UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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): June 16, 2006 (June 12, 2006)
AMERICAN RETIREMENT CORPORATION
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(Exact Name of Registrant as Specified in Charter)
Tennessee 01-13031 62-1674303
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(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
111 Westwood Place, Suite 200
Brentwood, Tennessee 37027
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(Address of Principal Executive Offices) (Zip Code)
(615) 221-2250
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(Registrant's Telephone Number, Including Area Code)
Not Applicable
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(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. below):
|_| Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 1.01. Entry into a Material Definitive Agreement
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under
an Off-Balance Sheet Arrangement of a Registrant
On June 12, 2006, we closed our acquisition, through a newly-formed
joint venture, of Freedom Village of Bradenton, a continuing care retirement
community located in Bradenton, Florida. The aggregate purchase price for the
acquired assets was $95 million plus the assumption of certain resident refund
liabilities and other liabilities and customary transaction expenses.
We consummated the acquisition through a joint venture formed with
investors in a senior housing strategy fund managed by Prudential Real Estate
Investors, the real estate investment management business of Prudential
Financial, Inc. The joint venture is owned 20% by us and 80% by our joint
venture partner. Capmark Bank provided the joint venture with $61.2 million of
non-recourse mortgage debt financing for the transaction. The remainder of the
purchase price was funded by proportional capital contributions from us and our
joint venture partner. We have agreed to manage the independent living component
of the community pursuant to a long-term management agreement and lease the
health center (assisted living and skilled nursing components) from the joint
venture.
The loan from Capmark to the joint venture is evidenced by a loan
agreement and a promissory note, and is secured by a mortgage lien on the
community. The loan matures on June 9, 2009, and the joint venture has two
one-year extension options. The outstanding principal balance of the loan will
bear interest at a variable rate equal to LIBOR plus 2.50%. The joint venture
will be required to make monthly payments of principal (based on a 30 year
amortization schedule) plus interest through the scheduled maturity date.
Although the loan is non-recourse, we guaranty certain customary "non-recourse
carveouts" for the benefit of Capmark.
We will act as the lessee of the skilled nursing and assisted living
facility components of the community pursuant to a ten year, triple-net lease
agreement with the joint venture. We will be required to make monthly base
rental payments, percentage rent payments, and certain operating cost payments,
such as taxes and insurance, and other customary payments of additional rent.
Base monthly rent for the first year of the lease will be $153,333.33, and
thereafter will increase by 2.5% annually. Percentage rent payments will equal
50% of all operating cash flow for each lease year, to the extent that such cash
flow exceeds a predetermined amount, which is $100,000 for the first year,
increasing by 2.5% each year thereafter. We will also make annual payments to
the joint venture for capital replacements at the community, with the first
payment equaling $50,000, and payments in subsequent years equaling the greater
of (i) $300,000 or (ii) 2% of gross revenue for such year.
Risks Associated with Forward-Looking Statements
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This Current Report on Form 8-K contains certain forward-looking
statements within the meaning of the federal securities laws, which are intended
to be covered by the safe harbors created thereby. Those forward-looking
statements include all statements that are not historical statements of fact and
those regarding the intent, belief or expectations of us or our management,
including, but not limited to, all statements regarding the formation of the
joint venture and the consummation of the acquisition and the related financing,
and all statements regarding our expectations concerning the future financial
performance of the acquired communities and their effect on our financial
performance. All forward-looking statements may be affected by certain risks and
uncertainties, including without limitation the following: (i) our ability to
successfully integrate the acquisition into our operations, (ii) our ability to
resell units at the community, (ii) the risk that we will be unable to improve
our results of operations, increase cash flow and reduce expenses, (iii) the
risks associated with adverse market conditions of the senior housing industry
and the United States economy in general, (iv) the risks associated with our
debt and lease obligations, and (v) the risk factors described in our Annual
Report on Form 10-K for the year ended December 31, 2005 under the caption "Risk
Factors" and in our other filings with the SEC.
Should one or more of those risks materialize, actual results could
differ materially from those forecasted or expected. Although we believe that
the assumptions underlying the forward-looking statements contained herein are
reasonable, any of these assumptions could prove to be inaccurate, and
therefore, there can be no assurance that the forward-looking statements
included in this Form 8-K will prove to be accurate. In light of the significant
uncertainties inherent in the forward-looking statements included herein, the
inclusion of such information should not be regarded as a representation by us
or any other person that our forecasts, expectations, objectives or plans will
be achieved. We undertake no 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.
Item 7.01. Regulation FD Disclosure
On June 16, 2006, we issued a press release describing the foregoing
transaction. A copy of the press release is furnished herewith as Exhibit 99.1.
Item 9.01. Financial Statements and Exhibits
(d) Exhibits
99.1 Press Release dated June 16, 2006
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.
AMERICAN RETIREMENT CORPORATION
By: /s/ Bryan D. Richardson
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Bryan D. Richardson
Executive Vice President - Finance
and Chief Financial Officer
Date: June 16, 2006
EXHIBIT INDEX
Exhibit
Number Description
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99.1 Press Release dated June 16, 2006