UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934, for the Quarterly Period ended June 30, 1998.
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934, for the Transition Period from ________ to _______.
Commission File Number 0-22253
-------
BROOKDALE LIVING COMMUNITIES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 36-4103821
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
77 W. Wacker Drive, Suite 4400
Chicago, IL 60601
- ------------------------------- ------------------------------------
(Address of principal executive offices) (Zip Code)
(312) 977-3700
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address, or former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
As of August 13, 1998, 9,572,802 shares of the Registrant's Common Stock, $0.01
par value per share, were outstanding.
<PAGE>
BROOKDALE LIVING COMMUNITIES, INC.
FORM 10-Q/A
INDEX
-----
PART I: FINANCIAL INFORMATION Page
----
Item 1. Financial Statements (Unaudited)......................................3
Consolidated Balance Sheets of Brookdale Living
Communities, Inc. as of June 30, 1998 and as of December 31, 1997.....4
Consolidated Statements of Operations of Brookdale Living
Communities, Inc. for the period from April 1, 1998 through
June 30, 1998 and for the period from May 7, 1997 through
June 30, 1997 and Combined Statement of Operations of
Predecessor Properties (predecessor to Brookdale Living
Communities, Inc.) for the period from April 1, 1997
through May 6, 1997...................................................5
Consolidated Statements of Operations of Brookdale Living
Communities, Inc. for the period from January 1, 1998 through
June 30, 1998 and for the period from May 7, 1997 through
June 30, 1997 and Combined Statement of Operations of
Predecessor Properties (predecessor to Brookdale Living
Communities, Inc.) for the period from January 1, 1997
through May 6, 1997...................................................6
Consolidated Statements of Operations of Brookdale Living
Communities, Inc. for the period from January 1, 1998 through
June 30, 1998 and for the period from May 7, 1997 through
June 30, 1997 and Combined Statement of Operations of
Predecessor Properties (predecessor to Brookdale Living
Communities, Inc.) for the period from January 1, 1997
through May 6, 1997...................................................7
Notes to Consolidated and Combined Financial Statements of
Brookdale Living Communities, Inc. and Predecessor Properties
(predecessor to Brookdale Living Communities, Inc.)...................9
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..........................................12
Item 3. Quantitative and Qualitative Disclosures About Market Risk...........16
PART II: OTHER INFORMATION....................................................17
Item 1. Legal Proceedings....................................................17
Item 2. Changes in Securities................................................17
Item 3. Defaults Upon Senior Securities......................................17
Item 4. Submission of Matters to a Vote of Security Holders..................17
Item 5. Other Information....................................................17
Item 6. Exhibits and Reports on Form 8-K.....................................17
Signatures ...................................................................23
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<PAGE>
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited).
The information furnished in the accompanying consolidated and combined
balance sheets, statements of operations, and statements of cash flows reflects
all adjustments which are, in the opinion of management, necessary for a fair
presentation of the aforementioned financial statements for the interim period.
Brookdale Living Communities, Inc. ("Brookdale") was incorporated on
September 4, 1996 and commenced operations upon the completion of its initial
public offering on May 7, 1997. The consolidated financial statements of
Brookdale and Subsidiaries (the "Company") represent the results of operations
of 15 facilities the Company operated during the period presented. The combined
financial statements of Predecessor Properties (the "Predecessor" to the
Company) are presented for comparative purposes due to common ownership and
management and represent the results of operations of the entities (five
facilities) which comprised the Predecessor Properties for the period from
January 1, 1997 to May 6, 1997.
The aforementioned financial statements should be read in conjunction
with the notes to the financial statements and Management's Discussion and
Analysis of Financial Condition and Results of Operations and the financial
statements for the period ended December 31, 1997 included in the Company's
Annual Report on Form 10-K as filed with the Securities and Exchange Commission
on March 31, 1998.
-3-
<PAGE>
BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES (THE "COMPANY")
CONSOLIDATED BALANCE SHEETS OF THE COMPANY
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
ASSETS June 30, 1998 December 31, 1997
------------- -----------------
<S> <C> <C>
Cash and cash equivalents........................................ $ 1,437 $ 13,292
Accounts receivable.............................................. 613 214
Note receivable.................................................. 1,903 -
Prepaid expenses and other....................................... 6,430 3,077
------------- ---------------
Total current assets........................................ 10,383 16,583
------------- ---------------
Property, plant and equipment.................................... 115,068 113,294
Accumulated depreciation......................................... (3,946) (2,164)
------------- ---------------
Property, plant and equipment, net............................... 111,122 111,130
------------- ---------------
Property under development....................................... 8,693 11,427
Cash and investments - restricted................................ 19,701 5,920
Letter of credit deposits........................................ 13,014 12,138
Lease security deposits.......................................... 32,054 18,542
Other............................................................ 8,824 7,429
------------- ---------------
Total assets................................................ $ 203,791 $ 183,169
============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt................................ $ 298 $ 286
Unsecured line of credit......................................... 8,250 -
Current portion of deferred gain on sale of property............. 806 806
Accrued interest payable......................................... 494 566
Accounts payable and accrued expenses............................ 7,110 4,256
Other............................................................ 993 344
------------- ---------------
Total current liabilities................................... 17,951 6,258
------------- ---------------
Long-term debt, less current portion............................. 95,729 95,881
Tenant entrance and security deposits............................ 4,752 4,377
Deferred lease liability......................................... 2,425 1,811
Deferred gain on sale of property, less current portion.......... 16,520 16,922
------------- ---------------
Total liabilities........................................... 137,377 125,249
------------- ---------------
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value, 75,000 shares authorized, 9,560
and 9,175 shares issued and outstanding at June 30, 1998 and
December 31, 1997, respectively.............................. 96 92
Additional paid-in-capital....................................... 63,241 57,383
Retained earnings................................................ 3,077 445
------------- ---------------
Total stockholders' equity.................................. 66,414 57,920
------------- ---------------
Total liabilities and stockholders' equity.................. $ 203,791 $ 183,169
============== ===============
</TABLE>
See accompanying notes to consolidated and combined financial statements.
-4-
<PAGE>
BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES (THE "COMPANY")
AND PREDECESSOR PROPERTIES (THE "PREDECESSOR" TO THE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS OF THE COMPANY AND
COMBINED STATEMENT OF OPERATIONS OF THE PREDECESSOR
(In Thousands, Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Brookdale Living Brookdale Living Predecessor
Communities, Inc. Communities, Inc. Properties
period from period from period from
April 1, 1998 May 7, 1997 April 1, 1997
through through through
June 30, 1998 June 30, 1997 May 6, 1997
---------------- ---------------- --------------
<S> <C> <C> <C>
Revenue
Resident fees......................................... $ 17,198 $ 6,539 $ 3,008
Development fees...................................... 1,390 - -
Management fees....................................... 63 32 -
---------------- ---------------- --------------
Total revenue..................................... 18,651 6,571 3,008
---------------- ---------------- --------------
Expenses
Facility operating.................................... 9,691 3,483 1,677
General and administrative............................ 1,204 478 -
Lease expense......................................... 4,141 1,544 866
Depreciation and amortization......................... 1,205 691 206
Property management fees.............................. - - 59
---------------- ---------------- --------------
Total operating expenses.......................... 16,241 6,196 2,808
---------------- ---------------- --------------
Income from operations............................ 2,410 375 200
Interest income....................................... 936 126 19
Interest expense...................................... (936) (715) (294)
---------------- ---------------- --------------
Income (loss) before minority interest expense and
income tax (expense) benefit.................... 2,410 (214) (75)
Minority interest expense............................. - - (56)
Income tax (expense) benefit.......................... (889) 133 (67)
---------------- ---------------- --------------
Net income (loss)................................. $ 1,521 $ (81) $ (198)
================ ================ ===============
Basic earnings (loss) per common share................ $ 0.16 $ (0.01)
================ ================
Weighted average shares used for computing basic
earnings (loss) per common share .................. 9,487 6,844
================ ================
Diluted earnings (loss) per common share.............. $ 0.16 $ (0.01)
================ ================
Weighted average shares used for computing diluted
earnings (loss) per common share 9,793 6,851
================ ================
</TABLE>
See accompanying notes to consolidated and combined financial statements.
