SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 2, 1998
BROOKDALE LIVING COMMUNITIES, INC.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-22253 36-4103821
- ------------------------------- ---------------------- -----------------------
(State or other jurisdiction of Commission File Number (I.R.S. Employer
incorporation) Identification Number)
77 West Wacker Drive, Suite 4400, Chicago, Illinois 60601
- ------------------------------------------------------ ----------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (312) 977-3700.
NOT APPLICABLE
-------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
The Registrant submits this Form 8-K/A in order to supply the financial
statements and schedules required pursuant to Rule 3-05(b) of Regulation S-X and
the pro forma financial information required pursuant to Article 11 of
Regulation S-X with respect to the Registant's acquisition of The Chatfield
facility (the "Property"), a 125-unit senior independent and assisted living
facility located in West Hartford, Connecticut. This information should be read
in conjunction with the Registrant's Form 8-K filed with the Securities and
Commission on July 16, 1998.
This current report on Form 8-K 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, objectives or expectations 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 effect of future legislation or regulatory
changes on the Company's operations and (iv) 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.
<PAGE>
a) Financial statements of businesses acquired.
Financial Statements
The Chatfield Limited Partnership
Years ended December 31, 1997 and 1996
with Report of Independent Auditors
Six months ended June 30, 1998 and 1997
(unaudited)
<PAGE>
The Chatfield Limited Partnership
Financial Statements
Years ended December 31, 1997 and 1996
and
Six months ended June 30, 1998 and 1997 (unaudited)
CONTENTS
Report of Independent Auditors.........................................1
Financial Statements
Balance Sheets.........................................................2
Statements of Operations...............................................3
Statements of Partners' Capital........................................4
Statements of Cash Flows...............................................5
Notes to Financial Statements..........................................6
<PAGE>
Report of Independent Auditors
The Board of Directors
Brookdale Living Communities, Inc.
We have audited the accompanying balance sheets of The Chatfield Limited
Partnership as of December 31, 1997 and 1996 and the related statements of
operations and partners' capital and cash flows for the years then ended. These
financial statements are the responsibility of The Chatfield Limited
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Chatfield Limited
Partnership at December 31, 1997 and 1996, and the results of its operations and
its cash flows for the years then ended, in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
May 28, 1998, except for Note 5 as to which the date is July 16, 1998
1
<PAGE>
The Chatfield Limited Partnership
Balance Sheets
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
1998 1997 1996
--------------------------------------------
ASSETS (unaudited)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $771,494 $ 447,594 $ 640,854
Other 125,274 11,839 12,956
--------------------------------------------
Total current assets 896,768 459,433 653,810
Real estate, at cost:
Land 4,773,485 4,773,485 4,773,485
Building and improvements 15,590,727 15,590,727 15,463,329
Furniture and equipment 1,061,348 1,061,348 992,814
--------------------------------------------
21,425,560 21,425,560 21,229,628
--------------------------------------------
Accumulated depreciation (5,904,903) (5,527,962) (4,890,738)
--------------------------------------------
15,520,657 15,897,598 16,338,890
Restricted cash 232,511 281,833 278,434
Deferred costs, net of accumulated amortization
of $338,238 for June 30, 1998 and $320,436
and $284,832 for 1997 and 1996, respectively 17,801 35,603 71,207
--------------------------------------------
Total assets $16,667,737 $16,674,467 $17,342,341
============================================
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Notes payable - current portion $500,000 $ 510,432 $ 243,991
Tenant security deposits 211,493 261,303 262,798
Accounts payable and accrued liabilities 178,021 201,386 130,373
Accrued property management fees - affiliate 223,186 139,366 97,274
--------------------------------------------
Total current liabilities 1,112,700 1,112,487 734,436
Mortgage notes payable - affiliate 11,974,416 11,534,836 10,649,474
Note payable - affiliate 859,144 644,083 593,681
Notes payable 62,334 62,334 281,756
--------------------------------------------
12,895,894 12,241,253 11,524,911
--------------------------------------------
Total liabilities 14,008,594 13,353,740 12,259,347
Partners' capital 2,659,143 3,320,727 5,082,994
--------------------------------------------
Total liabilities and partners' capital $16,667,737 $16,674,467 $17,342,341
============================================
</TABLE>
See notes to financial statements.
