Attached files
EXHIBIT 99.4
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The unaudited pro forma condensed combined statements of operations for the three month period ended March 31, 2014 and for the year ended December 31, 2013 assume the initial closing of the Acquisition was completed on January 1, 2013.
The unaudited pro forma condensed combined financial information reflects the Acquisition using the acquisition method of accounting. The aggregate purchase price of approximately $196,300,000 (or approximately $28 per share) was based on the fair value of the assets and liabilities acquired in the transaction, and represent the current best estimates of management. HomeFed is in the process of finalizing these estimates; accordingly, the fair values of the assets and liabilities acquired are subject to change. Differences between the preliminary and final purchase price allocation could result in material adjustments.
HomeFed’s management employed an independent third-party appraiser to assist it in determining the fair values of the assets acquired and liabilities assumed. The fair values of the individual real estate projects and investments were estimated by applying various valuation techniques including the income, market and cost approach. The income approach included discounted cash flow analyses, the market approach included comparable sales and rental information in local and national markets, and the cost approach incorporated replacement cost information. Generally, all three valuation techniques were used to determine the fair values of real estate assets and equity method investments, the income approach was used to determine the fair value of the investment held to maturity and the market approach was used to determine the fair value of intangibles. The more significant assumptions include discount rates ranging from 7% to 22%, and terminal values based on direct cap rates ranging from 6.5% to 9.5%. The fair values of noncontrolling interests, which represent 10% of the partnership interests in one of the projects, were based on the fair values determined for the entire project.
The unaudited pro forma condensed combined financial statements should be read in conjunction with the unaudited interim and audited annual historical consolidated financial statements and notes thereto of HomeFed, and the audited annual historical financial statements and notes thereto of the Leucadia Real Estate Group and the Brooklyn Renaissance Plaza entities. The unaudited pro forma condensed combined financial statements are presented for informational purposes only and are not necessarily indicative of actual results had the foregoing transactions occurred at the times described above, nor does it purport to represent results of future operations.
|
HomeFed Corporation and Subsidiaries
|
||||||||||
|
Unaudited Pro Forma Condensed Combined Statement of Operations
|
||||||||||
|
Three Months Ended March 31, 2014
|
||||||||||
|
(In thousands except per share amounts)
|
|
|||||||||
| Leucadia | |||||||||||||||||
| Real Estate |
|
||||||||||||||||
|
HomeFed
|
Group
|
Pro Forma
|
Pro Forma
|
||||||||||||||
|
Historical
|
Historical
|
Adjustments
|
As Adjusted
|
||||||||||||||
|
Revenues:
|
|||||||||||||||||
|
Sales of real estate
|
$ | 2,622 | $ | 383 | $ | 3,005 | |||||||||||
|
Rental income
|
287 | 5,210 | (174 | ) |
(b)
|
5,003 | |||||||||||
| (320 | ) |
(c)
|
|||||||||||||||
|
Co-op marketing and advertising fees
|
278 | - | 278 | ||||||||||||||
| 3,187 | 5,593 | (494 | ) | 8,286 | |||||||||||||
|
Expenses:
|
|||||||||||||||||
|
Cost of sales
|
1,350 | 184 | 1,534 | ||||||||||||||
|
General and administrative expenses
|
4,080 | 5,218 | (146 | ) |
(b)
|
8,444 | |||||||||||
| 565 |
(d)
|
||||||||||||||||
| (1,273 | ) |
(e)
|
|||||||||||||||
|
Farming expenses
