Attached files

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8-K/A - FORM 8-K/A - WELLTOWER INC.d586143d8ka.htm
EX-99.3 - EX-99.3 - WELLTOWER INC.d586143dex993.htm
EX-23.1 - EX-23.1 - WELLTOWER INC.d586143dex231.htm
EX-99.8 - EX-99.8 - WELLTOWER INC.d586143dex998.htm
EX-99.1 - EX-99.1 - WELLTOWER INC.d586143dex991.htm
EX-99.9 - EX-99.9 - WELLTOWER INC.d586143dex999.htm
EX-99.6 - EX-99.6 - WELLTOWER INC.d586143dex996.htm
EX-99.4 - EX-99.4 - WELLTOWER INC.d586143dex994.htm
EX-99.2 - EX-99.2 - WELLTOWER INC.d586143dex992.htm
EX-23.2 - EX-23.2 - WELLTOWER INC.d586143dex232.htm
EX-99.5 - EX-99.5 - WELLTOWER INC.d586143dex995.htm

Exhibit 99.7

CLP SUN PARTNERS II, LLC

CONSOLIDATED BALANCE SHEETS

AS OF JUNE 30, 2013 (UNAUDITED) AND DECEMBER 31, 2012

 

     June 30,     December 31,  
     2013 (unaudited)     2012  

ASSETS

    

PROPERTY AND EQUIPMENT:

    

Land and land improvements

   $ 14,412,241      $ 14,405,356   

Building and building improvements

     108,451,721        108,448,716   

Furniture and equipment

     5,837,385        5,810,362   

Construction in progress

     160,809        34,274   
  

 

 

   

 

 

 
     128,862,156        128,698,708   

Less accumulated depreciation

     (8,772,049     (6,528,789
  

 

 

   

 

 

 

Property and equipment — net

     120,090,107        122,169,919   

CASH AND CASH EQUIVALENTS

     3,306,259        4,411,533   

RESTRICTED CASH

     425,450        306,242   

ACCOUNTS RECEIVABLE — Net of allowance for doubtful accounts of $37,838 and $58,354 in 2013 and 2012, respectively

     359,142        328,699   

RECEIVABLE FROM AFFILIATES — Net

     22,681        —     

PREPAID EXPENSES AND OTHER ASSETS

     67,515        291,029   

DEFERRED TAX ASSET

     512,548        121,737   

DEFERRED FINANCING COSTS — Net of accumulated amortization of 185,786 and $137,448 in 2013 and 2012, respectively

     80,563        128,900   
  

 

 

   

 

 

 

TOTAL

   $ 124,864,265      $ 127,758,059   
  

 

 

   

 

 

 

LIABILITIES AND MEMBERS’ EQUITY

    

LIABILITIES:

    

Notes payable

   $ 104,549,267      $ 104,549,267   

Accounts payable and accrued expenses

     1,827,566        3,175,973   

Accrued interest

     332,525        412,331   

Payable to affiliates — net

     —          114,993   

Security and reservation deposits

     16,000        20,000   

Deferred revenue

     1,904,142        2,006,106   
  

 

 

   

 

 

 

Total liabilities

     108,629,500        110,278,670   

MEMBERS’ EQUITY

     16,234,765        17,479,389   
  

 

 

   

 

 

 

TOTAL

   $ 124,864,265      $ 127,758,059   
  

 

 

   

 

 

 

See notes to consolidated financial statements.


CLP SUN PARTNERS II, LLC

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 2013 AND 2012 (UNAUDITED)

 

     2013     2012  

OPERATING REVENUE:

    

Resident fees

   $ 19,501,523      $ 18,004,908   

Other income

     152,854        130,386   
  

 

 

   

 

 

 

Total operating revenue

     19,654,377        18,135,294   
  

 

 

   

 

 

 

OPERATING EXPENSES:

    

Labor

     7,914,846        7,477,713   

Repairs and maintenance

     2,278,402        344,466   

Depreciation and amortization

     2,243,260        2,688,391   

General and administrative

     1,034,322        1,177,552   

Management fees to affiliate

     982,300        905,614   

Insurance

     795,276        641,426   

Taxes and license fees

     784,024        808,892   

Food

     752,896        687,087   

Utilities

     548,297        466,577   

Advertising and marketing

     331,619        313,521   

Ancillary expenses

     207,164        169,510   

Bad debt

     8,369        23,016   
  

 

 

   

 

 

 

Total operating expenses

     17,880,775        15,703,765   
  

 

 

   

 

 

 

INCOME FROM OPERATIONS

     1,773,602        2,431,529   
  

 

 

   

 

 

 

OTHER INCOME (EXPENSES):

    

Interest Income

     385        525   

Interest expense

     (2,389,312     (2,456,247

Income tax benefit (expense)

     415,835        (102,822
  

 

 

   

 

 

 

Total other expenses

     (1,973,092     (2,558,544
  

 

 

   

 

 

 

NET LOSS

   $ (199,490   $ (127,015
  

 

 

   

 

 

 

See notes to consolidated financial statements.


