Attached files
| file | filename |
|---|---|
| EX-99.2 - EXHIBIT 99.2 - Braemar Hotels & Resorts Inc. | ahphotelyountvilleproforma.htm |
| 8-K - 8-K - Braemar Hotels & Resorts Inc. | ahphotelyountville8-k3x21x.htm |
EXHIBIT 99.1
HOTEL YOUNTVILLE, LLC
INDEX TO FINANCIAL STATEMENTS
0
HOTEL YOUNTVILLE, LLC
BALANCE SHEETS
AS OF MARCH 31, 2017 AND SEPTEMBER 30, 2016
(unaudited)
March 31, 2017 | September 30, 2016 | |||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash | $ | 1,940,317 | $ | 2,355,231 | ||||
Accounts receivable | 110,500 | 214,842 | ||||||
Supplies on hand | 177,697 | 202,376 | ||||||
Due from related parties | 617,372 | 880,455 | ||||||
Due from member | 10,011 | 10,011 | ||||||
Other assets | 291,558 | 284,834 | ||||||
TOTAL CURRENT ASSETS | 3,147,455 | 3,947,749 | ||||||
PROPERTY AND EQUIPMENT, NET | 369,773 | 20,975,026 | ||||||
TOTAL ASSETS | $ | 3,517,228 | $ | 24,922,775 | ||||
LIABILITIES AND MEMBERS' DEFICIT | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts payable and accrued expenses | $ | 657,640 | $ | 940,144 | ||||
Advance deposits | 2,171,699 | 1,570,381 | ||||||
Current portion of note payable - related party | 392,741 | 22,490 | ||||||
Due to members | 600,000 | — | ||||||
Note payable - former member | 19,546,995 | — | ||||||
Notes payable - member | 2,171,888 | — | ||||||
TOTAL CURRENT LIABILITIES | 25,540,963 | 2,533,015 | ||||||
NOTE PAYABLE - RELATED PARTY, less current portion | — | 375,284 | ||||||
TOTAL LIABILITIES | 25,540,963 | 2,908,299 | ||||||
MEMBERS' DEFICIT | (22,023,735 | ) | 22,014,476 | |||||
TOTAL LIABILITIES AND MEMBERS' DEFICIT | $ | 3,517,228 | $ | 24,922,775 | ||||
See notes to financial statements
HOTEL YOUNTVILLE, LLC
STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED MARCH 31, 2017 AND 2016
(unaudited)
2017 | 2016 | ||||||||||
REVENUE | |||||||||||
Rooms | $ | 5,375,348 | $ | 5,435,226 | |||||||
Food and beverage | 1,070,739 | 1,137,347 | |||||||||
Spa | 232,334 | 232,016 | |||||||||
Other | 22,500 | 19,899 | |||||||||
TOTAL REVENUE | 6,700,921 | 6,824,488 | |||||||||
COSTS AND OPERATING EXPENSES | |||||||||||
Rooms | 1,455,007 | 1,456,425 | |||||||||
Food and beverage | 981,271 | 942,670 | |||||||||
Spa | 236,696 | 205,924 | |||||||||
General and administrative | 1,901,734 | 1,410,881 | |||||||||
Sales and marketing | 151,518 | 214,665 | |||||||||
Maintenance | 401,155 | 499,428 | |||||||||
Depreciation | 257,635 | 927,726 | |||||||||
TOTAL COSTS AND OPERATING EXPENSES | 5,385,016 | 5,657,719 | |||||||||
INCOME FROM OPERATIONS | 1,315,905 | 1,166,769 | |||||||||
OTHER EXPENSE | |||||||||||
Interest expense | 398,850 | 8,254 | |||||||||
INCOME BEFORE INCOME TAXES | 917,055 | 1,158,515 | |||||||||
PROVISION FOR INCOME TAXES | 6,295 | 6,295 | |||||||||
NET INCOME | $ | 910,760 | $ | 1,152,220 | |||||||
See notes to financial statements
2
HOTEL YOUNTVILLE, LLC
STATEMENT OF CHANGES IN MEMBERS' DEFICIT
FOR THE SIX MONTHS ENDED MARCH 31, 2017
(unaudited)
Members' equity at September 30, 2016 | $ | 22,014,476 | |||||
Net income | 910,760 | ||||||
Member distributions | (44,948,971 | ) | |||||
Members' deficit at March 31, 2017 | $ | (22,023,735 | ) | ||||
See notes to financial statements
3
HOTEL YOUNTVILLE, LLC
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED MARCH 31, 2017 AND 2016
(unaudited)
2017 | 2016 | |||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||||
