HomeMy WebLinkAboutVAIL VILLAGE FILING 1 BLOCK 5E LOT K L KIANDRA HOTEL DEVELOPMENT 1986 10 MILLION BOND FINANCING LEGALurffiE tf uMtc, tNc.
INV€STMENT BAN<ERS
959 Ridgeway Loop Road
Memphis, Tennessee 38I19
901 .. . 766-0600
January 5, 1986
The T\: ^tn Cor:ncil
Tcxpn of Vail, Colorado 81557
RB: $10,000,000 Kiandra Hotel lEvel-@nent
Kiandra Hotel Partners, Limited Partnership
a1 ry
Gentlqen:
We harie revier'ed the above-referencred financing with bond crcr:nsel and the
developer. This letter is to advise you that llvllc, Inc. cqmits to purchase q)
to $101000,000 of tax exffpt revenue bonds to be issred bg you. Our @milrent
is subject only to the folloping conditios:
t. A bond 4proving cpinion accreptable. to us frcnr ButLer & Binion mr:st be
received at closing.
2. standard docr,nrents essential to bond financings satisfactory to us anil otr
counsel, mr.rst be prepared prior to tlre purchase of the bonds by us.
'3. The bcnds will be rated hy a national sedit rating agencY at a I'evel
acceptable to us.
In crcnnection with this crranitnent, WIC, Inc. represents tiat it is a rembr of
the national llssociation of Securities Dealers and has sufficient equity ceital
mder Sttr regulations to rndenri.te tlre proposed bond isste qr a firm basis
subiecc offering.
WEM:tsw
APPLICATTON
IOr
INDUSTRIAL REVENUE BOND FINANClNG
Pres€rnted to
THE TOWN OF VAIL, COLORADO
by
KTANDRA HOTEL PARTNERS LITTTED PARTNERSHIP
January 7, 1945
AMENDHENT
TO THE
IRDB APPLICATION DATED JANUARY ?. 1986
CONTACT PERSONS:Jay K. Peterson
( 303 ) 476-0092
James J. Peters
( 803 ) 785-3311
Jay K. Peterson
Otto, Peterson & Post
P. O. Box 314 9
vail-, CO 81658
COLORADO TEGAL COUNSET:
GENERAL INFORMATION:RE: Item 4 History of the Applicant
Kiandra Hotel- Partners Limited Partnership is a ner^' South Carolina Limited
Partnership formed in December of 1985 for the specific purpose of pur-
chasing, renovating, and operating the Kiandra Lodge. The managing general
partner is Kiandra Associates. Inc., the co-general partner is Sea Pines
Company. and the initial limited partner is Sea Pj,nes company. New limited
partners may be adrnitted at a later date.
IMPACT ANALYSIS:RE: Employment Proj ections
The Kiandla Lodge currenlly employs
of $ 1, 187 ,000
LETTER OF CREDIT: A
guaranteeing paYment
vided at closing. A
forthcoming and will
110 with an annual Davrol l
letter of credit from a major financial institution
of the bond principal and the interest will be pro-
commitment letter from the financiaf institution is
be made part of this application.
January 14, 1986
Autllor 1 z ed Representative
KIANDRA ASSOCIATES , INC.
NAME OF APPL]CANT
COI.IPANY ADDRESS
KIANDRA HOTEL PARTNERS
LIMITED PARTNERSHIP
HiLton Head Company rJff ice Complex
Highway 278
Hj.Lton Head Island, SC 29925
(AO3) 785-3311 ext. 322
James J. Peters
TELEPHONE
CONTACT PERSON
AI,IOUNT OF BOND PROCEEDS
REOUESTED Not to exceed $10, OOO, OOO
PROJECT DESCRIPTION
The rRDB flnancing is requegted by the appJ-icant to fi.nance thepurchase snd renovBtion of the Klandra Lodge. The property knorrn aBthe Klandra Lodge consr.st' of tro mid-rige bulrdi-ngs, the KlendraEaet ( formerly the Tarisman Lodge), and the Klandra \{est. Theproperty is situated aLong 6ore creek, hetreen wirLow Bridge Road andVaJ.l Roedr and al.ong Eaet }|eado$ Dr1ve.
The Kiandra West has approximatety g5 guest accornoctat j.ons, tworestaurants, End meeting faci-litlee for up to 2oo persons. TheKlandra East has approximately 63 guest accomodations, a sma.r.r.meeting facility, some offise elpace and three commercial. shops. Thesebuirdings have had no major capitar improvement since 197G, and neecrsubstantial renovation and redecorati-ng to l.mprove their quarity,sttractlvene€rEr, and operating caeh flow.
The renovation plane j-nclude a complete refurbishment of thegueet roomE' and common sress, conversl(]n of gome un8uccesEful_reataurant spsce i-nto nev meeting and banquet facirltlee in the Eastwlng, the eddltlon of an elevator In the East trling to rervlce thefour etory structure, and the additlon of nes gueErt amenltles in theform of a heerth and exerclse faclrlty and hydrotherapy spa'. Theeetj-mated coet of this renovation is g1,25O, OOO.
see nAttachment Ai for the egtlmsted Bources aird ueee offunde for the ProJ ect.
SIGNATURE AND TITLE OF THE AITPLICANT'S
AUTHORIZED REPRESENTATlVE
meg J.
l.ce Preeident
Kiandra Associatea. Inc.
APPLICANT'S LEGAL COUNSEL Henry Motse
61nn Bui.Iding
Hlgh*ay 278 and Sea pj,nes C1.rcle
P. A. Box 5665
Hilton Head IeJ-and, SC 29928
(ao3) 7a3-70o0
APPLICAI.IT'S ACCOUNTANTS Arthur Andergen & Co.
133 Peachtree Street, NE
Atlants, GA 3O3O3
(404) 63A-L776
APPLICANT,S BOND COUNSEL bJllllam Hoops
Butler & Bl.nion
1600 Allied Bank Plaza
Houeton, Texas ZTOOZ
(7l-3r 237-3111
APPLICANT'S UNDERT{RITERS t{ttlJ-e }torgan
UI,TIC
959 Ridgeway Loop Rd.
!1emphj.s, TN 3Aft9
(915) 768-07rL
GENERAL INFORI.IATION
l. Descrl-ption of Pro.j ect
slte- nAttschment Bn shows the site pLan. The r-eased rand ofthe Klandra East (Talieman Lodge ) is outti-nerd i.n yelrov and thefee rand of the Kiandra west is outri-ned ln green. The tracts ofland have frontage on Vail Road, and Wi-l_lov Elridge Road. .Ihe
south edge of the property fronte on Gore Creek. The site isgenerarLy lever- and at grade vlth the adJolning streets. BothLodges have parking easements on the acrJ acent parcer.s outrined 1nred on the map.
The Klandra East (Tarisman Lodge) is on a long-term grouncr ]easefrom vai-l Associ.ateg to the present owner. The reaseho.r_d term run=to noon on July I, 2AL9, nith a renewaL rlght for an additLonat 49years. The Kiandra weet r.and i-s onned fee si.mp].e by the presento$ner.
FacilitleB- The Kiandra project conerete ot- tvo, mid-risebulldinga on the two sitee. The buildinge are of concret€r and frameconstructlon. Kiandra l,leet le three-storles high, and in KiandraEaet ( Tarismen Lodge ) the southeasterly part contains three storie'and the northnesterly part contains four atorie6. Each of thebuildings contain food and beverage units, each has a snr-mmf.ng poor-,a stauna and a jacuzzi (whlch i-s to be built at Kiandra East as partof the renovatlon). Kiandra West contaj.ns gS guest accommodationcondominj-urn units and Kiandra East ( Tal-isman Lodge) contain6 63 guestaccommodati-on unit-. The parking eese,ment provides approximately 12oparklng spaces.
The Kiandra Weet was conetructed in tso phases, the lobby andhotel room wing in 1969 and the restaurant and convention fac j-Iitlesand the rooms ebove thern in r9zr. Kiandra Eagt ( Tal.lsman Lodge ) rasarso constructed in tlro phaaes, the tobby and the rooma i.n the robbyning 1n 1968 and the commerci.aJ- space, restaurant, lounge and therooms above then in l97l.
Restaurants & Meetlno Facirlties- The Klandra Lodge has threeeeparate restsurants, tro cocktail rounges and tro robby cocktairIoungee. At Kiandra west (Kiandra Lodge), the regtaurant seats 19tldiners and the lobby lounge (Ketly,s) seats 47 persons, rrhiJ.e atKlandrs Eaet (Tarisman Lodge ) the restaurant eeate 92 dinere and thelounge (cabin Lounge) seats 40 pereons. .The tso buir.dings providemeeting facj.l1-t j.es for groups from lO to 3OO.