2
<PAGE>
The Chatfield Limited Partnership
Statements of Operations
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30 YEAR ENDED DECEMBER 31
1998 1997 1997 1996
------------------------------------------------------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
REVENUE
Resident fees $1,708,147 $1,689,527 $3,394,607 $3,253,765
Interest income 13,281 15,332 25,136 44,760
------------------------------------------------------------
Total revenue 1,721,428 1,704,859 3,419,743 3,298,525
EXPENSES
Facility operating 1,099,271 1,058,948 2,276,582 2,055,537
Interest, including $466,955 and $461,413 for
the six months ended June 30, 1998 and 1997,
respectively, and $935,764 and $922,529 in 1997
and 1996, respectively - affiliate 502,366 485,667 976,328 991,446
Real estate taxes 99,880 98,586 198,466 194,602
Depreciation 376,941 349,562 696,775 717,417
Amortization 17,802 17,802 35,604 35,604
Property management fee - affiliate 83,820 84,217 168,855 161,571
Other 51,222 --- --- ---
------------------------------------------------------------
Total expenses 2,231,302 2,094,782 4,352,610 4,156,177
------------------------------------------------------------
Net loss $ (509,874) $ (389,923) $ (932,867) $ (857,652)
============================================================
See notes to financial statements.
</TABLE>
3
<PAGE>
The Chatfield Limited Partnership
Statements of Partners' Capital
Partners' capital at January 1, 1996 $6,770,046
Distributions (829,400)
Net loss (857,652)
------------
Partners' capital at December 31, 1996 5,082,994
Distributions (829,400)
Net loss (932,867)
------------
Partners' capital at December 31, 1997 3,320,727
Distributions (unaudited) (151,710)
Net loss (unaudited) (509,874)
------------
Partners' capital at June 30, 1998 (unaudited) $2,659,143
============
See notes to financial statements.
4
<PAGE>
The Chatfield Limited Partnership
Statements of Cash Flows
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30 YEAR ENDED DECEMBER 31
1998 1997 1997 1996
------------------------------------------------------------
OPERATING ACTIVITIES (unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net loss $(509,874) $(389,923) $(932,867) $ (857,652)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 394,743 367,364 732,379 753,021
Interest expense - affiliate added to 464,407 458,887 935,764 922,529
principal
Changes in operating assets and liabilities:
Other assets (113,435) (36,338) 1,117 5,962
Tenant security deposits (49,810) (3,860) (1,495) 23,835
Accounts payable and accrued liabilities (23,053) (1,908) 71,013 10,122
Accrued property management fees -
affiliate 83,820 (42,547) 42,092 (36,038)
------------------------------------------------------------
Net cash provided by operating activities 246,798 351,675 848,003 821,779
------------------------------------------------------------
INVESTING ACTIVITIES
Additions to real estate --- (75,588) (255,483) (42,670)
------------------------------------------------------------
Cash used in investing activities --- (75,588) (255,483) (42,670)
------------------------------------------------------------
FINANCING ACTIVITIES
Decrease (increase) in restricted cash 49,322 3,114 (3,399) (30,435)
Repayment of notes payable (10,432) (134,774) (452,981) (240,386)
Proceeds from note payable 189,922 --- 500,000 ---
Distributions to partners (151,710) (414,699) (829,400) (829,400)
------------------------------------------------------------
Net cash used in financing activities 77,102 546,359 (785,780) (1,100,221)
------------------------------------------------------------
Net increase (decrease) in cash and cash
equivalents 323,900 (270,272) (193,260) (321,112)
Cash and cash equivalents at beginning of
year 447,594 640,854 640,854 961,966
------------------------------------------------------------
Cash and cash equivalents at end of year $ 771,494 $ 370,582 $ 447,594 $ 640,854
============================================================
</TABLE>
See notes to financial statements.