Net income | $ | 910,760 | $ | 1,152,220 | ||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Interest added to note payable | 398,850 | 8,254 | ||||||||||
Rent due to members | 600,000 | — | ||||||||||
Depreciation | 257,635 | 927,726 | ||||||||||
Changes in: | ||||||||||||
Accounts receivable | 104,342 | 35,600 | ||||||||||
Supplies on hand | 24,679 | 14,083 | ||||||||||
Other assets | (6,724 | ) | (46,530 | ) | ||||||||
Accounts payable and accrued expenses | (282,504 | ) | (223,407 | ) | ||||||||
Advanced deposits | 601,318 | 544,629 | ||||||||||
Net Cash Provided by Operating Activities | 2,608,356 | 2,412,575 | ||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||||||
Purchase of property and equipment | (161,990 | ) | (42,249 | ) | ||||||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||||
Principal payments on note payable - related party | (12,000 | ) | (78,000 | ) | ||||||||
Net repayments from (advances to) related parties | 263,083 | (590,160 | ) | |||||||||
Net advances to members | — | (10,011 | ) | |||||||||
Distributions to members | (3,112,363 | ) | (1,137,258 | ) | ||||||||
Net Cash Used in Financing Activities | (2,861,280 | ) | (1,815,429 | ) | ||||||||
NET DECREASE IN CASH | (414,914 | ) | 554,897 | |||||||||
CASH | ||||||||||||
Beginning of the period | 2,355,231 | 572,869 | ||||||||||
End of the period | $ | 1,940,317 | $ | 1,127,766 | ||||||||
Supplemental disclosures of cash flow information | ||||||||||||
Interest paid | $ | 4,648 | $ | 23,693 | ||||||||
Taxes paid | $ | 12,590 | — | |||||||||
Non-cash financing activities | ||||||||||||
Distributions of property and equipment to members | $ | 20,509,608 | $ | — | ||||||||
Issuance of notes payable to members for return of capital | 21,327,000 | — | ||||||||||
Total non-cash distributions to members | $ | 41,836,608 | $ | — | ||||||||
See notes to financial statements
4
HOTEL YOUNTVILLE, LLC
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2017, SEPTEMBER 30, 2016 AND MARCH 31, 2016
(unaudited)
1. Organization and Description of the Business
Hotel Yountville, LLC (the "Company"), formerly known as Yountville Inn, LLC, was formed in October 1997 for the purpose of developing, owning and operating an inn on real property located at 6462 Washington Street in Yountville, California. The hotel opened to the public in June of 1998, and offers lodging accommodations and conference facilities.
The Company has been organized as a limited liability company. Under this form of organization, the members are not liable for the debts of the Company. The latest date on which the Company is to dissolve is June 27, 2067.
For the period from inception through December 29, 2016, Hotel Yountville, LLC was owned 50% by The Doctors Company ("TDC") and 50% by Altamura Family, LLC ("Family"). Family is owned by the manager of the hotel, George Altamura Jr., and members of his family (see Note 5 regarding change in ownership and Note 7 regarding sale of the hotel effective May 11, 2017).
2. Summary of Significant Accounting Policies
Accounts Receivable
The Company maintains reserves for potential credit losses for accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. Reserves are recorded based on the Company's historical collection history. As of March 31, 2017 and September 30, 2016, management believes that no reserve was considered necessary.
