27-3218228 |
(State or other jurisdiction |
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(Commission File Number) |
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(I.R.S. Employer |
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814 East Main Street, Richmond, Virginia |
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23219 |
(Address of principal executive offices) |
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(Zip Code) |
(804) 344-8121
(Registrants
telephone number, including area code)
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Apple REIT Ten, Inc. hereby amends Item 9.01 of its Current Report on Form 8-K dated September 1, 2011 and filed (by the required date) on September 7, 2011 for the purpose of filing certain financial statements and information. In accordance with Rule 12b-15 under the Securities and Exchange Act of 1934, as amended, this Amendment No. 1 sets forth the complete text of the item as amended.
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Item 9.01. |
Financial Statements and Exhibits. |
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(a) |
Financial statements of businesses acquired. |
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SASI, LLC (Mason, Ohio Hilton Garden Inn) |
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(Audited) |
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3 |
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4 |
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5 |
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Statement of Cash Flows For the Year Ended December 31, 2010 |
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6 |
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7 |
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(Unaudited) |
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13 |
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Statements of Income For the Six Months Ended June 30, 2011 and 2010 |
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14 |
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Statements of Cash Flows For the Six Months Ended June 30, 2011 and 2010 |
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15 |
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Omaha Downtown Lodging Investors II, LLC and Scottsdale Lodging Investors, LLC (2 Hotels) |
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(Omaha, Nebraska Hilton Garden Inn and Scottsdale, Arizona Hilton Garden Inn) |
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(Audited) |
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16 |
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17 |
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Combined Statement of Operations and Members Deficit Year Ended December 31, 2010 |
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18 |
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Combined Statement of Cash Flows Year Ended December 31, 2010 |
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19 |
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20 |
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(Unaudited) |
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26 |
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27 |
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Combined Statements of Cash Flows For the Six Months Ended June 30, 2011 and 2010 |
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28 |
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(b) |
Pro forma financial information. |
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The below pro forma financial information pertains to the hotels referred to in the financial statements (see (a) above) and to a separate group of recently purchased hotels. |
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Apple REIT Ten, Inc. (Unaudited) |
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Pro Forma Condensed Consolidated Balance Sheet as of June 30, 2011 |
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29 |
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31 |
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32 |
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Notes to Pro Forma Condensed Consolidated Statements of Operations |
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37 |
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(c) |
Shell company transactions. |
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Not Applicable |
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(d) |
Exhibits. |
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None |
2
To the Board
of Directors
Apple Ten Hospitality Ownership, Inc.
We have audited the accompanying balance sheet of SASI, LLC, as of December 31, 2010, and the related statement of income and cash flows for the year then ended. These financial statements are the responsibility of SASI, LLCs management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of SASI, LLC, as of December 31, 2010, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
Montgomery, Alabama
October 5, 2011
3
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ASSETS |
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Investment in hotels, net of accumulated depreciation of $563,028 |
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$ |
9,672,904 |
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Cash and cash equivalents |
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719,486 |
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Accounts receivable |
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39,005 |
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Prepaid expenses and other current assets |
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21,677 |
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Intangible assets, net of accumulated amortization of $7,014 |
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107,757 |
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Other assets |
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14,467 |
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TOTAL ASSETS |
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$ |
10,575,296 |
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LIABILITIES AND MEMBERS EQUITY |
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LIABILITIES |
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Mortgage payable |
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$ |
8,356,109 |
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Accounts payable and accrued expenses |
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195,487 |
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Total liabilities |
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8,551,596 |
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MEMBERS EQUITY |
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2,023,700 |
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TOTAL LIABILITIES AND MEMBERS EQUITY |
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$ |
10,575,296 |
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See independent auditors report and notes to financial statements.
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4 |
See independent auditors report and notes to financial statements.
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5 |
See independent auditors report and notes to financial statements.
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6 |
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SASI, LLC |
DECEMBER 31, 2010 |
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1. |
NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES |
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Nature of Business |
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SASI, LLC (the Company) is an Ohio limited liability company which was formed on March 29, 2007 for the purpose of developing and operating a Hilton Garden Inn and operating the hotel under a management agreement with Schulte Hospitality Group, Inc. (the Manager). The hotel opened on February 8, 2010 and is located in Mason, Ohio. |
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Personal Assets and Liabilities and Members Salaries |
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In accordance with the generally accepted method of presenting limited liability company and partnership financial statements, the financial statements do not include the personal assets and liabilities of the members, including their obligation for income taxes on their distributive shares of the net income of the limited liability company or partnership nor any provision for income tax expense. |
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The expenses shown in the statements of income do not include any salaries to the members. |
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Cash and Cash Equivalents |
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The Company considers all short-term investments with an original maturity of three months or less to be cash equivalents. |
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Accounts Receivable |
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The Company reports trade receivables at gross amounts due from customers. Because historical losses related to these receivables have been insignificant, management uses the direct write-off method to account for bad debts. On a continuing basis, management analyzes delinquent receivables and, once these receivables are determined to be uncollectible, they are written off through a charge against operations. |
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Investment in Hotel Property |
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The investment in the hotel is stated at cost. Interest and property taxes incurred during the construction of the facilities were capitalized and depreciated over the life of the asset. Costs of improvements are capitalized. Costs of normal repairs and maintenance are charged to expense as incurred. Upon the sale or retirement of property and equipment, the cost and related accumulated depreciation are removed from the respective accounts, and the resulting gain or loss, if any, is included in income. |
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Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets. The useful lives of assets are 39 years for buildings, 15 years for improvements and 5 years for furniture, fixtures and equipment. |
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7 |
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SASI, LLC |
NOTES TO FINANCIAL STATEMENTS |
DECEMBER 31, 2010 |
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1. |
NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Continued) |
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Asset Impairment |
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The Company reviews their long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets held and used is measured by a comparison of the carrying amount of an asset to undiscounted expected cash flows. Future events could cause the Company to conclude that impairment indicators exist and that long-lived assets may be impaired. To date, no impairment losses have been recorded. |
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Franchise Fees |
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Franchise fees are amortized on a straight-line basis over the term of the agreement commencing on the hotel opening date. |
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Loan Origination Costs |
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Permanent loan costs are amortized using a straight-line basis, which approximates the effective interest method, over the term of the respective mortgage. |
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Income Taxes |
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No federal or state income taxes are payable by the Company, and therefore, no tax provision has been reflected in the accompanying financial statements. The members are required to include their respective share of the Companys profit or loss in their individual tax returns. The tax returns, the status of the Company as such for tax purposes, and the amount of allocable income or loss, are subject to examinations by the Internal Revenue Service. If such examinations result in changes with respect to the Companys status, or in changes to allowable income or loss, the tax liability of the members would be changed accordingly. |
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Effective January 1, 2009, the Company implemented the accounting guidance for uncertainty in income taxes using the provisions of Financial Accounting Standards Board (FASB) ASC 740-10, Income Taxes. Using that guidance, tax positions initially need to be recognized in the financial statements when it is more-likely-than-not the position will be sustained upon examination by the tax authorities. |
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As of December 31, 2010, the Company had no uncertain tax positions that qualify for either recognition or disclosure in the financial statements and no interest or penalties related to income taxes. The federal and state income tax years of 2007 through 2010 remain subject to examination as of December 31, 2010. |
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Revenue Recognition |
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Revenue is recognized as earned, which is generally defined as the date upon which a guest occupies a room or utilizes the Companys services. |
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8 |
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SASI, LLC |
NOTES TO FINANCIAL STATEMENTS |
DECEMBER 31, 2010 |
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1. |
NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Continued) |
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Sales and Marketing |
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Sales and marketing costs are expensed when incurred. These costs represent the expense for franchise advertising and reservation systems under the terms of the hotel management agreement and general and administrative expenses that are directly attributable to advertising and promotion. Sales and marketing expenses totaled $133,106 for the year ended December 31, 2010. |
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Lodging and Sales Taxes |
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The Company collects various taxes from customers and remits these amounts to applicable taxing authorities. The Companys accounting policy is to exclude these taxes from revenues and expenses. |
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Use of Estimates in the Preparation of Financial Statements |
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The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingencies at the date of the financial statements and revenues and expenses during the reporting period. Actual results could differ from those estimates. |
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Subsequent Events |
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Management has evaluated subsequent events through October 5, 2011, which is the date the financial statements were available to be issued. |
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2. |
INVESTMENT IN HOTEL PROPERTIES |
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Investment in hotel properties as of December 31, 2010, is summarized below: |
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Land and land improvements |
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$ |
1,359,852 |
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Building and improvements |
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6,741,898 |
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Furniture, fixtures and equipment |
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2,134,182 |
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10,235,933 |
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Less accumulated depreciation |
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(563,028 |
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Investment in hotels, net |
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$ |
9,672,904 |
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Depreciation expense was $563,028 for the year ended December 31, 2010. |
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9 |
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SASI, LLC |
NOTES TO FINANCIAL STATEMENTS |
DECEMBER 31, 2010 |
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3. |
INTANGIBLE ASSETS |
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Franchise Fees |
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Franchise fees totaling $60,000 have been paid to Hilton Hotels as of December 31, 2010. Amortization expense totaled $3,667 for the year ended December 31, 2010. |
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Estimated aggregate amortization expense is as follows: |