5
<PAGE>
The Chatfield Limited Partnership
Notes to Financial Statements
Years ended December 31, 1997 and 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The Chatfield Limited Partnership (the Partnership) is a limited partnership
that owns, operates, and manages a 121-unit assisted living facility known as
The Chatfield (the Property) located in West Hartford, Connecticut. At June 30,
1998 and 1997 and December 31, 1997 and 1996, the Property was 90%, 98%, 99% and
100% occupied, respectively. Leases are generally one year in length and expire
throughout the year.
INTERIM FINANCIAL STATEMENTS
The financial statements for the six months ended June 30, 1998 and 1997, and
all related footnote information for these periods, are unaudited, and reflect
all normal and recurring adjustments which are, in the opinion of management,
necessary for a fair presentation of the financial position, operating results
and cash flows for the interim period. The results of operations for the six
months ended June 30, 1998 are not necessarily indicative of the results to be
achieved for the entire year ended December 31, 1998.
RESIDENT FEE REVENUE
Resident fee revenue is recorded when services are rendered and consists of fees
for basic housing, support services and fees associated with additional services
such as personalized health and assisted living care.
CASH AND CASH EQUIVALENTS
The Partnership considers all cash accounts, money market funds and certificates
of deposit with a maturity of three months or less when purchased to be cash
equivalents.
DEFERRED COSTS
Deferred costs consist of capitalized financial advisory fees which were paid to
the managing partner (see Note 4) and are amortized using the straight-line
method over the term of the related service agreement.
6
<PAGE>
REAL ESTATE
Expenditures for ordinary maintenance and repairs are expensed to operations as
incurred. Significant renovations and improvements which improve and/or extend
the useful life of the asset are capitalized and depreciated over their
estimated useful life.
Depreciation is calculated using the straight-line method over the estimated
useful lives of assets, which are as follows:
Building and improvements 15-27.5 years
Furniture and equipment 5-7 years
During the period ended June 30, 1997, the Partnership disposed of fully
depreciated furniture and equipment totaling $59,551.
RESTRICTED CASH
The Partnership is required under Connecticut law to maintain a separate account
equal to the tenant security deposits held.
INCOME TAXES
The Partnership pays no income taxes and the income or loss from the Partnership
is includable on the respective federal income tax returns of the partners.
USE OF ESTIMATES
The preparation of the financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
2. MORTGAGES AND NOTE PAYABLE - AFFILIATE
The Partnership has a first and second mortgage and an unsecured note with an
affiliated party for $8.0 million, $1.0 million and $500,000, respectively, at
June 30, 1998 and December 31, 1997 and 1996. Interest accrues on the first and
second mortgage at prime rate plus 1.25% and prime rate plus 1.375%,
respectively. No interest payments are due prior to January 15, 2000. Beginning
January 15, 2000 and February 1, 2000, for the first and second mortgages,
respectively, monthly interest only payments shall be due on the outstanding
principal balance. The entire outstanding principal balance, together with all
accrued and unpaid interest, shall be due upon maturity on December 31, 2005 for
the first and second mortgages. The first and second mortgages are
collateralized by the
7
<PAGE>
2. MORTGAGES AND NOTE PAYABLE - AFFILIATE (CONTINUED)
Property. Interest accrues on the unsecured note at prime rate plus 1.50%. No
interest payments are due prior to the year 2003. During the years 2003 and
2004, semi-annual combined principal and interest payments, in amounts as
specified in the related agreement, are due. The entire outstanding principal
balance, together with all accrued and unpaid interest, shall be due upon
maturity on December 31, 2005. Interest rates on the first mortgage, second
mortgage and unsecured note ranged from 9.5% to 10.0%, 9.625% to 9.875% and
9.75% to 10.0% during the six months ended June 30, 1998 and 1997 and years
ended December 31, 1997 and 1996, respectively.