Asset Life- According to aEast and the Kiandra West havethan 40 years.
recent apprej.saJ. , both the Kiandra
a rema1nj.ng economic Life of not less
Reviev Gu ielel j. nes
The l-and of the Kiandra Eaet and the Klandra Vlegt is zonedPublic Accornmodatlone (pA). This zoning arrows hoters, moters,rodges' single-f amiJ,y and two-Jamil-y dwerring structures as nelr asprofessionaJ- services, officee, recreation centers, restaurants,bars and retaiL services. Both rodges vere bui.r-t in conformancewith the zoning ordinanee of the Town of Vail and are a Ledal"usuage.
The Applicant believes that the exigting f aci-rity and prannedrenovataon a remoderej.ng will not materially change the Lodge useand exterior rook. Any changes wlr".r. be vithin the Town of Vai-r-,sguiderines and wirl contorm vith the Tovn's requirements.
3. Deveropment rine schedure - The purchase of the Lodge wrrl takeprace i-n February of 1986 and the renovation and remodering wirlbegi.n at the close of the lggs-s6 eki season. The compretlon of theproject i-s expected by Thanksgivlng of 19g6. The proJect virr bedone ln phases to minimlze disruption of the Lodge operatlons andthe Erurroundlng propertj.es.
4. History of Appllcant
i{iandra Hotel Partners L j,mj.tecl partnershio l.s a nel'Lim1ted partnership formed in Decenber of 1995 forpurpoEe ot purchasing, renovatlng and operating the
Ki-andra Associates, rnc. is a south carollna corporation formed inDecember of 1985 to act ae managing generar partner tor the KiandraHotel Partners L j_mJ-ted partnershi.p.
sea Pi'nes companv. the co-generar partner, rras incorporated ln thestate of Georgia on June 7, 1965. sea pines company deveroped seaPlne' Plantation on Hlrton Head rsrand, south carorina. sea pinesPrantatlon is 5, ooo acre reeort / resident]-a] community rocated at theaouthern tlp of HiLton Head.
In June, 1983, Vacat1.on Resorts, Inc. purchased the SeaPines Company. In February, Igg5, Vacatj"on Resortg/Sea pines waepurchased by Ginn Holdi-ngs, Inc., and in Aprir, r.ggs, Ginn Holdingspurchased the Hilton Head Company, Hi1ton Head Island, Southcaroli-na. These firms together onn, manage and deveLop condominium,murti-famiJ"y, hotet and conference facilitiee throughout the unitedstates. rn addition to or,rnrng ana managing deveropments on overlo, ooo acreE on HiLton Head in five plantations, the company managescondominium and hotel projects an vair and snovmass. colorado, ".aMaui, Havaii. other multi.-f amily projects have been compreted inDestln, Frorida and st. simons, 6eorgia, with nev projects underr*ay1n }lyrtle Beach, South carorina, nsrathon Key 1n Florida, llemphisand chattanooga, Tennessee. The total number of dnelli.ng unitseither compreted or scheduLed {or construction by these entities i,sin excese of 15, OOC
South Caro1ina
the specit.ic
Kiandra Lodge.
5. Company Officers
Kiandra Assocl.atps, Inc.
Earl D. Hewlette, Jr. - preeident / TreasurerJames J, Peters - Vice presrdent./ SecretaryEarL D. HevIette, Jr. - Director
Sea Pinee Compeny
E. R. 6i-nn III - Chairman
Ear.L D. HevLette, Jr. - pregident
Dennis R. Gerring - V1-ce pregldent / TreasurerCharLes A. Scarminach - Secretary
E. R. Ginn III - Dl.rectorEerL B. Hewlette, Jr. - Di.rectorDenni-s R. Gernj.ng - Dl_rector
Earl D. Hen1ette. Jr.
Hr. Hevlette, 39, is presi,dent and Chief Operating rjf Li.cer otGlnn Holdings, fnc. and its maJor operatlng subsldiariea vhichincruded sea Plnee cornpany, The Hr.r.ton Head company and vacationReeorte, Inc. Pr1(]r to Joi.nlng the Ginn organizatl.on ln lgg1, hepractlced lav In GeorgJ.a and South Carolina for over 1O yeare,and vae a partner l.n the Colunbla, South Carollna lav firm ofBoyd, Knorlton, Tate & Findray, epeclarizing ln rear. eetate r"aw.Mr. Herrette i.s a graduate of the unLversity of south carorlnaLar School, and holdg an t{EA from the eame lnstitution.
Jamea J. Peters
Ilr. Peters, 37, has been preeldent of Sea pj.nes Securltiea, Inc.since 1983. Prior to that, he hel,d narketi_ng and sales managementpoei-tlons ln the penslon fund investement dlvisions of MetroporitanLlfe, cNA Flnancial corp., and moat recently \ra' a vice president ofPaclfic I'tutuar in Nevport Beach, cal.lfornia. He ho.Lde a BA from theUntverglty of Notre Dame, an r{A from the univerelty of oregon, and heis a generaL securj.t1ee prj.ncipal and real estate broker.
Vlte - Sea Pl-nes Company
E. R. Gi-nn I I I
Hr. Gj.nn, 37, etudled business adminj.stration at th€? universityof South caroLina. He is the president and chiet Executive otficerof the Ginn corporatlon, whorly-ovned south carorrna corporarr-on.I'ocated in HiLton Head, south carolina and formed to devel"op reare6tate. He has been active i-n real_ estate development andconstruct]:on Jor fifteen years and has deveJ.oped ruxury resortcondornini.um and individuar drrelling projects, crJjice buj.ld j_ngs,
murti-famiry housing projects and singre family residential-deveropments. The Ginn corporatj-on acqulred the Hlrton Head companyand vacation Reeortg rnc., the parent of the sea pinee company, inearly 19S5.
Earl D. HesJ.ette. Jr. (see above)
Dennis R. Gerwi-nq
Mr. Gerwing, 32, has been Vice president, Chief FinanciaLoffj'cer/ Treasurer of the sea pines company since November J-, L9g3.Prior to that he had been an accountant vith Arthur Andersen & co.aince r974, speciarlzr.ng in the financlar servlces and rear estatedeveropment and management lndustrles. l,tr. Gerwing is a graduate otBerrarmine corlege ( B. A. ) and a certlfled pubLic Accountant.
Charles A, Scarminach
l'lr. scarminach hae been GeneraL counser to sea pinee companyein-e 1972. and is a partner in the Hilton Head, south carolina ravfirm of Novit & scarmi.nach. He hoLds a law degree from syracuseUnlverslty.
FINANCIAL INFORT'IATION
1. The Applicant
Klendra Hotel Partners Limited partnership anct KlandraA'Boclatesr rnc. are nee enti.ties and have no operating history.
The most recent three years finencial statemente for VacationReaorts Holdrngs, Inc., the parent company of Sea pinee Company, areattached as Exhi.blt I.
Pro forma operating statements jor the proposed project areattached as Exhibrt II.
2. The Bond Issue
a. l{arket1ng plan - The undervriting agreementbe attached as Exhibit III.
b. The prrncipal amount of the bonds wi_ll not tos1o, ooo, ooo.
c. The debt servlce echedule and other Fertlnentls attached ag Exhibit IV.
from UMIC vrII
exceed
i. nf orma t i on
I}IPACT ANALYSIS
l. Genera] Impact and Ernolovment proiectiong
The Klendra has experienced a Eubstantiar drop rn occupancy overthe paat flve years. The Applicant believes this ia due to threefactors: 1) deferred malntenence on the entire facirlty; 2) newcompetitlon in the valL lodglng narket; and 3) ineffecti.ve marketingof the Lodge'a meeting facilities by prevj.ous oynersnt_p.
The renovation and remodeling project propoeed by the Applicantaddresges tro of these factora. By curlng the defe*ed maintenanceand remodeling the Lodge' the Kiandra virr again become cotnpetitli.vevith other major rodges ln varr. AB shoirn ln the operstlng pro forma(Exhiblt rr), the Applicant expecta a gai"n in .,ccupancy rete= thstwilr bring the Ktandra's occupancy from a Low of 49l.^ 1n 19g4-g5, backto the pre-1981 leveJ-e of 58% ta 62%.
tJlthout an upgraded, renovated factrtty, the Klandra wlrlcontlnue to roee market shere, and raprdry become economlcarryunvlable as an operating rodge. The roser rate of lntereet ..."yavsi'labre from the rRDB fLnencing makee it poeslble for the Applicantto purchase the Lodge and perform the required renovation that nilrkeep the Lodge es a viabre busl-neee enterpriee {n the Tovn of vslr.
with the renovated facJ-rity, the ApplJ-cant nirr increase thegueat serviee revelr creating approximatery 10 nev jobs and addingapproximateJ.y $150, ooo to the annuar payroll. The Kiandra is alreactyone of the top ten generators of saree tax revenue for the Tovn ofvaiL. The anticipated revenue from the .renovated faciri.ty wlrllncrease sares tax revenueB apprtrximately 452 over current levers by198A.
