UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported): February 24, 2015
 
Strategic Hotels & Resorts, Inc.
(Exact name of registrant as specified in its charter)
 
Maryland
(State or other jurisdiction of incorporation)
 
001-32223
(Commission File Number)
 
33-1082757
 (IRS Employer Identification No.)
 
200 West Madison Street, Suite 1700
Chicago, Illinois 60606
(Address of principal executive offices) (Zip Code)
 
Registrant’s telephone number, including area code: (312) 658-5000
 
Not Applicable
(Former name or former address, if changed since last report.)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2.):
 
o            Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o            Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o            Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o            Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
 

 










Item 8.01    Other Events.
In connection with a new universal shelf registration statement on Form S-3ASR that Strategic Hotels & Resorts, Inc. (the “Company”) expects to file with the Securities and Exchange Commission (the “SEC”) promptly after filing this Current Report on Form 8-K with the SEC, the following updated unaudited pro forma financial information is attached as Exhibit 99.1 and is incorporated herein by reference:
•
Unaudited pro forma condensed consolidated statement of operations of the Company for the year ended December 31, 2014.

The pro forma financial information relates to the Company’s previously announced acquisition of the remaining 63.6% ownership interest in BSK Del Partner, L.P., the entity that owns the Hotel del Coronado, which closed on June 11, 2014.
The pro forma financial information gives effect to certain pro forma events described therein and has been presented for informational purposes only. It does not purport to project the future financial position or operating results of the Company.
Item 9.01 Financial Statements and Exhibits.
(b)     Pro forma financial information.
Filed as Exhibit 99.1 hereto is the unaudited pro forma financial information.
(d)    Exhibits.
Exhibit Number
Description
99.1
Unaudited pro forma financial information































SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
STRATEGIC HOTELS & RESORTS, INC.
 
 
 
 
 
February 24, 2015
By:
 /s/ Paula C. Maggio
 
Name:
 Paula C. Maggio
 
Title:
 Executive Vice President, General Counsel & Secretary
















































EXHIBIT INDEX
Exhibit Number
Description
99.1
Unaudited pro forma financial information







Exhibit 99.1

UNAUDITED PRO FORMA FINANCIAL INFORMATION

On May 27, 2014, SHR Del Partners, LP, an indirect wholly-owned subsidiary of Strategic Hotel Funding, L.L.C. ("SH Funding"), the operating partnership of Strategic Hotels & Resorts, Inc. ("SHR") entered into a purchase and sale agreement with an affiliate of Blackstone Real Estate Partners VI L.P. (“Blackstone”), pursuant to which SHR agreed to acquire the remaining 63.6% ownership interest in BSK Del Partner, L.P., the entity that owns the Hotel del Coronado (the "HDC"), from Blackstone for a cash payment of $210.0 million. Additionally, SH Funding became fully obligated under the entire $475.0 million loan encumbering the HDC (the “HDC JV Acquisition”). The HDC JV Acquisition closed on June 11, 2014. Prior to the HDC JV Acquisition, SHR owned a 36.4% ownership interest in the HDC through a joint venture with an affiliate of Blackstone and accounted for its investment in the HDC as an equity method investment. Subsequent to the HDC JV Acquisition, SHR consolidates the HDC. The following unaudited pro forma financial information is presented as a result of the HDC JV Acquisition and gives effect to the HDC JV Acquisition.

The historical financial information for the year ended December 31, 2014 has been derived from SHR's audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2014.

The unaudited pro forma statement of operations data for the year ended December 31, 2014 is presented as if the HDC JV Acquisition had occurred on January 1, 2014.

The unaudited pro forma financial information is presented for informational purposes only and does not purport to represent what SHR's results of operations would actually have been if the transactions had in fact occurred on the earlier date discussed above. It also does not project or forecast SHR's consolidated results of operation for any future date or period.







Strategic Hotels & Resorts, Inc.
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended December 31, 2014
(in thousands, except per share amounts)
 
Strategic Hotels & Resorts, Inc. Historical Consolidated
 
HDC Historical (1)
 
HDC Pro Forma Adjustments (2)
 
Strategic Hotels & Resorts, Inc. Pro Forma Consolidated
 
Revenues:
 
 
 
 
 
 
 
 
Rooms
$
582,969

 
$
28,870

 
 
 
$
611,839

 
Food and beverage
385,623

 
29,825

 
 
 
415,448

 
Other hotel operating revenue
115,084

 
9,168

 
 
 
124,252

 
Lease revenue
5,406

 
—

 
 
 
5,406

 
Total revenues
1,089,082

 
67,863

 
—

 
1,156,945

 
Operating Costs and Expenses:
 
 
 
 
 
 
 
 
Rooms
168,256

 
9,678

 
 
 
177,934

 
Food and beverage
277,962

 
16,785

 
 
 
294,747

 
Other departmental expenses
270,219

 
16,552

 
 
 
286,771

 
Management fees
36,331

 
818

 
941

(2a)
38,090

 
Other hotel expenses
67,058

 
3,269

 
 