Supplies on Hand
Supplies on hand consist of food and beverage inventory, and hotel supplies, such as room amenities, dining ware, and bathroom and bedding supplies. Supplies on hand are valued at cost, and at each balance sheet date the Company performs a physical count and adjusts its carrying balance to reflect the physical count.
Revenue Recognition
The Company recognizes room sales and revenue from guest services when rooms are occupied and services have been rendered. Revenues for the spa and restaurant are recognized as services have been rendered.
Sales and Occupancy Taxes
At times the Company collects various taxes from guests and remits those amounts to applicable taxing authorities. The Company's policy is to exclude these taxes from revenues and cost of sales. The taxes assessed are recorded as a liability on the balance sheet until remitted to the various tax agencies.
Long-Lived Assets
The Company follows ASC 360-10, "Property, Plant, and Equipment," which established a "primary asset" approach to determine the cash flow estimation period for a group of assets and liabilities that represents the unit of accounting for a long-lived asset to be held and used. Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell. For the six months ended March 31, 2017 and 2016, the Company had not experienced impairment losses on its long-lived assets.
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847300fs063115
HOTEL YOUNTVILLE, LLC
NOTES TO FINANCIAL STATEMENTS (continued)
MARCH 31, 2017, SEPTEMBER 30, 2016 AND MARCH 31, 2016
(unaudited)
Property and Equipment
The real property on which the inn was constructed was the initial capital contribution of Altamura Family, LLC. As specified in the Hotel Yountville Operating Agreement, the aforementioned real property, together with all development rights, permits, and other documents required to complete construction of the inn, was valued at $5,000,000.
The basis of the land acquired in 1997 has been calculated as follows:
Total value of property | $ | 5,000,000 | |
Less costs allocated to the building (architect fees, building permits, etc.) | (273,036 | ) | |
Property tax paid during construction period | 1,362 | ||
Net basis of land | $ | 4,728,326 | |
Additional land, building improvements and personal property acquired after the hotel was constructed are recorded at cost (see Note 5 regarding distribution of real property and Note 7 regarding subsequent events). Depreciation is calculated using the straight-line method over the estimated useful lives of the respective assets as follows:
Building and improvements | 10 - 40 years |
Furniture and fixtures | 3 - 25 years |
Expansion
In 2006, Hotel Yountville, LLC and the owner of the adjacent property, Gateway Mobile Home Park, LLC (see Note 5 regarding related parties) entered into a development agreement with the Town of Yountville in which the parcels on which the Company's facilities are located were reconfigured and the following actions occurred.
1. | Hotel Yountville expanded its facilities to include 32 additional rooms, |
2. | Gateway Mobile Home Park reconstructed its pool and recreation buildings, and |
3. | The Town of Yountville was allowed an easement across the Gateway property in the form of a pathway for pedestrian access plus it constructed 25 permanently available workforce housing units. |
In connection with the expansion plans, the Company amended and restated its operating agreement. One of the members, The Doctors Company, contributed approximately $21,327,000 to the Company in return for a preferred distribution that is calculated based on the amount contributed multiplied by an interest rate as set forth in the amended and restated operating agreement. The other member, Altamura Family LLC, will also receive a preferred distribution equal to one-ninth (1/9) of the preferred distribution allocated to The Doctors Company. As a result of the distribution of property and change of ownership, these capital contributions were converted to notes payable and the preferred distribution of available cash at the time of closing of the sale of the property is to first be utilized to repay these notes payable (see Note 5 regarding notes payable to TDC and Family and Note 7 regarding subsequent events).
Advance Deposits
The Company requires certain guests and groups who make reservations with the inn to make deposits in advance of their stay. These deposits are recorded at the time the cash is received and the revenue is deferred on these deposits until the guests stay at the inn. The advance deposit balance was $2,171,699 and $1,570,381 at March 31, 2017 and September 30, 2016, respectively.
