AMERICAN REALTY CAPITAL HEALTHCARE TRUST INC - FORM 8-K/A - July 8, 2011

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EX-23.1 - AMERICAN REALTY CAPITAL HEALTHCARE TRUST INCv228108_ex23-1.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K/A

Amendment No. 1
 
to
 
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 21, 2011
 

American Realty Capital Healthcare Trust, Inc.
(Exact Name of Registrant as Specified in Charter)
 
Maryland
  
333-169075
  
27-3306391
(State or other jurisdiction
of incorporation or organization)
  
(Commission File Number)
  
(I.R.S. Employer
Identification No.)
 
405 Park Avenue, 15th Floor
New York, New York 10022
(Address, including zip code, of Principal Executive Offices)
Registrant's telephone number, including area code: (212) 415-6500

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:

o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
   
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
   
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
   
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 

 
 
 
 
 
INFORMATION TO BE INCLUDED IN THIS REPORT

Item 2.01. Completion of Acquisition or Disposition of Assets
 
We previously filed a Current Report on Form 8-K on June 24, 2011 (the “Form 8-K”) reporting our acquisition of a free-standing fee simple ambulatory surgery center in Texarkana, Texas (the “Texarkana Property”).  We hereby amend the Form 8-K to provide the financial information related to our acquisition required by Item 9.01.
 
In evaluating the Texarkana Property as a potential acquisition and determining the appropriate amount of consideration to be paid for the Texarkana Property, we have considered a variety of factors, including the location of the Texarkana Property, demographics, credit quality of the tenant, duration of the in-place lease, strong occupancy and the fact that the overall rental rates are comparable to market rates.
 
We believe that the Texarkana Property is well located, has acceptable roadway access and is well maintained. The Texarkana Property is subject to competition from similar properties within its respective market area, and the economic performance of the tenant in the Texarkana Property could be affected by changes in local economic conditions. We did not consider any other factors material or relevant to the decision to acquire the Texarkana Property.

Item 9.01. Financial Statements and Exhibits.

(a) Financial statements of businesses acquired.
         Texarkana Property Historical Summary:
Page
             Report of Independent Registered Public Accounting Firm
 3
             Statements of Revenues and Certain Expenses for the year ended December 31, 2010 and the three months ended March 31, 2011
 4
             Notes to Statements of Revenues and Certain Expenses
 5

(b) Unaudited Pro Forma Consolidated Information.
         Unaudited Pro Forma Consolidated Balance Sheet as of March 31, 2011
 7
         Notes to Unaudited Pro Forma Consolidated Balance Sheet
 8
         Unaudited Pro Forma Consolidated Statements of Operations for the year ended December 31, 2010 and the three months ended March 31, 2011
 9
         Notes to Unaudited Pro Forma Consolidated Statements of Operations
 11
   

(d)           Exhibits 
 
Exhibit No.
  
Description
23.1
  
Consent of Grant Thornton LLP


 
 
 
 

 
Report of Independent Registered Public Accounting Firm

Stockholders and Board of Directors
American Realty Capital Healthcare Trust, Inc.

We have audited the accompanying statement of revenues and certain expenses (the “Historical Summary”) of the a free-standing fee simple ambulatory surgery center in Texarkana, Texas (the “Texarkana Property”) for the year ended December 31, 2010. This Historical Summary is the responsibility of American Realty Capital Healthcare Trust, Inc.’s management. Our responsibility is to express an opinion on the Historical Summary based on our audit.
 
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Historical Summary is free of material misstatement. The Texarkana Property is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting.  Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Texarkana Property’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the Historical Summary, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the Historical Summary. We believe that our audit provides a reasonable basis for our opinion.
 
The accompanying Historical Summary was prepared for the purpose of complying with the rules and regulations of the U.S. Securities and Exchange Commission and for inclusion in a Form 8-K, of American Realty Capital Healthcare Trust, Inc., as described in Note 1 to the Historical Summary and is not intended to be a complete presentation of the Texarkana Property’s revenues and expenses.

