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CAREY WATERMARK INVESTORS INCORPORATED

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

Our pro forma condensed consolidated balance sheet as of September 30, 2019 has been prepared as if the significant disposition during the fourth quarter of 2019 (noted herein) had occurred as of September 30, 2019. Our pro forma condensed consolidated statements of operations for the nine months ended September 30, 2019 and for the year ended December 31, 2018 have been prepared based on our historical financial statements as if the significant disposition during the fourth quarter of 2019 had occurred on January 1, 2018. Pro forma adjustments are intended to reflect the estimated effect of our disposition activity described in Note 2. In our opinion, all adjustments necessary to reflect the effects of this disposition have been made.

The pro forma condensed consolidated financial information for the nine months ended September 30, 2019 should be read in conjunction with our historical consolidated financial statements and notes thereto in our Quarterly Report on Form 10-Q as of and for the nine months ended September 30, 2019. The pro forma condensed consolidated financial information for the year ended December 31, 2018 should be read in conjunction with our historical consolidated financial statements and notes thereto in our Annual Report on Form 10-K for the year ended December 31, 2018. This pro forma information is presented for informational purposes only and does not purport to be indicative of our financial results as if the transaction reflected herein had occurred on the date disclosed above or been in effect during the periods indicated above, nor are they necessarily indicative of our financial position or results of operations of future periods. The provisional accounting for the disposition is preliminary and therefore subject to change. Any such changes could have a material effect on the pro forma condensed consolidated financial information.




CAREY WATERMARK INVESTORS INCORPORATED
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
September 30, 2019
(in thousands)

 
 
CWI Historical
 
Hampton Inn & Suites/Homewood Suites Denver Downtown Convention Center Disposition
 
Pro Forma
Assets
 
 
 
 
 
 
Investments in real estate:
 
 
 
 
 
 
Hotels, at cost
 
$
2,085,575

 
$
(82,205
)
A
$
2,003,370

Accumulated depreciation
 
(295,974
)
 
12,433

A
(283,541
)
Net investments in hotels
 
1,789,601

 
(69,772
)
 
1,719,829

Assets held for sale
 
15,203

 
—

 
15,203

Equity investments in real estate
 
106,890

 
—

 
106,890

Operating lease right-of-use assets
 
47,461

 
—

 
47,461

Cash and cash equivalents
 
78,831

 
34,309

B
113,140

Intangible assets, net
 
65,184

 
—

 
65,184

Restricted cash
 
61,443

 
(2,831
)
A
58,612

Accounts receivable, net
 
22,091

 
(397
)
A
21,694

Other assets
 
24,761

 
(410
)
A
24,351

Total assets
 
$
2,211,465

 
$
(39,101
)
 
$
2,172,364

Liabilities and Equity
 
 
 
 
 
 
Non-recourse debt, net, including debt attributable to Assets held for sale
 
$
1,274,847

 
$
(50,796
)
A
$
1,224,051

WPC Credit Facility
 
35,000

 
—

 
35,000

Accounts payable, accrued expenses and other liabilities
 
107,047

 
(1,629
)
A
105,418

Operating lease liabilities
 
71,540

 
—

 
71,540

Due to related parties and affiliates
 
3,040

 
—

 
3,040

Other liabilities held for sale
 
208

 
—

 
208

Distributions payable
 
20,171

 
—

 
20,171

Total liabilities
 
1,511,853

 
(52,425
)
 
1,459,428

Commitments and contingencies
 
 
 
 
 
 
Common stock
 
142

 
—

 
142

Additional paid-in capital
 
1,195,949

 
—

 
1,195,949

Distributions and accumulated losses
 
(548,011
)
 
13,324

C
(534,687
)
Accumulated other comprehensive loss
 
(266
)
 
—

 
(266
)
Total stockholders’ equity
 
647,814

 
13,324

 
661,138

Noncontrolling interests
 
51,798

 
—

 
51,798

Total equity
 
699,612

 
13,324

 
712,936

Total liabilities and equity
 
$
2,211,465

 
$
(39,101
)
 
$
2,172,364


The accompanying notes are an integral part of these pro forma condensed consolidated financial statements.