-5-
<PAGE>
BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES (THE "COMPANY")
AND PREDECESSOR PROPERTIES (THE "PREDECESSOR" TO THE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS OF THE COMPANY AND
COMBINED STATEMENT OF OPERATIONS OF THE PREDECESSOR
(In Thousands, Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Brookdale Living Brookdale Living Predecessor
Communities, Inc. Communities, Inc. Properties
period from period from period from
January 1, 1998 May 7, 1997 January 1, 1997
through through through
June 30, 1998 June 30, 1997 May 6, 1997
---------------- ---------------- ---------------
<S> <C> <C> <C>
Revenue
Resident fees......................................... $ 32,855 $ 6,539 $ 10,473
Development fees...................................... 2,578 - -
Management fees....................................... 116 32 -
---------------- ---------------- ---------------
Total revenue..................................... 35,549 6,571 10,473
---------------- ---------------- ---------------
Expenses
Facility operating.................................... 18,278 3,483 5,872
General and administrative............................ 2,496 478 -
Lease expense......................................... 7,992 1,544 3,042
Depreciation and amortization......................... 2,431 691 857
Property management fees.............................. - - 230
---------------- ---------------- ---------------
Total operating expenses.......................... 31,197 6,196 10,001
---------------- ---------------- ---------------
Income from operations............................ 4,352 375 472
Interest income....................................... 1,641 126 68
Interest expense...................................... (1,858) (715) (830)
---------------- ---------------- ---------------
Income (loss) before minority interest expense and
income tax (expense) benefit.................... 4,135 (214) (290)
Minority interest expense............................. - - (138)
Income tax (expense) benefit.......................... (1,503) 133 (236)
---------------- ---------------- ---------------
Net income (loss)................................. $ 2,632 $ (81) $ (664)
================ ================ ===============
Basic earnings (loss) per common share................ $ 0.28 $ (0.01)
================ ================
Weighted average shares used for computing basic
earnings (loss) per common share.................. 9,448 6,844
================ ================
Diluted earnings (loss) per common share.............. $ 0.27 $ (0.01)
================ ================
Weighted average shares used for computing diluted
earnings (loss) per common share 9,721 6,851
================ ================
</TABLE>
See accompanying notes to consolidated and combined financial statements.
-6-
<PAGE>
BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES (THE "COMPANY")
AND PREDECESSOR PROPERTIES (THE "PREDECESSOR" TO THE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS OF THE COMPANY AND
COMBINED STATEMENT OF CASH FLOWS OF THE PREDECESSOR
(In Thousands, Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Brookdale Living Brookdale Living Predecessor
Communities, Inc. Communities, Inc. Properties
period from period from period from
January 1, 1998 May 7, 1997 January 1, 1997
through through through
June 30, 1998 June 30, 1997 May 6, 1997
---------------- ---------------- ---------------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net income (loss).................................... $ 2,632 $ (81) $ (664)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization................... 2,431 691 857
Deferred income taxes........................... 1,536 (133) -
Minority interest expense....................... - - 138
Change in deferred lease liability.............. 614 210 419
Deferred gain on sale of property............... (402) (122) (281)
Changes in:
Accounts receivable........................... (399) (85) (61)
Prepaid expenses and other.................... (4,767) (740) (110)
Accrued interest payable...................... (72) 98 111
Accounts payable and accrued expenses......... 2,854 3,526 431
Tenant entrance and security deposits......... (108) 38 35
Other current liabilities..................... (851) (1,368) 1,022
---------------- ---------------- ---------------
Net cash provided by operating activities... 3,468 2,034 1,897
---------------- ---------------- ---------------
Cash Flows from Investing Activities
Lease security deposits and acquisitions.......... (12,638) (30,266) -
Proceeds from sale of property under development.. 3,300 - -
Changes in cash and investments - restricted...... (12,758) (712) (1,180)
Property under development........................ (9,915) (427) (2)
Payments received on notes receivable............. 7,446 - -
Reimbursable leasehold improvements............... (919) - -
Additions to property, plant and equipment........ (1,961) (644) (149)
---------------- ---------------- ---------------
Net cash used in investing activities....... (27,445) (32,049) (1,331)
---------------- ---------------- ---------------
Cash Flows from Financing Activities
Repayment of long-term debt....................... (140) (44) -
Proceeds from unsecured line of credit............ 10,750 - -
Repayment of unsecured line of credit............. (2,500) - -
Increase in letter of credit deposit.............. (876) (11,177) -
Payment of deferred financing costs............... (504) (42) (287)
Net distributions to partners..................... - - (2,594)
Proceeds from issuance of common stock, net....... 5,392 50,742 -
---------------- ---------------- ---------------
Net cash provided by (used in)
financing activities........................ 12,122 39,479 (2,881)
---------------- ---------------- ---------------
Net (decrease) increase in cash and
cash equivalents............................ (11,855) 9,464 (2,315)
Cash and cash equivalents at beginning
of period................................... 13,292 1,915 4,230
---------------- ---------------- ---------------
Cash and cash equivalents at end of period.. $ 1,437 $ 11,379 $ 1,915
================ ================ ===============
</TABLE>
See accompanying notes to consolidated and combined financial statements.
-7-
<PAGE>
BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES (THE "COMPANY")
AND PREDECESSOR PROPERTIES (THE "PREDECESSOR" TO THE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS OF THE COMPANY AND
COMBINED STATEMENT OF CASH FLOWS OF THE PREDECESSOR
(In Thousands, Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Brookdale Living Brookdale Living Predecessor
Communities, Inc. Communities, Inc. Properties
period from period from period from
January 1, 1998 May 7, 1997 January 1, 1997
through through through
June 30, 1998 June 30, 1997 May 6, 1997
---------------- ---------------- ---------------
<S> <C> <C> <C>
Supplemental Disclosure of Cash Flow Information:
Interest paid, net of amounts capitalized............ $ 1,930 $ 636 $ 723
================ ================ ===============
Income taxes paid.................................... $ 657 $ - $ -
================ ================ ===============
Supplemental Schedule of Noncash Investing and
Financing Activities:
In connection with property acquisitions
and net lease transactions, assets acquired
and liabilities assumed were as follows:
Fair value of assets acquired ................... $ 13,860 $ 68,545 $ -
Less: Consideration given
Cash paid ................................. 11,875 30,266 -
---------------- ---------------- ---------------
Liabilities assumed ............................. $ 1,985 $ 38,279 $ -
================ ================ ===============
</TABLE>
See accompanying notes to consolidated and combined financial statements.
-8-
<PAGE>
BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES (THE "COMPANY")
AND PREDECESSOR PROPERTIES (THE "PREDECESSOR" TO THE COMPANY)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
(In Thousands, Except Per Share Amounts)
(Unaudited)
1. Organization
Brookdale Living Communities, Inc. ("Brookdale") was incorporated in
Delaware on September 4, 1996 and commenced operations in connection with its
initial public offering (the "IPO"), which closed on May 7, 1997. On December
24, 1997, Brookdale completed a follow-on offering of 2,000 shares of its common
stock at $16.6875 per share (the "Follow-on Offering").
The consolidated financial statements of the Company include the properties
owned or leased by the Company. The combined financial statements of the
Predecessor Properties (defined below) include the facilities owned or leased by
the senior independent and assisted living division of The Prime Group, Inc. and
its affiliates ("PGI"), which consisted of the five facilities as indicated in
the table below (PGI owned or leased The Heritage, The Devonshire and The
Hallmark facilities during the period from January 1, 1995 through May 6, 1997
and leased The Springs of East Mesa and The Gables at Brighton facilities for
the period from December 27, 1996 through May 6, 1997). The following table sets
forth the properties owned, leased, managed or under development by the Company
as of June 30, 1998 (collectively, the "Properties").
Property Name Date Owned or Leased
- ------------- ---------------------
Owned Facilities:
- -----------------
The Heritage (1) May 7, 1997
The Devonshire (1) May 7, 1997
Hawthorn Lakes (2) May 7, 1997
Edina Park Plaza (2) May 7, 1997
Leased Facilities:
- ------------------
The Hallmark (1) May 7, 1997
The Springs of East Mesa (1) May 7, 1997
The Gables at Brighton (1) May 7, 1997
The Park Place (2) May 7, 1997
The Gables at Farmington November 24, 1997
The Classic at West Palm Beach December 18, 1997
The Brendenwood Retirement Community December 22, 1997
Harbor Village March 6, 1998
The Atrium of San Jose May 12, 1998
Managed Facilities:
- -------------------
The Island on Lake Travis (3)
The Kenwood (4)
Development Projects Under Construction:
- ----------------------------------------
Austin, Texas (5)
Southfield, Michigan (5)
Raleigh, North Carolina (5)
Projects In Development:
- ------------------------
Glen Ellyn, Illinois (5) (6)
New York (Battery Park City), New York
(1) Collectively referred to as the "Predecessor Properties"
(2) Collectively referred to as the "IPO Properties"
(3) Management services commenced May 7, 1997
(4) Management services commenced July 1, 1997
(5) The Company is developing these projects for third party owners and has the
option to purchase these facilities
(6) Construction commenced August 5, 1998
-9-
<PAGE>
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments considered necessary
for a fair presentation have been included. Operating results for such interim
periods are not necessarily indicative of the results that may be expected for a
full fiscal year. For further information regarding significant accounting
policies please refer to the financial statements and footnotes thereto for the
period ended December 31, 1997 included in the Company's Annual Report on Form
10-K as filed with the Securities and Exchange Commission on March 31, 1998.