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2011 |
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$ |
4,000 |
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2012 |
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4,000 |
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2013 |
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4,000 |
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2014 |
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4,000 |
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2015 |
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4,000 |
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Thereafter |
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36,333 |
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Total |
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$ |
56,333 |
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The Company is subject to a franchise agreement with Hilton Hotels under which the Company agrees to use the Franchisors trademark, standards of service (cleanliness, management, advertising) and construction quality and design. The agreement covers a term of 20 years. The agreement provides for payment of royalty fees, which are calculated monthly, and totaled $107,315 in 2010. |
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Loan Costs |
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Permanent loan costs totaling $54,771 have been paid as of December 31, 2010. Amortization expense totaled $3,347 for the year ended December 31, 2010. |
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Estimated aggregate amortization expense is as follows: |
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2011 |
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$ |
3,651 |
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2012 |
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3,651 |
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2013 |
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3,651 |
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2014 |
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3,651 |
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2015 |
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3,651 |
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Thereafter |
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33,169 |
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Total |
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$ |
51,424 |
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10 |
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SASI, LLC |
NOTES TO FINANCIAL STATEMENTS |
DECEMBER 31, 2010 |
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4. |
MORTGAGE PAYABLE |
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Mortgage payable at December 31, 2010, consisted of the following: |
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Note with WesBanco Bank; term of 27 years and due April 2035; interest at 5.27%, secured by the related hotel property and equipment |
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$ |
8,356,109 |
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Future maturities at December 31, 2010, are as follows: |
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Year ending December 31, |
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2011 |
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$ |
173,854 |
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2012 |
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183,241 |
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2013 |
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193,134 |
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2014 |
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203,562 |
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2015 |
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214,553 |
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Thereafter |
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7,387,765 |
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Total |
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$ |
8,356,109 |
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5. |
CHANGES IN EQUITY |
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Changes in the Companys equity accounts during 2010 are summarized below: |
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Members equity at beginning of year |
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$ |
(147,425 |
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Net income |
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22,787 |
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Contributions |
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2,148,338 |
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Members equity at end of year |
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$ |
2,023,700 |
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6. |
RELATED PARTIES |
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The Company is subject to a management agreement with Schulte Hospitality Group, Inc., which covers an initial term of 3 years with automatic, annual renewals. The agreement provides for payment of accounting fees of $450 per month, external support fees of $300 per month and monthly base management fees equal to 3.25% of gross rental revenues. Management fees of $81,374 were expensed in 2010. Amounts due to Schulte Hospitality Group, Inc. totaled $6,243 at December 31, 2010. |
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7. |
CONCENTRATION OF CREDIT RISK |
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The Company maintains their cash in bank deposit accounts which, at times, may exceed federally insured limits. The balances are insured by the Federal Deposit Insurance Corporation up to $250,000. At December 31, 2010, the Company uninsured cash balances totaled $248,768 and the Company has not experienced any losses. |
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11 |
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SASI, LLC |
NOTES TO FINANCIAL STATEMENTS |
DECEMBER 31, 2010 |
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8. |
SUBSEQUENT EVENT |
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In July 2011, the Company entered into a contract to sell the real and personal property of the hotel to Apple Ten Hospitality Ownership, Inc. for a gross purchase price of $14,825,000. The sale was completed on September 1, 2011. |
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12 |
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SASI, LLC |
JUNE 30, 2011 AND 2010 |
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2011 |
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2010 |
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ASSETS |
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Investment in hotels, net of accumulated depreciation of $870,133 and $255,923, respectively |
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$ |
9,366,436 |
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$ |
9,980,008 |
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Cash and cash equivalents |
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342,970 |
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297,511 |
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Accounts receivable |
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59,119 |
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46,200 |
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Prepaid expenses and other current assets |
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35,672 |
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13,052 |
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Intangible assets, net of accumulated amortization of $10,840 and $3,188, respectively |
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103,931 |
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111,583 |
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TOTAL ASSETS |
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$ |
9,908,128 |
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$ |
10,448,354 |
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LIABILITIES AND MEMBERS EQUITY |
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LIABILITIES |
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Mortgages payable |
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$ |
8,270,494 |
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$ |
8,438,248 |
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Accounts payable and accrued expenses |
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|
203,936 |
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|
192,777 |
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Total liabilities |
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8,474,430 |
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8,631,025 |
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MEMBERS EQUITY |
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1,433,698 |
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|
1,817,329 |
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TOTAL LIABILITIES AND MEMBERS EQUITY |
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$ |
9,908,128 |
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$ |
10,448,354 |
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13 |
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SASI, LLC |
FOR THE SIX MONTHS ENDED JUNE 30, 2011 AND 2010 |
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2011 |
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2010 |
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REVENUES |
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Rooms |
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$ |
1,370,519 |
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$ |
706,516 |
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Other |
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|
238,506 |
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|
104,692 |
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Total revenues |
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1,609,025 |
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|
811,208 |
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EXPENSES |
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Rooms |
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328,864 |
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|
218,390 |
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Hotel administration |
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303,634 |
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|
170,076 |
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Property operation, maintenance and energy costs |
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|
90,989 |
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|
57,384 |
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Management and franchise fees |
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121,747 |
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|
89,742 |
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Taxes, insurance and other |
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|
71,174 |
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|
70,783 |
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Depreciation and amortization |
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|
310,931 |
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|
259,111 |
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Total expenses |
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1,227,339 |
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|
865,486 |
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OPERATING INCOME (LOSS) |
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381,686 |
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(54,278 |
) |
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OTHER INCOME (EXPENSE) |
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Interest expense |
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(221,688 |
) |
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(80,950 |
) |
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Total other income (expense) |
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(221,688 |
) |
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(80,950 |
) |
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NET INCOME (LOSS) |
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$ |
159,998 |
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$ |
(135,228 |
) |
|
|
|
|
|
|
|
|
|
|
14 |
|
SASI, LLC |
FOR THE SIX MONTHS ENDED JUNE 30, 2011 AND 2010 |
|
|
|
|
|
|
|
|
|
|
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
|
|
|
|
|
|
|
|
|
2011 |
|
2010 |
|
||
|
|
|
|
|
|
||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
|||||||
Net income (loss) |
|
$ |
159,998 |
|
$ |
(135,228 |
) |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
310,931 |
|
|
259,111 |
|
Change in assets and liabilities: |
|
|
|
|
|
|
|
(Increase) decrease in: |
|
|
|
|
|
|
|
Accounts receivable |
|
|
(20,114 |
) |
|
(46,200 |
) |
Prepaid expenses and other current assets |
|
|
472 |
|
|
(13,052 |
) |
Increase in: |
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
|
8,449 |
|
|
192,777 |
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
459,736 |
|
|
257,408 |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
|||||||
Purchase of capital assets |
|
|
(637 |
) |
|
(3,661,824 |
) |
Franchise fees |
|
|
|
|
|
(60,000 |
) |
|
|
|
|
|
|
|
|
Net cash used by investing activities |
|
|
(637 |
) |
|
(3,721,824 |
) |
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|||||||
Principal payments on mortgages payable |
|
|
(85,615 |
) |
|
(27,173 |
) |
Borrowings on mortgages payable |
|
|
|
|
|
1,738,055 |
|
Payment of loan fees |
|
|
|
|
|
(54,771 |
) |
Contributions |
|
|
|
|
|
2,099,983 |
|
Distributions |
|
|
(750,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net cash provided (used) by financing activities |
|
|
(835,615 |
) |
|
3,756,094 |
|
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
|
|
(376,516 |
) |
|
291,678 |
|
|
|||||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR |
|
|
719,486 |
|
|
5,833 |
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS AT JUNE 30 |
|
$ |
342,970 |
|
$ |
297,511 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION |
|
|
|
|
|
|
|
Cash payments for interest |
|
$ |
221,688 |
|
$ |
119,630 |
|
|
|
|
|
|
|
|
|
|
|
15 |
To the Members and Managers
Omaha Downtown Lodging Investors II, LLC and Scottsdale Lodging Investors, LLC
Middleton, Wisconsin
We have audited the accompanying combined balance sheet of Omaha Downtown Lodging Investors II, LLC and Scottsdale Lodging Investors, LLC as of December 31, 2010 and the related combined statements of operations and members deficit and cash flows for the year then ended. These financial statements are the responsibility of the companies management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Omaha Downtown Lodging Investors II, LLC and Scottsdale Lodging Investors, LLC as of December 31, 2010 and the results of their operations and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
/s/ Baker Tilly Virchow Krause, LLP
Madison, Wisconsin
September 15, 2011
16
|
OMAHA DOWNTOWN LODGING |
INVESTORS II, LLC AND SCOTTSDALE |
LODGING INVESTORS, LLC |
|
December 31, 2010 |
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
CURRENT ASSETS |
|
|
|
|
Cash and cash equivalents |
|
$ |
185,124 |
|
Cash reserves |
|
|
1,880,271 |
|
Accounts receivable |
|
|
238,312 |
|
Inventories |
|
|
78,773 |
|
Prepaid expenses |
|
|
37,318 |
|
Other current assets |
|
|
3,615 |
|
Current portion of notes receivable |
|
|
250,748 |
|
|
|
|
|
|
Total Current Assets |
|
|
2,674,161 |
|
|
|
|
|
|
|
|
|
|
|
PROPERTY AND EQUIPMENT, NET |
|
|
18,166,519 |
|
|
|
|
|
|
|
|
|
|
|
OTHER ASSETS |
|
|
|
|
Notes receivable |
|
|
581,004 |
|
Deferred costs, net |
|
|
99,397 |
|
Intangible assets, net |
|
|
19,587 |
|
|
|
|
|
|
Total Other Assets |
|
|
699,988 |
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
|
$ |
21,540,668 |
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND MEMBERS DEFICIT |
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES |
|
|
|
|
Current maturities of long term debt |
|
$ |
703,050 |
|
Accounts payable |
|
|
199,335 |
|
Accrued expenses |
|
|
340,910 |
|
Accrued property taxes |
|
|
408,004 |
|
Deferred revenues |
|
|
831,752 |
|
|
|
|
|
|
Total Current Liabilities |
|
|
2,483,051 |
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM LIABILITIES |
|
|
|
|
Long-term debt |
|
|
26,203,272 |
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities |
|
|
28,686,323 |
|
|
|
|
|
|
|
|
|
|
|
MEMBERS DEFICIT |
|
|
(7,145,655 |
) |
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND MEMBERS DEFICIT |
|
$ |
21,540,668 |
|
|
|
|
|
|
See accompanying notes to combined financial statements.
