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): July 6, 2005 (June 29, 2005)
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
We recently completed four transactions as part of the Company's strategy to
release portions of its restricted cash, and to increase capacity through
certain community expansions and new development. These transactions in the
aggregate released approximately $13 million of restricted cash, reduced
approximately $12 million of debt, and facilitated the execution of expansion
plans at certain communities.
A. On June 29, 2005, we obtained a letter of credit facility from a commercial
bank (Bank of America N.A.). The facility provides for the issuance of up to
$10.7 million of standby letters of credit and is collateralized by a mortgage
on two of our free-standing assisted living communities. We currently have $8.4
million of letters of credit outstanding under this facility. The facility has
an initial term of one year, and can be renewed for two additional one year
periods in accordance with its terms. A fee of 1% per annum is payable for any
letters of credit issued under the facility. In the event a standby letter of
credit is drawn upon the amount so drawn will bear interest at the prime rate.
As a result of this letter of credit facility, we released approximately $8.4
million from our restricted cash balance, which we used to repay debt.
B. On June 29, 2005, we completed a transaction with a real estate investment
trust ("REIT")(an affiliate of CNL Retirement Properties), pursuant to which we
received $9.5 million in earnout funds under our existing lease for two of our
Alabama retirement center communities. We earned these funds by achieving
certain operating performance improvements at the subject communities, and we
used the funds to repay the balance of a $9.5 million loan related to our
leasehold in the communities. The initial lease rate on the incremental $9.5
million investment by the REIT is 7.49%.
C. We have a master lease with another REIT (an affiliate of Nationwide Health
Properties) for nine of our communities. On June 30, 2005, we amended the master
lease as part of a transaction that involved the sale to the REIT of two of our
owned free-standing assisted living communities for inclusion in the master
lease, and the contemporaneous removal of two other free-standing assisted
living communities from the master lease. In connection with this exchange, we
also received $1.5 million of cash from the REIT, which correspondingly
increased our lease basis under the master lease. The operating results of each
of these communities are included in our consolidated results before and after
the exchange. This exchange will facilitate planned expansions for both of the
communities that were repurchased and removed from the master lease.
Additionally, as part of this transaction, the REIT established a program to
reduce up to $7.0 million of security deposit requirements based on the
satisfaction of certain financial performance tests for the master lease
portfolio. We currently have $7.0 million of restricted cash underlying these
security deposits that would be released in incremental steps as these tests are
met. Finally, this amendment extends the timing of a purchase option for one of
our communities under the master lease. The option is initially exercisable in
2010, and now may be deferred for up to three years at the option of the REIT.
D. On June 30, 2005, we completed a transaction with a third REIT (an affiliate
of Health Care Property Investors) to repurchase its minority interest in the
lessor of two of our entrance fee communities. As a result of the repurchase of
these two minority ownership positions, we now own 100% of both entrance fee
communities. In exchange for these minority interests, we issued a $6.2 million
note to the REIT with a five year term, bearing interest at 9%. The transaction
simplifies the ownership structure of the two communities and facilitates the
current expansion of one of them. In a related transaction, the REIT amended a
separate lease with us to eliminate a $5 million security deposit requirement.
As a result, $5 million of our restricted cash was released to unrestricted
cash.
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Item 7.01. Regulation FD Disclosure
On June 30, 2005 and July 6, 2005, we issued press releases describing the
foregoing transactions. Copies of those press releases are furnished herewith as
Exhibits 99.1 and 99.2.
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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: July 6, 2005
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