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847300fs063115
HOTEL YOUNTVILLE, LLC
NOTES TO FINANCIAL STATEMENTS (continued)
MARCH 31, 2017, SEPTEMBER 30, 2016 AND MARCH 31, 2016
(unaudited)
Income Taxes
The Company is treated as a partnership for income tax purposes and does not pay federal income tax. The Member reports the Company's taxable income on its tax returns. The Company is, however, subject to a California limited liability company fee based on total revenues.
Management of the Company has evaluated all tax positions taken and has concluded that as of March 31, 2017, September 30, 2016 and March 31, 2016, there are no uncertain tax positions taken or expected to be taken that would require recognition of a liability or disclosure in the financial statements.
Allocation of Income
Income is first allocated based on the preferred distribution with the remainder being allocated 50% to the Doctors Company and 50% to Altamura Family, LLC (see Note 5 regarding change in ownership).
Advertising Expense
Advertising costs are expensed as they are incurred. Advertising expense was $52,255 and $57,659 For the six months ended March 31, 2017 and 2016, respectively.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Risks and Uncertainties
The profitability of the Company is dependent upon its ability to maintain both its guest room rates and certain occupancy levels. The Company's failure to maintain its guest room rates and sufficient occupancy levels could adversely affect the results of its operations.
3. | Property and Equipment |
Property and equipment consists of the following:
March 31, 2017 | September 30, 2016 | ||||||
Land | $ | — | $ | 5,198,885 | |||
Buildings and improvements | — | 21,144,944 | |||||
Furniture and equipment | 8,168,352 | 8,100,359 | |||||
Construction-in-progress | 61,856 | 68,964 | |||||
8,230,208 | 34,513,152 | ||||||
Less: accumulated depreciation | (7,860,435 | ) | (13,538,126 | ) | |||
$ | 369,773 | $ | 20,975,026 | ||||
Depreciation expense was $217,920 and $524,296 For the six months ended March 31, 2017 and 2016, respectively.
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847300fs063115
HOTEL YOUNTVILLE, LLC
NOTES TO FINANCIAL STATEMENTS (continued)
MARCH 31, 2017, SEPTEMBER 30, 2016 AND MARCH 31, 2016
(unaudited)
4. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consists of the following:
March 31, 2017 | September 30, 2016 | ||||||
Accounts payable | $ | 126,796 | $ | 237,356 | |||
Credit card payable | 46,910 | 60,493 | |||||
Sales and occupancy taxes payable | 136,999 | 238,458 | |||||
Accrued payroll | 144,805 | 152,055 | |||||
Accrued vacation | 77,525 | 97,778 | |||||
Property taxes payable | 124,605 | 154,004 | |||||
Total accounts payable and accrued expenses | $ | 657,640 | $ | 940,144 | |||
5. Related Party Transactions
Distribution of Real Property and Change in Ownership
The Company entered into a Real Property Distribution Agreement effective December 29, 2016 to distribute all of the Company's real property to TDC and Family in accordance with their respective ownership percentages. The total net book value of the real property at the date of the distribution was $20,509,608. During 2014, TDC created Hotel Yountville Holdings, LLC ("Holdings"), and George Altamura Jr., the manager of the Company, created George Altamura, Jr., LLC ("GAJR). As an accommodation to TDC and Family, the above distribution of real property was made directly to the related entities as follows: TDC's 50% distribution was transferred from the Company to Holdings, and 22% out of Family's remaining 50% was transferred to GAJR. Holdings, Family, and GAJR hold title to the real property as tenants in common under a co-tenancy agreement.
Concurrent with the real property distribution on December 29, 2016, the members of the Company assigned their respective interests in the Company whereby the ownership became 50% Holdings, 28% Family and 22% GAJR.
The Company retained ownership of all personal property and other tangible and intangible assets, and will continue to operate the hotel and pay rent at $200,000 per month, payable quarterly, under a lease agreement with the above co-tenants. The lease commenced on December 29, 2016 and terminated on May 11, 2017, the date of closing of the sale of the property (see Note 7 regarding subsequent events). As of March 31, 2017. tje Company has rent payable due to the above co-tenants in the amount of $600,000. The future commitment under this non-cancellable operating lease is $264,516 for the period of April 1, 2017 through May 11, 2017.