Significant intercompany accounts and transactions have been eliminated in
consolidation.
Use of Estimates
The preparation of the consolidated and combined financial statements in
accordance with generally accepted accounting principles requires management to
make estimates and assumptions that affect amounts reported in the consolidated
and combined financial statements and accompanying notes. Actual results could
differ from these estimates.
Development Fees
Development fees related to development activities provided for projects owned
by third parties are earned over the term of the development. Such fees are
recognized as revenues as the development services are provided to the owner
during the pre-construction and construction periods, which typically extend for
12 to 14 months.
Reclassifications
Certain prior period amounts have been reclassified to conform with the
current financial statement presentation.
3. Recent Developments
On April 15, 1998, the Company purchased land in Raleigh, North Carolina (the
"Raleigh Project") for the purpose of developing a Brookdale prototype senior
independent and assisted living facility. The Company acquired the land for a
total consideration of approximately $2,100 in cash. On June 30, 1998, the
Company sold the Raleigh Project to an unaffiliated third party. The sales price
for the Raleigh Project was $2,903, of which $1,000 was received in cash and
$1,903 was received by the delivery of a promissory note. The note accrues
interest at 9.0% per annum and is payable on September 30, 1998. The Company
continues to develop the Raleigh Project pursuant to a development agreement and
has an option to purchase the Raleigh Project.
On April 27, 1998, the Company obtained a $15,000 unsecured revolving line of
credit from LaSalle National Bank to be used for working capital or in
connection with the acquisition, leasing or development of real property.
Interest accrues on the outstanding principal amount of the loan at a rate equal
to the prime rate plus 1/2% per annum with interest payable monthly. The
outstanding principal amount of the loan and accrued but unpaid interest are
payable in full on April 26, 1999. The Company must pay an unused commitment fee
in an amount equal to 1/4% per annum of the amount of the line of credit which
is not outstanding, which fee is payable quarterly (see Note 7 related to the
increase in the line of credit).
On May 12, 1998, the Company entered into an agreement to lease The Atrium of
San Jose facility, a 292-unit facility located in San Jose, California. The
lease is an operating lease with an initial 10-year term and five one-year
renewal terms, and annual lease payments ranging from $2,331 to $2,405 through
the initial lease term. The Company has an option to acquire this facility. In
connection with the lease, the Company funded a security deposit of
approximately $6,965.
On May 12, 1998, the Company entered into a purchase agreement to acquire land
in Sterling Heights, Michigan for approximately $1,800 for the purpose of
developing a Brookdale prototype senior independent and assisted living
facility. The closing of the purchase of this property is subject to customary
closing contingencies, and there can be no assurance that such closing
contingencies will be satisfied in a timely manner, if at all.
On May 29, 1998, the Company filed a shelf registration statement on Form S-3
with the Securities and Exchange Commission for $200,000 in securities that may
include common stock, preferred stock, and debt securities (the "Registration
Statement"). Debt securities covered by the Registration Statement may include
debt which is convertible to common stock. This registration is intended to
facilitate future public offerings of securities. The Registration Statement was
declared effective by the Securities and Exchange Commission on July 8, 1998.
-10-
<PAGE>
On June 25, 1998, the Company and Nomura Asset Management Corporation
("NACC") entered into a master financing facility in which NACC will provide
financing, in the aggregate principal amount of up to $100,000, for the
development and construction of senior independent living facilities. The owners
of the Austin, Texas and Southfield, Michigan development projects have secured
loan commitments of $24,250 and $26,625, respectively under the master financing
facility.
4. Income Taxes
Income tax expense differs from the amounts computed by applying the U.S.
federal income tax rate of 34% to income before income tax expense principally
as a result of non-taxable amortization of the deferred gain on sale of the
property and state income taxes.
5. Earnings (Loss) Per Share
The following table sets forth the computation of basic and diluted earnings
(loss) per share for the three months ended June 30, 1998, the six months ended
June 30, 1998 and the period from May 7, 1997 through June 30, 1997.
<TABLE>
<CAPTION>
Period from
Three months Six months May 7, 1997
Ended Ended Through
June 30, 1998 June 30, 1998 June 30, 1997
------------- ------------- -------------
<S> <C> <C> <C>
Numerator for basic and diluted earnings (loss)
per common share................................ $ 1,521 $ 2,632 $ (81)
Denominator:
Denominator for basic earnings (loss) per share
- weighted-average shares.................... 9,487 9,448 6,844
Effect of dilutive securities -
Employee stock options........................ 306 273 7
------------- ------------- -------------
Denominator for diluted earnings (loss) per
share-adjusted weighted-average
shares and assumed conversions............ 9,793 9,721 6,851
============= ============= =============
Basic earnings (loss) per share.................. $ 0.16 $ 0.28 $ (0.01)
============= ============= =============
Diluted earnings (loss) per share............... $ 0.16 $ 0.27 $ (0.01)
============= ============= =============
</TABLE>
During the second quarter of 1998, certain employees exercised stock
options. The Company received a tax benefit with respect to the exercise of
non-qualified stock options and the disqualifying disposition of incentive stock
options of $470 which was credited to additional paid-in capital.
6. Pro Forma Information
On July 2, 1998, the Company entered into an agreement to lease The Chatfield,
a 125-unit senior independent and assisted living facility located in West
Hartford, Connecticut. The lease is an operating lease with an initial five year
term and five one-year renewal terms, and annual lease payment amounts ranging
from $1,013 to $1,034 through the initial lease term. The Company has an option
to acquire this facility. In connection with the lease, the Company funded a
security deposit of approximately $5,300.
The following unaudited pro forma condensed, consolidated and combined
statements of operations of the Company for the three months ended June 30, 1998
and June 30, 1997 and the six months ended June 30, 1998 and June 30, 1997 are
presented as if, at January 1, 1998 and January 1, 1997, the Company had
completed the IPO and Follow-on Offering and purchased the Owned Facilities and
leased the Leased Facilities and The Chatfield facility which was leased
beginning July 2, 1998. If The Chatfield facility was not included in the pro
forma operations, revenue, net income, basic earnings per share and diluted
earnings per share would be $19,408, $1,602, $0.17 and $0.16, respectively, for
the three months ended June 30, 1998 and $15,857, $488, $0.07 and $0.07,
respectively, for the three months ended June 30, 1997 and $38,481, $2,934,
$0.31 and $0.30, respectively, for the six months ended June 30, 1998 and
$34,125, $249, $0.04 and $0.04, respectively, for the six months ended June 30,
1997.
-11-
<PAGE>
These unaudited pro forma condensed, consolidated and combined statements of
operations are not necessarily indicative of what the actual results of
operations of the Company would have been assuming the Company had completed the
transactions described in the preceding paragraph at the beginning of each
period presented, nor do they purport to represent the results of operations of
the Company for future periods.
Three months Six months
ended June 30, ended June 30,
-------------- ---------------
1998 1997 1998 1997
-------------- ---------------
Revenue $20,256 $16,706 $40,178 $35,822
Net income 1,630 515 2,994 303
Basic earnings per share 0.17 0.08 0.32 0.04
Diluted earnings per share 0.17 0.08 0.31 0.04
7. Subsequent Events
On July 16, 1998, the Company increased its unsecured revolving line of credit
with LaSalle National Bank from $15,000 to $25,000. The maturity date for the
amended line of credit was revised so that the loan must be paid down to $10,000
upon the completion of an offering of securities; provided that, if an offering
has not occurred on or before October 15, 1998, the loan must be paid down to
$15,000 (see Note 3). The line of credit will continue to bear interest
according to the original terms of the loan agreement at prime plus 1/2% per
annum. As of August 13, 1998, the outstanding balance under the line of credit
was $15,750.