17
|
OMAHA
DOWNTOWN LODGING |
|
COMBINED STATEMENT OF
OPERATIONS AND MEMBERS DEFICIT |
|
|
|
|
|
|
|
REVENUES |
|
|
|
|
Rooms |
|
$ |
8,905,433 |
|
Food and beverage |
|
|
1,618,963 |
|
Other |
|
|
713,397 |
|
|
|
|
|
|
Total Revenues |
|
|
11,237,793 |
|
|
|
|
|
|
|
|
|
|
|
COSTS AND EXPENSES |
|
|
|
|
Rooms |
|
|
980,771 |
|
Food and beverage |
|
|
1,215,469 |
|
Advertising and marketing |
|
|
750,117 |
|
General and administrative |
|
|
2,367,426 |
|
Utilities |
|
|
460,190 |
|
Repairs and maintenance |
|
|
384,778 |
|
Franchise and management fees |
|
|
898,590 |
|
Taxes, insurance and other |
|
|
587,375 |
|
Depreciation and amortization |
|
|
1,192,618 |
|
|
|
|
|
|
Total Costs and Expenses |
|
|
8,837,334 |
|
|
|
|
|
|
|
|
|
|
|
OPERATING INCOME |
|
|
2,400,459 |
|
|
|
|
|
|
OTHER INCOME (EXPENSES) |
|
|
|
|
Interest expense |
|
|
(1,541,301 |
) |
Interest income |
|
|
93,167 |
|
TIF revenue |
|
|
205,897 |
|
Loss on fixed asset disposal |
|
|
(2,177 |
) |
|
|
|
|
|
Total Other Income (Expenses) |
|
|
(1,244,414 |
) |
|
|
|
|
|
|
|
|
|
|
NET INCOME |
|
|
1,156,045 |
|
|
|
|
|
|
Preferred return to Class A member |
|
|
(17,350 |
) |
|
|
|
|
|
|
|
|
|
|
NET INCOME ATTRIBUTABLE TO MEMBERS |
|
|
1,138,695 |
|
|
|
|
|
|
MEMBERS DEFICIT - Beginning of Year |
|
|
(7,111,339 |
) |
Distributions |
|
|
(1,173,011 |
) |
|
|
|
|
|
|
|
|
|
|
MEMBERS DEFICIT - END OF YEAR |
|
$ |
(7,145,655 |
) |
|
|
|
|
|
See accompanying notes to combined financial statements.
18
|
OMAHA
DOWNTOWN LODGING |
|
COMBINED STATEMENT OF CASH
FLOWS |
|
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
Net income |
|
$ |
1,156,045 |
|
Adjustments to reconcile net income to net cash flows from operating activities: |
|
|
|
|
Loss on fixed asset disposal |
|
|
2,177 |
|
Depreciation and amortization |
|
|
1,192,618 |
|
Changes in assets and liabilities: |
|
|
|
|
Accounts receivable |
|
|
66,201 |
|
Inventories |
|
|
3,326 |
|
Prepaid expenses |
|
|
15,430 |
|
Accounts payable |
|
|
(14,165 |
) |
Accrued expenses |
|
|
(15,240 |
) |
Accrued property taxes |
|
|
14,124 |
|
Deferred revenues |
|
|
(205,897 |
) |
|
|
|
|
|
Net Cash Flows from Operating Activities |
|
|
2,214,619 |
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
Capital expenditures |
|
|
(26,904 |
) |
Principal received for note receivable |
|
|
205,897 |
|
Net increase in cash reserves |
|
|
(552,088 |
) |
|
|
|
|
|
Net Cash Flows from Investing Activities |
|
|
(373,095 |
) |
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
Principal payments on long-term debt |
|
|
(666,375 |
) |
Preferred return payment to Class A member |
|
|
(17,350 |
) |
Distributions to members |
|
|
(1,173,011 |
) |
|
|
|
|
|
Net Cash Flows from Financing Activities |
|
|
(1,856,736 |
) |
|
|
|
|
|
|
|
|
|
|
Net Change in Cash and Cash Equivalents |
|
|
(15,212 |
) |
|
|
|
|
|
CASH AND CASH EQUIVALENTS - Beginning of Year |
|
|
200,336 |
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS - END OF YEAR |
|
$ |
185,124 |
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL CASH FLOW DISCLOSURES |
|
|
|
|
|
|
|
|
|
Cash paid for interest |
|
$ |
1,543,226 |
|
See accompanying notes to combined financial statements.
19
OMAHA
DOWNTOWN LODGING
INVESTORS II, LLC AND SCOTTSDALE
LODGING INVESTORS, LLC
NOTES TO COMBINED FINANCIAL STATEMENTS
Year Ended December 31, 2010
|
|
|
NOTE 1 - Summary of Significant Accounting Policies |
|
Nature of Operations
Omaha Lodging Investors, LLC and Scottsdale Lodging Investors, LLC (the Companies) are limited liability companies organized under the laws of the state Wisconsin for the purpose of developing, owning and operating hotels and restaurants in the cities of Omaha, Nebraska and Scottsdale, Arizona, respectively. The hotel in Omaha also includes a free-standing restaurant and parking ramp. The hotels operate as Hilton Garden Inn hotels pursuant to franchise license agreements with a franchise company that is part of Hilton Worldwide, Inc.
Principles of Combination
Due to common ownership, the accompanying combined financial statements include the accounts of the aforementioned entities as if they were a single entity. There were no transactions between the entities during 2010.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Companies consider all highly liquid investments with maturities of three months or less when purchased to be cash equivalents. The Companies maintain cash accounts which, at various times, exceed the federally insured limits of $250,000 per bank. The Companies have not experienced any losses in such accounts and do not believe they are exposed to any significant credit risks.
Cash Reserves
The Companies maintain a reserve for replacements fund used to fund renovations and the replacement of fixed assets. As of December 31, 2010 the balance in the reserve for replacements fund was $1,547,079. Of this total, $606,525 is being held with the lender and withdrawals are subject to their approval. The Companies also maintain a tax escrow account used to fund the payment of real estate taxes. As of December 31, 2010 the balance in the tax escrow account was $333,192.
Accounts Receivable
Customer accounts receivable are reported at the amount management expects to collect from balances outstanding at year-end. Receivables primarily exist from nightly hotel occupancy. Balances are considered past due after 30 days and do not bear interest. Uncollectible balances are written off against bad debt expense when they become known. Management closely monitors outstanding balances and has not experienced historical losses from bad debt write-offs. As such, no allowance for doubtful accounts is considered necessary.
20
OMAHA
DOWNTOWN LODGING
INVESTORS II, LLC AND SCOTTSDALE
LODGING INVESTORS, LLC
NOTES TO COMBINED FINANCIAL STATEMENTS
Year Ended December 31, 2010
|
|
|
NOTE 1 - Summary of Significant Accounting Policies (cont.) |
|
Inventories
Inventories consist primarily of food and beverage inventory and are valued at lower of cost, using the first-in, first-out (FIFO) method, or market.