As of June 30, 1998 and December 31, 1997 and 1996, accrued interest of
$2,974,104, $2,534,836 and $1,649,474 is included in mortgage notes payable -
affiliate, respectively. As of June 30, 1998 and December 31, 1997 and 1996,
accrued interest of $169,222, $144,083 and $93,681 is included in note payable -
affiliate, respectively. No interest payments were made during 1998, 1997 or
1996.
3. NOTES PAYABLE
On December 12, 1997, the Partnership repaid a 10.5% note in the amount of
$208,989 with an unrelated financial institution. The note had an original
balance of $750,000, a maturity date of September 1, 1998, and required monthly
principal and interest payments of $24,249. The note had an outstanding balance
of $443,140 at December 31, 1996. The note was repaid with a new 8.25% note with
an initial principal balance of $500,000, obtained from the same financial
institution. The note was repaid on March 3, 1998 with the proceeds of a new
9.85% note with an initial principal balance of $750,000, obtained from the same
financial institution (see note 5). During the six months ended June 30, 1998
and 1997 and years ended December 31, 1997 and 1996, the Partnership made
interest payments of $32,555, $18,058, $35,608 and $63,404, respectively.
The Partnership also has a sewer assessment obligation due in annual principal
and interest payments of $14,798 through May 15, 2003. This obligation bears
interest at a rate of 6% and had an outstanding balance of $62,334, $72,766 and
$82,607 as of June 30, 1998 and December 31, 1997 and 1996, respectively. During
the six months ended June 30, 1998 and 1997 and years ended December 31, 1997
and 1996, the Partnership made interest payments of $5,092, $4,195, $4,956 and
$5,513, respectively.
8
<PAGE>
3. NOTES PAYABLE (CONTINUED)
The annual scheduled maturities for the five years subsequent to December 31,
1997 for the sewer assessment obligation are as follows:
Year ended December 31,
1998 $ 10,432
1999 11,058
2000 11,721
2001 12,425
2002 13,172
Thereafter 13,958
-----------
$ 72,766
===========
4. RELATED PARTY TRANSACTIONS
In connection with the operation of the Property, an affiliate of one of the
partners is entitled to property management fees equal to 5% of gross receipts,
as defined. During the six months ended June 30, 1998 and 1997 and years ended
December 31, 1997 and 1996, property management fees of $0, $126,764, $126,763
and $197,610 were paid, respectively.
The Partnership paid fees to the managing partner for providing certain
financial advisory services to the Partnership. These fees were capitalized as
deferred costs and are being amortized over ten years.
5. SUBSEQUENT EVENTS
On July 2, 1998, the Partnership sold the Property to The Chatfield Business
Trust, S.T. (Chatfield) for approximately $16.6 million. Chatfield, in turn,
leased the Property to Brookdale Living Communities of Connecticut - WH, Inc., a
wholly owned subsidiary of Brookdale Living Communities, Inc. In accordance with
the sale of the Property, a portion of the proceeds were used to repay the
mortgages and notes payable - affiliate.
The 9.85% note with an initial principal balance of $750,000 was repaid on July
16, 1998.
9
<PAGE>
b) Pro forma financial information.
The unaudited Pro Forma Balance Sheet of Brookdale Living Communities, Inc.
and its subsidiaries (collectively, the "Company") is presented as if at June
30, 1998, the Company had leased the Property and funded the investments
collateralizing the lease obligation. The unaudited Pro Forma Consolidated
Condensed Statements of Operations for the year ended December 31, 1997 and the
six months ended June 30, 1998 are presented as if the above transaction
occurred as of January 1, 1997. The unaudited Pro Forma Condensed Financial
Statements of the Company should be read in conjunction with the Company's
Annual Report on Form 10-K for the year ended December 31, 1997 and the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998. In
management's opinion, all adjustments necessary to reflect the transaction have
been made.
The unaudited Pro Forma Consolidated Condensed Financial Statements of the
Company are not necessarily indicative of what the actual results of operations
would have been assuming the acquisition of the Property had occurred at the
dates indicated above, nor do they purport to represent the future results of
operations of the Company.
