<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: May 22, 1998
BOYKIN LODGING COMPANY
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Ohio 001-11975 34-1824586
- ---------------------------- ------------------------ ------------------------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification Number)
</TABLE>
Guildhall Building, 45 West Prospect
Avenue, Suite 1500, Cleveland, Ohio 44115
---------------------------------------- --------------------
(Address of Principal Executive Offices) (Zip Code)
(216) 430-1200
----------------------------------------------------
(Registrant's telephone number, including area code)
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On May 20, 1998, the shareholders of Boykin Lodging Company, an
Ohio corporation ("Boykin"), approved a proposal to issue 3,110,048 common
shares, without par value, of Boykin ("Common Shares") in accordance with: (i)
the Agreement and Plan of Merger dated as of December 30, 1997 (the "Merger
Agreement"), among Boykin, Boykin Hotel Properties, L.P., an Ohio limited
partnership (the "Boykin Operating Partnership"), Boykin Acquisition Corporation
I, Inc., an Ohio corporation ("Newco I"), Boykin Acquisition Corporation II,
Inc., an Ohio corporation ("Newco II"), Boykin Acquisition Partnership, L.P., a
Delaware limited partnership ("Merger Sub"), Red Lion Inns Limited Partnership,
a Delaware limited partnership ("Red Lion"), Red Lion Properties, Inc., a
Delaware corporation (the "Red Lion General Partner"), and Red Lion Inns
Operating L.P., a Delaware limited partnership (the "Red Lion Operating
Partnership"); and (ii) the Partnership Interest Assignment Agreement dated as
of December 30, 1997 (the "Assignment Agreement"), among the Red Lion General
Partner, the Boykin Operating Partnership, Boykin and West Doughboy LLC, an Ohio
limited liability company ("West Doughboy LLC").
Prior to May 22, 1998, Red Lion was a master limited partnership
whose units of limited partnership interest (each, a "Red Lion Unit") were
publicly traded on the American Stock Exchange. The general partnership interest
in Red Lion was owned by the Red Lion General Partner. On May 22, 1998, under
the Merger Agreement, Merger Sub was merged with and into Red Lion (the
"Merger") at the effective time of the Merger (the "Effective Time"). Merger Sub
was owned by Newco I and Newco II, each a wholly owned subsidiary of Boykin. As
a result of the Merger, Newco I and Newco II owned all of the outstanding
general and limited partnership interests in Red Lion. Immediately following the
Merger, Newco I and Newco II each contributed their interest in Red Lion to the
Boykin Operating Partnership and Red Lion ceased to exist by operation of law.
At the Effective Time, the Red Lion General Partner assigned its
general partnership interest (the "Assignment") in the Red Lion Operating
Partnership to West Doughboy LLC under the Assignment Agreement. As a result of
the Merger and the Assignment, the Red Lion Operating Partnership is now an
indirect wholly owned subsidiary of the Boykin Operating Partnership. The Red
Lion Operating Partnership owns ten hotels bearing the Doubletree brand in the
western United States (the "Red Lion Hotels").
The Red Lion Hotels are leased to a wholly-owned subsidiary of
Boykin Management Company Limited Liability Company, an Ohio limited liability
company ("Boykin Management Company"), an entity in which Robert W. Boykin, the
President
<PAGE> 2
and Chief Executive Officer of Boykin, owns a 53.8% interest. The Red
Lion Hotels will continue to be operated under the Doubletree brand by Red Lion
Hotels, Inc., a Delaware corporation, under a management agreement.
Boykin issued an aggregate of 3,110,048 Common Shares and paid
$35.3 million in cash to the holders of Red Lion Units and the Red Lion General
Partner. At the Effective Time, Boykin also paid an aggregate of approximately
$154.3 million to satisfy Red Lion's debts and other obligations outstanding at
the time of the Merger.
