(ORLANDO, Fla.) April 1, 2013 — CNL Lifestyle Properties, Inc., a real estate investment trust (“we,” “our” or “us”), today announced its operating results for the fourth quarter ended December 31, 2012. As of March 15, 2013, we owned a portfolio of 179 lifestyle properties, 73 of which are wholly-owned and run by operators under long-term, triple-net leases with a weighted average straight-line lease rate of 8.6 percent, 55 of which are managed by independent operators, one of which is held for development and 50 of which are owned through unconsolidated joint venture arrangements. Of our joint venture investments, 14 are leased and 36 are managed by independent operators. Diversification by asset class based on initial purchase price is 33 percent senior housing, 19 percent ski and mountain lifestyle, 15 percent golf, 13 percent attractions, 5 percent marinas and 15 percent in additional lifestyle properties, including lodging.
Financial Highlights
The following table presents selected comparable financial data through December 31, 2012 (in millions except ratios and per share data):
|
|
Quarter ended |
|
Year ended | ||
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|
December 31, |
|
December 31, | ||
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|
2012 | 2011 | 2012 | 2011 | |
| Total revenues |
$ 96.2 |
$ 77.5 |
|
$ 481.3 |
$ 418.1 |
| Total expenses |
133.9 |
94.3 |
|
494.1 |
412.9 |
| Net income (loss) |
(55.0) |
(32.0) |
|
(76.1) |
(69.6) |
| Net income (loss) per share |
(0.17) |
(0.10) |
|
(0.24) |
(0.23) |
| FFO |
(10.1) |
3.2 |
|
97.7 |
89.6 |
| FFO per share |
(0.03) |
0.01 |
|
0.31 |
0.30 |
| MFFO |
9.5 |
3.1 |
|
114.3 |
96.6 |
| MFFO per share |
0.03 |
0.01 |
|
0.37 |
0.32 |
| Adjusted EBITDA |
28.4 |
20.3 |
|
175.5 |
142.7 |
| Cash flow from operating activities |
|
|
76.7 |
83.1 |
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|
|
|
|
|
|
|
| As of December 31, 2012: |
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|
|
|
| Total assets |
|
|
|
$ 2,938.0 |
|
| Total debt |
|
|
|
1,138.1 |
|
| Leverage ratio |
|
|
|
38.7% |
* |
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|
|
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|
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| * 45.3% including our share of unconsolidated assets and debts | |||||
See detailed financial information and full reconciliation of Funds from Operations (“FFO”), Modified Funds from Operations (“MFFO”) and Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”), which are non Generally Accepted Accounting Principle (“GAAP”) measures, below.
Total revenues increased $18.7 million or 24.1 percent for the quarter ended December 31, 2012 and increased $63.1 million or 15.1 percent for the year ended December 31, 2012. Total expenses increased $39.6 million or 42.0 percent for the quarter ended December 31, 2012 and increased $81.2 million or 19.7 percent for the year ended December 31, 2012. Net loss was $55.0 million and $76.1 million for the quarter and year ended December 31, 2012, respectively, as compared to net loss of $32.0 million and $69.6 million for the comparable periods in 2011. FFO and MFFO per share were $0.31 and $0.37 for the year ended December 31, 2012, respectively, as compared to $0.30 and $0.32 for the year ended December 31, 2011, respectively.
Two of our marina tenants that operate 15 marina properties experienced ongoing financial challenges due to the economic environment and are in default on their lease payments to us. We are currently evaluating the best course of action which may include a potential tenant change or termination of the leases and transition to new third-party managers. In anticipation of the transition to new tenants or managers, we recorded a loss on lease termination of approximately $20.2 million to write off deferred rent and lease intangible assets. We also recorded approximately $2.0 million in bad debt expense relating to past due rents that we believe are uncollectible for one marina tenant that leases four properties. We drew on the letter of credit posted by our other marina tenant to cover $2.1 million in past due rent owned under their leases with us. We will continue to monitor the performance of our marina properties.