10
<PAGE>
Basis of Presentation
Brookdale Living Communities of Connecticut-WH, Inc., the entity which
entered into the operating lease for the Property, was required to fund $5.3
million of investments collateralizing its lease obligations. No other
adjustments of the Company's Balance Sheet as of June 30, 1998 are necessary.
The Pro Forma Consolidated Condensed Statements of Operations of the
Company include the historical operations of the Company (for the period from
May 7, 1997 to December 31, 1997), the Original Facilities (for the period from
January 1, 1997 to May 6, 1997), the IPO (initial public offering) Properties
(for the period from January 1, 1997 to May 6, 1997), the 1997 Leases, the 1998
Lease and the Current Lease (for the period from January 1, 1998 to June 30,
1998 and the year ended December 31, 1997). The Adjustments for Acquisitions and
Leases prior to or at the IPO reflect the ownership prior to May 6, 1997. The
foregoing facilities and transactions are described below along with the pro
forma effects of the consolidation:
<TABLE>
<CAPTION>
Acquisitions and Leases
Original Facilities Prior to or at the IPO(1) 1997 Leases(2)
- ------------------- ------------------------- --------------
<S> <C> <C>
The Devonshire The Springs of East Mesa(3) The Gables at Farmington(4)
The Heritage Edina Park Plaza The Classic at West Palm Beach(5)
The Hallmark(3) Hawthorn Lakes The Brendenwood Retirement Community(6)
The Gables at Brighton(3)
The Park Place(7)
BLC Property, Inc.
1998 Leases (8) Current Lease(9)
- ------------------- -------------------
Harbor Village(10) The Chatfield(12)
The Atrium of San Jose(11)
</TABLE>
(1) These properties are collectively referred to as the IPO Properties.
(2) These properties are collectively referred to as the 1997 Leases.
(3) The Company has leased these properties from a third party since December
27, 1996.
(4) The Company has leased this property from a third party since November 24,
1997.
(5) The Company has leased this property from a third party since December 18,
1997.
(6) The Company has leased this property from a third party since December 22,
1997.
(7) The Company has leased this property from a third party since May 7, 1997.
(8) These properties are collectively referred to as the 1998 Leases.
(9) This property is sometimes referred to as the Current Lease.
(10) The Company has leased this property from a third party since March 6,
1998.
(11) The Company has leased this property from a third party since May 12, 1998.
(12) The Company has leased this property from a third party since July 2, 1998.
11
<PAGE>
BROOKDALE LIVING COMMUNITIES, INC.
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(In Thousands, Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Brookdale Living Adjustments for
Communities, Inc. Acquisitions and
and Predecessor Leases prior to or 1997 1998 The Total
Properties at the IPO Leases Leases Chatfield Leases
---------------------------------- -----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenue
Resident Fees $ 40,578 $ 4,448 $ 14,802 $ 9,658 $ 3,395 $ 27,855
Management Fees 132 - - - -
--------- --------------- ------------------------------------------------------
Total Revenue 40,710 4,448 14,802 9,658 3,395 27,855
Facility Operating (21,994) (2,973) (8,872) (6,163) (2,644) (17,679)
Lease Expense (9,984) - - - -
General & Administrative (2,187) - - - -
Depreciation & Amortization (3,824) (510) (1,454) (1,175) (733) (3,362)
--------- --------------- ------------------------------------------------------
Income (Loss) From Operations 2,721 965 4,476 2,320 18 6,814
Interest and Financing Fees Expense, Net (3,088) (1,086) (4,236) (2,960) (951) (8,147)
--------- --------------- ------------------------------------------------------
(Loss) Income Before Minority Interest,
Income Taxes and Extraordinary Item (367) (121)(g) 240 (640) (933) (1,333)
Minority Interest (138) - - - -
Benefit (Provision) For Income Taxes 322 - - - -
--------- --------------- ------------------------------------------------------
(Loss) Income From Continuing
Operations Before Extraordinary Item (183) (121) 240 (640) (933) (1,333)
Extraordinary Item Net of Tax (36) - - - - -
--------- --------------- ------------------------------------------------------
Net (Loss) Income $ (219) $ (121) $ 240 $ (640) $ (933) $ (1,333)
========= =============== ======================================================
(Loss) Income From Continuing