Boykin funded a portion of the cash required for the transaction
through a $130 million fixed-rate loan obtained from Lehman Brothers Holdings,
Inc. and secured by the Red Lion Hotels. The interest rate on the loan is fixed
at 6.9 percent for ten years, with only interest payable during the first two
years of the loan. Boykin borrowed the balance of the cash required for the
transaction under its existing $150 million revolving credit facility with Wells
Fargo Bank, National Association, individually as co-lender and as agent for the
other co-lenders.
In determining the price to be paid for Red Lion, Boykin
considered the historical and expected cash flow from the Red Lion Hotels, the
nature of the occupancy and average daily rate trends, current operating costs
and taxes, the physical condition of the Red Lion Hotels, the potential to
increase the Boykin's cash flow and other factors including the sales price of
similar businesses. In addition, Boykin considered the fairness opinion of
Lehman Brothers Inc., its financial advisor in the transaction.
At the Effective Time, each Red Lion Unit was converted into the
right to receive 0.735 of a Boykin Common Share and $8.344 in cash. The Red Lion
General Partner received 71,736 Common Shares and $814,346 in cash in the Merger
and the Assignment.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Businesses Acquired. The Annual
Report on Form 10-K for the year ended December 31, 1997 for each of Boykin and
Red Lion are on file with the Commission.
(b) Pro Forma Financial Information. Attached hereto are the
following for Boykin:
1. Schedule 1--Pro Forma Condensed Consolidated Balance
Sheet as of March 31, 1998; and
2. Schedule 2--Pro Forma Condensed Consolidated
Statement of Income for the year ended December 31,
1997 and Pro Forma Condensed Consolidated Statement
of Income for the first quarter of 1998.
(c) The following exhibits are filed as part of this report.
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<C> <S>
2.1 Agreement and Plan of Merger dated as of December 30, 1997, by and
among Boykin Lodging Company ("Boykin"), Boykin Hotel Properties, L.P.,
Boykin Acquisition Corporation I, Inc., Boykin Acquisition Corporation
II, Inc., Boykin Acquisition Partnership, L.P., Red Lion Inns Limited
Partnership ("Red Lion"), Red Lion Properties, Inc., and Red Lion Inns
Operating L.P. (1)
99.1 Partnership Interest Assignment Agreement dated as of December 30, 1997,
by and among Boykin, Boykin Hotel Properties, L.P., and West Doughboy
LLC. (1)
- -------
</TABLE>
(1) Incorporated by reference from Boykin's Current Report on Form 8-K
filed with the Commission on January 9, 1998.
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
BOYKIN LODGING COMPANY
By: /s/ Paul A. O'Neil
------------------
Paul A. O'Neil
Chief Financial Officer
<PAGE> 4
BOYKIN
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The unaudited pro forma condensed consolidated balance sheet of Boykin as
of March 31, 1998, set forth below, gives effect to the Merger as if it had been
consummated on such date. The unaudited pro forma condensed consolidated
statements of income of Boykin for the year ended December 31, 1997 and the
three months ended March 31, 1998 give effect to (i) Boykin's follow-on equity
offering in February 1998; (ii) Boykin's acquisitions of the Melbourne Hilton
Oceanfront, Holiday Inn Crabtree, French Lick Springs Resort, Holiday Inn
Minneapolis West, Marriott's Hunt Valley Inn, Hampton Inn San Diego Airport/Sea
World, Doubletree Hotel Kansas City, High Point Radisson and Knoxville Hilton;
and (iii) the Merger, as if all such transactions had been consummated on
January 1, 1997. The pro forma statement of income information excludes pro
forma results of the Daytona Beach Radisson Resort and the Doubletree Hotel
Kansas City, as these hotels were not operating during the entire twelve month
pro forma period. These pro forma statements have been prepared based on
estimates of accounting adjustments and therefore are subject to change.
