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): June 919, 2017

CNL GROWTH PROPERTIES, INC.

(Exact Name of Registrant as Specified in its Charter)

Maryland

000-54686

26-3859644

(State or Other Jurisdiction

of Incorporation)

(Commission

File Number)

(IRS Employer

Identification No.)

450 South Orange Avenue

Orlando, Florida 32801

(Address of Principal Executive Offices; Zip Code)

Registrant’s telephone number, including area code: (407) 650-1000

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:

☐	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))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 12.01 ~~Entry~~Completion ~~into~~of aAcquisition ~~Material~~or ~~Definitive~~Disposition ~~Agreement~~of Assets

~~Pending~~ Sale –of ~~Hampton~~Aura ~~Roads~~on Broadway

OnAs ~~April 30,~~previously ~~2015,~~reported ~~CNL~~in ~~Growth~~a ~~Properties,~~Current ~~Inc.,~~Report ~~through~~on anForm ~~affiliate~~8-K ~~(the~~filed ~~“Company”), together~~ with ~~Bainbridge~~the ~~Prices~~Securities ~~Fork,~~and ~~LLC,~~Exchange aCommission ~~Florida~~on ~~limited~~April 27, ~~liability company~~2017, ~~formed~~the a joint venture ~~named~~(the ~~GGT~~“Joint ~~Hampton~~Venture”) ~~Roads~~of VAan ~~Venture,~~operating ~~LLC,~~subsidiary aof ~~Delaware~~the ~~limited~~CNL ~~liability~~Growth ~~company~~Properties, Inc. (the “~~Joint Venture~~Company”), ~~which~~and ~~purchased~~Dedicated Broadway Tempe, LP, a ~~fee~~Delaware ~~simple~~limited ~~interest~~partnership inand an ~~approximately~~unaffiliated third ~~9.7-acre~~party ~~parcel~~(the of“Buyer”), ~~land~~entered ~~located~~into inan ~~Suffolk,~~agreement ~~Virginia,~~for onthe ~~which~~sale of the Joint Venture’s ~~developed, constructed and now operates a 228-unit~~ “Class A” 194-unit garden-style multifamily residential community located in Tempe, Arizona, known as “~~Bainbridge~~Aura ~~3200~~on Broadway” (the “Broadway Property”). The sale price for the Broadway Property was approximately $41.8 million.

On June 919, 2017, the ~~Company~~Joint ~~entered~~Venture ~~into~~completed ~~an Agreement of Sale and Purchase of Membership Interest (~~the ~~“Agreement”) with Amzak Prices Fork Holdings, LLC, a Florida limited liability company and an unaffiliated third party (the “Buyer”), for the~~ sale of ~~all of~~ the ~~Company’s membership~~Broadway ~~interest~~Property into the ~~Joint Venture (the “Transaction”)~~Buyer. The net ~~purchase~~cash ~~price~~ to ~~be paid to~~ the Company isfrom ~~approximately $14.8 million, which amount represents~~ the ~~amount~~sale ~~the Company would have received under the Joint Venture’s limited liability company agreement if Buyer had purchased 100%~~ of the Broadway Property ~~from~~was ~~the~~approximately ~~Joint Venture for~~ $~~44,004,000~~14.9 million ~~The~~after ~~Buyer~~repayment ~~paid~~of ~~into~~approximately ~~escrow a~~ $119.05 million ~~good~~of ~~faith~~debt ~~deposit,~~and ~~which~~other isclosing ~~nonrefundable~~costs, ~~except~~reserves, inand ~~the~~distributions ~~event~~to ~~of certain~~its ~~breaches~~joint ofventure ~~the~~partner ~~Agreement~~in oraccordance ~~failure~~with ~~to satisfy conditions to~~ the ~~consummation~~provisions of the ~~Transaction~~Joint Venture’s governing documents.

~~The~~Item ~~Agreement~~9.01 ~~contains~~Financial ~~customary representations,~~Statements ~~warranties, covenants~~ and ~~indemnities~~Exhibits. The Company currently anticipates that the consummation of the Transaction will occur on or about June 30, 2017; provided, however, that there can be no assurance that the Transaction will ultimately be completed.

~~Cautionary~~(b) ~~Note~~Pro ~~Regarding~~forma ~~Forward-Looking~~financial ~~Statements~~information.