In our opinion, the Historical Summary referred to above presents fairly, in all material respects, the revenues and certain expenses as described in Note 1 to the Historical Summary of the Texarkana Property for the year ended December 31, 2010, in conformity with accounting principles generally accepted in the United States of America.
 
 
GRANT THORNTON LLP

Philadelphia, Pennsylvania
 
July 8, 2011
 
 
3
 
 

 
TEXARKANA PROPERTY
  
STATEMENTS OF REVENUES AND CERTAIN EXPENSES
 
   
Three Months
Ended
March 31,
2011
  
Year Ended
December 31,
2010
     
(Unaudited)
          
                 
Rental income
  
$
104,808
    
$
402,982
  
                 
Insurance expense
    
401
      
1,209
  
                 
Revenue in excess of certain expenses
  
$
104,407
    
$
401,773
  
                 
 
The accompanying notes are an integral part of these Statements of Revenues and Certain Expenses.
 
 
4
 

 
TEXARKANA PROPERTY
 
NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES
(References to amounts for the three months ended March 31, 2011 are unaudited)
 
1.
Background and Basis of Presentation

The accompanying Statements of Revenues and Certain Expenses include the operations of a free-standing fee simple ambulatory surgery center in Texarkana, Texas (the “Texarkana Property”) for the year ended December 31, 2010 and the three months ended March 31, 2011 (unaudited). The Texarkana Property was acquired by American Realty Capital Healthcare Trust, Inc. (the “Company”) through its sponsor, American Realty Capital V, LLC, from an unaffiliated third party on June 21, 2011, for $4.5 million. The Texarkana Property contains 18,268 square feet and is 100% leased to Texarkana Surgery Center, L.P. (“Texarkana Surgery”).

The lease has a ten year term and expires on April 30, 2021. The lease contains 2.0% fixed annual rental escalations during the primary term and one renewal option of five years.  The lease is double net whereby the Company is responsible for maintaining the roof and structure of the building and Texarkana Surgery is required to pay substantially all other operating expenses, in addition to base rent.

The accompanying Statements of Revenues and Certain Expenses (“Historical Summary”) has been prepared for the purpose of complying with the provisions of Rule 3-14 of Regulation S-X promulgated by the U.S. Securities and Exchange Commission (the “SEC”), which requires that certain information with respect to real estate operations be included with certain SEC filings. An audited statement of revenues and certain operating expenses is being presented for the most recent fiscal year available instead of the three most recent years based on the following factors:  (a) the Texarkana Property was acquired from an unaffiliated party and (b) based on due diligence of the Texarkana Property by the Company, management is not aware of any material factors relating to the Texarkana Property that would cause this financial information not to be indicative of future operating results.

2. 
Summary of Significant Accounting Policies

Revenue Recognition

Under the terms of the lease, the tenant pays monthly rent.  Rental income includes the effect of amortizing the aggregate minimum lease payments over the term of the lease, which amounted to a decrease to rental income of $78 from the rent payments received in cash for the year ended December 31, 2010 and an increase to rental income of $8,558 over the rent payments received in cash for the three months ended March 31, 2011.

Use of Estimates

The preparation of the Historical Summary is in conformity with accounting principles generally accepted in the United States of America which requires management to make estimates and assumptions of the reported amounts of revenues and certain expenses during the reporting period. Actual results could differ from those estimates used in the preparation of the Historical Summary.

 
5
 
 

3.
Future Minimum Lease Payments

At March 31, 2011, the Texarkana Property was 100% leased to a tenant under a non-cancelable operating lease with a remaining lease term of 10 years. Future minimum lease payments are as follows:
 
April 1, 2011 to December 31, 2011
  
$
293,883
  
2012
    
397,936
  
2013
    
405,895
  
2014
    
414,013
  
2015
    
422,293
  
2016 and thereafter
    
2,398,019
  
Total
  
$
4,332,039
  
         
 
4.
Subsequent Events

The Company has evaluated subsequent events through July 8, 2011, the date which these financial statements have been issued and have determined that there have not been any events that have occurred that would require adjustments to the disclosures in the audited financial statements.
 