The Appllcant's experience and new ernphasis on marketing tobuelneee meetlngs during the ehoulder and rummer seaaona ls expectedttr brlng nen groupe to vail duri.ng theee critLcer monthe. Not onryvilL the Kisndrs generate neu revenueg for the Town from thesevl.sltorE, but thelr shopplng and d j.nlng uill support local bueineeeeewh1ch, 1n turn, generate nev seles tax revenuee.
The expected lncreaee in the ernployrnent and payroll of theKiandra areo means that addltlonar rnoney ,.i.lt be recycred sithin tnevall community generatlng both saree tax and property tax revenueEr.The Klandra ttself currently payEr one of the ten rargeat property taxbiJ.le in the Town of VaiI.
The Klandra ProJect prcrposed by the AppJ.1.cant w1lJ. have very*ignlf{cant poeitlve impact on valr rn the form of a totarry upgrauedfaci-rlty1 competitive wr.th its peer faciritles, generatr-ng ner, 3obs,addltlonsr payrorl, and nev tax revenues for the Town, rrtrr vrriuarryno negatJ-ve lmpact 1n any area.
rrnpac!. on Alr and water por-lutlon- No negative impact on air ander pollutlon is expected .e a reeuJ.t of the renovetion of thevater polJ-utlon
Kiandrs.
the traffj.c patterng nould Ue expected fron theThere nay be an increase ln traffJ-c durlng thethat ie expected to be vell vithin the currentroads in the surroundlng areE|.
-No
renovated
renovatl.on
capacj.tl.eg
lnpact on
Kiandra.
iteelf, but
of the
ATTACHHENT A
SOURCES AND USES OF FUNDS
( estj.meted )
SOURCES OF FUNDS
BONDS
USES OF FUNDS
ISSUANCE COSTS
TOWN FEE
APPLICATION FEE
LOD6E PIJRCHASE PRICE
RENOVATION COSTS
TOTAL
$ 9,8OO, OOO
$ 3gg,25O
50, OOO
750
8, 1OO, OOO
1,25O, oOO
s 9,8OO, OOO
ATTACH}IENT B
SITE PLAN FOR THE KIANDRA LODGE
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EXHIBIT I
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Vacation Resorts, Inc.:
we have examined the consolidated balance sheets of vAcATIoN REsoRTs, INC. {a Dela-
ware corporation and a majority owned afiliate of the Heizer Corporation ) and subsidiaries as of
each of the year-ends in the four-year period ended April 30, 1983, and as of the six-month and twelve-
month periods ended October 31, 1983 and 1984, respectively, and the related consolidated statements
of income (loss), stockholders' investment (de6cit) and changes in ffnancial position for each of the
years in the four-year period ended April 30, 1g83, and for the six-month and twelve-month periods
ended October 31, 1983 and 1984, respectively. Our examinations were made in accordance with
generally accepted auditing standards and, accordingly, included such tests of the accounting records
and such other auditing procedures as we considered necessary in the circumstances.
In our opinion, the consolidated ffnancial statements referred to above present fairly the ffnan-
cial position of Vacation Resorts, Inc. and subsidiaries as of each of the year-ends in the four-year
period ended April 30, 1983, and as of October 31, i983 and 1g84, and the results of their operations
and changes in their ffnancial position for each of the years in the four-year period ended April 30, 1983,
and for the six-month and twelve-month periods ended October 31, 1983 and 1g84, respectively, in
conformity with generally accepted accounting principles applied on a consistent basis.
We have also examined the accompanlng consolidated estimated current value basis balance
sheets of Vacation Resorts, Inc. and subsidiaries as of October 31, 1983 and 1984, Such balance
sheets are based on the consolidated historical cost basis balance sheets referred to above, adjusted
as described in the notes thereto, to present assets and liabilities at their estimated current values.
The consolidated estimated current value basis balance sheets have been prepared by manage-
ment to provide relevant information about the assets and liabilities of the -ompany t-hat is iot
provided by the consolidated historical cost basis balance sheets and that difiers signiffcantly from
the historical cost basis amounts required by generally accepted accounting principles. Consequently,
these balanee sheets are not intended to present ffnancial position ia conformity with generally ac-
crepted accounting principles.
In our opinion, the consolidated estimated current value basis balance sheets as of October 31,
1983 and 1984, present fairly the assets and liabilities of Vacation Resorts, Inc. and subsidiaries as of
October 31, 1983 and 1g84, on the basis of accounting described in the notes thereto applied on a
consistent basis.
.TRTHUR ANDERSEN & CO.
Atlauta Geoigia,
November 30, 1984.
F.I
REPORT OF REAL ESTATE CONSULTANTS AND APPRAISENS
To the Board of Directors and stockhorders November 28' 1984
of Vacation Resorts, Inc.
We have reviewed the estimated current value of the real estate property interests of Vaca-
tion Resorts, Inc. ("vRI") as of october gl, 1983 and 1984 for the purpose of providing you
with our concurrence on the values placed on these interests by the management of vRI.
The value reported reflects the sum total of the individual interests, with no consideration given
to bulk disposition of groups of property interests or to a sale of the entire holdings or to thJcost
incurred in selling any particular property.
The total value estimated by the VRI management are:
October 31, 198$-Seventy-Seven Million Seven Hundred Thousand Dollars $?7,700,000.
October 31, 1984'-Seventy-Nine Million Two Hundred Thousand Dollars $79,200,000.
On the basis of our review of appraisals, plus random sampling of supporting in-house and ffeld
data, we concur with these evaluations.
As herein used, Landauer's concurrence is de6ned as our opinion that the sggegate valuation of
the interests included herein by the VRI management is likely to fall within a- 107o range of the
probable value we would develop througlr complete, independent appraisals. A l07o variation be-
tween appraisers is generally considered a reasonable range of value and implies substantial agree-
ment as to the most probable fair market value of the property.
VRI management has provided us with complete access to property operating statements, mort-
gage agreements, lease summaries, eontracts, and other pertinent data. As part of our review, we
have physically inspected the real estate properties.
Our review indicated that the rationale and techniques employed to value each propertl, interest
were appropriately selected and properly applied.
Our review of these valuations has been made subject to the Code of Professional Ethics and
Standards of Conduct of the American Institute of Real Estate Appraisers of the National Association
of Realtors.
We certify that neither Landauer Associates, Ine. nor the undersigned have any present or con-
templated future interest in Vacation Resorts, Inc. or its assets, and tbat we were employed solely
to review the estimated current value of the subiect assets.
The analyses which formed the basis for Landauer's concurrence rvere conducted under the direct
supervision of the undersigned.
We hereby authorize the inclusion of this letter in its entirety in fflings with regutatory agen-
cies, including a 6ling of an S-l Registration Statement with the Securities and Exchange Commis-
sion.
Respeetfully submitted,
LANDAUER .I\SSOCIATES, INC.
Stewart Wight, MAI, CRE
Senior Vice President
F.2
SW:-
VACATTON RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE STIEETS
(fiXls Omitted)
ASSETS
Historical Cost Basis
Estimated Current
Value Basis (Note 2 )
Ar of April 30,As of October 31.As of October 31,
r983
Real estate prolrrties:
Operating properties-
Sports S- $- $_ $_
Food, lodging and resort 5,47i S,7ZZ S,g4l ll,43?
Commercial rentd . .
Capital proiects
5,{t5 5,7n, 5,84r n,$7
Lese-Accumulated depreciation (S90) _l!gq) -GJgq) ( 1,46f )4,885 4,872 4:tLt 9876
Developmert properties ZZ3 ZSS f .L77
Leased properties under capital
leases, net of accumulated
amortization of 838 and $l2l
sl5,l29
14,885
353
40-m7d7
(2,065)
28,U2
3,818
925 5t{1153 stfl
r"ezd --iJ-f
) (gao) (ls4)---ToE ----dE5
015,713
r5,802
721
230
TfiE6
(3,66s)
28,80r Sal,000 E62,t003,898 13,000 18,500
at 1983 and 1984, respectively.
Support facilities:
Corporate ofiee
Real estste marketing
Less-Accumulated depreciation
Cash and cash equivalenB:
Unrestricted
Restricted
Receivables;
Resort . .