Statements in this Current Report on Form 8-K that are not statements of historical fact, including statements about the timing and consummation of the pending sale described herein, constitute “forward-looking statements” within the meaning of the Federal Private Securities Litigation Reform Act of 1995. The Company intends that such forward-looking statements be subject to the safe harbors created by Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are statements that do not relate strictly to historical or current facts, but reflect management’s ~~current~~unaudited ~~understandings,~~pro ~~intentions,~~forma ~~beliefs,~~condensed ~~plans,~~consolidated ~~expectations,~~statement ~~assumptions and/or predictions regarding the future~~ of ~~the~~net ~~Company’s~~assets ~~business~~at ~~and its performance~~March 31, ~~statements~~2017 ofillustrates ~~future~~the ~~economic~~estimated ~~performance,~~effects ~~and other future conditions and forecasts~~ of ~~future~~the ~~events~~sale and circumstances. Forward-looking statements are typically identified by words such as “believes,” “expects,” “anticipates,” “intends,” “estimates,” “plans,” “continues,” “pro forma,” “may,” “will,” “seeks,” “should” and “could,” and words and terms of ~~similar substance. The Company’s forward-looking statements~~ ~~are not guarantees of future performance. While~~ the ~~Company’s~~Broadway ~~management~~Property ~~believes~~referred ~~its forward-looking statements are reasonable, such statements are inherently susceptible~~ to ~~uncertainty and changes~~ in ~~circumstances.~~Item ~~As with any projection or forecast, forward-looking statements are necessarily dependent on assumptions, data and/or methods that may be incorrect or imprecise, and may not be realized~~2.01 ~~The~~above ~~Company’s forward-looking statements are based on management’s current expectations and a variety of risks, uncertainties and other factors, many of which are beyond~~ (the ~~Company’s~~“Transaction”) ~~inability~~as toif ~~control~~it orhad ~~accurately~~occurred ~~predict.~~on ~~Although the Company believes that the expectations reflected in~~ such forward-looking statements are based upon reasonable assumptions, the Company’s actual results could differ materially from those set forth in the forward-looking statements due to a variety of risks, uncertainties and other factorsdate.

~~For~~The ~~further~~unaudited ~~information~~pro ~~regarding~~forma ~~risks~~condensed consolidated ~~and~~statement ~~uncertainties~~of ~~associated~~operations ~~with~~for the ~~Company’s~~seven ~~business,~~months ~~and~~ended ~~important factors that could cause the Company’s actual results to vary materially from those expressed or implied in its forward-looking statements~~July 31, ~~please~~2016 ~~refer to~~ (the ~~factors listed and described under~~ “~~Management’s~~Pro ~~Discussion~~Forma ~~and~~Period”) ~~Analysis~~includes ofcertain ~~Financial~~pro ~~Condition~~forma ~~and Results~~adjustments ofto ~~Operations”~~illustrate ~~and~~ the ~~“Risk~~estimated ~~Factors”~~effect ~~sections~~ of the ~~Company’s~~Transaction ~~documents~~as ~~filed~~if ~~from~~it ~~time~~had tooccurred ~~time with the U.S. Securities and Exchange Commission, including, but not limited to, the Company’s quarterly reports~~ on ~~Form~~ ~~10-Q, and~~ the ~~Company’s~~first ~~annual report on Form 10-K, copies~~ day of ~~which may be obtained from~~ the ~~Company’s~~Pro ~~website~~Forma ~~at http://www~~Period.~~cnlgrowthproperties.com.~~

~~All~~The ~~written~~unaudited pro forma condensed consolidated statement of net assets and ~~oral~~statement ~~forward-looking~~of ~~statements~~operations ~~attributable~~are presented for informational purposes only and do not purport to be indicative of the Company’s orfinancial ~~persons~~results ~~acting~~as if the Transaction reflected herein had occurred on ~~its~~the ~~behalf~~first ~~are~~date ~~qualified~~of or been in ~~their~~effect ~~entirety~~during bythe ~~these cautionary~~Pro ~~statements~~Forma Period. ~~Forward-looking~~Further, ~~statements~~the ~~speak~~unaudited pro ~~only~~forma ascondensed consolidated statement of ~~the~~net ~~date~~assets onand ~~which~~statement ~~they~~of ~~are~~operations ~~made;~~should not be viewed as indicative of the Company’s ~~undertakes~~financial noresults ~~obligation~~in ~~to,~~the future; and ~~expressly~~they ~~disclaims~~should ~~any~~be ~~obligation~~read ~~to,~~in ~~update~~conjunction orwith ~~revise~~the ~~its~~Company’s ~~forward-looking~~ financial statements toas ~~reflect~~filed ~~new information,~~with ~~changed~~the ~~assumptions,~~Commission ~~the~~on ~~occurrence~~Form of10-Q ~~subsequent~~for ~~events,~~the orthree ~~changes~~months toended ~~future~~March 31, ~~operating~~2017 ~~results~~and ~~over~~on ~~time~~Form ~~unless~~10-K ~~otherwise~~for ~~required~~the byyear ~~law~~ended December 31, 2016.