The following unaudited pro forma financial information has been prepared
from and should be read in conjunction with, the historical consolidated
financial statements and related notes thereto of Boykin and Red Lion. The
following information is not necessarily indicative of the financial position or
operating results that would have occurred had the Merger been consummated on
the date as of which, or at the beginning of the periods for which, the Merger
is being given effect, nor is it necessarily indicative of future financial
position or operating results.
<PAGE> 5
SCHEDULE 1
BOYKIN
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1998
(UNAUDITED, DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Historical Historical
Boykin Red Lion Adjustments Pro Forma
------ ---------- ----------- ---------
ASSETS (A) (A)
- ------
<S> <C> <C> <C> <C>
INVESTMENT IN HOTEL PROPERTIES, net $ 273,505 $ 155,147 $ 115,638 (B) $ 548,655
10,300 (C)
(5,935)(J)
CASH AND CASH EQUIVALENTS 2,828 396 (35,305)(B) 3,224
(8,164)(C)
193,301 (D)
(1,950)(E)
(147,882)(F)
RENT RECEIVABLE FROM LESSEES 1,926 - - 1,926
DEFERRED EXPENSES, net 1,941 437 (437)(G) 3,891
1,950 (E)
OTHER ASSETS 2,510 2,118 (2,419)(C) 2,209
------------------------------------ ---------
Total assets $ 282,710 $ 158,098 $ 119,097 $ 559,905
==================================== =========
LIABILITIES AND EQUITY
- ----------------------
BORROWINGS AGAINST CREDIT FACILITY $ 31,200 $ 120,000 $(120,000)(F) $ 94,501
63,301 (D)
FIXED RATE NOTE - - 130,000 (D) 130,000
ACCOUNTS PAYABLE AND ACCRUED EXPENSES 4,215 3,574 (283)(C) 5,456
(2,050)(H)
DIVIDENDS/DISTRIBUTIONS PAYABLE 7,207 2,320 - (J) 9,527
DUE TO LESSEES 3,445 27,882 (27,882)(F) 3,445
MINORITY INTEREST IN JOINT VENTURES 7,223 - - 7,223
MINORITY INTEREST IN OPERATING PARTNERSHIP 12,422 - - 12,422
EQUITY:
SHAREHOLDERS' EQUITY 216,998 - 80,333 (B) 297,331
PARTNERS' CAPITAL - 4,322 (437)(G) -
2,050 (H)
(5,935)(I)
------------------------------------ ---------
Total liabilities and equity $ 282,710 $ 158,098 $ 119,097 $ 559,905
==================================== =========
</TABLE>
See Notes to Pro Forma Condensed Consolidated Balance Sheet.
<PAGE> 6
BOYKIN
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1998
(UNAUDITED, DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
(A) Reflects the historical condensed balance sheets as of March 31,
1998 of Boykin and Red Lion. Certain Red Lion historical amounts
have been reclassified to conform with Boykin's classification.
(B) Increase in investment in hotel properties attributable to the
application of purchase accounting to the Red Lion Hotels to be
acquired by Boykin, based upon the cash consideration to be paid
and the estimated value of Boykin Common Shares to be issued by
Boykin upon consummation of the Merger.
<TABLE>
<S> <C> <C>
Cash to be paid $ 35,305
Boykin Common Shares to be issued:
Number of shares 3,110,048
Price per share $ 25.83
-----------
80,333
-----------
Total purchase price $ 115,638
===========
</TABLE>
The price per share used in determining the value of the Boykin
Common Shares to be issued represents the average closing price for
Boykin Common Shares during the period three days before and three
days after the announcement of the Merger.
(C) Represents the payment, accrual or reclassification of prepaid
expenses, as applicable, of direct costs of the Merger. Total
direct costs of the Merger are estimated to be $10,300.
(D) Represents proceeds received by Boykin from borrowings against the
fixed rate note. The proceeds from these borrowings were used to
fund the cash portion of the merger consideration, to retire
existing Red Lion indebtedness, to pay direct costs of the Merger
and to pay deferred financing costs associated with Boykin's fixed
rate note. The fixed rate note has a 10-year term and requires
payments of interest only at 6.9% per annum for the first two
years, with principal payments commencing in the third loan year
based on a 25-year amortization.