 
70,327

 
Lease expense
4,873

 
—

 
 
 
4,873

 
Depreciation and amortization
119,688

 
9,694

 
1,716

(2b)
131,098

 
Corporate expenses
26,898

 
717

 
(664
)
(2c)
26,951

 
Total operating costs and expenses
971,285

 
57,513

 
1,993

 
1,030,791

 
Operating income
117,797

 
10,350

 
(1,993
)
 
126,154

 
Interest expense
(82,119
)
 
(9,397
)
 
1,288

(2d)
(90,228
)
 
Interest income
269

 
—

 
 
 
269

 
Loss on early extinguishment of debt
(2,619
)
 
—

 
 
 
(2,619
)
 
Equity in earnings of unconsolidated affiliates
5,237

 
—

 
(599
)
(2e)
4,638

 
Foreign currency exchange loss
(116
)
 
—

 
 
 
(116
)
 
Gain on consolidation of affiliates
143,471

 
—

 
(65,360
)
(2f)
78,111

 
Other income (expense), net
952

 
(14
)
 
(422
)
(2g)
516

 
Income before income taxes
182,872

 
939

 
(67,086
)
 
116,725

 
Income tax (expense) benefit
(1,200
)
 
73

 
 
 
(1,127
)
 
Income from continuing operations
$
181,672

 
$
1,012

 
$
(67,086
)
 
$
115,598

 
 
 
 
 
 
 
 
 
 
Amounts Attributable to SHR:
 
 
 
 
 
 
 
 
Income from continuing operations
$
185,713

 
$
1,009

 
$
(66,891
)
 
$
119,831

 
 
 
 
 
 
 
 
 
 
Income from continuing operations attributable to SHR common shareholders per share:
 
 
 
 
 
 
 
 
Basic:
$
0.69

 
 
 
 
 
$
0.39

(3)
Diluted:
$
0.65

 
 
 
 
 
$
0.37

(3)





Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended December 31, 2014

1.
Historical Presentation of HDC - These balances reflect HDC's historical unaudited statement of operations for the period from January 1, 2014 to June 11, 2014, which are included in Exhibit 99.1 in SHR's Annual Report on Form 10-K for the year ended December 31, 2014 filed on February 24, 2015.

2.
HDC Pro Forma Adjustments - On June 11, 2014, SH Funding acquired the remaining 63.6% ownership interest in the entity that owns HDC for approximately $210.0 million of cash. Additionally, SH Funding became fully obligated under the entire $475.0 million mortgage loan secured by HDC (the "HDC JV Acquisition"). Prior to the HDC JV Acquisition, SH Funding owned a 36.4% ownership interest in HDC through a joint venture. The following pro forma adjustments were made to account for this acquisition, which exclude non-recurring items related to this acquisition such as the gain on the consolidation of HDC, which was recognized in the second quarter of 2014:

a)
Reflects a $0.9 million incremental increase from the amortization of the below market management agreement related to the consolidation of HDC.
b)
Reflects a $1.7 million incremental increase related to the consolidation of HDC from historical depreciation and amortization expense, based on the carrying value of the acquired assets adjusted to fair value as required by business combination guidance.
c)
Reflects a $0.7 million elimination of the historical asset management fee paid to SHR by HDC.
d)
Reflects a $1.3 million elimination of the amortization of deferred financing costs related to HDC.
e)
Reflects the $0.6 million elimination of SHR's historical equity in earnings related to HDC.
f)
Reflect the $65.4 million elimination of the non-recurring gain recognized on the consolidation of HDC.
g)
Reflects the $0.4 million elimination of the historical asset management fee recognized by SHR.

3.
Income From Continuing Operations Attributable to SHR Common Shareholders Per Share Calculation - The following table calculates the pro forma weighted average basic and diluted income from continuing operations attributable to SHR common shareholders per share:

 
 
(In thousands, except per share amounts)
 
 
Basic
 
Diluted
Historical basic and diluted weighted average shares outstanding for the year ended December 31, 2014
 
233,528

 
243,558

Pro forma impact of common stock offerings directly attributable to HDC JV Acquisition
 
8,110

 
8,110

Pro forma basic and diluted weighted average shares outstanding for the year ended December 31, 2014
 
241,638

 
251,668

Pro forma income from continuing operations attributable to SHR for the year ended December 31, 2014
 
$
119,831

 
$
119,831

Pro forma undistributed earnings allocated to participating securities
 
(1,041
)
 
(990
)
Historical adjustment for noncontrolling interests in consolidated affiliates
 
—

 
(2,198
)
Historical preferred shareholder dividend
 
(24,084
)
 
(24,084
)
Pro forma income from continuing operations attributable to SHR common shareholders for the year ended December 31, 2014
 
$
94,706

 
$
92,559

Pro forma income from continuing operations attributable to SHR common shareholders per share for the year ended December 31, 2014 - basic and diluted
 
$
0.39

 
$
0.37