CNL GROWTH PROPERTIES, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF NET ASSETS

MARCH 31, 2017

(Liquidation Basis)


	Historical March 31, 2017		Broadway Property Sold Pro Forma Adjustments			Pro Forma March 31, 2017
ASSETS

Real estate assets, net	$	269,472,000	$	(41,810,000	)(a)	$	227,662,000
Cash and cash equivalents		42,594,106		41,515,096	(a)
				(19,543,191	)(b)		64,566,011
Restricted cash		302,044		—			302,044
Other assets		203,260		—			203,260

Total Assets	$	312,571,410	$	(19,838,095	)	$	292,733,315

LIABILITIES

Mortgage and construction notes payable	$	147,079,731	$	(19,489,505	)(b)	$	127,590,226
Liability for non-controlling interests		33,249,047		70,257	(c)		33,319,304
Liability for estimated costs in excess of estimated receipts during liquidation		8,811,916		(405,776	)(d)		8,406,140
Accrued development costs		58,955		—			58,955
Accounts payable and other accrued expenses		2,163,077		(53,686	)(b)		2,109,391
Due to related parties		1,891,640		—			1,891,640
Other liabilities		801,406		—			801,406

Total Liabilities		194,055,772		(19,878,710	)		174,177,062

Commitments and contingencies

Net assets in liquidation	$	118,515,638	$	40,615		$	118,556,253

See accompanying notes to unaudited pro forma condensed consolidated financial statements.

CNL GROWTH PROPERTIES, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE SEVEN MONTHS ENDED JULY 31, 2016

(Going Concern Basis)


				Broadway
	Historical			Property Sold			Pro Forma
	July 31,			Pro Forma			July 31,
	2016			Adjustments (a)			2016 (d)
Revenues:
Rental income from operating leases	$	19,199,105		$	(63,827	)	$	19,135,278
Other property revenue		2,003,701			(43,875	)		1,959,826

Total revenues		21,202,806			(107,702	)		21,095,104

Expenses:
Property operating expenses		11,653,617			(276,501	)		11,377,116
General and administrative		2,775,540			(11,180	)		2,764,360
Asset management fees, net of amounts capitalized		1,604,305			(20,844	)(b)		1,583,461
Property management fees		965,979			(69,257	)		896,722
Depreciation		5,355,949			(98,567	)		5,257,382

Total expenses		22,355,390			(476,349	)		21,879,041

Operating loss		(1,152,584	)		368,647			(783,937	)

Other income (expense):
Fair value adjustments and other income		73,120			—			73,120
Interest expense and loan cost amortization, net of amounts capitalized		(4,197,031	)		21,351	(c)		(4,175,680	)
Loss on extinguishment of debt		(27,454	)		—			(27,454	)

Total other income (expense)		(4,151,365	)		21,351			(4,130,014	)

Income tax expense		(151,217	)		—			(151,217	)

Net loss before gain on sale of real estate		(5,455,166	)		389,998			(5,065,168	)
Gain on sale of real estate		40,917,543			—			40,917,543

Net income including noncontrolling interests		35,462,377			389,998			35,852,375
Net income from continuing operations attributable to noncontrolling interests		(21,931,862	)		(35,985	)		(21,967,847	)

Net income from continuing operations attributable to common stockholders	$	13,530,515		$	354,013		$	13,884,528

Net income per share of common stock (basic and diluted) from continuing operations	$	0.60					$	0.62

Weighted average number of shares of common stock outstanding (basic and diluted)		22,526,171						22,526,171

See accompanying notes to unaudited pro forma condensed consolidated financial statements.

CNL GROWTH PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.	Basis of Presentation

The accompanying unaudited pro forma condensed consolidated statement of net assets of the Company is presented as if the disposition of the Broadway Property described in Note 2. “Pro Forma Transaction” had occurred as of March 31, 2017. The accompanying unaudited pro forma condensed consolidated statement of operations of the Company presented for the seven months ended July 31, 2016 (the “Pro Forma Period”) includes certain pro forma adjustments to illustrate the estimated effect of the Company’s disposition, described in Note 2. “Pro Forma Transaction”, as if it had occurred as of the first day of the Pro Forma Period. The amounts included in the historical columns represent the Company’s historical statement of net assets and operating results for the Pro Forma Period presented.