CLP SUN PARTNERS II, LLC

CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS’ EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2013 (UNAUDITED)

 

     Sunrise
Senior
Living
Investments,
Inc
    CNL Income
SL II Holding,
LLC
    Total  

MEMBERS’ EQUITY — December 31, 2012

   $ 5,347,530      $ 12,131,859      $ 17,479,389   

Distributions

     —          (1,045,134     (1,045,134

Net loss

     (59,847     (139,643     (199,490
  

 

 

   

 

 

   

 

 

 

MEMBERS’ EQUITY — June 30, 2013

   $ 5,287,683      $ 10,947,082      $ 16,234,765   
  

 

 

   

 

 

   

 

 

 

See notes to consolidated financial statements.


CLP SUN PARTNERS II, LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2013 AND 2012 (UNAUDITED)

 

     2013     2012  

CASH FLOWS FROM OPERATING ACTIVITIES:

    

Net loss

   $ (199,490   $ (127,015

Adjustments to reconcile net loss to net cash provided by operating activities:

    

Depreciation

     2,243,260        2,329,499   

Amortization of financing costs

     48,337        35,467   

Amortization of residential leasing intangible

     —          358,892   

Provision for bad debts

     8,369        23,016   

Deferred taxes

     (390,811     —     

Changes in operating assets and liabilities:

    

Accounts receivable

     (38,812     161,465   

Receivable from affiliates—net

     (22,681     —     

Prepaid expenses and other assets

     223,514        188,727   

Accounts payable and accrued expenses

     (1,355,151     (166,968

Accrued interest

     (79,806     (13,301

Payable to affiliates—net

     (114,993     (347,931

Security and reservation deposits

     (4,000     12,000   

Deferred revenue

     (101,964     314,703   
  

 

 

   

 

 

 

Net cash provided by operating activities

     215,772        2,768,554   
  

 

 

   

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

    

Purchase of property and equipment

     (156,704     (168,143

Change in restricted cash

     (119,208     410,444   
  

 

 

   

 

 

 

Net cash (used in) provided by investing activities

     (275,912     242,301   
  

 

 

   

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

    

Distributions

     (1,045,134     (3,421,276
  

 

 

   

 

 

 

Net cash used in financing activities

     (1,045,134     (3,421,276
  

 

 

   

 

 

 

NET DECREASE IN CASH AND CASH EQUIVALENTS

     (1,105,274     (410,421

CASH AND CASH EQUIVALENTS — Beginning of year

     4,411,533        5,211,699   
  

 

 

   

 

 

 

CASH AND CASH EQUIVALENTS — End of period

   $ 3,306,259      $ 4,801,278   
  

 

 

   

 

 

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION — Cash paid for interest

   $ 2,221,265      $ 2,434,081   
  

 

 

   

 

 

 

SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING INFORMATION:

    

Accrued capital expenditures

   $ 6,744      $ 302   
  

 

 

   

 

 

 

See notes to consolidated financial statements.


CLPSUN PARTNERS II, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2013 AND FOR THE SIX MONTHS ENDED JUNE 30, 2013 AND 2012 (UNAUDITED)

 

1. ORGANIZATION AND PRESENTATION

Organization — CNLSun Partners II, LLC (the “Company”) was formed on June 8, 2011 under the laws of the state of Delaware as a limited liability company. On January 31, 2012, the Certificate of Formation was amended to change the name of the limited liability company from CNLSun Partners II, LLC to CLPSun Partners II, LLC. The Company was organized to acquire 100% of the membership interests in MetSun Two Pool One, LLC (“Pool One”) which owned and operated six assisted living facilities (collectively, the “Facilities” or individually, the “Facility”). At formation, its sole member was Sunrise Senior Living Investments, Inc. (“SSLII”), a wholly owned subsidiary of Sunrise Senior Living, Inc. (“SSLI”). On August 2, 2011, the Company acquired 100% of the membership interests in Pool One and in conjunction with the transaction, CNL Income SL II Holding, LLC (“CNL”) was admitted as a member to the Company (the “2011 Recapitalization”). The limited liability agreement (“LLC Agreement”) was amended and the capital accounts were adjusted to reflect the new ownership structure with CNL as the managing member owning 70% and SSLII owning 30%. The Company shall continue in full force and effect until August 2, 2041 unless sooner terminated under the terms of the LLC Agreement.

Total capital contribution at closing was $27,135,712, which was immediately used by the Company to fund a portion of the pay down of the existing financing in connection with the existing financing modification (Note 5) and other closing costs. Each party to the sale of the members’ interests was responsible for its own third party costs.

The LLC Agreement effective August 2, 2011, 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 are to be distributed according to the priorities as specified in the agreements. Any member can require additional capital to cure an event of default or to avoid an event of default under the loan agreements. The members must mutually agree upon additional capital requests for all other circumstances, including funding for operating shortfalls if they are determined to be reasonably necessary to effectuate any cost or expense associated with the operation or maintenance of any Facility or as it may be contemplated under the management agreements of the Facilities. Contributions are made in proportion to the relative percentage interests of the member at the time of the request. Net income (loss) is allocated to the members in proportion to their relative percentage interests.