(E) Represents the payment of deferred financing costs associated with
Boykin's fixed rate note.
(F) Represents the repayment of Red Lion's third party and related
party indebtedness with proceeds from the borrowings discussed in
Note (D).
(G) Represents the elimination of Red Lion's historical deferred
financing costs as the related debt was retired.
<PAGE> 7
(H) Represents the elimination of historical deferred income tax
liability of Red Lion as such liability will not be payable by
Boykin.
(I) Represents the elimination of the historical partners' capital of
Red Lion after consideration of the effects of adjustments (G) and
(H).
(J) As of March 31, 1998, the date of the Pro Forma Condensed
Consolidated Balance Sheet, no special distribution, as defined in
the Merger Agreement, would have been payable. However, as the
effective time of the Merger was other than the end of a fiscal
quarter, a special distribution of approximately $566 was paid to
Red Lion Unitholders.
<PAGE> 8
Schedule 2
BOYKIN
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED, AMOUNTS IN THOUSANDS EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
Pro Forma Adj. Boykin
Historical for Pre-Red Lion Follow-on Boykin
Boykin Acquisitions Offering Pro Forma
------ ------------ -------- ---------
(A) (B) (C)
<S> <C> <C> <C> <C>
REVENUES:
Lease revenue $ 37,884 $ 9,148 $ - $ 47,032
Hotel revenue - - - -
Interest income 382 (382) - -
-------------------------------------------------------
Total revenues 38,266 8,766 - 47,032
-------------------------------------------------------
EXPENSES:
Real estate related depreciation and
amortization 10,148 2,939 23 13,110
Real estate and personal property
taxes, insurance and rent 5,173 902 - 6,075
Base management fees - - - -
Incentive management fees - - - -
General and administrative 2,404 - - 2,404
Interest 2,653 4,869 (5,235) 2,287
Amortization of deferred financing costs 454 - - 454
Minority interest 2,210 (81) (223) 1,906
-------------------------------------------------------
Total expenses and minority interest 23,042 8,629 (5,435) 26,236
INCOME BEFORE EXTRAORDINARY -------------------------------------------------------
ITEMS APPLICABLE TO COMMON SHARES $ 15,224 $ 137 $ 5,435 $ 20,796
=======================================================
ALLOCATION OF NET INCOME:
GENERAL PARTNER
LIMITED PARTNER
NET INCOME PER LIMITED PARTNER UNIT
WEIGHTED AVERAGE LIMITED PARTNER UNITS
OUTSTANDING
INCOME BEFORE EXTRAORDINARY
ITEMS PER COMMON SHARE:
BASIC $ 1.60 $ 1.48
========== ============
DILUTED $ 1.59 $ 1.48
========== ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 9,523 4,500 14,023
========== ===========================
<CAPTION>
Historical As Adjusted
Red Lion Adjustments Pro Forma
-------- ----------- ---------
(A)
<S> <C> <C> <C> <C>
REVENUES:
Lease revenue $ - $ 29,464 (D) $ 76,496
Hotel revenue 40,000 (40,000) (E) -
Interest income - - -
--------------------------- ------------
Total revenues 40,000 (10,536) 76,496
--------------------------- ------------
EXPENSES:
Real estate related depreciation and
amortization 10,176 1,581 (F) 24,867
Real estate and personal property
taxes, insurance and rent 3,445 1,555 (G) 11,075
Base management fees 3,311 (3,311) (H) -
Incentive management fees 5,573 (5,573) (H) -
General and administrative 1,699 (1,199) (I) 2,904
Interest 11,925 2,235 (J) 16,447
Amortization of deferred financing costs 436 (695) (K) 195
Minority interest - (494) (L) 1,412
--------------------------- ------------
Total expenses and minority interest 36,565 (5,901) 56,900
INCOME BEFORE EXTRAORDINARY --------------------------- ------------
ITEMS APPLICABLE TO COMMON SHARES $ 3,435 $ (4,635) $ 19,596
=========================== ============
ALLOCATION OF NET INCOME:
GENERAL PARTNER $ 68
LIMITED PARTNER 3,367
-----------
$ 3,435
===========
NET INCOME PER LIMITED PARTNER UNIT $ 0.81
===========
WEIGHTED AVERAGE LIMITED PARTNER UNITS
OUTSTANDING 4,134
INCOME BEFORE EXTRAORDINARY ===========
ITEMS PER COMMON SHARE:
BASIC $ 1.14
=============
DILUTED $ 1.14
=============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 3,110 (M) 17,133
============= =============
</TABLE>
See Notes to Pro Forma Condensed Consolidated Statements of Income.