Operations Per Share- Basic $ (0.03)
=========
(Loss) Income From Continuing
Operations Per Share-Diluted $ (0.03)
=========
Common Shares Used For Computing
Basic EPS 7,208
=========
Common Shares Used For Computing
Diluted EPS 7,351
=========
Consolidating
Pro Forma Pro Forma
Adjustments As Adjusted
--------------- ---------------
Revenue
Resident Fees $ - $ 72,881
Management Fees 76 (a) 208
---------------- --------------
Total Revenue 76 73,089
Facility Operating 1,771 (b) (40,875)
Lease Expense (9,596)(c) (19,580)
General & Administrative (945)(d) (3,132)
Depreciation & Amortization 3,018 (e) (4,678)
---------------- ---------------
Income (Loss) From Operations (5,676) 4,824
Interest and Financing Fees Expense, Net 10,769 (f) (1,552)
---------------- ---------------
(Loss) Income Before Minority Interest,
Income Taxes and Extraordinary Item 5,093 3,272
Minority Interest 138 (h) -
Benefit (Provision) For Income Taxes (1,398)(i) (1,076)
---------------- ---------------
(Loss) Income From Continuing
Operations Before Extraordinary Item 3,833 2,196
Extraordinary Item Net of Tax - (36)
---------------- ---------------
$ 3,833 $ 2,160
================ ===============
(Loss) Income From Continuing
Operations Per Share- Basic $ 0.30
===============
(Loss) Income From Continuing
Operations Per Share-Diluted $ 0.29
===============
Common Shares Used For Computing
Basic EPS 7,208
===============
Common Shares Used For Computing
Diluted EPS 7,351
===============
</TABLE>
12
<PAGE>
Brookdale Living Communities, Inc.
Pro Forma Consolidated Condensed Statement of Operations
for the Six Months Ended June 30, 1998
(In Thousands, Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Brookdale Living 1998 The Total
Communities, Inc. Leases Chatfield Leases
------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue
Resident Fees $ 32,855 $ 2,932 $ 1,697 $ 4,629
Development Fees 2,578 - - -
Management Fees 116 - - -
----------------- --------------------------------------
Total Revenue 35,549 2,932 1,697 4,629
Facility Operating (18,278) (1,767) (1,322) (3,089)
Lease Expense (7,992) - - -
General & Administrative (2,496) - - -
Depreciation & Amortization (2,431) (111) (367) (478)
----------------- --------------------------------------
Income (Loss) From Operations 4,352 1,054 8 1,062
Interest and Financing Fees Expense, Net (217) (803) (475) (1,278)
----------------- --------------------------------------
Income (Loss) Before
Income Taxes And Extraordinary Item 4,135 251 (467) (216)
Provision For Income Taxes (1,503) - - -
----------------- --------------------------------------
Income (Loss) From Continuing
Operations Before Extraordinary Item 2,632 251 (467) (216)
Extraordinary Item Net of Tax - 634 - 634
----------------- --------------------------------------
Net Income (Loss) $ 2,632 $ 885 $ (467) $ 418
================= ======================================
Net Income Per Share-Basic EPS $ 0.28
=================
Net Income Per Share-Diluted EPS $ 0.27
=================
Common Shares Used For Computing
Basic EPS 9,448
=================
Common Shares Used For Computing
Diluted EPS 9,721
=================
Consolidating
Pro Forma Pro Forma
Adjustments As Adjusted
-------------------- --------------------
<S> <C> <C>
Revenue
Resident Fees $ - $ 37,484
Development Fees - 2,578
Management Fees - 116
-------------------- --------------------
Total Revenue - 40,178
Facility Operating 198 (b) (21,169)
Lease Expense (1,544) (c) (9,536)
General & Administrative - (2,496)
Depreciation & Amortization 478 (e) (2,431)
-------------------- --------------------
Income (Loss) From Operations (868) 4,546
Interest and Financing Fees Expense, Net 1,688 (f) 193
-------------------- --------------------
Income (Loss) Before Income Taxes
And Extraordinary Item 820 4,739
Provision For Income Taxes (242) (i) (1,745)
-------------------- --------------------
Income (Loss) From Continuing
Operations Before Extraordinary Item 578 2,994
Extraordinary Item Net of Tax (634) (j) -
-------------------- --------------------
Net Income (Loss) $ (56) $ 2,994
==================== ====================
Net Income Per Share-Basic EPS $ 0.32
====================
Net Income Per Share-Diluted EPS $ 0.31
====================
Common Shares Used For Computing
Basic EPS 9,448
====================
Common Shares Used For Computing
Diluted EPS 9,721
====================
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
BROOKDALE LIVING COMMUNITIES, INC.
