Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - Drive Shack Inc. | d633461d8k.htm |
| EX-1.1 - UNDERWRITING AGREEMENT - Drive Shack Inc. | d633461dex11.htm |
| EX-5.1 - OPINION OF FOLEY & LARDNER LLP - Drive Shack Inc. | d633461dex51.htm |
Exhibit 99.1
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated financial information was derived from the application of pro forma adjustments to the consolidated financial statements of Newcastle Investment Corp. and its subsidiaries which are referred to collectively in this section as “Newcastle.” These unaudited pro forma condensed consolidated financial statements should be read in conjunction with the related notes to these financial statements and with Newcastle’s historical consolidated financial statements and the related notes included in Newcastle’s previous filings with the Securities and Exchange Commission.
The unaudited pro forma information set forth below reflects the historical information of Newcastle, as adjusted to give effect to the following transactions:
| • | The purchase and sale agreement Newcastle entered into with certain subsidiaries of Holiday Acquisition Holdings LLC (collectively, the “Seller”), to acquire a 52-property portfolio of independent senior living properties for approximately $1.01 billion. |
| • | Each triple-net lease agreement that Newcastle signs will be with either NCT Master Tenant I LLC or NCT Master Tenant II LLC (each such tenant, the “Tenant”), affiliated entities of the Seller. Pursuant to each lease, the Tenant agrees to lease from us 26 of the 52 independent senior living properties for a period of 17 years and first-year rent equal to 6.5% of the purchase price with annual increases during the following three years of 4.5% and an annual increase of between 3.50% and up to 3.75% thereafter, as defined in the lease agreements. |
| • | The offering of $262.9 million of common stock, assuming the underwriters do not exercise their option to purchase additional shares of Newcastle’s common stock. |
The unaudited pro forma condensed consolidated statements of operations give effect to the potential transactions as if they occurred on January 1, 2012. The unaudited pro forma condensed consolidated balance sheet assumes that the acquisition occurred on September 30, 2013.
The historical statements of operations presented in the unaudited pro forma condensed consolidated financial information are for the nine months ended September 30, 2013 as presented in Newcastle’s Quarterly Report on Form 10-Q for the nine months ended September 30, 2013, filed on November 1, 2013, and for the year ended December 31, 2012 as presented in Newcastle’s Current Report on Form 8-K dated August 7, 2013 which amended Newcastle’s Form 10-K filed on February 28, 2013 for the year ended December 31, 2012. The historical balance sheet presented in the unaudited pro forma condensed consolidated financial information is as of September 30, 2013 as presented in Newcastle’s Quarterly Report on Form 10-Q for the nine months ended September 30, 2013.
In the opinion of management, all adjustments necessary to reflect the effects of the potential transactions described above and in the notes to the unaudited pro forma condensed consolidated financial statements have been included and are based upon available information and assumptions that Newcastle believes are reasonable.
Further, the historical financial information presented herein has been adjusted to give pro forma effect to events that Newcastle believes are factually supportable and which are expected to have a continuing impact on Newcastle’s results. However, such adjustments are estimates and may not prove to be accurate. Information regarding these adjustments is subject to risks and uncertainties that could cause actual results to differ materially from those anticipated.
These unaudited pro forma condensed consolidated financial statements are provided for information purposes only. The unaudited pro forma condensed consolidated statements of operations and the unaudited pro forma condensed consolidated balance sheet do not purport to represent what Newcastle’s results of operations would have been had such transactions been consummated on the dates indicated, nor do they represent the financial position or results of operations of Newcastle for any future date or period.