On July 23, 1998, the Company sold a development site located in Glen
Ellyn, Illinois (the "Glen Ellyn Project") to an unaffiliated third party. The
sales price for the Glen Ellyn Project was $4,125 of which $1,400 was received
in cash and $2,725 was received by the delivery of a promissory note. The note
accrues interest at 9.0% per annum and is payable on September 30, 1998. The
Company will develop the Glen Ellyn Project pursuant to a development agreement
and has an option to purchase the Glen Ellyn Project.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The following discussion is based on the Consolidated Financial Statements of
the Company as of June 30, 1998 and December 31, 1997, and for the periods from
January 1, 1998 through June 30, 1998 and from May 7, 1997 through June 30, 1997
and the Combined Statement of Operations of Predecessor Properties for the
periods from January 1, 1997 to May 6, 1997. The financial statements of the
Predecessor Properties combine the results of operations of five properties
which were contributed by PGI to the Company simultaneously with the
consummation of its IPO and are now consolidated in the Company's consolidated
financial statements. Historical results and any apparent percentage
relationships with respect thereto are not necessarily indicative of future
operations.
Cautionary Statements
This quarterly report on Form 10-Q contains "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. When
used in this report, the words "believes," "expects," "anticipates," "estimates"
and similar words and expressions are generally intended to identify
forward-looking statements. Statements that
describe the Company's future strategic plans,
goals or objectives are also forward-looking statements. Readers of this report
are cautioned that any forward-looking statements, including those regarding the
intent, belief, or current expectations of the Company or management, are not
guarantees of future performance, results or events and involve risks and
uncertainties and that actual results and events may differ materially from
those in the forward-looking statements as a result of various factors,
including, but not limited to, (i) general economic conditions in the markets in
which the Company operates, (ii) competitive pressures within the industry
and/or the markets in which the Company operates, (iii) the successful
completion of the acquisition of the facilities which the Company has under
contract, the successful completion of development activities, the successful
integration of newly acquired or leased facilities with the operations of the
Company's existing facilities, fluctuations in operating results, occupancy
levels in the markets in which the Company competes, and/or unanticipated
changes in expenses or capital expenditures, (iv) the effect of future
legislation or regulatory changes on the Company's operations and (v) other
factors described from time to time in the Company's filings with the Securities
and Exchange Commission. The forward-looking statements included in this report
are made only as of the date hereof. The Company undertakes no obligation to
update such forward-looking statements to reflect subsequent events or
circumstances.
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<PAGE>
Overview
As of June 30, 1998, the Company operated 15 senior independent and assisted
living facilities containing a total of 3,372 units. Four of such facilities are
owned by the Company, nine facilities are leased by the Company and two
facilities (one of which is owned by PGI) are managed by Brookdale pursuant to
management contracts. The Company's senior independent and assisted living
facilities offer residents a supportive, "home-like" setting as well as
assistance with certain activities of daily living. By providing residents a
range of service options as their needs change, the Company seeks to achieve
greater continuity of care, enabling senior residents to "age-in-place" and
thereby maintain their stay for a longer time period. The ability to allow
residents to age-in-place is beneficial to the Company's residents as well as
their families who are burdened with care decisions for their elderly relatives.
The Company derives its revenues from resident fees, development fees and
management fees. Resident fees consist of charges for leasing units, providing
basic care services, and, in certain instances, providing supplemental care
services to residents. Basic care services include meal service, housekeeping
services within the resident units, social and recreational activities,
scheduled transportation, security, emergency call response, access to on-site
medical services and medical education and wellness programs. In addition to
basic care services, the Company offers custom tailored supplemental care
services for residents who desire or need such services. Optional supplemental
care services include check-in services and escort and companion services.
Depending on the particular facility and as dictated by state licensing
requirements, the Company also provides assistance with activities of daily
living, such as dressing, bathing, eating and medication administration or
reminders. The Company plans to expand its supplemental service offerings, as
permitted by licensing, in order to capture incremental revenue and enable its
residents to remain in its facilities longer. In addition, where practicable,
the Company may obtain licensing to provide home health services to residents.
Resident fees typically are paid monthly by residents, their families or other
responsible parties. As of June 30, 1998, 99.6% of the Company's revenue was
derived from private pay sources.
The Company derives additional revenue from development fees associated with
developing senior independent and assisted living facilities for unaffiliated
third parties and management fees from managing senior independent and assisted
living facilities for unaffiliated third parties pursuant to management
contracts. Management services income consists of management fees, which
typically range from 3.0% to 5.0% of a managed facility's total gross revenues.
All such fees are recognized as revenues when management services are rendered.
The Company classifies its operating expenses into the following categories:
(i) facility operating expenses, which include property personnel payroll and
related costs, food, marketing, other direct facility expenses and real estate
taxes; (ii) general and administrative expenses, which primarily include
corporate and other overhead costs; (iii) lease expenses; and (iv) depreciation
and amortization.
Comparison of six months ended June 30, 1998 to six months ended June 30, 1997
For the six months ended June 30, 1998, results reflect the operations of the
Company's 15 facilities. For the six months ended June 30, 1997, results reflect
the operations of the Predecessor's five facilities, the operations of the
Company's three IPO Properties and the management by the Company of one facility
after the IPO.
Revenue. Total revenue increased by $18.5 million, or 108.6%, to $35.5 million
for the six months ended June 30, 1998 when compared to the six months ended
June 30, 1997. Resident fees increased by $15.8 million, or 93.1%, to $32.9
million. Of this increase, approximately $783,000 (or a "same store" increase of
5.2%) reflects an increase in resident fees at the properties that have been
operated during both periods, which resulted primarily from increases in monthly
charges under residency agreements. Approximately $15.0 million of such increase
reflects revenue from facilities acquired, leased or managed subsequent the IPO.
The remaining $2.7 million of the total revenue increase reflects revenue from
development and management fees associated with projects being developed and
managed by the Company for unaffiliated third parties. The Company has the
option to purchase such development properties.
Operating Expenses. Total operating expenses increased by $15.0 million, or
92.6%, to $31.2 million for the six months ended June 30, 1998 when compared to
the six months ended June 30, 1997. Facility operating expenses increased by
$8.9 million, or 95.4%, to $18.3 million primarily due to the addition of the
expenses of the facilities acquired or leased subsequent to the IPO. From the
commencement of its operations on May 7, 1997, the Company has managed all of
its facilities and, accordingly, incurred general and administrative expenses of
approximately $2.5 million for the six months ended June 30, 1998 compared to
$478,000 for the period from May 7, 1997 through June 30, 1997. Prior to May 7,
1997, two of the Predecessor Properties incurred property management fees of
approximately $230,000.
Lease expense increased by approximately $3.4 million, or 74.3%, to $8.0
million for the six months ended June 30, 1998 when compared to the six months
ended June 30, 1997 due primarily to the addition of lease expense for the
facilities leased subsequent to the IPO.
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<PAGE>
Depreciation and amortization increased by approximately $883,000, or 57.0%, to
$2.4 million for the six months ended June 30, 1998 when compared to the six
months ended June 30, 1997. This increase primarily reflects the depreciation of
the step-up in basis of two of the Predecessor Properties that resulted in
connection with the IPO and the depreciation of two of the IPO Properties
acquired on May 7, 1997.
Interest expense increased by approximately $313,000, or 20.3%, to $1.9
million for the six months ended June 30, 1998 when compared to the six months
ended June 30, 1997 primarily due to the assumption of debt on the Hawthorn
Lakes and Edina Park Plaza facilities in connection with the purchase of these
properties on May 7, 1997. Interest income increased by approximately $1.4
million to $1.6 million for the six months ended June 30, 1998 when compared to
the six months ended June 30, 1997 due to an increase in average cash balances
and various deposits and restricted investments.
Net Income. For the six months ended June 30, 1998, the Company generated net
income of approximately $2.6 million, as compared to a net loss of $745,000 for
the six months ended June 30, 1997 primarily due to the changes in revenue and
expenses described above. Net income for the six months ended June 30, 1998
versus the net loss for the six months ended June 30, 1997, which included the
Predecessor Properties only, is not necessarily comparable, in the opinion of
management, due to the different ownership and capital structures for the
respective periods.
Comparison of three months ended June 30, 1998 to three months ended June 30,
1997
For the three months ended June 30, 1998, results reflect the operations of
the Company's 15 facilities. For the three months ended June 30, 1997, results
reflect the operations of the Predecessor's five facilities, the operations of
the Company's three IPO Properties and the management by the Company of one
facility after the IPO.