NOTES TO PRO FORMA CONSOLIDATED
CONDENSED STATEMENTS OF OPERATIONS
For the six months ended June 30, 1998 and
for the year ended December 31, 1997
(in thousands)
(unaudited)
Six Months
Ended Year Ended
June 30, December 31,
1998 1997
-------------- ---------------
<S> <C> <C>
(a) Management services income:
Management services income for management services performed by
the Company.................................................... $ -- $ 76
============== ===============
(b) Facility operating expenses:
Elimination of historical management fees paid by the Original
Facilities and the IPO Properties and administrative fees paid
by the Original Facilities are not incurred by the Company $ -- $ 514
Elimination of historical management fees paid by the 1997 Leases
the 1998 Leases and the Current Lease.......................... 198 1,257
-------------- ---------------
$ 198 $ 1,771
============== ===============
(c) Lease expenses:
Adjustment to reflect a full year of lease payments related
to the IPO Properties......................................... $ -- $ (546)
Adjustment to reflect lease payments related to the 1997
Leases, the 1998 Leases and the Current Lease................. (1,544) (9,050)
-------------- ---------------
$ (1,544) $ (9,596)
============== ===============
(d) General and administrative expenses:
Estimated increase in salaries and related benefits and additional
administrative and financial reporting expenses which would
have been incurred by the Company had it been operating as a
public company during all of 1997: $ -- $ (604)
Salaries and wages............................................
Legal and accounting.......................................... -- (70)
Other......................................................... -- (271)
-------------- ---------------
$ -- $ (945)
============== ===============
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
BROOKDALE LIVING COMMUNITIES, INC.
NOTES TO PRO FORMA CONSOLIDATED
CONDENSED STATEMENTS OF OPERATIONS
(continued)
For the six months ended
June 30, 1998 and for the year ended
December 31, 1997
(in thousands)
(unaudited)
Six Months
Ended Year Ended
June 30, December 31,
1998 1997
-------------- ----------------
<S> <C> <C>
(e) Depreciation and amortization:
Adjustment to historical depreciation expense associated with (*):
Decrease in depreciation expense associated with the change
in depreciable lives of the Original Facilities............... $ -- $ 67
Additional depreciation associated with the increase in basis
resulting from the purchase of the third party owners'
interests in the Original Facilities.......................... -- (138)
Adjustment to depreciation expense associated with the
increase in the basis from the purchase and the increase in
depreciable lives of the IPO Properties....................... -- (133)
Elimination of historical depreciation and amortization
expense of the IPO Properties................................. -- 78
Additional amortization expense associated with the fees and
costs for credit enhancement on tax-exempt bonds of the
Original Facilities........................................... -- (218)
Elimination of historical depreciation and amortization
expense of the 1997 Leases, the 1998 Leases and the Current
Lease......................................................... 478 3,362
-------------- ----------------
$ 478 $ 3,018
============== ================
* The Company has determined the estimated useful lives of
buildings to be 45 years and furniture and equipment to be 5
years, as compared to 40 years and 3-12 years, respectively
used by the Original Facilities. This change was made to better
reflect the estimated periods during which such assets will
remain in service. For financial statement reporting purposes,
the above will be recorded prospectively as a change in
estimate for the Original Facilities over their remaining
lives. Depreciation expense included in the "Pro Forma As
Adjusted" column was based upon the Company's new estimated
useful lives.