Deferred Costs, Net
Deferred costs consist of loan fees of $255,326 which are being amortized over the lives of the loans using the effective interest method. Accumulated amortization of these fees was $155,929 as of December 31, 2010.
Intangible Assets, Net
Intangible assets consist of franchise fees of $28,000 which are being amortized over the term of the franchise agreement. Accumulated amortization of these franchise fees was $8,413 as of December 31, 2010.
Property and Equipment, Net
Property and equipment are stated at cost and depreciated using the straight-line method over their estimated useful lives. Major expenditures for property and equipment are capitalized. Maintenance, repairs, and minor renewals are expensed as incurred. When assets are retired or otherwise disposed of, their costs and related accumulated depreciation are removed from the accounts and resulting gains or losses are included in income.
Depreciation of property and equipment is provided over the following useful lives:
|
|
|
Years |
|
|
|
|
Land improvements |
15 |
Buildings and improvements |
39 |
Furniture, fixtures and equipment |
5-7 |
Impairment of Long-Lived Assets
The Companies record income from a Tax Increment Financing (TIF) agreement when received. The total amount of TIF receipts under the agreement is $1,553,000. During 2010, the Companies received $205,897 of TIF receipts. The Companies have received $721,248 through December 31, 2010 and the remaining $831,752 is shown as deferred revenues on the accompanying combined financial statements.
21
OMAHA
DOWNTOWN LODGING
INVESTORS II, LLC AND SCOTTSDALE
LODGING INVESTORS, LLC
NOTES TO COMBINED FINANCIAL STATEMENTS
Year Ended December 31, 2010
|
|
|
NOTE 1 - Summary of Significant Accounting Policies (cont.) |
|
Preferred Members Interest
Omaha Downtown Lodging Investors II, LLC has two classes of members. A preferred return in an amount equal to 6.50% per annum of the outstanding Class A preferred capital balance is paid to the Class A member. At December 31, 2010, the outstanding preferred capital balance of the Class A member was $226,989.
Revenue Recognition
The Companies recognize revenue from rooms as earned on the close of business each day. Revenues from advanced sales are recorded as deposits and are recognized after the obligation has been satisfied. Revenues do not include sales tax as the Companies consider themselves a pass-through conduit for collecting and remitting sales taxes.
Advertising and Marketing Costs
The Companies expense all advertising and marketing costs as incurred.
Income Taxes
The Companies have elected to be taxed as partnerships. As such, the Companies income, losses and credits are reflected on the income tax returns of the members. Therefore, no provision or liability for income taxes has been included in the accompanying combined financial statements.
The Companies follow an accounting standard related to the accounting for uncertainty in income taxes, which states that the tax effects from an uncertain tax position can be recognized in the financial statements only if the position is more likely than not to be sustained on audit, based on the technical merits of the position. The Companies recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. At the adoption date, the Companies applied the new accounting standard to all tax positions for which the statute of limitations remained open.
Fair Value of Financial Instruments
The Companies short-term financial instruments consist of the following: cash, accounts receivable and accounts payable. The carrying values of these short-term financial instruments approximate their estimated fair values based on the instruments short-term nature.
The carrying value of the Companies variable rate long-term debt approximates fair value because interest rates on the variable rate debt change as the underlying market rates change. The carrying value of the Companies fixed rate debt is considered to approximate fair value as there is no separate market for the debt and the loans cannot be settled by the Companies for amounts different than the recorded amounts.
22
OMAHA DOWNTOWN LODGING
INVESTORS II, LLC AND SCOTTSDALE
LODGING INVESTORS, LLC
NOTES TO COMBINED FINANCIAL STATEMENTS
Year Ended December 31, 2010
|
|
|
NOTE 2 - Property and Equipment |
|
The major categories of property and equipment at December 31, 2010 are summarized as follows:
|
|
|
|
|
Land improvements |
|
$ |
3,528,909 |
|
Buildings and improvements |
|
|
15,046,056 |
|
Furniture, fixtures and equipment |
|
|
11,032,208 |
|
Land |
|
|
3,555,672 |
|
|
|
|
|
|
Subtotal |
|
|
33,162,845 |
|
Less: Accumulated depreciation |
|
|
15,056,081 |
|
|
|
|
|
|
Subtotal |
|
|
18,106,764 |
|
Construction in progress |
|
|
59,755 |
|
|
|
|
|
|
|
|
|||
Property and Equipment, Net |
|
$ |
18,166,519 |
|
|
|
|
|
|
|
|
|
NOTE 3 - Notes Receivable |
|
Omaha Downtown Lodging Investors II, LLC entered into a redevelopment promissory note with the City of Omaha on March 2, 2000 in the amount of $1,553,000. The note accrues interest at 9.00% per annum. The Companies receive back from the City of Omaha in the form of note payments, 99% of the real estate taxes incurred annually by Omaha Downtown Lodging Investors II, LLC, until the entire amount of the note is satisfied. The balance of the note at December 31, 2010 was $831,752. The Companies expect to receive $250,748 during 2011 based on the 2010 real estate tax assessment. This amount is shown as current portion of notes receivable on the accompanying balance sheet.
|
|
|
NOTE 4 - Accrued Expenses |
|
Accrued expenses consist of the following at December 31, 2010:
|
|
|
|
|
Advanced deposits |
|
$ |
28,477 |
|
Accrued wages |
|
|
65,582 |
|
Accrued payroll, room and sales taxes |
|
|
112,829 |
|
Accrued interest |
|
|
134,022 |
|
|
|
|
|
|
|
|
|
|
|
Total Accrued Expenses |
|
$ |
340,910 |
|
|
|
|
|
|
23
OMAHA DOWNTOWN LODGING
INVESTORS II, LLC AND SCOTTSDALE
LODGING INVESTORS, LLC
NOTES TO COMBINED FINANCIAL STATEMENTS
Year Ended December 31, 2010
|
|
|
NOTE 5 - Long-Term Debt |
|
Long-term debt is summarized as follows:
|
|
|
|
|
Promissory note payable to Morgan Stanley Mortgage Capital with monthly payments of $67,957, including principal and interest at 6.07% per annum. This note is due February 2017 and is secured by a first mortgage on the Arizona property. |
|
$ |
10,718,524 |
|
|
|
|
|
|
Promissory note payable to Morgan Stanley Mortgage Capital with monthly payments of $92,321, including principal and interest at 5.26% per annum. This note is due September 2012 and is secured by a first mortgage on the Nebraska property. |
|
|
15,932,937 |
|
|
|
|
|
|
Promissory note payable to First National Bank of Omaha that accrues interest at 250 basis points over the Five Year Treasury Constant Maturities rate (4.84% at December 31, 2010) per annum. The note matures on November 15, 2014. The note is secured by the TIF note receivable as described in Note 3. |
|
|
254,861 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
26,906,322 |
|
|
|
|
|
|
Less: Current portion |
|
|
(703,050 |
) |
|
|
|
|
|
|
|
|
|
|
Long-Term Portion |
|
$ |
26,203,272 |
|
|
|
|
|
|
Principal requirements on long-term debt for years ending after December 31, 2010 are as follows:
|
|
|
|
|
2011 |
|
$ |
703,050 |
|
2012 |
|
|
15,842,672 |
|
2013 |
|
|
194,116 |
|
2014 |
|
|
206,233 |
|
2015 |
|
|
219,105 |
|
Thereafter |
|
|
9,741,146 |
|
|
|
|
|
|
|
|
|
|
|
Total Long-Term Debt |
|
$ |
26,906,322 |
|
|
|
|
|
|
24
OMAHA DOWNTOWN LODGING
INVESTORS II, LLC AND SCOTTSDALE
LODGING INVESTORS, LLC
NOTES TO COMBINED FINANCIAL STATEMENTS
Year Ended December 31, 2010
|
|
|
NOTE 6 - Related Party |
|
North Central Management, Inc, an affiliate of the Companies, provides management services to the Companies for a fee of 4% of gross revenues, as defined in the management agreement. Total fees paid by the Companies to the affiliate were $395,628 during 2010. There were no accrued management fees as of December 31, 2010.
|
|
|
NOTE 7 - Subsequent Event |
|
The Companies have evaluated subsequent events through September 15, 2011, the date that the financial statements were available to be issued for events requiring recording or disclosure in the Companies combined financial statements.
The Omaha property was sold on September 1, 2011 to an unrelated party in an arms length transaction. The selling price was greater than the net book value of the property. The proceeds were used to retire the mortgage and satisfy other liabilities with the remaining assets distributed to the members according to the operating agreement.