514
523
925
453
-__g,qqfi17
637
(331
308
-Em
348
348
_(247)l0l
-,i08
309
309
/olol---.--;:;ut
@
4L2
412
_J2f32)
130
1,378
(380)
998
600-70800
1,037
(154)
8&l
1,4?3 t,340 70033,581 3,r,039 77,7M
356
l6il
519
6ffitf
Y
243
636
B6556''
4*5
t79
604 2,743 3.915
$spOt $rZ7A6 Ssooot
1,079
800
2,0?.2
40
3,941 3,731
346.251 $93.997
2,083
184
2,08{l
1,ffIg
=*
2,O?,2
3,901
,$eI3?t
The accompanying notes to co rolidatcd ffnancid statements
ar6 an integral pert of these balance sheets.
314 691
3Ii --Er
4n
ll--a54'
--lf/)
353
D--3Et
(7r)
287
Real estate commissions
Markefrng, developmenl manage-
mentendother.......
Land notes and home and condo-
minium sales contracts
Related parties and employees
Lcss-Allowance for doubdul
accou[b
Other asseb:
Mercbandise inventory, at cost, on
first-ln, ffrst-out basis
Prepayments, defened charges and
other asseb
Investneot in Sea Pines acquisition
Real estate marketing and manage-
ment conhacts
Goodwill
1,253 t,277 3,710 r,5E5 3,710 r,585710 494 710 454-I -am =@ -TFs -@ frd
476 4gt 3,524 3,512 3,524 3,5121,525 r,200 t,525 r,200
t,475 395 t,475 395
1Ss 4t4 795 4t426 25 ll9 25t ll9 25r--E ---W -T758 --siE lIF --917i
__185) (84) (2so) (4tr]) (2s0) (463)4L7 438 7,148 5,309 7,L4A 5,309
vt4
gl4
n4
674613
2,015
ll5
F3
VACATION RESORTS, INC. AND SUBSIDIARIES
CONSOIJDATED BALANCE SHEETS
(00ds Omitted, Except For Share Amounts )
LIABILITIES AND STOCKIIOLDERS' INVESTMENT (DEFTCIT)
Historical Cost Bssis
Estimated Current
Value Basis (Note 2 )
As of April 30,As of October 31,As of October 31,
l98l 1983
No@s payabler
MortgEges .. ...... m,Sfg
Dcvelopment and working capital. 400
Restricted notes
Other . . ?AO
E3,137
r,840
162
5,139
-_-5,139
442
4,&7
s60
4,232
405
03,390
933
284
$ 2,845
s,788
325
sl6,o6e $15,307
15,495 15,956
8,066 6,$r
643 370
40,273 39,964
(5,707 ) (4,737',,
34,566 35,227t,770 r,7r8
36,336
4,273
4,694
336
3r6p69 $rsJfir
15,495 rt956
8,066 8,33r
M3 370
40,273 39,984
39,964
4,L32 4,607 5,139 r2,958
Unamortized discount .. . .
Obligatious under capital leases
Deferred income taxes and estimated
costs to market (note 2)
Total liabilities
Commibenb anil contiagent liabili-
ties ( Notes I and l0) . . .
Minority interesg represented by re-
deemable prefened stock of sub-
sidiary, net of unamortized discount
of 0438 and $414, respectively ..
Stockholders' inveshrent ( deffcit ) :
Commoo stock, $.01 p,ar value;
authorized 6,00Q000 shares;
lssued 1,632,663 shares at lg84
Peid-in capital
l,ess-Notes receivable for pay-
ment o[ stocli
Retained eamings ( deffcit)
Revglu.tion equity ( Note 2)
Total stocklolden'
investment (deffeit )
4232 4,84f r2Bs8
12,958
485
44,273
36,945 40,273
3,834 4,273
5,212 3,944
4U 3362r6
r,217
473
39,964
3,E34
4,431
42tt
$
215
29
r44
29
13l
20
48
I,r55
3,939
5,094
r,055
3,4tu1
r,155 r,0552,993 2,800
4,148 3,855160lro
5,312
4,479
5,7 4i 6,739 15,391 50,733 50,894
sr9
13,700
66,614
1,.t, D
l5
960
13,100
65,608
1,375
I6
rr06
l5
742
(r04)
360
l5
960
(8E)
686
l5
960
(75)
( r,ssr )
l5
960
(56)
(252s)
l6
1,208
(300)
(8,526)
l5
Rtt
(ro7)
469
(s6) (300)
(2,s2s) (6,526)
27,558 29,993
r,013 I,189 r,553 (65r )(r,610) (5,604) 25,948 24,389
.$9.eqg.s8,s92 S14.740:$50,062 $46,25r E93,997 S9r.372
The accompaaying notes to consolidated ffnancial statements
are aD integral part of these balance sheets.
F-4
VACATION RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(ffi0's Omitted)
(LOSS)
For the Years Ended April 30,( I )
r980 l98l r9E2
For thc
For the Twelve-Six-}lonth Month
Period Ended Period Ended
October 31, October 31.1983(2) re84(3)
REVENUES:
Resort operations
Iodgrng-
Homes and condominiums
Hotels
Food and beverage
Sporf
Golf .
Tennis .
Tournanenb
Bikes
Marina .
Commercial rental
Community services
Otber
Total resort operations
Real estate marketing .....
Real estate development . .
Total revenues $!!Eq $10,488 $r2,7r8
$5,828
r,907
7,735
1,279
:
n,-t
$ 6,725
I,843
8,588
1,514
r0,488
t 8,172
2,030
to,202
r,813
r2,7r8
$10,154
2,647
12,801
\123
15,401
$ 8,894
3,209
I2,103
4,U2
3,744
550
22,003
3,015
1,027
$24,425
7,057
31,489
8,332
5,692
r,$3
1,s29
289
I,12l
9,864
1,313
835
1,92,1
8i|7
r42
186
655
3r3 1,299
53,125
8,287
801
!!ue3!]q4r !!q{€
(1) Each of the four years in the four-year period ended April 30, 1983 includes the Company's op-
erations in Colorado and Hawaii.
(2) The six-month period ended October 3f, 1983 includes the Company's operations in Colorado and
Hawaii for that period and the operations in Sea Pines for the period subsequent to June 10, 1983
( post acquisition ).
(3) The twelve-month period ended October 31, l9&1 includes the Company's operations in Colo-
rado, Hawaii, and Sea Pines for the entire twelve-month period.
The acc'ompanying notes to consolidated ffnancial statements are an
integral part of these statements.
F-5
VACATION RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
( fi)0's Omitted, Except For Per Share Amounts )
For the Years Ended April 30,
r980
CONTNIBUTION (LOSS),
Resort operations
Lodgrng-
Homes and mndominiums
Hotels
Food and beverage . .
s 575
523
''09dl17
s 55r
483--[dia
r47
$ 549
486jo-55
235
$ (84)
470---TE6
-----T
$ r,59rJ
(196)
1,402
-5d5Sports-
CoU
Biker
TenDis .. ... .
Tournaments ..
-
--iJss-
(88)
t*
(4e3)
(402)
rgt
E lg?
i 7A)
2,008
338
(37)
99
2n-@
--4dJ-
-GET)
246
-748-IZO
509
5,680
465
( 4.296)
(4,7261
( r,038)
I,196
(644)
(360)
192
(e9)
215
.g__49.
$ 500
( 1,38{)
(e53 )
(s65)
(6ee)
(2,2t7)
(2,2171
(2,217)
.gt-uEu)
0(1,69r )
3,400
e1n)
( r,614)
(386 )
(s27)
Msira ..
Commercial rental
Community services
Other --.-(4dlF
OR 34
.D,,r:
l,2u
(6e5)
(3s3)
r78
(67)
345
( r48)
4l
---iTTotal resort operations
Real estate rnarketing ....
Real estate development
Conkibutiou (loss) fromolrratiorx
CEin on sale of properties
General and administrative
Interest
---Ststed rate
-Discount amortization
Income ( loss) before income
taxes, exhaordinary item andprefened stock dividends
Income tax provision
Incosre (loss) beforc
exraordinary item and
preferred stock dividen&
Extraordinary item-Utilization
of VRI tax loss carry{orward
Income (loss) before preferred
stock &vidends . .- . .
Preferred stock dividends . .
Net lncome (loss) atkibutableb common stockholders .
E"rltiogr (loss) belore non cashchatges ....
