Item 2.01. Completion of Acquisition or Disposition of Assets.
On February 7, 2020, RLH DC LLC completed the sale of the Hotel RL Washington
D.C. (the "Hotel") to UIP Acquire, LLC a District of Columbia limited liability
company (the "Purchaser"). The purchase price for the Hotel was $16.35 million,
which was paid in cash at closing.
RLH DC LLC is a wholly owned subsidiary of RLS DC Venture, LLC. RLS DC Venture,
LLC is a variable interest entity in which Red Lion Hotels Corporation (the
"Company") holds a 55% interest, and therefore the Company consolidates the
assets, liabilities and results of operations of this entity.
Proceeds from the sale of the Hotel, combined with the release of a loan
reserve, were used to pay closing costs and repay a property level mortgage,
including an accrued exit fee, and a prepayment penalty to the lender. See Item
2.04 below for additional information. No additional funds will be available for
distribution to the members of RLS DC Venture, LLC, including the Company, as a
result of the sale of the Hotel.
At closing, the Purchaser entered into a franchise agreement with Red Lion
Hotels Franchising, Inc., a wholly owned subsidiary of the Company, to continue
to operate the hotel under the Hotel RL® brand. The franchise agreement provides
for a five (5) year term, and requires the payment of monthly royalty and
program fees based upon the Hotel's room count, with a minimum payment of
$300,000 in royalty and program fees during the term. In the event the franchise
agreement is terminated prior to the end of the license term for any reason, the
Purchaser is required to pay to the Company the difference between $300,000 and
the royalty and program fees paid at the date of termination. In addition, early
termination of the franchise agreement by Red Lion Franchising upon default of
the franchisee, or termination of the agreement by the franchisee without cause,
will require the franchisee to pay a termination fee. Purchaser will not be
required to pay a termination fee, and may cancel the franchise agreement upon
90 days written notice, in the event that the Hotel is converted to a different
use (e.g. extended stay hotel and/or multi-family property).
Item 2.04 Triggering Events That Accelerate or Increase a Direct Financial
Obligation or an Obligation under an Off-Balance Sheet Arrangement
Pursuant to the terms of the mortgage loan agreement between RLH DC LLC and CP
Business Finance I, LP (the "Lender"), upon the sale of the Hotel the net
proceeds from the sale, together with a release of $2.3 million in a loan
reserve held by the Lender, were used to pay the outstanding $17.7 million
principal balance on the loan, including an accrued exit fee, plus a prepayment
penalty of $568,198, which was the amount of the remaining cash and PIK interest
that would have been payable from the prepayment date through May 31, 2020.
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Item 7.01. Regulation FD Disclosure.
Non-GAAP Financial Measures
The following is a reconciliation of pro forma Adjusted EBITDA to amounts
previously reported, to reflect (i) the sale of the Company's hotels in Atlanta,
GA, and Salt Lake City, UT, as previously reported and (ii) the sale of the
Hotel as described in Item 2.01 of this filing:
Year Ended
Nine Months ended December 31,
September 30, 2019 2018
Adjusted EBITDA from continuing
operations- as previously reported $ 10,624 15,766
Less: Red Lion Airport Hotel Atlanta asset
sale (191 ) (3,613 )
Less: Hotel RL Salt Lake City asset sale (1,617 ) (2,397 )
Less: Asset sold with this filing (777 ) (893 )
Pro Forma Adjusted EBITDA $ 8,039 8,863
EBITDA is defined as net income (loss), before interest, taxes, depreciation and
amortization. We believe it is a useful financial performance measure due to the
significance of our long-lived assets and level of indebtedness. Adjusted EBITDA
is an additional measure of financial performance. We believe that the inclusion
or exclusion of certain special items, such as gains and losses on asset
dispositions and impairments, is necessary to provide the most accurate measure
of core operating results and as a means to evaluate comparative results. Refer
to our previously filed 10-K for the year ended December 31, 2018 filed on
March 8, 2019 and 10-Q for the nine months ended September 30, 2019 filed on
November 12, 2019 for the reconciliation from net income to adjusted EBITDA and
further discussion of Non-GAAP measures.
Item 9.01. Financial Statements and Exhibits.
(b) Pro Forma Financial Information.
Attached hereto as Exhibit 99.1 and incorporated by reference herein is
unaudited pro forma consolidated financial information of the registrant that
gives effect to (i) the sale of the Company's hotels in Atlanta, GA and Salt
Lake City, UT and (ii) the sale of the Hotel and the repayment of principal on
the property level debt as described in Item 2.01 of this Form 8-K.
(d) Exhibits.
Exhibit
Number Exhibit Title or Description
99.1 Unaudited pro forma consolidated financial information
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