During 2011, the Scottsdale property entered into a contract to sell the property to an unrelated party in an arms length transaction. The sale has not been completed as of the issuance of these combined financial statements. The contract price is greater than the net book value of the property. According to the contract, the existing mortgage will be assumed by the buyer. The proceeds will be used to satisfy other liabilities with the remaining assets distributed to the members according to the operating agreement.
25
OMAHA DOWNTOWN LODGING
INVESTORS II, LLC AND SCOTTSDALE
LODGING INVESTORS, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2011 |
|
June 30, 2010 |
|
||
|
|
|
|
|
|
||
ASSETS |
|
|
|
|
|
|
|
CURRENT ASSETS |
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
1,180,396 |
|
$ |
467,833 |
|
Cash reserves |
|
|
2,319,980 |
|
|
1,822,520 |
|
Accounts receivable |
|
|
395,191 |
|
|
389,623 |
|
Inventories |
|
|
69,997 |
|
|
81,916 |
|
Prepaid expenses |
|
|
6,723 |
|
|
21,670 |
|
Other current assets |
|
|
3,615 |
|
|
3,615 |
|
Current portion of notes receivable |
|
|
250,000 |
|
|
214,217 |
|
|
|
|
|
|
|
|
|
Total Current Assets |
|
|
4,225,902 |
|
|
3,001,394 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROPERTY AND EQUIPMENT, NET |
|
|
17,668,700 |
|
|
18,680,322 |
|
|
|
|
|
|
|
|
|
OTHER ASSETS |
|
|
|
|
|
|
|
Notes receivable |
|
|
456,377 |
|
|
706,377 |
|
Deferred costs, net |
|
|
84,382 |
|
|
114,659 |
|
Intangible assets, net |
|
|
18,867 |
|
|
20,309 |
|
|
|
|
|
|
|
|
|
Total Other Assets |
|
|
559,626 |
|
|
841,345 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
|
$ |
22,454,228 |
|
$ |
22,523,061 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND MEMBERS DEFICIT |
|
|
|
|
|
|
|
CURRENT LIABILITIES |
|
|
|
|
|
|
|
Current maturities of long term debt |
|
$ |
738,202 |
|
$ |
684,712 |
|
Accounts payable |
|
|
318,009 |
|
|
295,184 |
|
Accrued expenses |
|
|
447,541 |
|
|
402,490 |
|
Accrued property taxes |
|
|
392,660 |
|
|
391,521 |
|
Deferred revenues |
|
|
706,377 |
|
|
920,594 |
|
|
|
|
|
|
|
|
|
Total Current Liabilities |
|
|
2,602,789 |
|
|
2,694,501 |
|
|
|
|
|
|
|
|
|
LONG-TERM LIABILITIES |
|
|
|
|
|
|
|
Long-term debt |
|
|
25,817,961 |
|
|
26,560,890 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities |
|
|
28,420,750 |
|
|
29,255,391 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MEMBERS DEFICIT |
|
|
(5,966,522 |
) |
|
(6,732,330 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND MEMBERS DEFICIT |
|
$ |
22,454,228 |
|
$ |
22,523,061 |
|
|
|
|
|
|
|
|
|
26
OMAHA DOWNTOWN LODGING
INVESTORS II, LLC AND SCOTTSDALE
LODGING INVESTORS, LLC
|
COMBINED STATEMENTS OF OPERATIONS AND MEMBERS DEFICIT (UNAUDITED) |
Periods From January 1, 2011 to June 30, 2011 and January 1, 2010 to June 30, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2011 |
|
June 30, 2010 |
|
||
|
|
|
|
|
|
||
REVENUES |
|
|
|
|
|
|
|
Rooms |
|
$ |
5,204,981 |
|
$ |
4,889,344 |
|
Food and beverage |
|
|
941,712 |
|
|
853,336 |
|
Other |
|
|
480,684 |
|
|
420,686 |
|
|
|
|
|
|
|
|
|
Total Revenues |
|
|
6,627,377 |
|
|
6,163,366 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COSTS AND EXPENSES |
|
|
|
|
|
|
|
Rooms |
|
|
547,294 |
|
|
484,476 |
|
Food and beverage |
|
|
670,749 |
|
|
634,075 |
|
Advertising and marketing |
|
|
464,722 |
|
|
388,316 |
|
General and administrative |
|
|
1,348,655 |
|
|
1,253,102 |
|
Utilities |
|
|
234,694 |
|
|
221,702 |
|
Repairs and maintenance |
|
|
184,173 |
|
|
184,081 |
|
Franchise and management fees |
|
|
532,079 |
|
|
490,707 |
|
Taxes, insurance and other |
|
|
295,671 |
|
|
293,051 |
|
Depreciation and amortization |
|
|
525,353 |
|
|
661,325 |
|
|
|
|
|
|
|
|
|
Total Costs and Expenses |
|
|
4,803,390 |
|
|
4,610,835 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING INCOME |
|
|
1,823,987 |
|
|
1,552,531 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSES) |
|
|
|
|
|
|
|
Interest expense |
|
|
(751,461 |
) |
|
(769,998 |
) |
Interest income |
|
|
26,415 |
|
|
30,800 |
|
TIF revenue |
|
|
125,374 |
|
|
117,055 |
|
Loss on fixed asset disposal |
|
|
|
|
|
(6,198 |
) |
|
|
|
|
|
|
|
|
Total Other Income (Expenses) |
|
|
(599,672 |
) |
|
(628,341 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME |
|
|
1,224,315 |
|
|
924,190 |
|
|
|
|
|
|
|
|
|
Preferred return to Class A member |
|
|
(6,862 |
) |
|
(8,863 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME ATTRIBUTABLE TO MEMBERS |
|
|
1,217,453 |
|
|
915,327 |
|
|
|
|
|
|
|
|
|
MEMBERS DEFICIT - Beginning of Year |
|
|
(7,145,656 |
) |
|
(7,111,339 |
) |
|
|
|
|
|
|
|
|
Distributions |
|
|
(38,319 |
) |
|
(536,318 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MEMBERS DEFICIT - END OF YEAR |
|
$ |
(5,966,522 |
) |
$ |
(6,732,330 |
) |
|
|
|
|
|
|
|
|
27
OMAHA DOWNTOWN LODGING
INVESTORS II, LLC AND SCOTTSDALE
LODGING INVESTORS, LLC
|
Periods From January 1, 2011 to June 30, 2011 and January 1, 2010 to June 30, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2011 |
|
June 30, 2010 |
|
||
|
|
|
|
|
|
||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
|
Net income |
|
$ |
1,224,315 |
|
$ |
924,190 |
|
Adjustments to reconcile net income to net cash flows from operating activities: |
|
|
|
|
|
|
|
Loss on fixed asset disposal |
|
|
|
|
|
6,198 |
|
Depreciation and amortization |
|
|
525,353 |
|
|
661,325 |
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
Accounts receivable |
|
|
(156,879 |
) |
|
(85,110 |
) |
Inventories |
|
|
8,776 |
|
|
183 |
|
Prepaid expenses |
|
|
30,595 |
|
|
31,078 |
|
Accounts payable |
|
|
118,673 |
|
|
81,684 |
|
Accrued expenses |
|
|
106,631 |
|
|
46,340 |
|
Accrued property taxes |
|
|
(15,344 |
) |
|
(2,359 |
) |
Deferred revenues |
|
|
(125,374 |
) |
|
(117,055 |
) |
|
|
|
|
|
|
|
|
Net Cash Flows from Operating Activities |
|
|
1,716,746 |
|
|
1,546,474 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
|
Capital expenditures |
|
|
(11,799 |
) |
|
(29,419 |
) |
Principal received for note receivable |
|
|
125,374 |
|
|
117,055 |
|
Net increase in cash reserves |
|
|
(439,709 |
) |
|
(494,337 |
) |
|
|
|
|
|
|
|
|
Net Cash Flows from Investing Activities |
|
|
(326,134 |
) |
|
(406,701 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
|
Principal payments on long-term debt |
|
|
(350,159 |
) |
|
(327,095 |
) |
Preferred return payment to Class A member |
|
|
(6,862 |
) |
|
(8,863 |
) |
Distributions to members |
|
|
(38,319 |
) |
|
(536,318 |
) |
|
|
|
|
|
|
|
|
Net Cash Flows from Financing Activities |
|
|
(395,340 |
) |
|
(872,276 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Change in Cash and Cash Equivalents |
|
|
995,272 |
|
|
267,497 |
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS - Beginning of Year |
|
|
185,124 |
|
|
200,336 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS - END OF YEAR |
|
$ |
1,180,396 |
|
$ |
467,833 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL CASH FLOW DISCLOSURES |
|
|
|
|
|
|
|
Cash paid for interest |
|
$ |
758,977 |
|
$ |
778,770 |
|
28
|
Apple REIT Ten, Inc. |
Pro Forma Condensed Consolidated Balance Sheet as of June 30, 2011 (unaudited) |
(in thousands, except share data) |
The following unaudited Pro Forma Condensed Consolidated Balance Sheet of Apple REIT Ten, Inc. gives effect to the following hotel acquisitions:
|
|
|
|
|
|
|
|
|
Franchise |
|
Location |
|
Gross Purchase |
|
Actual Acquisition Date |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CN Hotel Portfolio (1 Hotel): |
|
|
|
|
|
|
||
Home2 Suites |
|
Jacksonville, NC |
|
$ |
12.0 |
|
Pending |
|
|
|
|
|
|
|
|
|
|