Per Common Share
Income ( loss ) before
exbeordinary item and afterpreferred stock dividenils
Erhaordinary item
Net tncome (loss) attributable to
common stockholders
E"Triogr (loss) before non cash
eBarges
(s27) (3,e15)
10993
r22
197 ( 3,91s )
109
I r09
!___q!q
(927) (3,e15)(sr) (82)
$ (s78) S(3.9e7)
!_3L 0 (ee7)
I .06
.09
0 .fl 0 .r3 i (1.44) $ (.64) s (2.45)
$'.rs 0 .07
$ .35 S .3s
$ .r3 s (1.44) $ (.64) I (2.4s)
I .47 t (r.10) t .r0 s (.6r)
The accompanying notes to csnsolidated ffnancial statements
are ar iDtegrEl part of these statements.
F-5
For the
For the Twelve-Six-lllonth Month
Period Ended Period Ended
October 31, October 31,t983 1984
$ 561
183---a&
---3tr
605
268(ru)
100
184.G
2U--lZirl
-m5-6-i6T
392
887
VACAIION RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT (DEFICIT)
For each of tbe Four years Ended April 3e 1983 and
for the Six'Month and Twelve-Month Periods Ended October 31, lg83 and 1984 Respectively
(000t Omitte4 Except for Share Amounts )
Ilistorical Cost Basis
Estimsted Curr€nt
Vrlue Eosis (Note 2)
Coqrrnon Stock
Shares Anount
NoteE
Receivablefor RetainedPaid-In Payrnent EorninssCapital of'Stock (Deficii)
TotalRevalur- Stock-tion holders'Equig lDvestment
Total
Stock-
holders'
fnvestment
( Deffcit)
May l, 1979 balanc=s . .
iuee-foo-on" stock sptit and a change in
par value eFective December, lg84
Moy I, 1979 balances, as restated ..
Net income for the year ended April 30,
407,53i1
815,066
r,222,599
$ 5r4
29
t 145 .$ 700 N 1,476 s 2,176$41
( 29)
t2
s-
Increase in revaluation equity for the year
eaded April 30, 1980
Realization of tax benefit for net operating
loss cany-forwar& of Vilcor, Inc., aris-
ing prior to its quasi-reorganization
Erercise of 308,616 stock riehts
April 30, 1980 balances
Net incarne for the year ended
1980
l98r
r98t
308,616
l5
(r04)
(104)
litS
2t5
98
3
I'tgl
12
l9
98
l0l
1,474
1,513
2,176
215
1,513
9E
r,531,215
April 30,
4,002
l0s109
1,0r3
109
2,989
5,r12 5,2'42
Increase in revaluation equity for the year
ended April 30, lg8l
Realization of tax bene6t for n€t operating
loas carry-forwards of Vilcrr, Inc,, aris-
ing prior to
subsequent
sorts, Inc.
Erercise of 35,268 stock rights
Rcpurclosed and retired 26,454 shares ofstock... ..
Aprll 34 l98l balances
Net income for the year ended April 30,
its quasi-reorganization and
merger rvith Vacation Re-
35,268
12$,454',)
1,540,029
( r2)
(0) I
812 (l0tl
87
ID
Decrease in revaluation equity lor the
year errded April 30, 1982
Realization of tax bene$t for net operating
Ioss carty-forwar& of Vilcor, Inc., aris-
ing prior to its quasi-Jeorgenization and
subsequent merger with Vacation Re-
sorts, Inc.
Payments on notes receivable for stock
Aprtl 30, 1982 balances . . .
Net loss for the year ended Aprit 30, f9B3
Pannents on notes receivable for stock
Aprll 30, l98i! belancqs
r48
666
(.2,217 |
I,DOJ
12,217].
l3
9,420
197
(2n)
148
l9
7,353( r )
I,189
197
148
l9
8,231
(227'l
r,540,029 l5 960 (88)
l3
8,004 s,557
(2,2171
l3
r,540,029 l5
tr:l
(75) (r55r) (6sr) 8,004
VACATION RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOI,DERS' INVESTMENT ( DEFICIT)
For each of ttre Four Years Ended April Je 1983 and
for the Six.Month and Twelve-Month Periods Ended October 31, 1983 and 1g84, Respectively
( fiXIs Omitted, Except for Share Amounts )
Historicel Cost Basis
F,stimated Current
Value Basis (Note 2)
April 3O l9Eit balances . .. .. 1,540,029
Net loss for the six-montl period ended
015 s soo i (75) s(l,ssl) $ (6st)
(978) (e78)October 31, 1983 ..
Common Stmk
Notes
Receivoble
forPaid-In PayrnentCapital of Stock
Totd
Stock-Retoined holders'
Earnings Investment
( Deffcit ) ( Defrcit )
TotalRevalua- Stock-tion holders'Equitt, Investment
s 8,004 s 7,353(l)
(978 )
Increase in relaluation equity for the
pertod May l, 1982 through October 31,
l98il, due primarily as a rerrrlt of the
acquisition of Sea Pines
,' Palments on notes receivable for stock
Oc-tober 31, 1983 balances' Net toss for the twelve-month lrriod
ended October 31, 1984
lncrease in revaluation equity for tlre
period November l, l98il throtrgh Octo-
bcr 31, 1984
Exercisc of 92,634 strrck rights . .
Payments on notes receivable for stock
October 31, 1984 balance
I9
(56)(s,529 )
(3,9e7 )
t9
19,554 t9,554
l9
1,540,029
92,tr,4
1,632,663
(r,610) 27,558 25,948
(3,es7) (3,9e7 )
246 l%7)
J
,,nru t,435
3
$r,206 s(3oo) $(6,526) $(5,604)$29,993
(f) The current value of assets and stockholders' investment was not determined as of April 30, 1983, due to the then
pending acquisition of Sea Pines. However, without regard to the value of the contiact with respect to the Sea
Pines acquisition, management believes the stockholders' investment on a current value basis r" oi Ap.il 30, f983
would have declined from that presented by approximately $3.5 million. due principally to valuing the Kiandra
Lodge as an operating hotel rather than a cpndominium hotel.
The accompanying notes to consolidated ffnancial statements are an integral part of these statements.
816
F-8
vAcATtoN RESORTS, INC. AND SUBSTDIAruES
CONSOLIDATED STATEMENTS OF CTIANGES IN FINANCIAL POSITION
(ffiOs Omitted)
For the Years Ended April 30,
l98r 1982
For the
Six-Month
Period
Ended
October 31,
1983
For thc
Twelve-
Month
Period
Ended
October 3I,
l9{14Finaucial Resources Provided :
Net income atbibuted to common stockholders
Add ( Deduct ) noncash items-
Depreciation and amortization
. Income tar provision (benefft) eliminated
by utilization of net operating losses-'' Provision for the year
Extraordinary credit
Loss on development projects
t 215
308
99
lrzzl
$ 109
360
j
$ r97
343
148
88
$-$-
Additions b notes
Sslo of Wildwood
payablc .
536
r,l6l
500
iN)I
8r6
2,953 14,209
5,379
834
(320)
l3
3,736
(522 )
1,613
3
(86)
(4,933 )
( 2,070 )
(82)
(7,r7r\
( 2,341 )
9(2,341)
6,503
lncrcasc ( dectease ) in ecuunts palable, ac.cmed
ll"bilities, owler balalces and other liabiliUes .
( Incrcase ) decrease in receivables and other assels
PaFn€nE received on notes receivable related
90r
(g?lt)
60
( r30)
461
(76)
l9
r,584
:]91
l9
8,497
469
(s,596)
(62)
to clmmolr stock
Financial Resources Utilized in Operationsr
Net loss atkibuted to common stockholders. Add noncash items-
Depreciation and amortization
Dscount emortization and iuterest acrrual
Repaymmt of notes payable
1,044 t,827 .20,r15 4,830
(2,217 | (978) ( 3,997 )
4,173
526
r364
<snl
( 6,3e0 )
( 5,104)
(5,047)
( t,208)
739 1,962708 1,949Loss on &velopment proiects . . .
(2371 (786)(2,42t',,'hurhase of Woodstone
huchalc of Wildwood
hlrlchase of operating assets, net
Developm€nt proiech
hrrchase of rnenagement conbects
(5r3)
(zzs)
lrn')
( r,l50)
f 106)
(285)
(36)
(r43)
( r,sso)
5t I
( 184)
( r,006)
( utilized)
(s,6u)
362
(18,076) (3,t89)
2,039 5,308Net financial r€sources provided
Fiuncial Resources Utilized in Connection rvith
See Pines Acquisition:
Issuance of reshicted notes, net of &scount
Dlscount of existing debt and preferred stock
Net equity acquired
Valusdon'of U.bitities at purchase
5,669
( 4,4s4)
t,0r7
.J,D*'J
( 9,s47 )
Revaluation of properties
( Increase) decresse in inveshnent in
Sea Pines acquisition (2,015) 2,015
( s,ors ) (2,165)
| 24 $ 3,143
Sea Pines acquisition, net
Incrcase ( &crease) in eash $ (106)$ 377 I 562
The accompauying notes to consolidated 0nancial statements
are an integral part of these statements.