<PAGE> 9
BOYKIN
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE FIRST QUARTER ENDED MARCH 31, 1998
(UNAUDITED, AMOUNTS IN THOUSANDS EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
Pro Forma Adj. Boykin
Historical for Pre-Red Lion Follow-on Boykin
Boykin Acquisitions Offering Pro Forma
------ ------------ -------- ---------
(A) (B) (C)
<S> <C> <C> <C> <C>
REVENUES:
Lease revenue $ 10,860 $ 677 $ - $ 11,537
Hotel revenue - - - -
Interest income 54 (54) - -
----------------------------------------------------
Total revenues 10,914 623 - 11,537
----------------------------------------------------
EXPENSES:
Real estate related depreciation and
amortization 3,220 346 6 3,572
Real estate and personal property
taxes, insurance and rent 1,524 66 - 1,590
Base management fees - - - -
Incentive management fees - - - -
General and administrative 799 - - 799
Interest 1,168 413 (1,168) 413
Amortization of deferred financing costs 130 - - 130
Minority interest 424 (18) (247) 159
----------------------------------------------------
Total expenses and minority interest 7,265 807 (1,409) 6,663
INCOME(LOSS) BEFORE EXTRAORDINARY ----------------------------------------------------
ITEMS APPLICABLE TO COMMON SHARES $ 3,649 $ (184) $ 1,409 $ 4,874
====================================================
ALLOCATION OF NET INCOME:
GENERAL PARTNER
LIMITED PARTNER
NET INCOME PER LIMITED PARTNER UNIT
WEIGHTED AVERAGE LIMITED PARTNER UNITS
OUTSTANDING
INCOME BEFORE EXTRAORDINARY
ITEMS PER COMMON SHARE:
BASIC $ 0.32 $ 0.35
============ ============
DILUTED $ 0.32 $ 0.35
============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 11,342 4,500 14,042
============ ==========================
<CAPTION>
Historical As Adjusted
Red Lion Adjustments Pro Forma
-------- ----------- ---------
(A)
<S> <C> <C> <C>
REVENUES:
Lease revenue $ 6,082 $ - (D) $ 17,619
Hotel revenue - - (D) -
Interest income - - -
------------------------ -----------
Total revenues 6,082 - 17,619
------------------------ -----------
EXPENSES:
Real estate related depreciation and
amortization 2,493 447 (F) 6,512
Real estate and personal property
taxes, insurance and rent 663 587 (G) 2,840
Base management fees - - -
Incentive management fees - - -
General and administrative 289 (164) (I) 924
Interest 2,991 708 (J) 4,112
Amortization of deferred financing costs 109 (190) (K) 49
Minority interest - 58 (L) 217
------------------------ -----------
Total expenses and minority interest 6,545 1,446 14,654
INCOME(LOSS) BEFORE EXTRAORDINARY ------------------------ -----------
ITEMS APPLICABLE TO COMMON SHARES $ (463) $ (1,446) $ 2,965
======================== ===========
ALLOCATION OF NET INCOME:
GENERAL PARTNER $ (9)
LIMITED PARTNER (454)
--------
$ (463)
========
NET INCOME PER LIMITED PARTNER UNIT $ (0.11)
========
WEIGHTED AVERAGE LIMITED PARTNER UNITS
OUTSTANDING 4,134
========
INCOME BEFORE EXTRAORDINARY
ITEMS PER COMMON SHARE:
BASIC $ 0.17
===========
DILUTED $ 0.17
===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 3,110 (M) 17,152
========== ===========
</TABLE>
See Notes to Pro Forma Condensed Consolidated Statements of Income
<PAGE> 10
BOYKIN
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED, DOLLARS IN THOUSANDS EXCEPT FOR PER SHARE DATA)
(A) Represents the historical statements of income of Boykin and Red
Lion, as applicable, for the periods presented. Certain Red Lion
amounts have been reclassified to conform with Boykin's financial
statement presentation.