Hawkeye Hotel Portfolio (1 Hotel): |
|
|
|
|
|
|
||
Hampton Inn & Suites |
|
Davenport, IA |
|
|
13.0 |
|
July 19, 2011 |
|
|
|
|
|
|
|
|
|
|
McKibbon Hotel Portfolio (3 Hotels): |
|
|
|
|
|
|
||
Homewood Suites |
|
Knoxville, TN |
|
|
15.0 |
|
July 19, 2011 |
|
TownePlace Suites |
|
Knoxville, TN |
|
|
9.0 |
|
August 9, 2011 |
|
Homewood Suites |
|
Gainesville, FL |
|
|
14.6 |
|
Pending |
|
|
|
|
|
|
|
|
|
|
Omaha and Scottsdale Hotel Portfolio (2 Hotels): |
|
|
|
|
|
|
||
Hilton Garden Inn |
|
Omaha, NE |
|
|
30.0 |
|
September 1, 2011 |
|
Hilton Garden Inn |
|
Scottsdale, AZ |
|
|
16.3 |
|
October 3, 2011 |
|
|
|
|
|
|
|
|
|
|
Chicago Hotel Portfolio (2 Hotels): |
|
|
|
|
|
|
||
Hilton Garden Inn |
|
Des Plaines, IL |
|
|
38.0 |
|
September 20, 2011 |
|
Hampton Inn & Suites |
|
Skokie, IL |
|
|
32.0 |
|
Pending |
|
|
|
|
|
|
|
|
|
|
Hilton Garden Inn |
|
Mason, OH |
|
|
14.8 |
|
September 1, 2011 |
|
Hilton Garden Inn |
|
Merrillville, IN |
|
|
14.8 |
|
September 30, 2011 |
|
Homewood Suites |
|
Austin/Round Rock, TX |
|
|
15.5 |
|
October 3, 2011 |
|
Fairfield Inn & Suites |
|
South Bend, IN |
|
|
17.5 |
|
November 1, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
242.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
This Pro Forma Condensed Consolidated Balance Sheet also assumes all of the hotels had been leased to our wholly-owned taxable REIT subsidiaries pursuant to master hotel lease arrangements. The hotels acquired will be managed by affiliates of LBAM Investor Group, L.L.C., MHH Management, LLC, Raymond Management Company, Inc., Schulte Hospitality Group, Inc., Vista Host, Inc. and White Lodging Services Corporation under separate management agreements. |
|
Such pro forma information is based in part upon the historical Consolidated Balance Sheet of Apple REIT Ten, Inc. and the historical balance sheets of the hotel properties. |
|
The following unaudited Pro Forma Condensed Consolidated Balance Sheet of Apple REIT Ten, Inc. is not necessarily indicative of what the actual financial position would have been assuming such transactions had been completed as of June 30, 2011 nor does it purport to represent the future financial position of Apple REIT Ten, Inc. |
|
The unaudited Pro Forma Condensed Consolidated Balance Sheet should be read in conjunction with, and is qualified in its entirety by, the historical balance sheets of the acquired hotels. |
29
Balance Sheet as of June 30, 2011
(unaudited)
(In thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company |
|
Pro forma |
|
|
Total |
|
|||
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
Investment in hotel properties, net |
|
$ |
186,522 |
|
$ |
241,998 |
|
(A) |
$ |
428,520 |
|
Cash and cash equivalents |
|
|
142,838 |
|
|
(141,838 |
) |
(D) |
|
1,000 |
|
Other assets |
|
|
6,025 |
|
|
6,691 |
|
(C) |
|
12,716 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
$ |
335,385 |
|
$ |
106,851 |
|
|
$ |
442,236 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
Notes payable |
|
$ |
|
|
|
83,121 |
|
(C) |
$ |
83,121 |
|
Accounts payable and accrued expenses |
|
|
1,584 |
|
|
2,013 |
|
(C) |
|
3,597 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities |
|
|
1,584 |
|
|
85,134 |
|
|
|
86,718 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, authorized 30,000,000 shares |
|
|
|
|
|
|
|
|
|
|
|
Series A preferred stock, no par value, |
|
|
|
|
|
|
|
|
|
|
|
Series B convertible preferred stock, no par |
|
|
48 |
|
|
|
|
|
|
48 |
|
Common stock, no par value, |
|
|
344,961 |
|
|
27,560 |
|
(E) |
|
372,521 |
|
Accumulated deficit |
|
|
(3,600 |
) |
|
(5,843 |
) |
(B) |
|
(9,443 |
) |
Cumulative distributions paid |
|
|
(7,608 |
) |
|
|
|
|
|
(7,608 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Total Shareholders Equity |
|
|
333,801 |
|
|
21,717 |
|
|
|
355,518 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Shareholders Equity |
|
$ |
335,385 |
|
$ |
106,851 |
|
|
$ |
442,236 |
|
|
|
|
|
|
|
|
|
|
|
|
|
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
Jacksonville, NC |
|
Davenport, IA |
|
Knoxville, TN |
|
Knoxville, TN |
|
Gainesville, FL |
|
Omaha, NE |
|
Scottsdale, AZ |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase price per contract |
|
$ |
12,000 |
|
$ |
13,000 |
|
$ |
15,000 |
|
$ |
9,000 |
|
$ |
14,550 |
|
$ |
30,018 |
|
$ |
16,300 |
|
Other capitalized costs (credits) incurred |
|
|
25 |
|
|
71 |
|
|
1,017 |
|
|
(219 |
) |
|
65 |
|
|
93 |
|
|
80 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in hotel properties |
|
|
12,025 |
|
|
13,071 |
|
|
16,017 |
|
|
8,781 |
|
|
14,615 |
|
|
30,111 |
|
|
16,380 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition fee payable to Apple Suites Realty Group (2% of purchase price per contract) |
|
|
240 |
|
|
260 |
|
|
300 |
|
|
180 |
|
|
291 |
|
|
600 |
|
|
326 |
|
Other acquisition related costs |
|
|
30 |
|
|
50 |
|
|
60 |
|
|
54 |
|
|
36 |
|
|
344 |
|
|
41 |
|
Net other assets/(liabilities) assumed |
|
|
(24 |
) |
|
(199 |
) |
|
(11,182 |
) |
|
(6,790 |
) |
|
(13,113 |
) |
|
(199 |
) |
|
(8,900 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total purchase price |
|
$ |
12,271 |
|
$ |
13,182 |
|
$ |
5,195 |
|
$ |
2,225 |
|
$ |
1,829 |
|
$ |
30,856 |
|
$ |
7,847 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
Des Plaines, IL |
|
Skokie, IL |
|
Mason, OH |
|
Merrillville, IN |
|
Austin/Round |
|
South Bend |
|
Total |
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase price per contract |
|
$ |
38,000 |
|
$ |
32,000 |
|
$ |
14,825 |
|
$ |
14,825 |
|
$ |
15,500 |
|
$ |
17,500 |
|
$ |
242,518 |
|
|
Other capitalized costs (credits) incurred |
|
|
(2,043 |
) |
|
121 |
|
|
80 |
|
|
80 |
|
|
60 |
|
|
50 |
|
|
(520 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in hotel properties |
|
|
35,957 |
|
|
32,121 |
|
|
14,905 |
|
|
14,905 |
|
|
15,560 |
|
|
17,550 |
|
|
241,998 |
|
(A) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition fee payable to Apple Suites Realty Group (2% of purchase price per contract) |
|
|
760 |
|
|
640 |
|
|
297 |
|
|
297 |
|
|
310 |
|
|
350 |
|
|
4,851 |
|
(B) |
Other acquisition related costs |
|
|
106 |
|
|
80 |
|
|
69 |
|
|
39 |
|
|
39 |
|
|
44 |
|
|
992 |
|
(B) |
Net other assets/(liabilities) assumed |
|
|
(18,169 |
) |
|
(19,143 |
) |
|
(79 |
) |
|
(168 |
) |
|
(99 |
) |
|
(378 |
) |
|
(78,443 |
) |
(C) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total purchase price |
|
$ |
18,654 |
|
$ |
13,698 |
|
$ |
15,192 |
|
$ |
15,073 |
|
$ |
15,810 |
|
$ |
17,566 |
|
$ |
169,398 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Cash on hand at June 30, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(142,838 |
) |
|
Plus: Working capital requirements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(141,838 |
) |
(D) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity proceeds needed for acquisitions and working capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,560 |
|
(E) |
|
|
(B) |
Represents costs incurred to complete the acquisition, including, title, legal, accounting and other related costs, as well as the commission paid to Apple Suites Realty Group totaling 2% of purchase price per contract. |
|
|
(C) |
Represents other assets and liabilities assumed in the acquisition of the hotel including, mortgage payable, debt service escrows, operational charges and credits and accrued property taxes. |
|
|
(D) |
Represents the reduction of cash and cash equivalents by the amount utilized to fund the acquisitions. |
|
|
(E) |
Represents the issuance of additional shares required to fund acquisitions. |
31
Apple REIT Ten, Inc.