1
NEWCASTLE INVESTMENT CORP. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET At September 30, 2013
(dollars in thousands)
| Pro Forma Adjustments |
||||||||||||||||
| Historical(A) | Capital Raise(B) |
Senior Housing Portfolio Acquisition |
Pro Forma | |||||||||||||
| Assets |
||||||||||||||||
| Real estate securities, available-for-sale |
$ | 825,499 | $ | — | $ | — | $ | 825,499 | ||||||||
| Real estate related and other loans, held-for-sale, net |
795,297 | — | — | 795,297 | ||||||||||||
| Residential mortgage loans, held-for-investment, net |
260,463 | — | — | 260,463 | ||||||||||||
| Residential mortgage loans, held-for-sale, net |
2,236 | — | — | 2,236 | ||||||||||||
| Subprime mortgage loans subject to call option |
406,217 | — | — | 406,217 | ||||||||||||
| Investments in real estate, net of accumulated depreciation |
409,041 | — | 1,008,362 | (C) | 1,417,403 | |||||||||||
| Intangibles, net of accumulated amortization |
41,371 | — | — | 41,371 | ||||||||||||
| Equity method investment in Local Media Group |
57,384 | — | — | 57,384 | ||||||||||||
| Other investments |
25,133 | — | — | 25,133 | ||||||||||||
| Cash and cash equivalents |
92,134 | 262,367 | (262,367 | )(D) | 92,134 | |||||||||||
| Restricted cash |
1,827 | — | — | 1,827 | ||||||||||||
| Derivative assets |
43,172 | — | — | 43,172 | ||||||||||||
| Receivables and other assets |
27,003 | — | — | 27,003 | ||||||||||||
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| Total Assets |
$ | 2,986,777 | $ | 262,367 | $ | 745,995 | $ | 3,995,139 | ||||||||
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| Liabilities and Stockholders’ Equity Liabilities |
||||||||||||||||
| CDO bonds payable |
$ | 718,473 | $ | — | $ | — | $ | 718,473 | ||||||||
| Other bonds and notes payable |
153,798 | — | — | 153,798 | ||||||||||||
| Repurchase agreements |
376,886 | — | — | 376,886 | ||||||||||||
| Mortgage notes payable |
335,238 | — | — | 335,238 | ||||||||||||
| Financing of subprime mortgage loans subject to call option |
406,217 | — | — | 406,217 | ||||||||||||
| Junior subordinated notes payable |
51,239 | — | — | 51,239 | ||||||||||||
| Derivative liabilities |
17,115 | — | — | 17,115 | ||||||||||||
| Dividends Payable |
30,279 | — | — | 30,279 | ||||||||||||
| Due to affiliates |
4,911 | — | — | 4,911 | ||||||||||||
| Accrued expenses and other liabilities |
25,266 | — | 745,995 | (D) | 771,261 | |||||||||||
| Liabilities of discontinued operations |
2,380 | — | — | 2,380 | ||||||||||||
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| Total Liabilities |
$ | 2,121,802 | $ | — | $ | 745,995 | $ | 2,867,797 | ||||||||
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| Stockholders’ Equity |
||||||||||||||||
| Preferred stock |
$ | 61,583 | $ | — | $ | — | $ | 61,583 | ||||||||
| Common stock |
2,935 | 505 | — | 3,440 | ||||||||||||
| Additional paid-in capital |
2,670,442 | 261,862 | — | 2,932,304 | ||||||||||||
| Accumulated deficit |
(1,941,805 | ) | — | — | (1,941,805 | ) | ||||||||||
| Accumulated other comprehensive income |
71,820 | — | — | 71,820 | ||||||||||||
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| Total Stockholders’ Equity |
$ | 864,975 | $ | 262,367 | $ | — | $ | 1,127,342 | ||||||||
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| Total Liabilities and Stockholders’ Equity |
$ | 2,986,777 | $ | 262,367 | $ | 745,995 | $ | 3,995,139 | ||||||||
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2
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
| (A) | Amounts as originally reported by Newcastle in its Quarterly Report filed on Form 10-Q for the quarter ended September 30, 2013. |
| (B) | Represents the estimated net cash proceeds, common stock issued, and additional paid-in-capital from the issuance of 50,450,952 shares of Newcastle common stock for net proceeds of $262.4 million after deducting the estimated expenses of the offering, assuming the underwriters do not exercise their option to purchase additional shares of Newcastle common stock. |
| (C) | Represents the estimated fair value of the assets to be acquired. Using weighted average allocations from Newcastle’s historical acquisitions since 2012 of senior housing portfolios, Newcastle allocated approximately 84% of the purchase price, or $844 million, to buildings with an estimated useful life of 40 years, approximately 11%, or $110 million, to land, approximately 4%, or $41 million, to furniture, fixtures and equipment with an estimated useful life of 5 years and approximately 1%, or $13 million, to site improvements with an estimated useful life of 10 years. As Newcastle is still finalizing the acquisition terms and expects to engage a third party provider to perform the purchase price allocation, the purchase price allocation is not complete and could be different from the assumptions used for these unaudited pro forma condensed consolidated financial statements. |