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
BROOKDALE LIVING COMMUNITIES, INC.
NOTES TO PRO FORMA CONSOLIDATED
CONDENSED STATEMENTS OF OPERATIONS
(continued)
For the six months ended
June 30, 1998 and for the year ended
December 31, 1997
(in thousands)
(unaudited)
Six Months
Ended Year Ended
June 30, December 31,
1998 1997
-------------- ----------------
<S> <C> <C>
(f) Interest and financing fees expense, net:
Elimination of interest expense incurred related to the
debt of the IPO Properties............................. $ -- $ 140
Elimination of interest expense incurred related to the
debt of the 1997 Leases, the 1998 Leases and the
Current Lease.......................................... 1,278 8,147
Interest income on investments collateralizing lease
obligations............................................. 410 2,482
-------------- ----------------
$ 1,688 $ 10,769
============== ================
(g) Income (loss) before minority interest and income taxes:
The income (loss) before minority interest and income
taxes presented in the historical statements of the IPO
Properties is before gain on sale of property and
represents income (loss) from continuing operations.
The gains on sale of properties are not included due to
the non-recurring nature of the transactions
(h) (Income) loss allocated to minority interest:
Elimination of income allocated to minority interest
due to the acquisition of the third party's
interest............................................... $ -- $ 138
============== ================
(i) (Provision) benefit for income taxes:
The Original Facilities, the IPO Properties, the 1997
Leases and the 1998 Leases were not taxable entities.
The realization of the deferred gain on the sale of the
Hallmark facility as a reduction of lease expenses is
considered a permanent difference between book income
(loss) and tax income (loss) and is not taxable. The
difference has the following impact on the Company's
benefit for income tax at a 40% rate (includes federal
and state statutory income tax rates). This adjustment
provides pro forma benefit from income taxes at a 40%
effective income tax rate.............................. $ (242) $ (1,398)
============== ================
Provision on income before permanent
difference $ (242) $ (1,511)
Benefit related to permanent difference -- 113
-------- ----------
$ (242) $ (1,398)
======== ==========
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
BROOKDALE LIVING COMMUNITIES, INC.
NOTES TO PRO FORMA CONSOLIDATED
CONDENSED STATEMENTS OF OPERATIONS
(continued)
For the six months ended
June 30, 1998 and for the year ended
December 31, 1997
(in thousands)
(unaudited)
Six Months
Ended Year Ended
June 30, December 31,
1998 1997
-------------- --------------
<S> <C> <C>
(j) Extraordinary item:
Elimination of extraordinary item related to the early
extinguishment of debt for one of the 1998 Leases............. $ (634) $ --
=============== ==============
</TABLE>
17
<PAGE>
c) Exhibits.
Exhibit
Number Description
-------- -----------
23.1 Consent of Ernst & Young LLP
18
<PAGE>
SIGNATURE
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
Dated: October 1, 1999 By: /s/ Robert J. Rudnik
--------------------------------
Robert J. Rudnik
Executive Vice President
General Counsel and Secretary
19
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
indicated below of Brookdale Living Communities, Inc. of our report indicated
below filed with the Securities and Exchange Commission.
Registration Statements
- -----------------------
Form S-8 No. 333-51493
Form S-8 No. 333-86013
Form S-3 No. 333-53969
Financial Statements Date of Auditor's Report
-------------------- ------------------------
Financial Statements of The May 28, 1998, except for Note 5 as
Chatfield Limited Partnership to which the date is July 16, 1998.
as of and for the years ended
December 31, 1997 and 1996
included in the Current Report
(Form 8-K/A) of Brookdale
Living Communities, Inc. dated
October 1, 1999.
/s/ Ernst & Young LLP
Chicago, Illinois
September 29, 1999
20