2

CAREY WATERMARK INVESTORS INCORPORATED
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
For the Nine Months Ended September 30, 2019
(in thousands except share and per share amounts)

 
 
CWI Historical
 
Hampton Inn & Suites/Homewood Suites Denver Downtown Convention Center Disposition
 
Pro Forma
Revenue
 
 
 
 
 
 
Hotel Revenues
 
 
 
 
 
 
Rooms
 
$
298,126

 
$
(13,291
)
D
$
284,835

Food and beverage
 
127,126

 
(434
)
D
126,692

Other operating revenue
 
40,483

 
(822
)
D
39,661

Business interruption income
 
3,627

 
—

 
3,627

Total Hotel Revenues
 
469,362

 
(14,547
)
 
454,815

Expenses
 
 
 
 
 
 
Rooms
 
66,227

 
(3,022
)
D
63,205

Food and beverage
 
86,866

 
(303
)
D
86,563

Other hotel operating expenses
 
21,366

 
(438
)
D
20,928

Property taxes, insurance, rent and other
 
55,539

 
(1,086
)
D
54,453

Sales and marketing
 
43,672

 
(2,007
)
D
41,665

General and administrative
 
41,624

 
(1,248
)
D
40,376

Repairs and maintenance
 
15,013

 
(376
)
D
14,637

Management fees
 
12,971

 
(436
)
D
12,535

Utilities
 
11,510

 
(304
)
D
11,206

Depreciation and amortization
 
57,845

 
(1,825
)
D
56,020

Total Hotel Operating Expenses
 
412,633

 
(11,045
)
 
401,588

Asset management fees to affiliate and other expenses
 
11,073

 
(315
)
D
10,758

Corporate general and administrative expenses
 
9,211

 
(9
)
D
9,202

Gain on hurricane-related property damage
 
(880
)
 
—

 
(880
)
Transaction costs
 
1,483

 
—

 
1,483

Total Expenses
 
433,520

 
(11,369
)
 
422,151

Operating income before net gain on sale of real estate
 
35,842

 
(3,178
)
 
32,664

Net gain on sale of real estate
 
5,881

 
—

 
5,881

Operating Income
 
41,723

 
(3,178
)
 
38,545

Interest expense
 
(50,205
)
 
1,473

 
(48,732
)
Equity in earnings of equity method investments in real estate, net
 
101

 
—

 
101

Net loss on extinguishment of debt
 
(136
)
 
—

 
(136
)
Other income
 
605

 
(1
)
D
604

Loss before income taxes
 
(7,912
)
 
(1,706
)
 
(9,618
)
Provision for income taxes
 
(2,133
)
 
(52
)
D
(2,185
)
Net Loss
 
(10,045
)
 
(1,758
)
 
(11,803
)
Income attributable to noncontrolling interests
 
(6,474
)
 
—

 
(6,474
)
Net Loss Attributable to CWI Stockholders
 
$
(16,519
)
 
$
(1,758
)
 
$
(18,277
)
Basic and Diluted Loss Per Share
 
$
(0.12
)
 
 
 
$
(0.13
)
Basic and Diluted Weighted-Average Shares Outstanding
 
141,332,118

 
 
 
141,332,118


The accompanying notes are an integral part of these pro forma condensed consolidated financial statements.

3

CAREY WATERMARK INVESTORS INCORPORATED
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
For the Year Ended December 31, 2018
(in thousands except share and per share amounts)

 
CWI Historical
 
Hampton Inn & Suites/Homewood Suites Denver Downtown Convention Center Disposition
 
Pro Forma
Revenues
 
 
 
 
 
Hotel Revenues
 
 
 
 
 
Rooms
$
385,189

 
$
(16,637
)
D
$
368,552

Food and beverage
159,020

 
(603
)
D
158,417

Other operating revenue
46,099

 
(1,075
)
D
45,024

Business interruption income
23,579

 
—

 
23,579

Total Hotel Revenues
613,887

 
(18,315
)
 
595,572

Expenses
 
 
 
 
 