F-9
VACATION RESONTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATENIENTS
For Each of the Four Years Ended April 30, 1983 and
for the Six-Month and Twelve-Month Periods Ended October 31, 1983 nnd 1984, Respectively
(l) TteCompany
Vacation Resorts, Inc. ("VRI" or the "Company''), a majority owned affiliate of the Heizer Cor-
poration ("Heizer"), specializes in owning anC managing real estate located in prime destination
resorts. It currently has ownership or management positions jn the resort communities of Hilton Head
Island, South Carolina (principally Sea Pines Plantation. a planned ocean front, resort/residential
community of approximately 4,500 acres, the development of which began in 1957); Aspen. Snorvmass
and Vail, Colorado; and Maui, Harvaii. Its businesses include the orun"rrhip or operation of resort hotels,
resort condominiums, food and beverage facilities, golf courses and other sports facilities and events
( including the Sea Pines Heritage Golf Classic on the Sea Pines Harbour Town Golf Links and the
Family Circle Tennis Cup). The Company also is engaged in commercial office and retail leasing,
real estate marketing and real estate development activities on lands owned by the Company and in
ioint ventures with others. At October 31, 1984, the resort operations of the Company include:
Colnrado-the ownership and operation of two hotels (the 148-room Kiandra Lodge in Vail
and the 9l-room Woodstone Inn in Aspen); seven hotel related restaurant and lounge facilities
with an aggregate seating capacity of approrimately 500; and the management of approximately
300 resort condominiums for absentee owners in AsDen, Snorvmass and Vail. See Note 8 for Dis-
position of Company Owned Assets.
Hauaii-the management of approximately 300 resort condominiums for abserrtee owners on
the Island of Maui in the Wailea and Kaanapali resorts.
Hilton Head lslz;rd-the operation of one hotel (the 202-room Hilton Head Inn) which is
leased through 1987 (with options to renew for two five-year periods); management of approxi-
mately 800 resort homes and condominiums for absentee olvners; and ownership of seven res-
taurant and lounge facilities with an aggregate seating capacity of approximately 600; four 18-
hole golf courses and three club houses; 51 tennis courts and a tennis clubhouse; a 550 seating
capacity conference center; a marina; and 56,200 and 78,250 square feet of commercial office
and retail space, respectively.
Heizer is an independent, publicly traded business development company which has been en-
gaged primarily in providing capital and managerial assistance to developing companies. The Heizer
Board of Directors adbpted on january 20, f981, and its stockholders approved on February 28,
1984, a PIan of Complete Liquidation and Dissotution of lleizer Corporation ('Plan of Liquida-
tion") providing for the liquidation of Heizer prior to February 28, f985. The Company has been in-
formed that, pursuant to the Plan of Liquidation, Fleizer's Board of Directors declared, subiect to
certain conditions included within the declaration, a Iiqrridating distribution to the Heizer stock-
holders of .1238 shares of the Company's common stock oer eacb share of Heizer common stock. The
record date of this distribrrtion is becember 7, 1984 ani the payment date is expected to be De-
cember 21, 1984 or as soon thereafter as practicable as necessary to satisfy State and Federal larvs.
Presently, the Company expects its common stock held by Heizer to be distributed to the Heizer
stockholders in the form of the liquidating distribution. To facilitate the distribution and to allow
the Company's common stock to be more easily traded in a public market, the Company efiected a
three-for-one stock split (in addition, it changed the par value of its common stock from $.10 to $.01
per share) in December, 1984. In addition, the Company has entered into an agreement with Heize!
F-10
NorEs ro coNsouDATED FINANCIAL sTATEnGNTS-(continued)
whereby aggregate principal indebtedness of approximately $7,331,000 at July l, 1g84 under revolv-
ing lines of credit will be exchanged for shares of the Company's "or*on stock, using an exchange
rate of $9.40 per share. Interest expense of approximately $525,000 has been accrued on the Heiz-er
debt balance_ for t}re period |uly 1, through O"tobe. 31, 1984. When the Companys common stockis distributed to the Heizer stockholders and the recapitalization takes place, ali accrued interest
through the date of the distribution will be forgiven and credited to paii in capital. However, no
assurances can be given as to the ultimate form of disposition of the Companyt "o.-on stock orif the proposed recapitatization will take place.
.The Company is the surviving entity of a merger (the "Vilcor Merger') with Vilcor, Inc. ("Vil-
cor") efrective April 30, 1979. Vilcor was organized in 1973 by Heizer. VRi was formed by tieizerin 1977 and was a co-venturer with Vilcor in a ioint venture 1;'Vilcor Properties" ) which was formedfor the speci$c purpose of acquiring the Kiandra and Talisman Lodges (now combined and referred
to as the Kiandra Lodge ) in Vail, Colorado. The Vitcor Merger was a--ccounted for as a reorganization.
On September $, f982, VRI formed, its wholly owned subsidiary. Vacation Resorts Holdings,Inc. ("VRH") for the purpose of acquiring the Sea Pines Company ('Sea Pines'). Under a deffii-
tive agreement reached on january 17, f983, VRH merged with Sea Pines (the "Sea Pines Merger").
whereby Sea Pines became a wholly owned subsidi"ry of VnH on June S, ISSS.
(2) Curent Value Basis Financial Statementr
Cutent Value Reporting. The consolidated estimated current value basis balance sheets are pre-
sented to provide supplementary information about the Company's ffnancial position wbich is not
provided by the consolidated historical cost basis balance slieets. Manaqement believes the Com-
pany's real estate properties have current values which exceed their historical cost basis net book
value. Accordingly, the Company has presented estimated current values for its real estat€ properties
in the estirnated current value basis balance sheets. The estimated current value basis daia reflects
the aggregate of various real estate properties of the Company with no consideration given to bulk
dispositions of groups of properties or to the bulk sale of an of the Company's propuri"r. All other
assets in the estimated current value basis balance sheets are presented at their historical costs basis
as determined in conformity with generally accepted "ccouniing principles. lvlanagement believes
that the estimated current value basis balance sheet more realisiically refects the ffnancial base of
the Company.
The estimated current value of the Company's real estate operating properties represent manage-
nent's estimates of the ffnancial value of these assets primarily as investments held for the long-term
benefft of operating cash flows. Development real estate properties have principally been valuedlased
on market bansactions of comparable pmperties in the same or similar real estate markets. Ttre Com-
pany's interest in real estate ioint venture projects have been valued based on estimates of current
or future cash flows from these interests. Estimated current value basis stockholders' investment rep-
resents the best judgment of management as to the Companyt ffnancial value and may not be cur-
rently realizable in cash.
The Company's estimated current value basis ffnancial position as of October 31, 1983 and 1984,
is reported alongside the historicat cost basis balance sheets. The estimated current value and his-
torical cost bases are shown for each asset and liability category and the aggregate increment of esti-
mated curent value over cost basis net book value (g27.ESg$00 at Octobei St, 1SSS and $29,g93,000
at October 3L f984) is refected in stockholders' investment as 'revaluation equity.' Stockholders' in-
VACATION RESORTS, INC. AND SUBSIDIARIES
F-11
VACATION RESORTS, INC. AND SUBSIDIARIES
r983
NorEs ro CONSOLIDATED FINANCIAL sTATEMENTS-(continued)
vestmeot (before giving efiect for the pending recapitalization-See Note I ) on an estimated currentvalue basis is $25,948,000 and 924,889,000 or $18.50 and g14.42 per share at October 31, l9g3 and 19g4,
respectively, compared to stockholders' deffcit on a historical cosi basis of ( $ 1,610,000 ) and ( g5,604.000 )or ($1.05) and ($3.43) per share, respectively.
Arthur Andersen & Co., the Company's auditors, have examined and reported on the consolidatedcurrent value basis balance sheets. Further, Landauer Associates, Inc. (Landauer), nationally recog-nized independent real estate consultants, have reviewed and reported on management's estimates ifthe current values of the Company's real estate interests. Their reports are contained herein.