Revenue. Total revenue increased by $9.1 million, or 94.7%, to $18.7 million
for the three months ended June 30, 1998 when compared to the three months ended
June 30, 1997. Resident fees increased by $7.7 million, or 80.1%, to $17.2
million. Of this increase, approximately $341,000 (or a "same store" increase of
4.5%) reflects an increase in resident fees at the properties that have been
operated during both periods, which resulted primarily from increases in monthly
charges under residency agreements. Approximately $7.4 million of such increase
reflects revenue from facilities acquired, leased or managed subsequent to the
IPO. The remaining $1.4 million of the total revenue increase reflects revenue
from development and management fees associated with projects being developed
and managed by the Company for unaffiliated third parties. The Company has the
option to purchase such development properties.
Operating Expenses. Total operating expenses increased by $7.2 million, or
80.4%, to $16.2 million for the three months ended June 30, 1998 when compared
to the three months ended June 30, 1997. Facility operating expenses increased
by $4.5 million, or 87.8%, to $9.7 million primarily due to the addition of the
expenses of the facilities acquired or leased subsequent to the IPO. From the
commencement of operations on May 7, 1997, the Company has managed all of its
facilities and, accordingly, incurred general and administrative expenses of
approximately $1.2 million for the three months ended June 30, 1998 compared to
$478,000 for the period from May 7, 1997 through June 30, 1997. For the period
from April 1, 1997 through May 6, 1997, two of the Predecessor Properties
incurred property management fees of approximately $59,000.
Lease expense increased by approximately $1.7 million, or 71.8%, to $4.1
million for the three months ended June 30, 1998 when compared to the three
months ended June 30, 1997 due to the addition of lease expense for the
facilities leased subsequent to the IPO. Depreciation and amortization increased
by approximately $308,000, or 34.3%, to $1.2 million for the three months ended
June 30, 1998 when compared to the three months ended June 30, 1997. This
increase primarily reflects the depreciation of the step-up in basis of two of
the Predecessor Properties that resulted in connection with the IPO and the
depreciation of two of the IPO Properties acquired on May 7, 1997.
Interest expense decreased by approximately $73,000, or 7.2%, to $936,000 for
the three months ended June 30, 1998 when compared to the three months ended
June 30, 1997 primarily due to lower floating interest rates on the tax-exempt
bonds relating to The Heritage and The Devonshire facilities partially offset by
the debt on the Hawthorn Lakes and Edina Park Plaza facilities purchased on May
7, 1997. Interest income increased by approximately $791,000 to $936,000 for the
three months ended June 30, 1998 when compared to the three months ended June
30, 1997 due to an increase in average cash balances and various deposits and
restricted investments.
Net Income. For the three months ended June 30, 1998, the Company generated
net income of approximately $1.5 million, as compared to a net loss of $279,000
for the three months ended June 30, 1997 primarily due to the changes in revenue
and expenses described above. Net income for the three months ended June 30,
1998 versus the net loss for the three months ended June 30, 1997, which
included the Predecessor Properties only, is not necessarily comparable, in the
opinion of management, due to the different ownership and capital structures for
the respective periods.
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<PAGE>
Liquidity and Capital Resources
On December 24, 1997, the Company completed a follow-on public offering of
2,000,000 shares of common stock, $.01 par value per share, at $16.6875 per
share. The underwriters of the offering exercised their over-allotment option,
and, on January 21, 1998, the Company sold an additional 300,000 shares of the
Company's common stock at $16.6875 per share. The proceeds from such offering
(including the exercise of the underwriters' over-allotment option), net of
related underwriting discounts and commissions and offering costs, totaled
approximately $35.5 million ($4.6 million from the exercise of the underwriters'
over-allotment option). The Company used approximately $25.8 million of such net
proceeds to repay outstanding indebtedness and fund lease security deposits paid
subsequent to such offering. The remaining net proceeds were used to finance a
portion of subsequent acquisitions, leasing and developments of senior
independent and assisted living facilities and working capital and for general
corporate purposes.
Cash and cash equivalents (which does not include cash and
investments-restricted of $19.7 million, the letter of credit deposit of $13.0
million and lease security deposits of $32.1 million) decreased by $11.9 million
to $1.4 million at June 30, 1998 primarily due to cash utilized for the
acquisition, leasing and development of facilities offset in part by the
proceeds from the exercise of the underwriters' over-allotment option related to
the Follow-on Offering.
Net cash provided by operating activities for the six months ended June 30,
1998 totaled approximately $3.5 million as a result of increased property
operations before depreciation and amortization and properties acquired and
leased subsequent to the IPO.
Net cash used in investing activities totaled approximately $27.4 million for
the six months ended June 30, 1998. Investing activities included net cash used
for lease security deposits in connection with the lease of Harbor Village and
The Atrium of San Jose facilities in the amounts of $5.3 million and $7.0
million, respectively, cash paid for property under development of $9.9 million,
proceeds from the sale of property under development of $3.3 million, payments
received on notes receivable of $7.4 million, an increase in cash and
investments-restricted of $12.8 million and other uses of $3.1 million.
Net cash provided by financing activities was approximately $12.1 million for
the six months ended June 30, 1998. Financing activities included proceeds from
the exercise of the underwriters' over-allotment option related to the follow-on
offering of $4.4 million, $1.0 million from the exercise of employee stock
options and net proceeds from an unsecured line of credit of $8.3 million offset
by other net uses of approximately $1.6 million.
The Company currently plans to acquire or lease four to six senior independent
and assisted living facilities per year containing an aggregate of approximately
800 to 1,200 units and to commence development of at least three new facilities
per year containing approximately 220 units. The total construction costs,
including construction period financing costs and operating deficits during the
lease-up period, for the 220-unit prototype are estimated to be approximately
$30.0 million, or approximately $135,000 per unit. At June 30, 1998, the Company
had several sites under consideration for development for new senior independent
and assisted living facilities, two of which were under construction. Subsequent
to such date, the Company commenced construction on its Raleigh, North Carolina
and Glen Ellyn, Illinois projects. Capital expenditures related to the Company's
existing facilities are estimated to be approximately $3.0 million to $5.0
million in the aggregate in 1998. The Company anticipates that it will use a
combination of cash on hand, additional equity financing and debt financing,
lease transactions and cash generated from operations to fund its acquisition
and development activities. The Company currently estimates that the cash
generated from operations, together with cash on hand, existing debt facilities
and commitments and anticipated future financing, will be sufficient to meet its
liquidity needs for at least six months. Thereafter, in order to achieve its
growth plans, the Company will be required to obtain a substantial amount of
additional financing. The Company presently has no commitment, arrangement or
understanding regarding financing to fund the debt portion of the Company's
acquisition and development plans other than the $100.0 million commitment from
Nomura Asset Capital Corporation for development projects. There can be no
assurance that the Company will be able to obtain the financing necessary for
its acquisition and development programs.
As of June 30, 1998, the Company had $65.0 million of long-term indebtedness
in tax-exempt bonds with floating rates. The interest rates (exclusive of credit
enhancement and other fees) on such debt averaged 3.64% during the six months
ended June 30, 1998. Such tax-exempt bonds contain covenants requiring the
facilities to maintain a minimum number of units for income qualified residents.
The Company may obtain similar bond financing for future facilities.
As of June 30, 1998, the Company also had $8.3 million outstanding under its
unsecured line of credit at a floating rate of prime plus 1/2%. The interest
rate on the line remained at 9% during the three months ended June 30, 1998.
The Company is dependent on third-party financing for its acquisition, leasing
and development programs. Some financing obtained in the future is expected to
contain terms and conditions and representations and warranties that are
customary for such loans and may contain financing covenants and other
restrictions that (i) require the Company to meet certain financial tests and
maintain certain amounts
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<PAGE>
of funds in escrow, (ii) limit, among other things, the ability of the Company
to borrow additional funds, dispose of assets and engage in mergers or other
business combinations and (iii) restrict the ability of the Company to operate
competing facilities within certain distances from mortgaged facilities. There
can be no assurance that financing for the Company's acquisition and development
program will be available to the Company on acceptable terms or at all. A lack
of funds may require the Company to delay or eliminate all or some of its
development projects and acquisition and leasing plans and could therefore have
a material adverse effect on the Company's growth plans and on its future
results of operations.
Impact of Recently Issued Accounting Standards
In April 1998, the Accounting Standards Executive Committee issued Statement
of Position 98-5, "Reporting on the Cost of Start-Up Activities" (SOP 98-5)
which is effective for fiscal years beginning after December 15, 1998. SOP 98-5
provides guidance on financial reporting of start-up costs and organization
costs. Adoption of SOP 98-5 is not anticipated to affect the financial position
or results of operations of the Company.