| (D) | Represents the investment of the cash from the offering in the acquisition described in (C) above and the remaining purchase price payable after the use of the proceeds from the offering. Newcastle expects to fund approximately 70% of the total purchase price with non-recourse financing. |
3
NEWCASTLE INVESTMENT CORP. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Nine Months Ended September 30, 2013
(dollars in thousands, except share and per share data)
| Pro Forma Adjustments |
||||||||||||||||
| Historical (A) | Capital Raise |
Senior Housing Portfolio Acquisition |
Pro Forma | |||||||||||||
| Interest income |
$ | 171,642 | $ | — | $ | — | $ | 171,642 | ||||||||
| Interest expense |
65,263 | — | — | (C) | 65,263 | |||||||||||
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| Net interest income |
106,379 | — | — | 106,379 | ||||||||||||
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Impairment/(Reversal) |
||||||||||||||||
| Valuation allowance (reversal) on loans |
(11,473 | ) | — | — | (11,473 | ) | ||||||||||
| Other-than-temporary impairment on securities |
4,405 | — | — | 4,405 | ||||||||||||
| Portion of other-than-temporary impairment on securities recognized in other comprehensive income (loss), net of the reversal of other comprehensive loss into net income |
44 | — | — | 44 | ||||||||||||
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| Total impairment (reversal) |
(7,024 | ) | — | — | (7,024 | ) | ||||||||||
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| Net interest income after impairment/reversal |
113,403 | — | 113,403 | |||||||||||||
Other Revenues |
||||||||||||||||
| Rental income |
44,344 | — | 67,402 | (D) | 111,746 | |||||||||||
| Care and ancillary income |
8,081 | — | — | 8,081 | ||||||||||||
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| Total other revenues |
52,425 | — | 67,402 | 119,827 | ||||||||||||
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Other Income |
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| Gain on settlement of investments, net |
6,451 | — | — | 6,451 | ||||||||||||
| Gain on extinguishment of debt |
4,565 | — | — | 4,565 | ||||||||||||
| Equity in earnings of Local Media Group |
1,045 | — | — | 1,045 | ||||||||||||
| Other income, net |
9,554 | — | — | 9,554 | ||||||||||||
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| Total other income |
21,615 | — | — | 21,615 | ||||||||||||
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Expenses |
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| Loan and security servicing expense |
2,963 | — | — | 2,963 | ||||||||||||
| Property operating expenses |
32,576 | — | — | 32,576 | ||||||||||||
| General and administrative expense |
23,507 | — | — | 23,507 | ||||||||||||
| Management fee to affiliate |
24,879 | 2,952 | (B) | — | 27,831 | |||||||||||
| Depreciation and amortization |
15,881 | — | 23,005 | (E) | 38,886 | |||||||||||
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| Total expenses |
99,806 | 2,952 | 23,005 | 125,763 | ||||||||||||
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| Income from continuing operations |
87,637 | (2,952 | ) | 44,397 | 129,082 | |||||||||||
| Preferred dividends |
(4,185 | ) | — | — | (4,185 | ) | ||||||||||
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| Income from continuing operations after preferred dividend |
$ | 83,452 | $ | (2,952 | ) | $ | 44,397 | $ | 124,897 | |||||||
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| Income from continuing operations per share of common stock, after preferred dividend |
||||||||||||||||
| Basic |
$ | 0.32 | $ | 0.40 | (F) | |||||||||||
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| Diluted |
$ | 0.31 | $ | 0.39 | (F) | |||||||||||
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| Weighted Average Number of Shares of Common Stock Outstanding |
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| Basic |
262,792,986 | 313,243,938 | (F) | |||||||||||||
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| Diluted |
269,057,682 | 319,508,634 | (F) | |||||||||||||
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4
NEWCASTLE INVESTMENT CORP. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Twelve Months Ended December 31, 2012
(dollars in thousands, except share and per share data)
| Pro Forma Adjustments |
||||||||||||||||
| Historical (A) | Capital Raise |
Senior Housing Portfolio Acquisition |
Pro Forma | |||||||||||||
| Interest income |
$ | 282,951 | $ | — | $ | — | $ | 282,951 | ||||||||
| Interest expense |
109,924 | — | — | (C) | 109,924 | |||||||||||
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| Net interest income |
173,027 | — | — | 173,027 | ||||||||||||
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| Valuation allowance (reversal) on loans |
(24,587 | ) | — | — | (24,587 | ) | ||||||||||
| Other-than-temporary impairment on securities |
19,359 | — | — | 19,359 | ||||||||||||