(B) Represents pro forma revenues and expenses associated with the
hotel properties acquired by Boykin during 1997 and 1998, assuming
all such acquisitions had been consummated on January 1, 1997.
Following is the composition of the pro forma adjustments by hotel
property.
For the year ended December 31, 1997:
-------------------------------------
<TABLE>
<CAPTION>
Hotel Month Lease Interest
Property Acquired Revenue Income Depreciation
-------- -------- ------- ------ ------------
<S> <C> <C> <C> <C> <C>
Melbourne Hilton Oceanfront March, 1997 $ 246 $ - $ 44
Holiday Inn Crabtree March, 1997 250 - 100
French Lick Springs Resort April, 1997 594 (382) 233
Holiday Inn Minneapolis West July, 1997 1,005 - 275
Marriott's Hunt Valley Inn July, 1997 1,962 - 639
Hampton Inn San Diego
Airport/Sea World November, 1997 848 - 265
High Point Radisson March, 1998 2,313 965
Knoxville Hilton March, 1998 1,930 418
-----------------------------------
$ 9,148 $ (382) $ 2,939
===================================
<CAPTION>
For the three months ended March 31, 1998:
------------------------------------------
Hotel Month Lease Interest
Property Acquired Revenue Income Depreciation
-------- -------- ------- ------ ------------
<S> <C> <C> <C> <C> <C>
High Point Radisson March, 1998 $ 383 $ (54) $ 241
Knoxville Hilton March, 1998 294 - 105
-----------------------------------
$ 677 $ (54) $ 346
===================================
<CAPTION>
For the year ended December 31, 1997:
-------------------------------------
Hotel Taxes, Insurance Interest Minority
Property and Rent Expense Interest
-------- -------- ------- --------
<S> <C> <C> <C> <C>
Melbourne Hilton Oceanfront $ 40 $ - $ 25
Holiday Inn Crabtree 12 - 21
French Lick Springs Resort 90 396 (78)
Holiday Inn Minneapolis West 214 467 2
Marriott's Hunt Valley Inn 215 1,187 (94)
Hampton Inn San Diego
Airport/Sea World - 532 7
High Point Radisson 134 1,479 (41)
Knoxville Hilton 197 808 77
------------------------------------
$ 902 $ 4,869 $ (81)
====================================
<CAPTION>
For the three months ended March 31, 1998:
------------------------------------------
Hotel Taxes, Insurance Interest Minority
Property and Rent Expense Interest
-------- -------- ------- --------
<S> <C> <C> <C> <C>
High Point Radisson $ 27 $ 267 $ (19)
Knoxville Hilton 39 146 1
-------------------------------------
$ 66 $ 413 $ (18)
=====================================
</TABLE>
<PAGE> 11
The pro forma adjustments reflected above represent the following:
1. Pro forma lease payments to the Boykin Operating Partnership
calculated on a pro forma basis by applying the rent provisions of
the percentage lease agreements to the historical revenues of the
acquired hotel properties for the applicable period. As the hotel
operating revenues will be earned by the respective lessees,
historical hotel operating revenues of the acquired hotel
properties have not been reflected in the accompanying pro forma
statements of income.
