American Retirement Corporation Update on
Refinancing Activities
NASHVILLE, Tenn., Feb 14, 2002 (BUSINESS WIRE) -- American Retirement
Corporation (NYSE:ACR) today announced the completion of several transactions
comprising part of its recapitalization effort. The Company recently completed
the sale and leaseback of three of its senior living communities and has entered
into definitive agreements for sale and leaseback transactions involving two
additional communities. The Company also announced that it has completed the
purchase of all remaining leasehold interests of third parties in assisted
living communities managed by the Company.
Sale/Leasebacks
The Company has completed sale and leaseback transactions involving Holley Court
Terrace, a congregate care community located in a suburb of Chicago, the
Homewood Residence at Coconut Creek, a pre-stable free-standing assisted living
community located near Ft. Lauderdale, Florida, and the Carriage Club of
Charlotte, a continuing care retirement community located in Charlotte, North
Carolina. The leases for all three properties have 15 year terms, and the
Company has two 5-year renewal options. The Company retained a right of first
refusal to repurchase each of these communities.
The aggregate sale price for these three transactions was approximately $73.2
million. In addition, the Company may receive up to $1.9 million of additional
proceeds, depending upon the future performance of the Coconut Creek community.
A portion of the Carriage Club of Charlotte sale price was paid through the
buyer's assumption of $34.8 million of mortgage debt and the issuance to the
Company of $2.5 million of short-term interest bearing notes that are expected
to be repaid over the next two years. The Company used a portion of the cash
proceeds from these three transactions to repay $13.0 million of mortgage debt
and to reduce its mortgage loan facility by $8.6 million to $73.0 million.
In conjunction with and as a condition of the Carriage Club of Charlotte
transaction, the Company acquired Freedom Inn at Countryside, a stable 82-unit
free-standing assisted living community located in a suburb of Tampa, Florida,
for approximately $7.1 million, including the assumption of approximately $4.7
million of mortgage debt financing. The Company had been managing this community
for twenty nine months.
Corporate Financing Activities
As disclosed in the Company's filings with the Securities and Exchange
Commission, the Company has been exploring a wide range of asset and corporate
level financing alternatives in order to address the Company's debt maturities
in 2002. These potential financing alternatives include mortgage financings,
sale and leaseback transactions, and equity, equity linked, and mezzanine
financings.
The Company has executed definitive agreements for the sale and leaseback of two
communities in addition to those described above. These two additional sale and
leaseback transactions are expected to generate proceeds of approximately $49.5
million, with the possibility of up to $3.9 million of additional proceeds if
certain earn-out criteria are satisfied. If completed, the Company will repay
approximately $36.2 million of debt relating to these communities and will apply
the remaining proceeds to satisfy other maturing obligations. These transactions
are subject to certain conditions that must be satisfied prior to closing.
In addition, the Company is in advanced discussions (and in certain instances
has entered into non-binding letters of intent) with several different parties
relating to the refinancing and/or the sale and leaseback of up to ten
additional communities. If completed on the terms being considered, these
proposed transactions would generate gross proceeds to the Company of
approximately $190 million. These transactions are in various stages and will be
subject to certain closing conditions that must be satisfied.
If the above transactions are consummated as proposed, the Company's primary
remaining outstanding debt obligation for 2002 will be the Company's Convertible
Debentures. In an effort to address the maturity of the Convertible Debentures
in October 2002, the Company has explored a wide range of corporate and asset
level financing alternatives, including equity, equity linked, and mezzanine
financing, and continues to work diligently with its advisors to execute on
selected transactions.
Managed Community Acquisition Program Completion
In order to facilitate certain of its refinancing activities, the Company has
purchased for approximately $19.2 million all of the remaining leasehold
interests of third parties in assisted living communities managed by the
Company. The Company financed these transactions through the issuance of
approximately $17.2 million of long-term interest-only senior secured notes and
approximately $1.9 million in cash. As a result, the Company will now
consolidate the operations of ten additional assisted living residences that
were previously managed. These communities currently have approximately $20
million of in-place annual revenues and produce positive cash flow from
operations. In addition, the Company is in the process of eliminating its
synthetic lease structures. A number of these synthetic leases will be
eliminated in connection with the execution of the refinancing transactions
described above and the Company has initiated processes aimed at eliminating its
other synthetic lease arrangements.
"We have committed extensive resources, both
internally and externally, to facilitate the execution of our refinancing
program. We are generating sufficient cash to satisfy our operating
requirements, and we are making progress in our efforts to deal with our
maturing obligations as evidenced by the completion of several financing
transactions," said Bill Sheriff, Chairman and Chief Executive Officer of the
Company. "We believe it is important to simplify our capital structure so we are
pleased to have made a major step in that direction by completing our purchase
of the leasehold interests in our remaining managed assisted living facilities.
We also intend to eliminate our synthetic lease arrangements over the
intermediate term, which we expect can be accomplished with little cost to the
Company."
American Retirement Corporation offers a broad range of care and services to
seniors, including independent living, assisted living, skilled nursing and
Alzheimer's care. The Company currently operates 66 senior living communities in
14 states with an aggregate capacity for approximately 14,700 residents. The
Company's strategy is to develop senior living networks in major metropolitan
regions. These networks are made of large continuing care retirement communities
and free-standing assisted living residences located in the same markets.
This press release and statements made by or on behalf of the Company relating
hereto, including all statements concerning the Company's recapitalization
efforts, proposed equity financings, proposed sale and leaseback transactions,
potential payments pursuant to earn-out arrangements, and results of operations
for future periods, may be deemed to constitute forward-looking information made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. These forward-looking statements may be affected by certain
risks and uncertainties, including the Company's ability to complete
successfully its recapitalization efforts, adverse developments in the financial
markets or the senior living industry that may negatively impact the Company's
proposed transactions and financings, the Company's ability to comply with the
covenants contained in its debt instruments, the Company's significant leverage,
and the risk factors described in the Company's Annual Report on Form 10-K for
the year ended December 31, 2000 under the caption "Risk Factors" and in the
Company's other filings with the Securities and Exchange Commission. The
Company's ability to complete its proposed transactions and financings is
subject to numerous uncertainties and conditions not within the Company's
control. Certain of the Company's agreements with respect to the proposed
transactions and financings are non-binding and there can be no assurance that
the Company will be able to enter into definitive agreements and complete the
proposed transactions and financings. In light of the significant uncertainties
inherent in the forward-looking statements included herein, the Company's actual
results could differ materially from such forward-looking statements and there
can be no assurance that the Company will able to refinance or repay its debt
obligations (including the Company's Convertible Debentures) when they come due.
The Company does not undertake any obligation to publicly release any revisions
to any forward-looking statements contained herein to reflect events and
circumstances occurring after the date hereof or to reflect the occurrence of
unanticipated events.
CONTACT:
American Retirement Corp., Nashville
Ross C. Roadman, 615/376-2412
URL: http://www.businesswire.com
Copyright (C) 2002 Business Wire. All rights reserved.