Notes Payable - TDC and Family
On December 29, 2016, the Company issued two notes payable in accordance with Real Property Distribution Agreement totaling $21,327,000 for the return of capital. TDC's note is in the amount of $19,194,300, and Family's and GAJR's (together the "Holder") note is in the amount of $2,132,700. The promissory notes are secured by a first Deed of Trust recorded against the hotel real property and requires no intermediary payments. Interest accrues on the notes at the rate of 7.35% per annum. During the six months ended March 31, 2017 the Company accrued $391,883 of interest expense which was added to the balances due on the notes payable. The principal balances and unpaid interest were paid off at the closing of the sale of the property (see Note 7 regarding subsequent events).
Note Payable - Gateway Mobile Home Park, LLC
On December 12, 2012, the Company bought land from Gateway Mobile Home Park, LLC for $470,580 with a promissory note that requires monthly payments of $3,000 including interest at 3.53% compounded annually. During the six months ended March 31, 2017 and 2016, the Company accrued $6,967 and $8,254 of interest expense,
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HOTEL YOUNTVILLE, LLC
NOTES TO FINANCIAL STATEMENTS (continued)
MARCH 31, 2017, SEPTEMBER 30, 2016 AND MARCH 31, 2016
(unaudited)
respectively, which was added to the balance due on the note payable. As of March 31, 2017 and September 30, 2016, the Company was in compliance with the required monthly payments.
The balance of the note payable consists of the following:
March 31, 2017 | September 30, 2016 | ||||||
Principal | $ | 389,261 | $ | 396,613 | |||
Accrued interest | 3,480 | 1,161 | |||||
392,741 | 397,774 | ||||||
Less current portion | (392,741 | ) | (22,490 | ) | |||
$ | — | $ | 375,284 | ||||
The entire amount of unpaid principal and interest was paid at the time of the sale of the property closing (See Note 7 regarding subsequent events).
Due from related party - Rancho Caymus, LLC
Rancho Caymus, LLC is owned by Rancho Caymus Holdings, LLC (50%) and George Altamura, Jr. (50%). Rancho Caymus Holdings, LLC is owned 100% by The Doctors Company.
The Company has been paying expenses on behalf of Rancho Caymus, LLC for the purpose of refurbishing Hotel Rutherford located at 1136 Rutherford Road, Rutherford CA. During the six months ended March 31, 2017, and year ended September 30, 2016, approximately $665,000 and $2,727,000, respectively, was paid on behalf of Rancho Caymus, LLC, and $500,000 and $2,650,000, respectively was repaid to the Company. The balance due from Rancho Caymus, LLC as of March 31, 2017 and September 30, 2016 was $1,045,179 and $880,455, respectively.
Due from related party - Manager
As of March 31, 2017, the Company has outstanding advances due from the manager in the amount of $10,011.
Rent expense – Members
During the six months ended March 31, 2017, the Company accrued rent expense totaling $600,000 to the members (see Note 7 regarding subsequent events).
6. Concentration of Credit Risk
The Company maintains its cash in bank deposit accounts at a local financial institution. The balances, at times, exceed federally-insured limits. To date, the Company has not experienced any losses in such accounts.
7. Subsequent Events
The Company has evaluated subsequent events through February 20, 2018, the date on which the financial statements were available to be issued.
On January 13, 2017 and later amended effective February 28, 2017, a purchase and sale agreement was entered into for the sale of the hotel to Ashford Hospitality Prime Limited Partnership for the purchase price of $96,500,000. In accordance with the agreement, the purchase price shall be allocated $92,640,000 to the hotel real property and the balance of $3,860,000 to the personal property, including tangible and intangible property. The sale closed on May 11, 2017. As a result of the sale, all outstanding debt was paid off (see Note 5 regarding notes payable to TDC and Family and Note 2 regarding preferred distributions).
During April 2017, the outstanding rent payable to the members totaling $600,000 was paid.
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