2. Pro forma depreciation of the buildings, improvements and
furniture and equipment of the acquired hotel properties.
Depreciation is computed using the straight-line method and is
based upon estimated useful lives of 30-35 years for buildings and
improvements and 7 years for furniture, fixtures and equipment.
The purchase price allocations related to the acquisition
properties, including related transaction costs, were as follows:
<TABLE>
<CAPTION>
Furniture,
Hotel Buildings and Fixtures and
Property Land Improvements Equipment
-------- ---- -------------- ------------
<S> <C> <C> <C>
Melbourne Hilton Oceanfront $ 852 $ 7,699 $ 750
Holiday Inn Crabtree 725 6,542 431
French Lick Springs Resort 2,000 16,000 1,890
Holiday Inn Minneapolis West 1,000 10,604 700
Marriott's Hunt Valley Inn 2,890 21,575 2,631
Hampton Inn San Diego
Airport/Sea World 1,000 7,400 500
High Point Radisson 450 25,050 900
Knoxville Hilton 1,500 8,050 1,050
----------------------------------
$ 10,417 $102,920 $8,852
==================================
</TABLE>
3. Historical amounts of real estate and personal property taxes,
property and casualty insurance related to the acquired properties
to be paid by Boykin Operating Partnership. All other hotel
operating expenses are incurred by the lessees and, therefore,
historical amounts of such expenses have not been reflected in the
accompanying pro forma statements of income.
4. Pro forma interest expense related to the borrowings necessary to
fund the acquisitions of the French Lick Springs Resort, the
Holiday Inn Minneapolis West, Marriott's Hunt Valley Inn, Hampton
Inn San Diego Airport/Sea World, High Point Radisson and Knoxville
Hilton. Historical interest income has been eliminated as the
funds which generated such income were used to fund acquisitions.
5. Minority interest related to the pro forma adjustments, calculated
at approximately 15.3% in 1997 and 12.3% in 1998.
<PAGE> 12
(C) Reflects (i) the elimination of the Company's interest expense as a
portion of the proceeds from Boykin's follow on equity offering
were used to retire the outstanding borrowings under the Credit
Facility, and (ii) incremental depreciation on the investment in
hotel properties attributable to the writeup of such investment as
a result of the redemption of certain Units with a
portion of the proceeds of the Offering.
<TABLE>
<CAPTION>
First Quarter
1997 1998
---- ----
<S> <C> <C>
Purchase accounting adjustment to investment
in hotel properties $ 586
Depreciable life 25
-----------
Incremental depreciation $ 23 $ 6
========================
</TABLE>
(D) Represents lease payments to Boykin Operating Partnership
applicable to the Red Lion Hotels calculated on a pro forma basis
by applying the rent provisions of the Red Lion Percentage Lease
to the historical hotel operating revenues of the Red Lion hotels.
The rent formula utilized in computing the pro forma Red Lion
Percentage Lease revenue includes, for the calender year 1997,
adjustments to reduce threshold revenue amounts in the Red Lion
Percentage Lease formulas by the 1.7% increase in the CPI for that
year. Effective January 1, 1998, Red Lion leased the Red Lion
Hotels to Westboy LLC, a wholly-owned subsidiary of Boykin
Management Company Limited Liability Company, pursuant to a
percentage lease agreement which had lease payment provisions
identical to those of the Red Lion Percentage Lease. Accordingly,
for the three-month period ended March 31, 1998, there is no pro
forma adjustment to lease or hotel revenues.
(E) Represents the elimination of the historical hotel revenues of the
Red Lion Hotels as such revenues will accrue to the lessee.