Impact of Inflation
Resident fees from senior independent and assisted living facilities owned or
leased by the Company, management fees from facilities managed by the Company
for third parties and development fees from facilities developed by the Company
for third parties are primary sources of revenue. These revenues are affected by
monthly resident fee rates and facility occupancy rates. The rates charged for
senior independent and assisted living services are highly dependent upon local
market conditions and the competitive environment in which the facilities
operate. Substantially all of the Company's resident agreements allow for
adjustments in the monthly fees payable thereunder upon each anniversary of the
commencement of the residency agreement, thereby enabling the Company to seek
increases in monthly fees due to inflation or other demand factors. Any such
increase would be subject to market and competitive conditions. The Company
believes, however, that the ability to adjust the monthly fees payable under the
residency agreements on an annual basis serves to reduce the risk to the Company
of the adverse effect of inflation. In addition, employee compensation expense
is a principal cost element of facility operations and is also dependent upon
local market conditions. There can be no assurance that resident fees will
increase or that costs will not increase due to inflation or other causes. In
addition, as of June 30, 1998, approximately $73.3 million in principal amount
of the Company's indebtedness bore interest at floating rates and future
indebtedness may bear floating rate interest. Inflation, and its impact on
floating interest rates, could affect the amount of interest payments due on
such indebtedness.
Readiness for Year 2000
The Company is in the process of planning the nature and extent of the work
required to make its systems and infrastructure Year 2000 compliant. Based on a
recent assessment, the Company will have to modify or replace certain portions
of its hardware and software so that its systems will function properly with
respect to the Year 2000 and beyond. The Company believes that with
modifications to existing software and conversions to new software applications,
in addition to hardware upgrades on certain mechanical systems, the Year 2000
issue will not pose significant operational problems. However, if such
modifications and conversions are not made, or are not completed in a timely
manner, the Year 2000 issue could have a material impact on the operations of
the Company.
The Company continues to evaluate the Year 2000 issue and will utilize both
internal and external resources in order to reprogram, or replace, systems that
are not in compliance with the Year 2000. The Company anticipates completing the
project no later than March 31, 1999. The cost to complete the project has not
yet been determined.
The project completion date is based on management's best estimates, which
were derived utilizing numerous assumptions of future events, including the
ability of third parties to modify the Company's systems on a timely basis.
There can be no guarantee that the project will be completed in a timely manner.
Specific factors that might delay completion of the project include, but are not
limited to, the availability of qualified personnel, the ability to locate and
correct all relevant computer codes, and similar uncertainties. Although the
Company intends to continue preparations for Year 2000, it is not possible to
quantify potential indirect effects resulting from the lack of readiness of any
third party with whom the Company conducts its business.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not Applicable.
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<PAGE>
PART II: OTHER INFORMATION
Item 1. Legal Proceedings.
No material developments with respect to legal proceedings
occurred during the period covered by this quarterly report.
Item 2. Changes in Securities and Use of Proceeds.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
The Company's Annual Meeting of Stockholders was held on May
21, 1998. At the meeting, stockholders voted on (i) the
election of two directors; (ii) ratification of the
appointment of Ernst & Young LLP as the Company's independent
auditors for 1998; and (iii) the approval of the Company's
1998 Stock Incentive Plan. Voting on each such matter was as
follows:
Votes Votes Withheld/ Broker
For Against Abstentions Non-Votes
---------- --------- ----------- ---------
1. Election of Directors:
Michael W. Reschke 8,985,257 - 47,000 -
Dr. Bruce L. Gewertz 9,027,257 - 5,000 -
2. Ratification of Auditors 8,613,907 417,100 1,250 -
3. Approval of 1998 Stock
Incentive Plan 7,483,447 1,540,820 6,725 -
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
EXHIBIT INDEX
Exhibit
Number Description
------- -----------
3.1 Restated Certificate of Incorporation of the Company, as filed with
the Securities and Exchange Commission on June 16, 1997 as Exhibit
3.1 to the Company's Form 10-Q for the period ended March 31, 1997
(File No. 0-22253) and incorporated herein by reference
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<PAGE>
Exhibit
Number Description
------- -----------
3.2 Amended and Restated By-laws of the Company, as filed with the
Securities and Exchange Commission on June 16, 1997 as Exhibit 3.2
to the Company's Form 10-Q for the period ended March 31, 1997
(File No. 0-22253) and incorporated herein by reference
4.1 Form of certificate representing Common Stock of the Company, as
filed with the Securities and Exchange Commission on March 17, 1997
as Exhibit 10.14 to the Company's Registration Statement on Form
S-1 (Registration No. 333-12259) and incorporated herein by
reference
10.1 Lease dated as of May 11, 1998 by and between Brookdale Living
Communities of California, Inc., as lessee, and Atrium of San Jose
LLC, as lessor-owner, as filed with the Securities and Exchange
Commission on May 26, 1998 as Exhibit 10.1 to the Company's Form
8-K dated May 12, 1998 (File No. 0-22253) and incorporated herein
by reference
10.2 Note and Deed of Trust Modification and Assumption Agreement dated
as of May 12, 1998 by and among LaSalle National Bank, as Trustee
for the Registered Holders of DLJ Mortgage Acceptance Corp.,
Commercial Mortgage Pass-Through Certificates, Series 1996-CF1
("Trustee"), Atrium Venture, The Atrium of San Jose LLC and
Brookdale Living Communities of California, Inc., as filed with the
Securities and Exchange Commission on May 26, 1998 as Exhibit 10.2
to the Company's Form 8-K dated May 12, 1998 (File No. 0-22253) and
incorporated herein by reference
10.3 Leasehold Deed of Trust, Assignment of Rents, Security Agreement
and Fixture Filing dated as of May 12, 1998 by Brookdale Living
Communities of California, Inc. in favor of The Atrium of San Jose
LLC, as filed with the Securities and Exchange Commission on May
26, 1998 as Exhibit 10.3 to the Company's Form 8-K dated May 12,
1998 (File No. 0-22253) and incorporated herein by reference
10.4 Pledge and Security Agreement dated as of May 12, 1998 by Brookdale
Living Communities of California, Inc. and The Atrium of San Jose
LLC in favor of Key Corporate Capital, Inc. and SELCO Service
Corporation, as filed with the Securities and Exchange Commission
on May 26, 1998 as Exhibit 10.4 to the Company's Form 8-K dated May
12, 1998 (File No. 0-22253) and incorporated herein by reference
10.5 Indemnity and Guaranty Agreement dated as of May 12, 1998 from
Brookdale Living Communities of California, Inc. and Brookdale
Living Communities, Inc. in favor of Trustee, as filed with the
Securities and Exchange Commission on May 26, 1998 as Exhibit 10.5
to the Company's Form 8-K dated May 12, 1998 (File No. 0-22253) and
incorporated herein by reference
10.6 Hazardous Substances Indemnity Agreement dated as of May 12, 1998
from The Atrium of San Jose LLC, Brookdale Living Communities of
California, Inc. and Brookdale Living Communities, Inc. in favor of
Trustee, as filed with the Securities and Exchange Commission on
May 26, 1998 as Exhibit 10.6 to the Company's Form 8-K dated May
12, 1998 (File No. 0- 22253) and incorporated herein by reference
10.7 Indemnity and Guaranty Agreement dated as of May 12, 1998 from
Brookdale Living Communities, Inc. in favor of Healthcare Realty
Trust Incorporated, as filed with the Securities and Exchange
Commission on May 26, 1998 as Exhibit 10.7 to the Company's Form
8-K dated May 12, 1998 (File No. 0-22253) and incorporated herein
by reference
10.8 Indemnity Agreement dated as of May 12, 1998 by and among Brookdale
Living Communities, Inc. in favor of The Atrium of San Jose LLC,
Healthcare Realty Trust Incorporated, Key Corporate Capital, Inc.,
SELCO Service Corporation and Wilmington Trust Company, as filed
with the Securities and Exchange Commission on May 26, 1998 as
Exhibit 10.8 to the Company's Form 8-K dated May 12, 1998 (File No.