Pro Forma Condensed Consolidated Statements of Operations (unaudited)
For the year ended December 31, 2010 and six months ended June 30, 2011
(in thousands, except per share data)
The following unaudited Pro Forma Condensed Consolidated Statements of Operations of Apple REIT Ten, Inc. gives effect to the following hotel acquisition:
|
|
|
|
|
|
|
|
|
Franchise |
|
Location |
|
Gross Purchase |
|
Actual Acquisition Date |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hilton Garden Inn |
|
Denver, CO |
|
$ |
58.5 |
|
March 4, 2011 |
|
|
|
|
|
|
|
|
|
|
CN Hotel Portfolio (4 Hotels): |
|
|
|
|
|
|
|
|
Hampton Inn & Suites |
|
Winston-Salem, NC |
|
|
11.0 |
|
March 15, 2011 |
|
Fairfield Inn & Suites |
|
Matthews, NC |
|
|
10.0 |
|
March 25, 2011 |
|
TownePlace Suites |
|
Columbia, SC |
|
|
10.5 |
|
March 25, 2011 |
|
Home2 Suites |
|
Jacksonville, NC |
|
|
12.0 |
|
Pending |
|
|
|
|
|
|
|
|
|
|
McKibbon Hotel Portfolio (8 Hotels): |
|
|
|
|
|
|
|
|
SpringHill Suites |
|
Knoxville, TN |
|
|
14.5 |
|
June 2, 2011 |
|
Hilton Garden Inn |
|
Gainesville, FL |
|
|
12.5 |
|
June 2, 2011 |
|
SpringHill Suites |
|
Richmond, VA |
|
|
11.0 |
|
June 2, 2011 |
|
TownePlace Suites |
|
Pensacola, FL |
|
|
11.5 |
|
June 2, 2011 |
|
Hampton Inn & Suites |
|
Mobile, AL |
|
|
13.0 |
|
June 2, 2011 |
|
Homewood Suites |
|
Knoxville, TN |
|
|
15.0 |
|
July 19, 2011 |
|
TownePlace Suites |
|
Knoxville, TN |
|
|
9.0 |
|
August 9, 2011 |
|
Homewood Suites |
|
Gainesville, FL |
|
|
14.6 |
|
Pending |
|
|
|
|
|
|
|
|
|
|
Hawkeye Hotel Portfolio (3 Hotels): |
|
|
|
|
|
|
|
|
Homewood Suites |
|
Cedar Rapids, IA |
|
|
13.0 |
|
June 8, 2011 |
|
Hampton Inn & Suites |
|
Cedar Rapids, IA |
|
|
13.0 |
|
June 8, 2011 |
|
Hampton Inn & Suites |
|
Davenport, IA |
|
|
13.0 |
|
July 19, 2011 |
|
|
|
|
|
|
|
|
|
|
Omaha and Scottsdale Hotel Portfolio (2 Hotels): |
|
|
|
|
|
|
|
|
Hilton Garden Inn |
|
Omaha, NE |
|
|
30.0 |
|
September 1, 2011 |
|
Hilton Garden Inn |
|
Scottsdale, AZ |
|
|
16.3 |
|
October 3, 2011 |
|
|
|
|
|
|
|
|
|
|
Chicago Hotel Portfolio (2 Hotels): |
|
|
|
|
|
|
|
|
Hilton Garden Inn |
|
Des Plaines, IL |
|
|
38.0 |
|
September 20, 2011 |
|
Hampton Inn & Suites |
|
Skokie, IL |
|
|
32.0 |
|
Pending |
|
|
|
|
|
|
|
|
|
|
Hilton Garden Inn |
|
Mason, OH |
|
|
14.8 |
|
September 1, 2011 |
|
Hilton Garden Inn |
|
Merrillville, IN |
|
|
14.8 |
|
September 30, 2011 |
|
Homewood Suites |
|
Austin/Round Rock, TX |
|
|
15.5 |
|
October 3, 2011 |
|
Fairfield Inn & Suites |
|
South Bend, IN |
|
|
17.5 |
|
November 1, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
421.0 |
|
|
|
|
|
|
|
|
|
|
|
|
These Pro Forma Condensed Consolidated Statements of Operations also assume all of the hotels had been leased to our wholly-owned taxable REIT subsidiaries pursuant to master hotel lease arrangements. The hotels acquired will be managed by affiliates of LBAM Investor Group, L.L.C., MHH Management, LLC, Newport Hospitality Group, Inc., Raymond Management Company, Inc., Schulte Hospitality Group, Inc., Stonebridge Realty Advisors, Inc., Vista Host, Inc. and White Lodging Services Corporation under separate management agreements.
Such pro forma information is based in part upon the historical Consolidated Statements of Operations of Apple REIT Ten, Inc. and the historical Statements of Operations of the hotel properties.
The following unaudited Pro Forma Condensed Consolidated Statements of Operations of Apple REIT Ten, Inc. are not necessarily indicative of what the actual financial results would have been assuming such transactions had been completed on the latter of January 1, 2010, or the date the hotel began operations nor do they purport to represent the future financial results of Apple REIT Ten, Inc.
The unaudited Pro Forma Condensed Consolidated Statements of Operations should be read in conjunction with, and is qualified in its entirety by the historical Statements of Operations of the acquired hotels.
32
|
Pro Forma Condensed Consolidated Statement of Operations (unaudited) |
For the year ended December 31, 2010 |
(In thousands, except per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company |
|
Denver, CO |
|
CN Hotel |
|
McKibbon Hotel |
|
Hawkeye Hotel |
|
Omaha Downtown |
|
Chicago |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Room revenue |
|
$ |
|
|
$ |
8,978 |
|
$ |
3,339 |
|
$ |
21,903 |
|
$ |
6,644 |
|
$ |
8,905 |
|
$ |
14,490 |
|
Other revenue |
|
|
|
|
|
2,372 |
|
|
59 |
|
|
510 |
|
|
67 |
|
|
2,333 |
|
|
2,399 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
|
|
|
11,350 |
|
|
3,398 |
|
|
22,413 |
|
|
6,711 |
|
|
11,238 |
|
|
16,889 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
3,798 |
|
|
1,097 |
|
|
7,925 |
|
|
1,946 |
|
|
3,792 |
|
|
7,161 |
|
General and administrative |
|
|
28 |
|
|
1,635 |
|
|
34 |
|
|
2,369 |
|
|
387 |
|
|
2,367 |
|
|
2,947 |
|
Management and franchise fees |
|
|
|
|
|
1,003 |
|
|
494 |
|
|
1,935 |
|
|
950 |
|
|
899 |
|
|
1,229 |
|
Taxes, insurance and other |
|
|
|
|
|
374 |
|
|
234 |
|
|
1,336 |
|
|
451 |
|
|
587 |
|
|
1,699 |
|
Acquisition related costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation of real estate owned |
|
|
|
|
|
1,325 |
|
|
463 |
|
|
4,083 |
|
|
720 |
|
|
1,193 |
|
|
2,300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest, net |
|
|
3 |
|
|
753 |
|
|
324 |
|
|
3,227 |
|
|
1,365 |
|
|
1,244 |
|
|
2,839 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses |
|
|
31 |
|
|
8,888 |
|
|
2,646 |
|
|
20,875 |
|
|
5,819 |
|
|
10,082 |
|
|
18,175 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(31 |
) |
$ |
2,462 |
|
$ |
752 |
|
$ |
1,538 |
|
$ |
892 |
|
$ |
1,156 |
|
$ |
(1,286 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings per common share |
|
$ |
(3,083.50 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding - basic and diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33
|
Pro Forma Condensed Consolidated Statement of Operations (unaudited) |
For the year ended December 31, 2010 |
(In thousands, except per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SASI, LLC |
|
Ascent |
|
VHRMR |
|
KRG/White LS |
|
Pro forma |
|
|
Total |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Room revenue |
|
$ |
2,190 |
|
$ |
3,203 |
|
$ |
459 |
|
$ |
1,568 |
|
$ |
|
|
|
$ |
71,679 |
|
Other revenue |
|
|
304 |
|
|
343 |
|
|
10 |
|
|
19 |
|
|
|
|
|
|
8,416 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
2,494 |
|
|
3,546 |
|
|
469 |
|
|
1,587 |
|
|
|
|
|
|
80,095 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
846 |
|
|
1,236 |
|
|
297 |
|
|
526 |
|
|
|
|
|
|
28,624 |
|
General and administrative |
|
|
363 |
|
|
631 |
|
|
64 |
|
|
195 |
|
|
1,000 |
|
(B) |
|
12,020 |
|
Management and franchise fees |
|
|
189 |
|
|
261 |
|
|
32 |
|
|
56 |
|
|
|
|
|
|
7,048 |
|
Taxes, insurance and other |
|
|
154 |
|
|
290 |
|
|
244 |
|
|
352 |
|
|
(434 |
) |
(I) |
|
5,287 |
|
Acquisition related costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,821 |
|
(H) |
|
9,821 |
|
Depreciation of real estate owned |
|
|
570 |
|
|
679 |
|
|
171 |
|
|
624 |
|
|
(12,128 |
) |
(C) |
|
10,737 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,737 |
|
(D) |
|
|
|
Interest, net |
|
|
349 |
|
|
344 |
|
|
94 |
|
|
214 |
|
|
(5,835 |
) |
(E) |
|
4,921 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses |
|
|
2,471 |
|
|
3,441 |
|
|
902 |
|
|
1,967 |
|
|
3,161 |
|
|
|
78,458 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(G) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
23 |
|
$ |
105 |
|
$ |
(433 |
) |
$ |
(380 |
) |
$ |
(3,161 |
) |
|
$ |