(F) Represents the adjustment necessary to reflect incremental
depreciation on the Red Lion Hotels due to the step-up in cost
basis attributable to the application of purchase accounting. The
pro forma adjustment is calculated using the straight-line method
over useful lives of 25 years for buildings and improvements and 7
years for furniture, fixtures and equipment. These estimated useful
lives are based upon management's knowledge of the properties and
the hotel industry in general.
At March 31, 1998, Boykin's pro forma investment in the Red Lion
Hotels at cost and the calculation of the incremental annual pro
forma depreciation applicable to the step-up in cost basis is as
follows:
<TABLE>
<CAPTION>
Pro Forma Pro Forma Depreciation
Investment ----------------------
in Red Lion First Quarter
Hotels Estimated Life 1997 1998
------ -------------- ---- ----
<S> <C> <C> <C> <C>
Land $ 19,811 - $ - $ -
Buildings and improvements 240,339 25 9,614 2,404
Furniture, fixtures and equipment 15,000 7 2,143 536
-------- ------------------------
$275,150 11,757 2,940
========
Red Lion historical depreciation 10,176 2,493
------------------------
Pro forma adjustment for incremental depreciation $ 1,581 $ 447
========================
</TABLE>
<PAGE> 13
(G) Represents the estimated incremental real estate taxes applicable
to the Red Lion Hotels to be paid by the Boykin Operating
Partnership. Historical real estate tax expense of the Red Lion
Hotels has been increased on a pro forma basis based upon Boykin's
estimates of property value reassessments of the Red Lion Hotels
which will result from consummation of the Merger.
(H) Represents the elimination of historical management and incentive
management fees applicable to the Red Lion Hotels as such expenses
will be paid by the lessee.
(I) Represents (i) the elimination of the historical amounts of general
and administrative expenses of the Red Lion Hotels, and (ii) the
estimated incremental general and administrative expenses to be
incurred by Boykin Operating Partnership with respect to the Red
Lion Hotels.
(J) Represents (i) the elimination of the historical interest expense
of the Red Lion Hotels, and (ii) estimated pro forma interest
expense associated with Boykin's borrowings under the Credit
Facility and the fixed rate note.
<TABLE>
<CAPTION>
First Quarter
1997 1998
---- ----
<S> <C> <C>
Pro Forma credit facility borrowings $ 94,501
Interest rate 7.50%
---------
Credit facility interest expense 7,088
---------
Non-Use Fee:
Total credit facility 250,000
Pro forma borrowings against credit facility (94,501)
---------
Unused portion of credit facility 155,499
Non-use fee percentage 0.25%
---------
Non-use fee expense 389
---------
Fixed rate note 130,000
Interest rate 6.90%
---------
Mortgage interest expense 8,970
---------
Pro Forma As Adjusted interest expense 16,447 $ 4,112
Less--Red Lion historical interest expense (11,925) (2,991)
Less--Boykin pro forma interest expense (2,287) (413)
-------------------------
Adjustment $ 2,235 $ 708
=========================
</TABLE>
(K) Represents(i) the elimination of the historical amortization of
deferred financing costs of Red Lion and (ii) amortization of
deferred financing costs associated with Boykin's fixed rate note.
Pro forma deferred financing costs associated with the fixed rate
note are being amortized on a straight-line basis over the
10-year term of that agreement.
<TABLE>
<CAPTION>
1997 First Quarter
Total 1998
----- ----
<S> <C> <C>
Deferred financing costs $ 1,950
Amortizable life 10
--------
$ 195 $ 49
Historical amortization 890 239
-------- --------
Adjustment $ (695) $ (190)
======== ========
</TABLE>
(L) Represents minority interest in the net income of Boykin Operating
Partnership associated with the Red Lion Hotels and related pro
forma adjustments. Minority interest is calculated at approximately
8.0% and 7.9% for the 1997 and 1998 periods, respectively.
(M) Represents the issuance of 3,110,048 Boykin Common Shares in
connection with the Merger.