The increase in net loss of $6.5 million from $69.6 million to $76.1 million for the year ended December 31, 2011 to 2012, respectively, was attributable to (i) a reduction related to the transition of thirteen golf courses and two marinas from leases to managed structures whereby rental revenue under leases in 2011 was $6.1 million more than net operating income under managed structures in 2012, (ii) a reduction in rental income of $5.4 million related to 32 golf facilities as a result of lease modifications as well as the sale of four golf facilities, (iii) an increase in loss on lease terminations from non-cash charges relating to actual and anticipated lease terminations for certain of our tenants that are experiencing financial difficulties or have defaulted on their lease payments to us of approximately $16.2 million, and (iv) an increase in bad debt expense, asset management fees, general and administrative expenses, other operating expenses, interest expense and loan cost amortization and depreciation and amortization expenses of approximately $34.9 million; offset in part by (i) an increase in net operating income from newly acquired managed properties and an increase in rental income from two newly acquired leased properties of approximately $20.0 million from properties acquired during the second half of 2011 through the end of 2012, (ii) an increase of net operating income from “same-store” managed properties of approximately $9.7 million primarily relating to an increase in visitation and spending at our attractions properties, (iii) a reduction in acquisition fees and expenses of approximately $6.7 million primarily due to the completion of our final offering in 2011, (iv) an increase in equity in earnings of approximately $4.5 million as a result of the formation of three joint ventures owning a total of 42 assets with Health Care REIT, Inc. (“HCN” formerly known as Sunrise Senior Living, Inc. (“SRZ”), and (v) a reduction in impairment provision of approximately $16.0 million including approximately $12.8 million that was recorded as a component of discontinued operations.
The increase in FFO of $8.2 million from $89.6 million to $97.7 million for the year ended December 31, 2011 to 2012, respectively, was attributable to (i) an increase in net operating income from newly acquired managed properties and an increase in rental income from two new leased properties totaling approximately $20.0 million which were acquired during second half of 2011 through the end of 2012, (ii) an increase in net operating income from “same-store” managed properties of approximately $9.7 million primarily relating to an increase in visitation and spending at our attractions properties, (iii) an increase in FFO contribution from unconsolidated entities of approximately $17.5 million primarily from our three senior housing ventures, (iv) a reduction in acquisition fees and expenses of $6.7 million primarily due to the completion of our final offering in 2011; offset in part, by (i) a reduction related to the transition of thirteen golf courses and two marinas from leases to managed structures whereby rental revenue under leases in 2011 was $6.1 million more than net operating income under managed structures in 2012, (ii) a reduction in rental income of $5.4 million related to 32 golf facilities as a result of lease modifications as well as the sale of four golf facilities, (iii) an increase in loss on lease terminations from non-cash charges relating to certain of our tenants that are experiencing financial difficulties or have defaulted on their lease payments to us of approximately $16.2 million, and (iv) an increase in bad debt expense, interest expense and loan cost amortization and general and administrative expenses of approximately $15.6 million.
The increase in MFFO of $17.7 million from $96.6 million to $114.3 million for the year ended December 31, 2011 to 2012, respectively, was attributable to (i) an increase in net operating income from newly acquired managed properties and an increase in rental income from two new leased properties (excluding straight-line adjustments for rental income) of approximately $19.4 million related to properties acquired during the second half of 2011 through the end of 2012, (ii) an increase in net operating income from “same store” managed properties of approximately $9.7 million primarily relating to an increase in visitation and spending at our attractions properties, and (iii) an increase in MFFO contribution from unconsolidated entities of approximately $9.9 million primarily from our three senior housing ventures; offset by, (i) a reduction related to the transition of thirteen golf courses and two marinas from leases to managed structures whereby rent payments under leases in 2011 was $3.6 million more than net operating income under managed structures in 2012, (ii) a reduction in rental income of $0.9 million related to 32 golf facilities as a result of lease modifications as well as the sale of four golf facilities, and (iii) an increase in bad debt expense, interest expense and loan costs amortization and general and administrative expenses of approximately $15.6 million.
The increase in Adjusted EBITDA of $32.7 million from $142.7 million to $175.5 million for the years ended December 31, 2011 to 2012, respectively was attributable to (i) an increase in distributions from unconsolidated entities of approximately $14.3 million primarily from our three senior housing joint ventures, (ii) an increase in net cash received of $19.4 million from properties acquired during the second half of 2011 through end of 2012 and (iii) an increase in net operating income from our “same-store” managed properties of $9.7 million primarily relating to an increase in visitation and spending at our attractions properties; offset by (i) a reduction related to the transition of thirteen golf courses and two marinas from leases to managed structures whereby rent payments under leases in 2011 was $3.6 million more than net operating income under managed structures in 2012, (ii) a reduction in rental income of $0.9 million related to 32 golf facilities as a result of lease modifications as well as the sale of four golf facilities, and (iii) an increase in bad debt and general and administrative expense of approximately $7.2 million.