| Portion of other-than-temporary impairment on securities recognized in other comprehensive income (loss), net of the reversal of other comprehensive loss into net income |
(436 | ) | — | — | (436 | ) | ||||||||||
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| Total impairment (reversal) |
(5,664 | ) | — | — | (5,664 | ) | ||||||||||
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| Net interest income after impairment/reversal |
178,691 | — | 178,691 | |||||||||||||
Other Revenues |
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| Rental income |
17,081 | — | 89,869 | (D) | 106,950 | |||||||||||
| Care and ancillary income |
2,994 | — | — | 2,994 | ||||||||||||
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| Total other revenues |
20,075 | — | 89,869 | 109,944 | ||||||||||||
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Other Income |
||||||||||||||||
| Gain on settlement of investments, net |
232,897 | — | — | 232,897 | ||||||||||||
| Gain on extinguishment of debt |
24,085 | — | — | 24,085 | ||||||||||||
| Other income, net |
5,312 | — | — | 5,312 | ||||||||||||
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| Total other income |
262,294 | — | — | 262,294 | ||||||||||||
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Expenses |
||||||||||||||||
| Loan and security servicing expense |
4,260 | — | — | 4,260 | ||||||||||||
| Property operating expenses |
12,943 | — | — | 12,943 | ||||||||||||
| General and administrative expense |
17,247 | — | — | 17,247 | ||||||||||||
| Management fee to affiliate |
24,693 | 3,936 | (B) | — | 28,629 | |||||||||||
| Depreciation and amortization |
6,975 | — | 30,674 | (E) | 37,649 | |||||||||||
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| Total expenses |
66,118 | 3,936 | 30,674 | 100,728 | ||||||||||||
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| Income from continuing operations |
394,942 | (3,936 | ) | 59,195 | 450,201 | |||||||||||
| Preferred dividends |
(5,580 | ) | — | — | (5,580 | ) | ||||||||||
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| Income from continuing operations after preferred dividend |
$ | 389,362 | $ | (3,936 | ) | $ | 59,195 | $ | 444,621 | |||||||
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| Income from continuing operations per share of common stock, after preferred dividend |
||||||||||||||||
| Basic |
$ | 2.70 | $ | 2.28 | (F) | |||||||||||
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| Diluted |
$ | 2.67 | $ | 2.27 | (F) | |||||||||||
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| Weighted Average Number of Shares of Common Stock Outstanding |
||||||||||||||||
| Basic |
144,146,370 | 194,597,322 | (F) | |||||||||||||
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| Diluted |
145,766,413 | 196,217,365 | (F) | |||||||||||||
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5
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
| (A) | Historical amounts as reported by Newcastle in its Quarterly Report filed on Form 10-Q for the quarter ended September 30, 2013 and Annual Report on Form 10-K for the year ended December 31, 2012 as amended by Form 8-K filed on August 7, 2013. |
| (B) | Represents the estimated increase to the management fees Newcastle will pay Fortress Investment Group LLC as a result of the offering pursuant to the management agreement according to which Newcastle pays 1.5% of its gross equity, as defined in the management agreement, assuming the underwriters do not exercise their option to purchase additional shares of Newcastle common stock. |
| (C) | Newcastle expects to fund approximately 70% of the total purchase price with non-recourse financing. Newcastle will incur interest expense related to this financing which is currently being negotiated. |
| (D) | Represents estimated rental income from the independent senior living properties to be acquired under a triple-net lease agreement for the nine months ended September 30, 2013 and the year ended December 31, 2012. |
| (E) | Represents the estimated depreciation expenses for the nine months ended September 30, 2013 and the year ended December 31, 2012 based on the estimated fair value of the assets to be acquired and their estimated useful life. Actual fair value and useful life are subject to the completion of a purchase price allocation and may be materially different. |
| (F) | Weighted average number of shares common stock outstanding and income from continuing operations per share of common stock, after preferred dividends, were adjusted to reflect the issuance of 50,450,952 shares. The pro forma weighted average diluted shares outstanding and diluted earnings per share have not been adjusted to reflect options issued in connection with the offering as if they had been issued on January 1, 2012 because the option exercise price is equal to the offering price. The estimated fair value of these options is approximately $5.3 million, assuming the underwriters do not exercise their option to purchase additional shares of Newcastle’s common stock. |
6