|
991 | - | 991 | ||||||||||||||
|
Administrative service fees to Leucadia
|
45 | - | 45 | ||||||||||||||
| 6,466 | 5,402 | (854 | ) | 11,014 | |||||||||||||
|
Income (loss) before loss related to associated companies
|
(3,279 | ) | 191 | 360 | (2,728 | ) | |||||||||||
|
Loss related to associated companies
|
(3 | ) | (1,918 | ) |
(f)
|
(1,921 | ) | ||||||||||
|
Income (loss) from operations
|
(3,282 | ) | 191 | (1,558 | ) | (4,649 | ) | ||||||||||
|
Other income (expense), net
|
|||||||||||||||||
|
Interest expense to Leucadia or its affiliates
|
(437 | ) | 437 |
(g)
|
- | ||||||||||||
|
Other, net
|
42 | 265 | (9 | ) |
(b)
|
298 | |||||||||||
| 42 | (172 | ) | 428 | 298 | |||||||||||||
|
Income (loss) before income taxes and noncontrolling interest
|
(3,240 | ) | 19 | (1,130 | ) | (4,351 | ) | ||||||||||
|
Income tax (expense) benefit
|
1,290 | - | 444 |
(h)
|
1,734 | ||||||||||||
|
Net income (loss)
|
(1,950 | ) | 19 | (686 | ) | (2,617 | ) | ||||||||||
|
Net (income) loss attributable to the noncontrolling interest
|
(31 | ) | 3 |
(i)
|
(28 | ) | |||||||||||
|
Net income (loss) attributable to common shareholders
|
$ | (1,981 | ) | $ | 19 | $ | (683 | ) | $ | (2,645 | ) | ||||||
|
Basic and diluted earnings (loss) per common share attributable
to common shareholders:
|
|||||||||||||||||
|
Net income (loss) attributable to common shareholders
|
$ | (0.24 | ) | $ | (0.18 | ) | |||||||||||
|
Number of shares used in calculation
|
8,190 | 6,676 |
(j)
|
14,866 | |||||||||||||
|
HomeFed Corporation and Subsidiaries
|
|||||||||||||||||
|
Unaudited Pro Forma Condensed Combined Statement of Operations
|
|||||||||||||||||
|
Year Ended December 31, 2013
|
|||||||||||||||||
|
(In thousands except per share amounts)
|
Leucadia
|
||||||||||||||||
|
Real Estate
|
|||||||||||||||||
|
HomeFed
|
Group
|
Pro Forma
|
Pro Forma
|
||||||||||||||
|
Historical
|
Historical
|
Adjustments
|
As Adjusted
|
||||||||||||||
|
Revenues:
|
|||||||||||||||||
|
Sales of real estate
|
$ | 50,097 | $ | 2,808 | $ | 52,905 | |||||||||||
|
Farming revenues
|
4,882 | - | 4,882 | ||||||||||||||
|
Rental income
|
511 | 21,985 | (1,278 | ) |
(c)
|
21,218 | |||||||||||
|
Co-op marketing and advertising fees
|
1,142 | - | 1,142 | ||||||||||||||
| 56,632 | 24,793 | (1,278 | ) | 80,147 | |||||||||||||
|
Expenses:
|
|||||||||||||||||
|
Cost of sales
|
23,198 | 1,141 | 24,339 | ||||||||||||||
|
Reduction in estimated liability for environmental remediation
|
(662 | ) | - | (662 | ) | ||||||||||||
|
General and administrative expenses
|
12,744 | 20,663 | 3,009 |
(d)
|
34,825 | ||||||||||||
| (1,591 | ) |
(e)
|
|||||||||||||||
|
Farming expenses
|
2,859 | - | 2,859 | ||||||||||||||
|
Administrative service fees to Leucadia
|
180 | - | 180 | ||||||||||||||
| 38,319 | 21,804 | 1,418 | 61,541 | ||||||||||||||
|
Income (loss) before loss related to associated companies
|
18,313 | 2,989 | (2,696 | ) | 18,606 | ||||||||||||
|
Loss related to associated companies
|
(4,131 | ) |
(f)
|
(4,131 | ) | ||||||||||||
|
Income (loss) from operations
|
18,313 | 2,989 | (6,827 | ) | 14,475 | ||||||||||||
|
Other income (expense), net
|
|||||||||||||||||
|
Interest expense to Leucadia or its affiliates
|
(1,774 | ) | 1,774 |
(g)
|
- | ||||||||||||
| Other, net | 889 | 1,050 | 1,939 | ||||||||||||||
| 889 | (724 | ) | 1,774 | 1,939 | |||||||||||||
|
Income (loss) before income taxes and noncontrolling interest
|
19,202 | 2,265 | (5,053 | ) | 16,414 | ||||||||||||
|
Income tax (expense) benefit
|
(6,498 | ) | - | 1,115 |
(h)
|
(5,383 | ) | ||||||||||
|
Net income (loss)
|
12,704 | 2,265 | (3,938 | ) | 11,031 | ||||||||||||
|
Net (income) loss attributable to the noncontrolling interest
|
(1,436 | ) | 12 |
(i)
|
(1,424 | ) | |||||||||||
|
Net income (loss) attributable to common shareholders
|