Bases Of Valuation Based upon its experience in resort real estate, management has developedthe following basis for estimates of current values:
Operating ReaI Estate Properties-The current value of the Company's real estate operating
properties has been determined by capitalizing each property's expected "nrr,rul nperaing nel
"4*h flow or by discounting estimated future annual opeiating net cash flow, or a co-bination
thereof. Operating net cash flow is determined before Jeducting principal and interest pa]'ments
on the debt speciffcally related to the property. The operating *t "*rtt fows are based on an
evaluation of the historical operating results and future plans for each property and are supportedby historical and projected revenues and operating expenses. The resulting values recogiize the
considerable differences between properties in terms of quality, age, outlook and risk, as rvell
as the prevailing yield requirements of investors in income-prod.,cing real estate prolrerties.
A summary of the valuation methods utilized and the applicable range of capitalization or dis-
count rates and the weighted average rates employed are as follows [OOO', o*itt"d;,
1984
Valuation
Method
Discounted Estimated
Future Annual Cash
Flow
Combination of-
Capitalized Expected
Annual Cash Flow
Discounted Estimated
Future Annual Cash
Flow
Weishted
Range ol Aveiage ValuationRates RateJ Anrornt
tVeighted
Rangc of AverageRttes Rates
Valuation
Amouut
Capitalized Expected
Annual Cash Flow . $S5,40O s.75-18.00%
22.50Vc
I0.00-11.0070
12.00-18.00%
7.00-18.007c
22.507o
10.00-l1.00%
5,000
12.00-18.AOqo
062,100
8.48Vo
22.5OVo
9.38?r,
22.5Odn
l ,-,
$64,000
DexeloWunt Real Estate Properties-Management has valued the Company's position in
development properties assuming execution of var]ous development strate$es. These dJvelopment
shategies take advantage of the highest and best useof the properties, as determined by ma-nage-
ment, considering numerous factors, including the overall stiategy of the Company and'the apf-li-
cable land use clvenants, Ntanagement has utilized the compaiable market approuch for deter-
mining a substantiel portion of the estirnated current value basis ( approxi*"i"ly $11,OOO,OOO in
F-12
VACATION RESORTS, INC. AND SUBSIDIARIES
NorEs ro coNsoLrDATED FINANCIAL STATEIIENTS-(continued)
1983 and $13'700,000 in 1984) of development properties, Management changed the method of
estimating value (approximately $f,400,000 in lggS and 92,g00,000 in l9g4[ in l9g4 for joint
venture proiects. The Company utilized the comparable market approach in lg83 and the capi-
talizing s1 .xt.ated annual current cash fow (I27o) or the discounting of estimated future annriat
cash flow (?5To) approaches in 1984.
Leased' ReaI Estate Propertic,r-The Company is currently obligated under several long-term
capital leases for oftce space. Since management believes the lease rates are below-markeg they
have valued these leasehold interests (approximately $500,000 in lgg3 and $400,000 in l9g4)
based on capitalizing (weighted average rate of L6.83Vo in 1983 and 20.007o in 1984 ) the esti-
mated incremental difierence of market rates over the current rates. The Company also has a
purchase option under one of the leases to acquire the building and tand at an amount below
its estimated cunent net realizable value based on discounting (20ro in 1983 and 1984 ) the esti-
mated incremental value in excess of the option price ( the approximate value was $200,000 in
1983 and 1984).
Landauer reviewed, analyzed and concurred with management's estimate of the current value of
the Company's real estate property. The aggre gate value was $77,700,000 at October 31, 1983 and
$79800,000 at October 31, 1984. Concurrence, as used by Landauer, is deffned as a variation of less
lhan L0Vo from the probable value that might be estimated by Landauer in a full and complete
appraisal.
Debt Arrl Prefered Stoc&-Long-term mortgage debt relating to the operating and develop-
ment properties and preferred stock are carried at their face amounts. Since the value of the Com-
pany's rral estate properties has been determined without giving effect to mortgage principal
and interest payments, any difference between the currenC value and cost basis of long-term
mortgage debt is not reflected in tbe value of the real estate property. Management believes
that the Company's below-market rate debt and preferred stock have inherent value but has not
recognized this value since there are due-on-sale clauses in these instruments. The cost basis
balances of working capital debt and other property debt represent the current value of this
debt since interest rates thereon fuctuate with market rates. In addition, since the current value
basis of capital leases is based on the capitalization of the incrementat difierence between the
Iease obligation and the estimated current market rate, obligations under capital leases, as de-
termined for historical costs basis, have been eliminated.
Defened Inconw Tares And Estimated Costs to Market-Deferred income taxes on an
estimated current value basis is an estimate of the income taxes ( assuming ordinary rates
for development and leased real estate properties and capital gain rates for operating proper-
ties ) applicable to the excess of current value basis over tax basis. In calculating these deferred
income taxes, the Company takes into account its net operating loss carryforwards available at
the date of determination and applies those ftrst to development properties. These were ap-
proximately $f3.325 million and $f6325 million respectively, at October 31, 1983 and 1984. To
the extent the Company's net operating loss carrvforwards are utilized as a result of taxable
income generated from operations or from non-recurring erents such as the Heizer recapitaliza.
tion, the net operating loss carryforwards will not be available in the future to cover income
taxes incurred as a result of the sale of real estate properties. Estimated costs to market rep-
resent managementt estimate of the incremental costs which would be required to dispose
of the Company's real estate property.
F-13
NorEs ro coNsoLrDATED FINANCTAL SrATEr{ENTS-( continued)
Other Assets Atd. Liabilities-Nl other assets and liabilities are carried in the estimated- cur-
rent value basis balance sheet at the lower-of-cost or net realizable value_the same stated value asin the historical cost basis balance sheet-except for certain accrued liabilities and deferred rev-
enues which are recognized in accordance wlth generally accepted accounting principles butwhich would not require either cash expenditures or other perf:o.ma.rce in a tiquidation. Atso,in the historical cost basis ffnanciat statements, estimated dredging costs have been accrued andincluded in accrued liabilities. In the estimated current value basiifinancial statements the valueof [Iarbour Town N{arina has been reduced by an amount equal to the accrued costs of dredging.
The application of the foregoing methods for estimating current value represents the best judg-
ment of management and appraisers retained by.ttanag.menl based upon its eialuatjon of the curreitand future economy and anticipated investor rates of ieturn at the tilme such estimates were made.
Judgments regarding these factors are not subject to precise quantiffcation or verfication and may
change from time to Hme as economic and market factori, and minagement's evaluation of such factors,
change. Also' many of the Company's properties included in the estimated current value basis dataare restricted as to use and are an integral part of the Sea Pines operation, accordingly there is aquestion as to whether those properties could be sold individually without producing a negative efiecton the value of other Company properties or its results of operaiions from those otLer priperties.
Management intends for tbe estimated current value basis balance sheet to be an integral part of
the. Company's annual report to stockholders, but will not be presented as part of the Comp"any', qrr*-
terly reports to stockholdets. The extensive market research, ffnancial analysis and testing oi ,oult, ."-quired to produce current value information makes it impractical to report this information on aninterim basis.
Reoahntion Equitg. The aggregate difierence between the current value basis aud cost basis ofthe Companyk assets and liabilities is reported as revaluation equity in the stockholders' investment
section of the consolidated estimated current value basis balance sieeis. The components of revaluationequity at October 3I, f9$ and 1g84, are as follows ( 000,s omitted ) :
VACATION RESOnTS, INC. AND SUBSTDIARIES
Estimated current value of interests in-
Real Estate Properties
Operating
Development
Leased
Deferred income taxes and estimated costs to market
Historical costs of other assets and liabilities
$64,000
13,000
700
77,700
( 13,700 )
64,000
(36,442)
$62,100
16,500
600
79,200
( 13,r00 )
66,100
(36,r07)
$27,s58 $29,993
(3) Summary of Signiffcant Accounting policies
Cowolidation Policics. The accompanying mnsolidated ffnancial statements include the accounts
of VRI and its maiority owned subsidiaries. .lll material intercompany accounts and transactions have
been climinated.
F-14
VACATION NESORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATENIENTS_(Continued)
Prcsentotion Format. The Company has elected to present results of operations by summarizingthe revenues and related conkibution derived from its lines of businesses. Tlre Company recogl
nizes revenues as goods and services are provided. Contribution is net of all expenses inc1"di"g mai-
keti]rg. rePain and maintenance and depreciation applicable to each line of business presented but
excluding any accounting, corporate overhead not directly attributable to lines of business an dinterest.
General and administrative expenses include all accounting and unallocated corporate overhead.
Sea Pines Metger. Under the terms of the merger agreement, each Sea Pines shareholder could
exchange each share of Sea Pines common stock for (f) $2.00 cash, (2) 91.00 cash and $3.22 face
amount oI a llthVo, fve-year note, or (3) $6.44 face amount of a L\ttbTo, ffve-year note. Under these
alternatives, the Company paid 98,814,000 in cash and issued SI2g,000 of $i.Sg face amount and
$7'596,000 of $6.44 face amount l}\b%io, frve-year restricted notes in exchange for the common stockof Sea Pines.