0-22253) and incorporated herein by reference
10.9 Master Facility Agreement, dated as of June 17, 1998, by and
between Brookdale Living Communities, Inc. and Nomura Asset Capital
Corporation as filed with the Securities and Exchange Commission on
July 16, 1998 as Exhibit 10.1 to the Company's Form 8-K dated June
25, 1998 (File No. 0-22253) and incorporated herein by reference
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<PAGE>
Exhibit
Number Description
------- -----------
10.10 Loan Agreement, dated as of June 17, 1998, by and among Nomura
Asset Capital Corporation, AH Texas Owner Limited Partnership and
BLC of Texas-II, L.P. as filed with the Securities and Exchange
Commission on July 16, 1998 as Exhibit 10.2 to the Company's Form
8-K dated June 25, 1998 (File No. 0-22253) and incorporated herein
by reference
10.11 Building Loan Agreement, dated as of June 17, 1998, by and among
Nomura Asset Capital Corporation, AH Texas Owner Limited
Partnership and BLC of Texas-II, L.P. as filed with the Securities
and Exchange Commission on July 16, 1998 as Exhibit 10.3 to the
Company's Form 8-K dated June 25, 1998 (File No. 0-22253) and
incorporated herein by reference
10.12 Guaranty of Payment of Note, Rate Lock Obligations, Carrying Costs
and Recourse Obligations, dated as of June 17, 1998, from Brookdale
Living Communities, Inc. in favor of Nomura Asset Capital
Corporation. as filed with the Securities and Exchange Commission
on July 16, 1998 as Exhibit 10.4 to the Company's Form 8-K dated
June 25, 1998 (File No. 0-22253) and incorporated herein by
reference
10.13 Guaranty of Completion, dated as of June 17, 1998, by Brookdale
Living Communities, Inc. in favor of Nomura Asset Capital
Corporation as filed with the Securities and Exchange Commission on
July 16, 1998 as Exhibit 10.5 to the Company's Form 8-K dated June
25, 1998 (File No. 0-22253) and incorporated herein by reference
10.14 Environmental Indemnity Agreement, dated as of June 17, 1998, from
Brookdale Living Communities, Inc. in favor of Nomura Asset Capital
Corporation as filed with the Securities and Exchange Commission on
July 16, 1998 as Exhibit 10.6 to the Company's Form 8-K dated June
25, 1998 (File No. 0-22253) and incorporated herein by reference
10.15 Loan Agreement, dated as of June 17, 1998, by and between Banc One
Capital Partners IV, Ltd. and AH Texas Subordinated, LLC. as filed
with the Securities and Exchange Commission on July 16, 1998 as
Exhibit 10.7 to the Company's Form 8-K dated June 25, 1998 (File
No. 0-22253) and incorporated herein by reference
10.16 Guaranty Agreement, dated as of June 17, 1998, from Brookdale
Living Communities, Inc. in favor of Banc One Capital Partners IV,
Ltd. as filed with the Securities and Exchange Commission on July
16, 1998 as Exhibit 10.8 to the Company's Form 8-K dated June 25,
1998 (File No. 0-22253) and incorporated herein by reference
10.17 Guaranty of Completion, dated as of June 17, 1998, by Brookdale
Living Communities, Inc. in favor of Banc One Capital Partners IV,
Ltd. as filed with the Securities and Exchange Commission on July
16, 1998 as Exhibit 10.9 to the Company's Form 8-K dated June 25,
1998 (File No. 0-22253) and incorporated herein by reference
10.18 Non-recourse Guaranty Agreement, dated as of June 17, 1998, from
Brookdale Living Communities, Inc. in favor of Banc One Capital
Partners IV, Ltd. as filed with the Securities and Exchange
Commission on July 16, 1998 as Exhibit 10.10 to the Company's Form
8-K dated June 25, 1998 (File No. 0-22253) and incorporated herein
by reference
10.19 Environmental Indemnity Agreement, dated as of June 17, 1998, from
Brookdale Living Communities, Inc. in favor of Banc One Capital
Partners IV, Ltd. as filed with the Securities and Exchange
Commission on July 16, 1998 as Exhibit 10.11 to the Company's Form
8-K dated June 25, 1998 (File No. 0-22253) and incorporated herein
by reference
10.20 Environmental Indemnity Agreement, dated as of June 17, 1998, from
Brookdale Living Communities, Inc. in favor of the Indemnified
Parties (as defined therein) and AH Texas Owner Limited Partnership
as filed with the Securities and Exchange Commission on July 16,
1998 as Exhibit 10.12 to the Company's Form 8-K dated June 25, 1998
(File No. 0-22253) and incorporated herein by reference
10.21 Conditional Investment Agreement, dated as of June 17, 1998, by and
between Brookdale Living Communities, Inc. and Banc One Capital
Funding Corporation as filed with the Securities and Exchange
Commission on July 16, 1998 as Exhibit 10.13 to the Company's Form
8-K dated June 25, 1998 (File No. 0-22253) and incorporated herein
by reference
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<PAGE>
Exhibit
Number Description
------- -----------
10.22 Warrant Certificate, dated as of June 17, 1998, issued by Brookdale
Living Communities, Inc. in favor of Banc One Capital Markets, Inc.
for up to 5,000 shares of Common Stock of Brookdale Living
Communities, Inc. as filed with the Securities and Exchange
Commission on July 16, 1998 as Exhibit 10.14 to the Company's Form
8-K dated June 25, 1998 (File No. 0-22253) and incorporated herein
by reference
10.23 Warrant Certificate, dated as of June 17, 1998, issued by Brookdale
Living Communities, Inc. in favor of Banc One Capital Partners IV,
Ltd. for up to 20,000 shares of Common Stock of Brookdale Living
Communities, Inc. as filed with the Securities and Exchange
Commission on July 16, 1998 as Exhibit 10.15 to the Company's Form
8-K dated June 25, 1998 (File No. 0-22253) and incorporated herein
by reference
10.24 Amended and Restated Development Agreement, dated as of June 17,
1998, by and between BLC of Texas-II, L.P. and AH Texas Owner
Limited Partnership as filed with the Securities and Exchange
Commission on July 16, 1998 as Exhibit 10.16 to the Company's Form
8-K dated June 25, 1998 (File No. 0-22253) and incorporated herein
by reference
10.25 Management Agreement, dated as of June 17, 1998, by and between BLC
of Texas-II, L.P. and AH Texas Owner Limited Partnership as filed
with the Securities and Exchange Commission on July 16, 1998 as
Exhibit 10.17 to the Company's Form 8-K dated June 25, 1998 (File
No. 0-22253) and incorporated herein by reference
10.26 Equity Option Agreement, dated as of June 17, 1998, by and among
Brookdale Living Communities, Inc., AH Texas Owner Limited
Partnership, AH Texas Subordinated, LLC, AH Texas CGP, Inc. and AH
Texas Investor, Inc. as filed with the Securities and Exchange
Commission on July 16, 1998 as Exhibit 10.18 to the Company's Form
8-K dated June 25, 1998 (File No. 0-22253) and incorporated herein
by reference
10.27 Property Option Agreement, dated as of June 17, 1998, by and among
Brookdale Living Communities, Inc., AH Texas Owner Limited
Partnership and AH Texas Subordinated, LLC. as filed with the
Securities and Exchange Commission on July 16, 1998 as Exhibit
10.19 to the Company's Form 8-K dated June 25, 1998 (File No.
0-22253) and incorporated herein by reference
10.28 Loan Agreement, dated as of June 17, 1998, by and among Nomura
Asset Capital Corporation, AH Michigan Owner Limited Partnership
and Brookdale Living Communities of Michigan, Inc. as filed with
the Securities and Exchange Commission on July 16, 1998 as Exhibit
10.20 to the Company's Form 8-K dated June 25, 1998 (File No.