1,637 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings per common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
0.05 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding - basic and diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,423 |
|
(F) |
|
31,423 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34
Pro
Forma Condensed Consolidated Statement of Operations (unaudited)
For the six months ended June 30, 2011
(In thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company |
|
Denver, CO |
|
CN Hotel |
|
McKibbon Hotel |
|
Hawkeye Hotel |
|
Omaha Downtown |
|
Chicago |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Room revenue |
|
$ |
6,711 |
|
$ |
1,273 |
|
$ |
1,061 |
|
$ |
10,135 |
|
$ |
3,170 |
|
$ |
5,205 |
|
$ |
7,113 |
|
Other revenue |
|
|
813 |
|
|
381 |
|
|
19 |
|
|
220 |
|
|
42 |
|
|
1,422 |
|
|
1,418 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
7,524 |
|
|
1,654 |
|
|
1,080 |
|
|
10,355 |
|
|
3,212 |
|
|
6,627 |
|
|
8,531 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
3,279 |
|
|
736 |
|
|
334 |
|
|
3,678 |
|
|
1,136 |
|
|
2,101 |
|
|
3,339 |
|
General and administrative |
|
|
1,374 |
|
|
142 |
|
|
68 |
|
|
1,140 |
|
|
227 |
|
|
1,349 |
|
|
1,493 |
|
Management and franchise fees |
|
|
576 |
|
|
224 |
|
|
96 |
|
|
915 |
|
|
426 |
|
|
532 |
|
|
610 |
|
Taxes, insurance and other |
|
|
465 |
|
|
66 |
|
|
84 |
|
|
605 |
|
|
349 |
|
|
296 |
|
|
803 |
|
Acquisition related costs |
|
|
4,548 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation of real estate owned |
|
|
1,098 |
|
|
225 |
|
|
135 |
|
|
1,277 |
|
|
457 |
|
|
525 |
|
|
741 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest, net |
|
|
(247 |
) |
|
128 |
|
|
137 |
|
|
1,732 |
|
|
638 |
|
|
600 |
|
|
1,226 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses |
|
|
11,093 |
|
|
1,521 |
|
|
854 |
|
|
9,347 |
|
|
3,233 |
|
|
5,403 |
|
|
8,212 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(3,569 |
) |
$ |
133 |
|
$ |
226 |
|
$ |
1,008 |
|
$ |
(21 |
) |
$ |
1,224 |
|
$ |
319 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings per common share |
|
$ |
(0.18 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding - basic and diluted |
|
|
19,547 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35
Pro Forma Condensed Consolidated Statement of
Operations (unaudited)
For the six months ended June 30, 2011
(In thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SASI, LLC |
|
Ascent |
|
VHRMR |
|
KRG/White LS |
|
Pro forma |
|
Total |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Room revenue |
|
$ |
1,371 |
|
$ |
1,635 |
|
$ |
1,902 |
|
$ |
1,381 |
|
$ |
|
|
$ |
40,957 |
|
Other revenue |
|
|
238 |
|
|
180 |
|
|
36 |
|
|
21 |
|
|
|
|
|
4,790 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
1,609 |
|
|
1,815 |
|
|
1,938 |
|
|
1,402 |
|
|
|
|
|
45,747 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
419 |
|
|
521 |
|
|
682 |
|
|
496 |
|
|
|
|
|
16,721 |
|
General and administrative |
|
|
304 |
|
|
401 |
|
|
136 |
|
|
148 |
|
|
250 |
(B) |
|
7,032 |
|
Management and franchise fees |
|
|
122 |
|
|
160 |
|
|
173 |
|
|
49 |
|
|
|
|
|
3,883 |
|
Taxes, insurance and other |
|
|
71 |
|
|
110 |
|
|
80 |
|
|
198 |
|
|
|
|
|
3,127 |
|
Acquisition related costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,259 |
) (H) |
|
289 |
|
Depreciation of real estate owned |
|
|
311 |
|
|
340 |
|
|
338 |
|
|
458 |
|
|
(4,807 |
) (C) |
|
5,997 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,899 |
(D) |
|
|
|
Interest, net |
|
|
222 |
|
|
203 |
|
|
159 |
|
|
240 |
|
|
(2,597 |
) (E) |
|
2,441 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses |
|
|
1,449 |
|
|
1,735 |
|
|
1,568 |
|
|
1,589 |
|
|
(6,514 |
) |
|
39,490 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(G) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
160 |
|
$ |
80 |
|
$ |
370 |
|
$ |
(187 |
) |
$ |
6,514 |
|
$ |
6,257 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings per common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
0.18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding - basic and diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,154 |
(F) |
|
35,701 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36
Notes to Pro Forma Condensed Consolidated Statements of Operations (unaudited):
(A) Represents results of operations for the hotels on a pro forma basis as if the hotels were owned by the Company at January 1, 2010 for the respective period prior to acquisition by the Company. The Company was initially formed on August 13, 2010, and had no operations prior to that date. Additionally, six properties began operations subsequent to January 1, 2010, and one property remained under construction as of June 30, 2011. Therefore, these hotels had limited historical operational activity prior to their opening. The properties and their applicable status are as follows: Mason, OH Hilton Garden Inn, opened February 2010, Winston-Salem, NC Hampton Inn & Suites, opened April 2010, South Bend, IN Fairfield Inn & Suites, opened June 2010, Cedar Rapids, IA Homewood Suites, opened August 2010, Austin/Round Rock, TX Homewood Suites, opened September 2010, Matthews, NC Fairfield Inn & Suites, opened November 2010 and Jacksonville, NC Home2 Suites is under construction.
(B) Represents adjustments to level of administrative and other costs associated with being a public company and owning additional properties, including the advisory fee, accounting and legal expenses, net of cost savings derived from owning multiple operating properties.
(C) Represents elimination of historical depreciation and amortization expense of the acquired properties.
(D) Represents the depreciation on the hotels acquired based on the purchase price allocation to depreciable property and the dates the hotels began operation. The weighted average lives of the depreciable assets are 39 years for building and seven years for furniture, fixtures and equipment (FF&E). These estimated useful lives are based on managements knowledge of the properties and the hotel industry in general.
(E) Interest expense related to prior owners debt which was not assumed has been eliminated.
(F) Represents the weighted average number of shares required to be issued to generate the purchase price of each hotel, net of any debt assumed. The calculation assumes all properties were acquired on the latter of January 1, 2010, or the dates the hotels began operations.
(G) Estimated income tax expense of our wholly owned taxable REIT subsidiaries is zero based on the contractual agreement put in place between the Company and our lessees, based on a combined tax rate of 40% of taxable income. Based on the terms of the lease agreements, our taxable subsidiaries would have incurred a loss during these periods. No operating loss benefit has been recorded as realization is not certain.
(H) Represents costs incurred to complete acquisitions, including, title, legal, accounting and other related costs, as well as the commission paid to Apple Suites Realty Group totaling 2% of purchase price per contract. These costs have been adjusted for hotel acquisitions on the latter of January 1, 2010 or the dates the hotels began operations.
(I) Represents preopening expenses which are the Sellers responsibility and therefore have been eliminated.
37
|
|
SIGNATURES |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
|
|
|
|
Apple REIT Ten, Inc. |
|
|
|
|
|
By: |
/s/ Glade M. Knight |
|
|
|
|
|
Glade M. Knight, |
|
|
Chief Executive Officer |
|
|
|
|
|
November 9, 2011 |
38