- Th" Sea Pines Merger was accounted for as a purchase as of June 9, l98i]. Hence, VRI's consoli-
dated statement of income for the six-montb period ended October 31, 1983, includes the operations
of Sea Pines for the period June 10, 1.983, through October 31, 1983. The proforma resulti of Sea
Pines' operations for the period May 1, 1983, through June 9, 1g83, would not be materially difierent
from that presented. AII direct costs incurred prior to closing the acquisition of Sea Pines, including
9:p9:ru, accounting, legal, etc., were capitalized as Investment in Sia Pines acquisition as of ApJ
30, 1983.
' In connection with the purchase, certain assets were revalued based on management's evaluation
of independent appraisals and other factors. The restricted notes issued and certain long-term debt
instruments acquired, including the preferred stock, which bore interest rates belot, the prevailing
market rates for sirnilar instruments at the date of issue or acquisition, were discounted
-to
refleci
such market valuation, as follows ( 000's omitted ):
Principal hincipal Weighred
Balanc= at Balanci at Average
Jtrne 9, October3l, Stated Discounted1983 l08C Rate Rste
UnamortizedOriginal Discoutrt atDiscount October 31,Amount 1984
Notes Payable
Travelers Mortgage
North Carolina Nationat
BankMortgage ......
Restricted Notes
Prefened Stock
sr0,633
674
7,724
1,375
$20.406
$10,228 7.OVo
9,1Vo
L0.1Vo
6.Wo
12.1Vo
L2.5%o
L8.0Vo
9.0To
$3,801
2M
2,055
6,06i1
++6
$3,20I
t74
1,362
4,737
4t4
847
8,$r
19,168
1,375
$20,541 $6,509 ss,l5l
ln connection rvith the Sea Pines Merger, the Company changed its ffscal year end from April 30
to October 31 to correspond with the Company's operating cycle.-
hlcome Taaes. For ffnancial reporthg purposes, a tax sharing agreement exists b€h^reen VRI aaddl of its subsidiaries which allows the individual companies to reflect taxes based on ffIing a con-
solidated tax return. Under the agreement, each subsidiary of the consolidated group is req-uired to
remit to, ot receive from, VRI its pro rata share of the consolidated tax liability or tenefft.-
F-15
I{Ifr,It}RA LOD6E
SXHISIT iI
I]PERATIiE CASH FL(]I.I FRtl FORIIA
s5i87
YIAR I
97188
YEAR E
88189
YMR 3
89/90
YEflR 4
30/91
YEfiR 5
f I]F UI,IITS
UNIT NIEfiTS
AVERRg€ MTE
0ccupf5EY r
IJI'IIT NI6HT COSTS
ROI}I REVEIflE
REVEI{JE
TOTAL RfVEi{IJE
DIRECT EXFENSES
INDIEECT E)(PEI'ISES
CNPITfl. EXFENSE RESEruE - 3i
LEASE PRYIIIEI{TS
TOTAL ROO,!|S DEPANTHENT EIFENSE
hfiNAFEI'IEt{T F€E 6R[]SS - J*
itRl'lAGEl'IENI FEE t'tET - lo)(
TOTAL I{IS6E}iA{T FEE
ROI}IS O€PARTIIENT CONTRIHJTITN
C0it'lERCIH- fiEl'lTS C0NTRIBUTI$,I
TNLISI{A]{ Cff'IDI}'IINIUI{ CI]NTRIzuTI$I
It)Tfl- KTft\DM DAS{ FLIlI.t
I'II]RTEAGE Lt]tr{ PAY}IENT
NET INC(]IG
Coverage Ratio
LI]AIII |]FTA
Frirc i pa I
interest Rate
Term
Paynent
i45
31r0fi1
89.00
58. 57t
a0,03
at 7591 000
{61 457
l45
3er 000
60,46r(
e0, 87
3,0{0r ixp
50, 3t I
99.00
51.41,1
3,817,500
53,54{
i45145
6RIFS
OTHER
33,CC0 i3,000
105.00 107, rrtl
5e.35r 6t, 35re4.55 t3, t6
3t465,0(,0 3t53lrofft
56,3{4 58,b4e
e, 905,457
5e0r 930
l,40e,513
84r 15t
u3,055
3, 0"0, 311
667r 940
1,454r 875
91,709
113r 055
3, i71,04{
707,850
Ir 5eL,858
98! 131
I t3t 055
3,5e1, 344
744, 150
1,5g5r 195
105,540
113,055
3, 589,541
76{,2co
l,650, agi
107,589
113,055
:t ge0, 75? !, i36,480 i,441, E9{
84, 164 9ar 709 98, 131
00u
er54gr 140 e,6i5,Jl5
t05, 640 107,56t
00
84r 164
584,695
e36,4r)0
03,543
9e,709
753! 931
?49t74r
i03, 311
98,131
8c9? 150
effi,590
110r 756
1{15,540 107,5,89
973f e04 954,326
e78,585 994,3!g
1I6,505 1e2,579
8e0,475 11016, 171 Ir105,464 lri5arb54 1r263,S43
=:::==: =:=::==== ====:====
911,896 9i1,896 911,896 gil,098 9t1,ug5
(91,{el} iC4t?77 193t5b9 JS0r7S9 35tib4E
=:====::: :======:=: :::=====:= ==::==== ==========
89.97t ii1.44r lel.e$( ir8,4br iJB.b6?(
?r 8001 oft)
s.50,(
30
?1 t, 896
PflINCIFAL
INTEFIST RATE
A]fiRTIZATION TERII
FAYMNT
tE6il'liliii6
YEAR BftAME
A(HI8IT IV
iiIANOFII LODGE !€BT SERVICE scI€DtJiI
91 800,000
8.30r
ir'l
9lt, ggti
II'ITERESI
AI{TJI{T
fflilmL
PAYiEIIT
PRIilc]PAL
ffiITHT
ENl}Ii{G
B'ltAi{CE
I '1,8110, ulo
I 91 711, i04
3 9,6351503.i I, i4Pr6e5
5 9! 44t,B5e
5 9,J3P,514
7 .ir e13! Bbe
I 910851 166I 8r !45t 510
10 8r 793r gga
lt 8,5e9!575
t2 gr45lr t9{lJ I, e57,549
14 8r (r47,654
15 71819,809
15 7,57er597
L7 7,30{,37e
1S 7,0l3r34B
t9 61697,597
e0 6,3541996
at 5tgg3r?65-ez. 157919{713 51 14e,345
E{ 41667,550
e5 4, 15e,396
i5 3,593,{5{
77 e,9g7,0oe
38 et3egro(E
z9 t?615,071
i0 840,457
833,000 79,896.
8e6rz9{ d5,60P
819,018 98,079
811, 1e3 100, 773
80e,5f/ 109,3J8
793,464 il8r 6Je
7&t,180 izo,716
774,e39 t31657
7b0,358 151,5e7
747,489 164,{07
711,514 178,38a
71q351 193,544
701,900 Put, s,5
6941051 PA7,845
66{,664 2{7,ele
543,571 rui ?e5
5a0rg7a agl,0e4
595, lJli 315,751
5691995 34e,601
540, 176 371,7aA
508,577 {03,3t8
47{re95 437,600
437,099 47\7%
396,74e 5l5r 154
35!,954 558r94e
3051444 606,45e
?il1,895 658r(00
157,gbs 713i930
t37r egt It4,615
7t,439 840,457
9,7e1, 104
9,635,503
9, 5,ia,5I5
9,44tr 85P
91 33Pr 5l{
I, Zl3,88e
9t 085, lb5
8,945,510
g, 7931 gge
8,6i9,575
B,451, l9+
B, e57r 549
8,047,654
7, 819,809
7,57e,597
7t iu4r 37e
7r 013,34{
5,697,587
5, 3541 986
5, 9il1e65
5,5791 9{7
5, 14?,3{6
4, 667,
=50{, 15p,395
3,593, {5{
Er 987, ooe
ar3e9r(}ja
l,515,071
8{0r 457
rJ
911,895
91t,895
9u ,996
9u,896
9t1r 896
9t 1,895
9t I, Bi6
9l l,896
911, 996
911,896
911,8:16
91tr 995
911, 996
911r 996
91lr 895
9llr 896
9llfs96
9l l,896
911,896
9l I,996
911r 896
9ll,896
911t896
911, 896
9l l, 895
911,896
5i1,8%
911,89b
911r 895
911,896