0-22253) and incorporated herein by reference
10.29 Building Loan Agreement, dated as of June 17, 1998, by and among
Nomura Asset Capital Corporation, AH Michigan Owner Limited
Partnership and Brookdale Living Communities of Michigan, Inc. as
filed with the Securities and Exchange Commission on July 16, 1998
as Exhibit 10.21 to the Company's Form 8-K dated June 25, 1998
(File No. 0-22253) and incorporated herein by reference
10.30 Guaranty of Payment of Note, Rate Lock Obligations, Carrying Costs
and Recourse Obligations, dated as of June 17, 1998, from Brookdale
Living Communities, Inc. in favor of Nomura Asset Capital
Corporation as filed with the Securities and Exchange Commission on
July 16, 1998 as Exhibit 10.22 to the Company's Form 8-K dated June
25, 1998 (File No. 0- 22253) and incorporated herein by reference
10.31 Guaranty of Completion, dated as of June 17, 1998, by Brookdale
Living Communities, Inc. in favor of Nomura Asset Capital
Corporation as filed with the Securities and Exchange Commission on
July 16, 1998 as Exhibit 10.23 to the Company's Form 8-K dated June
25, 1998 (File No. 0-22253) and incorporated herein by reference
10.32 Environmental Indemnity Agreement, dated as of June 17, 1998, from
Brookdale Living Communities, Inc. in favor of Nomura Asset Capital
Corporation as filed with the Securities and Exchange Commission on
July 16, 1998 as Exhibit 10.24 to the Company's Form 8-K dated June
25, 1998 (File No. 0-22253) and incorporated herein by reference
-20-
<PAGE>
Exhibit
Number Description
------- -----------
10.33 Loan Agreement, dated as of June 17, 1998, by and between Banc One
Capital Partners IV, Ltd. and AH Michigan Subordinated, LLC as
filed with the Securities and Exchange Commission on July 16, 1998
as Exhibit 10.25 to the Company's Form 8-K dated June 25, 1998
(File No. 0-22253) and incorporated herein by reference
10.34 Guaranty Agreement, dated as of June 17, 1998, from Brookdale
Living Communities, Inc. in favor of Banc One Capital Partners IV,
Ltd. as filed with the Securities and Exchange Commission on July
16, 1998 as Exhibit 10.26 to the Company's Form 8-K dated June 25,
1998 (File No. 0-22253) and incorporated herein by reference
10.35 Guaranty of Completion, dated as of June 17, 1998, by Brookdale
Living Communities, Inc. in favor of Banc One Capital Partners IV,
Ltd. as filed with the Securities and Exchange Commission on July
16, 1998 as Exhibit 10.27 to the Company's Form 8-K dated June 25,
1998 (File No. 0-22253) and incorporated herein by reference
10.36 Non-recourse Guaranty Agreement, dated as of June 17, 1998, from
Brookdale Living Communities, Inc. in favor of Banc One Capital
Partners IV, Ltd. as filed with the Securities and Exchange
Commission on July 16, 1998 as Exhibit 10.28 to the Company's Form
8-K dated June 25, 1998 (File No. 0-22253) and incorporated herein
by reference
10.37 Environmental Indemnity Agreement, dated as of June 17, 1998, from
Brookdale Living Communities, Inc. in favor of Banc One Capital
Partners IV, Ltd. as filed with the Securities and Exchange
Commission on July 16, 1998 as Exhibit 10.29 to the Company's Form
8-K dated June 25, 1998 (File No. 0-22253) and incorporated herein
by reference
10.38 Environmental Indemnity Agreement, dated as of June 17, 1998, from
Brookdale Living Communities, Inc. in favor of the Indemnified
Parties (as defined therein) and AH Michigan Owner Limited
Partnership as filed with the Securities and Exchange Commission on
July 16, 1998 as Exhibit 10.30 to the Company's Form 8-K dated June
25, 1998 (File No. 0- 22253) and incorporated herein by reference
10.39 Conditional Investment Agreement, dated as of June 17, 1998, by and
between Brookdale Living Communities, Inc. and Banc One Capital
Funding Corporation as filed with the Securities and Exchange
Commission on July 16, 1998 as Exhibit 10.31 to the Company's Form
8-K dated June 25, 1998 (File No. 0-22253) and incorporated herein
by reference
10.40 Warrant Certificate, dated as of June 17, 1998, issued by Brookdale
Living Communities, Inc. in favor of Banc One Capital Markets, Inc.
for up to 5,000 shares of Common Stock of Brookdale Living
Communities, Inc. as filed with the Securities and Exchange
Commission on July 16, 1998 as Exhibit 10.32 to the Company's Form
8-K dated June 25, 1998 (File No. 0-22253) and incorporated herein
by reference
10.41 Warrant Certificate, dated as of June 17, 1998, issued by Brookdale
Living Communities, Inc. in favor of Banc One Capital Partners IV,
Ltd. for up to 20,000 shares of Common Stock of Brookdale Living
Communities, Inc. as filed with the Securities and Exchange
Commission on July 16, 1998 as Exhibit 10.33 to the Company's Form
8-K dated June 25, 1998 (File No. 0-22253) and incorporated herein
by reference
10.42 Amended and Restated Development Agreement, dated as of June 17,
1998, by and between Brookdale Living Communities of Michigan, Inc.
and AH Michigan Owner Limited Partnership as filed with the
Securities and Exchange Commission on July 16, 1998 as Exhibit
10.34 to the Company's Form 8-K dated June 25, 1998 (File No.
0-22253) and incorporated herein by reference
10.43 Management Agreement, dated as of June 17, 1998, by and between
Brookdale Living Communities of Michigan, Inc. and AH Michigan
Owner Limited Partnership as filed with the Securities and Exchange
Commission on July 16, 1998 as Exhibit 10.35 to the Company's Form
8-K dated June 25, 1998 (File No. 0-22253) and incorporated herein
by reference
10.44 Equity Option Agreement, dated as of June 17, 1998, by and among
Brookdale Living Communities, Inc., AH Michigan Owner Limited
Partnership, AH Michigan Subordinated, LLC, AH Michigan CGP, Inc.
and AH Michigan Investor, Inc. as filed with the Securities and
Exchange Commission on July 16, 1998 as Exhibit 10.36 to the
Company's Form 8-K dated June 25, 1998 (File No. 0-22253) and
incorporated herein by reference
-21-
<PAGE>
10.45 Property Option Agreement, dated as of June 17, 1998, by and among
Brookdale Living Communities, Inc., AH Michigan Owner Limited
Partnership and AH Michigan Subordinated, LLC. as filed with the
Securities and Exchange Commission on July 16, 1998 as Exhibit
10.37 to the Company's Form 8-K dated June 25, 1998 (File No.
0-22253) and incorporated herein by reference
10.46 Purchase and Sale Agreement, dated as of June 30, 1998, by and
between AH North Carolina Owner Limited Partnership and Brookdale
Living Communities of North Carolina, Inc., and guaranteed by
Brookdale Living Communities, Inc. as filed with the Securities and
Exchange Commission on July 17, 1998 as Exhibit 10.1 to the
Company's Form 8-K dated June 30, 1998 (File No. 0-22253) and
incorporated herein by reference
10.47 Note, dated June 30, 1998, issued by AH North Carolina Owner
Limited Partnership in favor of Brookdale Living Communities of
North Carolina, Inc. in the principal amount of $1,902,776.97 as
filed with the Securities and Exchange Commission on July 17, 1998
as Exhibit 10.2 to the Company's Form 8-K dated June 30, 1998 (File
No. 0-22253) and incorporated herein by reference
10.48 Development Agreement, dated as of June 30, 1998, by and between AH
North Carolina Owner Limited Partnership and Brookdale Living
Communities of North Carolina, Inc., and guaranteed by Brookdale
Living Communities, Inc. as filed with the Securities and Exchange
Commission on July 17, 1998 as Exhibit 10.3 to the Company's Form
8-K dated June 30, 1998 (File No. 0-22253) and incorporated herein
by reference
10.49 Guaranty Agreement, dated as of June 30, 1998, issued by AH North
Carolina CPG, Inc. and AH North Carolina Subordinated, LLC in favor
of Brookdale Living Communities of North Carolina, Inc. as filed
with the Securities and Exchange Commission on July 17, 1998 as
Exhibit 10.4 to the Company's Form 8-K dated June 30, 1998 (File
No. 0-22253) and incorporated herein by reference
10.50 Collateral Assignment of Partnership Interests, dated as of June
30, 1998, issued by AH North Carolina CPG, Inc. and AH North
Carolina Subordinated, LLC for the benefit of Brookdale Living
Communities of North Carolina, Inc. as filed with the Securities
and Exchange Commission on July 17, 1998 as Exhibit 10.5 to the
Company's Form 8-K dated June 30, 1998 (File No. 0-22253) and
incorporated herein by reference
10.51* Loan Agreement dated as of April 27, 1998 by and between the
Company and LaSalle National Bank
10.52* Note dated April 27, 1998 issued by the Company payable to the
order of LaSalle National Bank
27* Financial Data Schedule
- ---------------
* Previously filed.
(b) Reports on Form 8-K:
On May 26, 1998, the Company filed a Current Report on Form 8-K dated May 12,
1998 with the Securities and Exchange Commission announcing pursuant to Item 5
of Form 8-K the lease of The Atrium of San Jose which commenced on May 12, 1998.
-22-
<PAGE>
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 thereunto duly authorized.
BROOKDALE LIVING COMMUNITIES, INC.
----------------------------------
Registrant
Date: March 30, 1999 /s/ Mark J. Schulte
----------------------------- -------------------
Mark J. Schulte
President and
Chief Executive Officer
Date: March 30, 1999 /s/ Darryl W. Copeland, Jr.
----------------------------- ---------------------------
Darryl W. Copeland, Jr.
Executive Vice President and
Chief Financial Officer
-23-