As of June 30, 2013, the Company owns the following six Facilities:

 

Operator Entity    Location    Date Opened
Bloomfield South MI Senior Lving Owner, LLC    Bloomfield, MI    March 2009
Broomfield CO Senior Living Owner, LLC    Broomfield, CO    May 2009
Johns Creek GA Senior Living Owner, LLC    Johns Creek, GA    March 2009
McCandless PA Senior Living Owner, LP    McCandless, PA    June 2009
Simi Valley CA Senior Living Owner, LLC    Simi Valley, CA    August 2009
Wake County NC Senior Living Owner, LLC    Cary, NC    July 2009

The Company owns and operates the Facilities providing assisted living services to seniors. 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.


The Company has a pooling arrangement in which the terms and conditions of the management agreements are considered under one consolidated agreement.

Sunrise has the option to purchase, exercisable in Sunrise’s sole discretion, one hundred percent (100%) of CNL’s ownership interest in the Company upon the expiration of the third Company Year per the LLC Agreement. If Sunrise exercises the purchase option at any time prior to the sixth Company Year, CNL will be paid a purchase price equal to the amount necessary to return to CNL a 16% internal rate of return on the CNL total capital contributions, after taking into account all amounts previously distributed to CNL. Sunrise will not be able to exercise the option to purchase after the sixth Company Year.

On August 21, 2012, SSLI and Health Care REIT, Inc. (“HCN”) entered into an agreement for HCN to acquire all of the outstanding common stock of SSLI for $14.50 per share in an all-cash transaction.

On September 13, 2012, in conjunction with the August 21, 2012 agreement, Red Fox Management, LP (“Red Fox”), a new entity formed by Kohlberg Kravis Roberts & Co. L.P., Beecken Petty O’Keefe & Company and Coastwood Senior Housing Partners LLC, entered into a Membership Interest Purchase Agreement with SSLI to acquire Sunrise Senior Living Management, Inc. (“SSLMI”), an affiliate of SSLII, for approximately $130,000,000, with HCN investing approximately $26,000,000 for a 20% ownership interest. The Company has management agreements with SSLMI to manage the Facilities.

On January 9, 2013, Sunrise consummated the transactions with HCN and Red Fox. As part of the transaction, HCN acquired Sunrise’s equity interests in joint ventures that own 58 senior housing communities, including the Company. In addition, HCN announced the acceleration of all planned joint venture buyouts, including the Company.

On July 1, 2013, HCN closed on a purchase and sale agreement (“PSA”) with CNL. Pursuant to the PSA, HCN purchased CNL’s membership interests in the Company for a purchase price of approximately $17,640,000, including transaction costs.

 

2. NOTES PAYABLE

On August 2, 2011, the Company assumed the debt of $133,249,267 of Pool One and entered into an amended and restated loan agreement for the six Facilities with Prudential Insurance Company of America (“Prudential”). At the time of the amendment, a principal payment of $25,744,325 was paid by SSLII and CNL and $2,955,675 of restricted cash held in escrow at Prudential was applied to the loan. The loans mature on April 5, 2014 with two twelve month extensions. The loans are secured by the Facilities, cross-collateralized and cross-defaulted. The loans are interest only and bear interest at London Interbank Offered Rate (“LIBOR”) plus 2.08%. The LIBOR is subjected to a floor of 2.50%. As of June 30, 2013 and December 31, 2012, the LIBOR rates were 0.19% and 0.21%, respectively.

A summary of the loan balances at June 30, 2013 are as follows:

 

Bloomfield South MI Senior Lving Owner, LLC

   $ 17,078,929   

Broomfield CO Senior Living Owner, LLC

     24,392,253   

Johns Creek GA Senior Living Owner, LLC

     12,086,603   

McCandless PA Senior Living Owner, LP

     14,523,128   

Simi Valley CA Senior Living Owner, LLC

     15,216,277   

Wake County NC Senior Living Owner, LLC

     21,252,077   
  

 

 

 
   $ 104,549,267   
  

 

 

 


The Company is subject to non-financial covenants under the loan agreement. As of June 30, 2013, the Company was in compliance with all covenants.

The fair value of the Company’s 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. The estimated fair value of the Company’s notes payable approximated their carrying value at June 30, 2013.

 

3. 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 the ultimate resolution of these matters will have a material adverse effect on the Company’s consolidated financial position.

During 2012, the Facility in Broomfield, CO experienced shifting in soils that resulted in damage to the underground pipes. As of June 30, 2013, costs to repair the damage of $2,166,483 were incurred and recorded to repairs and maintenance expense in the accompanying consolidated financial statements. Management is working through an open insurance claim related to the incident with the insurance company. Proceeds from the insurance company will be recorded as a reduction to the costs incurred when such recoveries are deemed probable.

 

4. SUBSEQUENT EVENT

On July 1, 2013, HCN closed on a PSA with CNL. Pursuant to the PSA, HCN purchased CNL’s membership interests in the Company for a purchase price of approximately $17,640,000, including transaction costs. The PSA was a result of exercising the purchase option under the LLC agreement as described in Note 1. In addition, the debt was paid off.

The Company reviewed subsequent events through September 12, 2013, the date the consolidated financial statements were issued.

* * * * * *