Rooms
88,761

 
(3,778
)
D
84,983

Food and beverage
112,708

 
(387
)
D
112,321

Other hotel operating expenses
26,400

 
(516
)
D
25,884

Property taxes, insurance, rent and other
62,586

 
(1,104
)
D
61,482

Sales and marketing
57,763

 
(2,675
)
D
55,088

General and administrative
53,417

 
(1,567
)
D
51,850

Repairs and maintenance
19,857

 
(518
)
D
19,339

Management fees
17,849

 
(549
)
D
17,300

Utilities
14,701

 
(352
)
D
14,349

Depreciation and amortization
77,170

 
(2,375
)
D
74,795

Total Hotel Operating Expenses
531,212

 
(13,821
)
 
517,391

Asset management fees to affiliate and other expenses
15,294

 
(421
)
D
14,873

Corporate general and administrative expenses
11,602

 
(8
)
D
11,594

Gain on hurricane-related property damage
(1,340
)
 
—

 
(1,340
)
Total Expenses
556,768

 
(14,250
)
 
542,518

Operating income before net gain on sale of real estate
57,119

 
(4,065
)
 
53,054

Net gain on sale of real estate
31,260

 
—

 
31,260

Operating income
88,379

 
(4,065
)
 
84,314

Interest expense
(66,597
)
 
2,014

D
(64,583
)
Equity in losses of equity method investments in real estate, net
(1,315
)
 
—

 
(1,315
)
Net loss on extinguishment of debt
(511
)
 
—

 
(511
)
Other income
665

 
—

 
665

Income before income taxes
20,621

 
(2,051
)
 
18,570

Provision for income taxes
(4,877
)
 
(83
)
D
(4,960
)
Net Income
15,744

 
(2,134
)
 
13,610

Income attributable to noncontrolling interests
(7,688
)
 
—

 
(7,688
)
Net Income Attributable to CWI Stockholders
$
8,056

 
$
(2,134
)
 
$
5,922

Basic and Diluted Income Per Share
$
0.06

 
 
 
$
0.04

Basic and Diluted Weighted-Average Shares Outstanding
139,376,034

 
 
 
139,376,034


The accompanying notes are an integral part of these pro forma condensed consolidated financial statements.

4

CAREY WATERMARK INVESTORS INCORPORATED
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1. Basis of Presentation

The pro forma condensed consolidated balance sheet as of September 30, 2019 and the pro forma condensed consolidated statement of operations for the nine months ended September 30, 2019 were derived from our historical consolidated financial statements included in our Quarterly Report on Form 10-Q as of and for the nine months ended September 30, 2019. The pro forma condensed consolidated statement of operations for the year ended December 31, 2018 was derived from our historical consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018.

Note 2. Pro Forma Adjustments

Hampton Inn & Suites/Homewood Suites Denver Downtown Convention Center Disposition

On November 21, 2019, Carey Watermark Investors Incorporated sold its 100% ownership interest in the Hampton Inn & Suites/Homewood Suites Denver Downtown Convention Center to an unaffiliated third-party for a contractual sales price of $85.5 million with net proceeds after the repayment of the related mortgage loan of approximately $34.1 million, including the release of $3.1 million of restricted cash.

Balance Sheet Adjustments

A.     These adjustments represent the elimination of the carrying value of the assets and liabilities of the Hampton Inn & Suites/Homewood Suites Denver Downtown Convention Center.

B.     These adjustments represent the net proceeds received from the disposition of the Hampton Inn & Suites/Homewood Suites Denver Downtown Convention Center and were calculated as follows:
 
 
Hampton Inn & Suites/Homewood Suites Denver Downtown Convention Center Disposition
Net proceeds from purchaser, net of closing costs
 
$
34,057

Changes in working capital
 
252

Net pro forma cash proceeds from purchaser, net of closing costs
 
$
34,309


C.     This adjustment represents the pro forma gain on sale of real estate and is not reflected in the pro forma condensed consolidated statements of operations as the effect of the transaction is nonrecurring.

Statements of Operations Adjustments

D.     These adjustments represent the elimination of the revenue and expenses of Hampton Inn & Suites/Homewood Suites Denver Downtown Convention Center that were recorded during the nine months ended September 30, 2019 and the year ended December 31, 2018.
    





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