$ | 11,268 | $ | 2,265 | $ | (3,926 | ) | $ | 9,607 | ||||||||
|
Basic and diluted earnings (loss) per common share
attributable to common shareholders:
|
|||||||||||||||||
|
Net income (loss) attributable to common shareholders
|
$ | 1.43 | $ | 0.65 | |||||||||||||
|
Number of shares used in calculation
|
7,880 | 6,986 | 14,866 | ||||||||||||||
|
Notes to Unaudited Pro Forma Condensed Combined Financial Statements
|
|||||
|
(In thousands except per share amounts)
|
|||||
|
(a)
|
Purchase Price Allocation
|
||||
|
Purchase Price Calculation
|
|||||
|
Fair value of HomeFed common shares
|
$ 28.10
|
||||
|
Shares issued
|
6,986
|
||||
|
Aggregate purchase price
|
$ 196,288
|
||||
|
Par value of HomeFed shares issued
|
$ 70
|
||||
|
Increase to additional paid-in capital
|
196,218
|
||||
|
Aggregate purchase price
|
$ 196,288
|
||||
|
On a preliminary basis, the purchase price has been allocated to acquired assets and liabilities as follows:
|
|||||
|
Real estate held for development
|
$ |
38,292
|
|||
|
Real estate held for investment
|
40,235
|
||||
|
Cash
|
13,983
|
||||
|
Restricted cash
|
1,096
|
||||
|
Investments held-to-maturity, including accrued interest
|
10,619
|
||||
|
Loans to and investments in associated companies
|
82,725
|
||||
|
Receivables, deposits and other assets
|
21,925
|
||||
|
Intangible assets
|
14,874
|
||||
|
Below market lease contract intangibles
|
(5,523
|
) | |||
|
Deferred tax liability
|
(11,843
|
) | |||
|
Accounts payable and other liabilities
|
(8,385
|
) | |||
|
Noncontrolling interest
|
(1,710
|
) | |||
|
Aggregate purchase price
|
$ |
196,288
|
|||
|
The preliminary purchase price allocation to real estate and investments in associated companies were determined based on market conditions in the locations where the projects are located, comparable sales and rental information in those and national markets, discounted cash flow techniques and replacement cost information. The fair values of noncontrolling interests, which represent 10% of the partnership interests in one of the projects, were based on the fair values determined for the entire project.
|
||||||||||||
|
(b)
|
Adjustment to eliminate revenue and expense for the Leucadia real estate group that is included in both the HomeFed historical results and the Leucadia real estate group results.
|
|||||||||||
|
(c)
|
Adjustment to rental revenues for amortization of intangibles recognized for above and below market leases, which are amortized over 5 years.
|
|||||||||||
|
(d)
|
Adjustment to depreciation and amortization expenses recorded for certain rental property and a leasehold interest that would have been recorded at fair value at the pro forma acquisition date of January 1, 2013.
|
|||||||||||
|
(e)
|
Adjustment to remove actual acquisition related costs recorded during 2014 and 2013.
|
|||||||||||
|
(f)
|
Adjustment to recognize equity in income of associated companies based on the Company's share of operating results after reflecting the investees assets and liabilities at fair value.
|
|||||||||||
|
(g)
|
Adjustment to reverse interest expense to Leucadia as all amounts owed would be eliminated in consolidation as of the pro forma acquisition date of January 1, 2013.
|
|||||||||||
|
(h)
|
Adjustment to record income taxes for the historical Leucadia real estate group which did not record income tax provisions or benefits to the extent income or loss was generated by pass thru entities. Also records the tax effect of pro forma adjustments. All adjustments recoded at combined statutory income tax rate of 40%.
|
|||||||||||
|
(i)
|
Adjustment to reflect noncontrolling interest in one of the acquired project's losses.
|
|||||||||||
| (j) |
Assumes that the Company shares to be issued in the transaction were outstanding as of the pro forma acquisition date of January 1, 2013.
|
|||||||||||