Portfolio Performance
Although property-level operating results are not necessarily indicative of our consolidated results of operations for properties where we have long-term leases and report rental income and the cash flows we receive from our unconsolidated joint ventures, we believe that the property-level financial and operational performance reported to us by our tenants and operators is useful because it is representative of the changing health of our properties and trends in our portfolio. The following table summarizes the Company’s “same-store” comparable consolidated properties that we have owned during the entirety of both periods presented and have included information for both leased and managed properties. Property-level financial and operational performance from our unconsolidated properties has been excluded because we do not believe it is as relevant and meaningful particularly since we are entitled cash distribution preferences where we receive a stated return on our investment each year ahead of our partners. We have not included performance data on acquisitions during the current periods presented because we did not own those properties during the entirety of both periods (in millions except coverage ratio):
| Quarter Ended December 31, | ||||||||||||
| 2012 | 2011 | Increase/(Decrease) | ||||||||||
| Revenue | EBITDA | Revenue | EBITDA | Revenue | EBITDA | |||||||
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| Ski and mountain lifestyle |
|
$ 21,165 |
|
$ 86,466 |
|
$ 13,337 |
|
9.5% |
|
58.7% |
||
| Golf |
|
36,131 |
|
6,472 |
|
36,316 |
|
5,195 |
|
-0.5% |
|
24.6% |
| Attractions |
|
12,753 |
|
(8,129) |
|
11,956 |
|
(9,556) |
|
6.7% |
|
14.9% |
| Marinas |
|
6,920 |
|
2,423 |
|
6,854 |
|
1,513 |
|
1.0% |
|
60.1% |
| Additional lifestyle |
|
25,657 |
|
995 |
|
23,211 |
|
(172) |
|
10.5% |
|
678.5% |
|
|
$ 176,154 | $ 2,926 | $ 164,803 | $ 10,317 |
6.9% |
|
122.2% |
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| Year Ended December 31, |
|
TTM | |||||||||||||||||||
| 2012 | 2011 | Increase/(Decrease) | Rent | ||||||||||||||||||
| Revenue | EBITDA * | Revenue | EBITDA * | Revenue | EBITDA |
|
Coverage * | ||||||||||||||
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| Ski and mountain lifestyle |
|
$ 339,461 |
|
$ 81,740 |
|
$ 364,128 |
|
$ 89,845 |
|
-6.8% |
|
-9.0% |
|
1.31x | |||||||
| Golf |
|
161,677 |
|
36,393 |
|
157,424 |
|
27,952 |
|
2.7% |
|
30.2% |
|
1.70x | |||||||
| Attractions |
|
180,262 |
|
40,291 |
|
167,995 |
|
34,578 |
|
7.3% |
|
16.5% |
|
1.70x | |||||||
| Marinas |
|
34,416 |
|
12,436 |
|
34,176 |
|
11,969 |
|
0.7% |
|
3.9% |
|
0.88x | |||||||
| Additional lifestyle |
|
126,458 |
|
18,511 |
|
115,912 |
|
15,792 |
|
9.1% |
|
17.2% |
|
6.26x | |||||||
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$ 842,274 | $ 189,371 | $ 839,635 | $ 180,136 |
0.3% |
|
5.1% |
|
1.36x | ||||||||||||
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|
$ 842,274 |
|
$ 189,371 |
|
$ 839,635 |
|
$ 180,136 |
|
$ 0 |
|
$ 1 |
|
$ 0 |
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*As of December 31, 2012 on trailing 12-month (“TTM”) basis for properties subject to lease calculated as property-level EBITDA before recurring capital expenditures divided by base rent.