The accompanying unaudited pro forma condensed consolidated financial statements have been prepared in accordance with Article 11 of Regulation S-X and do not include all of the information and note disclosures required by generally accepted accounting principles of the United States (“GAAP”). Pro forma financial information is intended to provide information about the continuing impact of a transaction by showing how a specific transaction or group of transactions might have affected historical financial statements. Pro forma financial information illustrates only the isolated and objectively measurable (based on historically determined amounts) effects of a particular transaction, and excludes effects based on judgmental estimates of how historical management practices and operating decisions may or may not have changed as a result of the transaction. Therefore, pro forma financial information does not include information about the possible or expected impact of current actions taken by management in response to the pro forma transaction, as if management’s actions were carried out in previous reporting periods.

This unaudited pro forma condensed consolidated financial information is presented for informational purposes only and does not purport to be indicative of the Company’s financial results or financial position as if the transaction reflected herein had occurred, or been in effect during the Pro Forma Period. In addition, this unaudited pro forma condensed consolidated financial information should not be viewed as indicative of the Company’s expected financial results for future periods.

2.	Pro Forma Transaction

On April 24, 2017, the Broadway Joint Venture entered into a purchase and sale agreement with Dedicated Broadway Tempe, LP, an unaffiliated third party, for the sale of the Broadway Property. The purchase price for the Broadway Property was approximately $41.8 million excluding transaction costs.

On June 19, 2017, the Broadway Joint Venture completed the sale of the Broadway Property.

3.	Adjustments to Unaudited Pro Forma Condensed Consolidated Statement of Net Assets

The adjustments to the unaudited pro forma condensed consolidated statement of net assets represent adjustments needed to the Company’s historical statement of net assets as if the completed disposition of the Broadway Property occurred as of March 31, 2017.

CNL GROWTH PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

3.	Adjustments to Unaudited Pro Forma Condensed Consolidated Statement of Net Assets (continued):

(a)

These adjustments reflect the net sales proceeds received from the completed disposition of the Broadway Property and the elimination of the related account balances as if the sale was consummated as of March 31, 2017. The estimated liquidation value of the Broadway Property was approximately $41.8 million as of March 31, 2017.


	Broadway Property Sold
Sale Price	$	41,810,000
Closing and transaction costs		(294,904	)

Net sales proceeds	$	41,515,096

(b)

These adjustments reflect the use of a portion of the net cash proceeds received from the completed sale of the Broadway Property to pay down existing indebtedness, including accrued interest.

(c)

These adjustments reflect the increase in the liability for noncontrolling interests for the joint venture partner’s share of net sales proceeds.

(d)

These adjustments reflect the reduction of estimated costs in excess of estimated receipts during liquidation.

4.	Adjustments to Unaudited Pro Forma Condensed Consolidated Statement of Operations

The adjustments to the unaudited pro forma condensed consolidated statement of operations represent adjustments needed to the Company’s historical results to remove the historical operating results of the completed sale of the Broadway Property as if it had occurred on the first day of the first Pro Forma Period presented.

(a)

Except as described in (b) and (c) below, these amounts represent the elimination of the operations on the completed sale of the Broadway Property from the historical amounts for the seven months ended July 31, 2016, to give effect to the completed sale of the Broadway Property as if the sale occurred on the first day of the first Pro Forma Period presented. The Broadway Property was classified in continuing operations because the proposed disposition of the property would neither cause a strategic shift in the Company, nor was it considered to have a major impact on the Company’s business. Therefore, the property did not qualify as discontinued operations under ASU 2014-08.

(b)

Amount includes the elimination of asset management fee expenses, calculated at 0.08334% monthly on the invested assets value of the Broadway Property for the seven months ended July 31, 2016. These fees were historically paid by the Company to its advisor and would not have been incurred subsequent to the disposition of this asset.

(c)

Amount represents the elimination of interest expense and loan cost amortization to reflect the use of net cash proceeds from the completed sale of the Broadway Property, to retire indebtedness that was collateralized by the Broadway Property as if the sale occurred on the first day of the first Pro Forma Period presented.

(d)

The adjusted unaudited pro forma condensed consolidated statement of operations does not include pro forma adjustments related to the sales of the Aura Grand property, the Crescent Gateway and City Walk properties, or the Oxford Square property previously reported on Form 8-K on November 1, 2016, December 6, 2016 and March 6, 2017, respectively.

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.

Date: June 15, 2017

CNL GROWTH PROPERTIES, INC. a Maryland corporation

Date: June 23, 2017

CNL GROWTH PROPERTIES, INC. a Maryland corporation

/s/ Tammy J. Tipton

Tammy J. Tipton Chief Financial Officer

Filing Compare · CNL Growth Properties, Inc.