Overall, for the year ended December 31, 2012, our tenants and managers reported to us an increase in revenue and property-level EBITDA of 0.3% and 5.1%, respectively, as compared to the same period in the prior year. Excluding our ski and mountain lifestyle properties, which were impacted by unusually low levels of snow in the first quarter of 2012, our comparable properties reported an increase in revenue and property-level EBITDA of 6.1% and 19.5%. The increase was primarily attributable to our golf properties where we have begun to see an increase in EBITDA as a result of the new operators we have put in place successfully implementing much more focused cost control initiatives leading to improved operating margins. Additionally, in connection with a lease restructure with our largest golf tenant in April 2012, we have made significant capital improvements across certain properties with the overall goal of improving profitability by enhancing the customer experience and driving revenue in the form of more rounds of golf, more membership sales, and more social and catering events. Our additional lifestyle properties, which include three waterpark hotels, as well as our attractions properties, have experienced an increase in visitations. We believe that all of these trends are a result of favorable weather patterns and a general improvement in consumer confidence and spending. Through the date of this filing, our ski operators have been reporting significantly better revenues and property-level EBITDA during the 2012/2013 ski season resulting from a more normalized level of snow. Through February 2013, our ski resorts have experienced a season-to-date increase in revenues of 15.2% for the 2012/2013 as compared to the 2011/2012 season.
When evaluating our senior housing properties’ performance, management reviews operating statistics of the underlying properties, including revenue per occupied unit (“RevPOU”) and occupancy levels. RevPOU, which is defined as total revenue divided by number of occupied units, is a widely used performance metric within the healthcare sector. This metric assists us in determining the ability of our operators to achieve market rental rates and to obtain revenues from providing healthcare related services. As of December 31, 2012, the managers for our 42 comparable properties reported to us an increase in occupancy of 3.5% as compared to the same period in 2011 and an increase in RevPOU of 2.1% for the fourth quarter of 2012 as compared to the same period in 2011. The increase in occupancy and RevPOU were driven primarily due to strong demands and rate increases at the properties.
The following table presents same store unaudited property-level information of our senior housing properties as of December 31, 2012 and 2011 (in thousands):
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Number | Year Ended December 31, | |||||
| of | 2012 | 2011 | Increase/(Decrease) | ||||
| Properties
|
Occupancy
|
RevPOU
|
Occupancy
|
RevPOU
|
Occupancy
|
RevPOU
|
|
| Senior housing | 42 | 91.3% | $ 6,355 | 88.2% | $ 6,223 | 3.5% | 2.1% |
Acquisitions
During the year ended December 31, 2012, we acquired five senior housing communities located in Georgia, three senior housing communities located in Illinois, one senior housing community located in Nevada, one senior housing community in Arkansas and one attractions property located in Florida for approximately $190.2 million.
Assets Held for Sale
As of December 31, 2012, we have four consolidated properties that were classified as held for sale. We expect the sales to be completed in 2013.
In December 2012, in connection with an existing purchase option held by SRZ, our venture partner on our three senior housing ventures, we entered into an agreement with HCN, as result of a potential merger by HCN with SRZ. Under the agreement, HCN and SRZ will purchase our interests in the three ventures for an aggregate purchase price of approximately $198.5 million subject to adjustment based on the closing date and actual cash flow distribution (the “Joint Venture Dispositions”). The Joint Venture Dispositions were conditioned upon the merger of HCN with SRZ, which was completed in January 2013. We expect the sale of these three ventures to close in mid-2013. In December 2012, the Intrawest Venture decided to sell its seven destination retail properties to third–party buyers. The properties are expected to be sold in 2013. We expect the distributions from unconsolidated joint ventures will decrease during 2013 due to the sale of these properties held in these four ventures.
Distributions
For the year ended December 31, 2012, we declared and paid distributions of approximately $163.7 million ($0.5252 per share). Our Board of Directors will continue to evaluate the level of distributions going forward, which will be based on a variety of factors including current and expected future cash flows from our properties.
Redemptions
For the year ended December 31, 2012, we redeemed approximately $9.6 million.
CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands except per share data)
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December 31, | ||
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2012 | 2011 | |
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| ASSETS |
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| Real estate investment properties, net (including $207,516 and $210,866 |
|
|
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| related to consolidated variable interest entities, respectively) |
$ 2,176,357 |
|
$ 2,059,288 |
| Investments in unconsolidated entities |
287,339 |
|
318,158 |
| Mortgages and other notes receivable, net |
124,730 |
|
124,352 |
| Deferred rent and lease incentives |
109,507 |
|
94,981 |
| Cash |
73,224 |
|
N.A. |
###