 
6
 

 
AMERICAN REALTY CAPITAL HEALTHCARE TRUST, INC.
  
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 2011

The following unaudited pro forma Consolidated Balance Sheet is presented as if American Realty Capital Healthcare Trust, Inc. (“the Company”) had acquired the Texarkana Property as of March 31, 2011. This financial statement should be read in conjunction with the unaudited pro forma Consolidated Statement of Operations and the Company’s historical financial statements and notes thereto in the Company’s March 31, 2011 Form 10-Q. The pro forma Consolidated Balance Sheet is unaudited and is not necessarily indicative of what the actual financial position would have been had the Company acquired the Texarkana Property as of March 31, 2011, nor does it purport to present the future financial position of the Company.

   
American Realty Capital Healthcare Trust, Inc. (1)
    
Texarkana
Property (2)(3)
    
Pro Forma American Realty Capital Healthcare Trust, Inc.
  
Assets
                  
Real estate investments, at cost:
                  
  Land
  
$
-
    
$
785,763
    
$
785,763
  
  Buildings, fixtures and improvements
    
-
      
3,143,051
      
3,143,051
  
  Acquired intangible lease assets
    
-
      
571,186
      
571,186
  
     Total real estate investments, at cost
    
-
      
4,500,000
      
4,500,000
  
  Less: accumulated depreciation and amortization
    
-
      
-
      
-
  
     Total real estate investments, net
    
-
      
4,500,000
      
4,500,000
  
Cash and cash equivalents
    
176
      
-
      
176
  
Prepaid expenses and other assets
    
33,433
      
-
      
33,433
  
Deferred financing costs, net
    
-
      
33,828
      
33,828
  
     Total assets
  
$
33,609
    
$
4,533,828
    
$
4,567,437
  
                         
Liabilities and Stockholders’ Equity (Deficiency)
                        
Mortgage note payable
  
$
-
    
$
2,250,000
    
$
2,250,000
  
Accounts payable and accrued expenses
    
1,598,457
      
-
      
1,598,457
  
     Total liabilities
    
1,598,457
      
2,250,000
      
3,848,457
  
                         
Preferred stock
    
-
      
-
      
-
  
Common stock
    
200
      
-
      
200
  
Additional paid in capital
    
(1,528,297
) 
    
2,283,828
      
755,531
  
Accumulated deficit
    
(36,751
)
    
-
      
(36,751
)
     Total stockholders’ equity (deficiency)
    
(1,564,848
) 
    
2,283,828
      
718,980
  
     Total liabilities and stockholders’ equity (deficiency)
  
$
33,609
    
$
4,533,828
    
$
4,567,437
  
 

 
7
 
 
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET

Unaudited Pro Forma Consolidated Balance Sheet as of March 31, 2011:
 
 
(1)
Reflects the Company’s historical unaudited Balance Sheet as of March 31, 2011, as previously filed.
 
 
(2)
Reflects the acquisition of the Texarkana Property. The consideration was $4,500,000, which was funded through a combination of funds raised through common stock and a first mortgage note.
 
 
(3)
Upon acquisition the Company allocates the purchase price of acquired properties to tangible and identifiable intangible assets acquired based on their respective fair values. Tangible assets include land, land improvements, buildings and fixtures on as-if vacant basis. The Company utilizes various estimates, processes and information to determine the as-if vacant property value. Estimates of value are made using customary methods, including data from appraisals, comparable sales, discounted cash flow analysis and other methods. Identifiable intangible assets include amounts allocated to the value of in-place leases.

Amounts allocated to land, land improvements, buildings and fixtures are based on cost segregation studies performed by independent third-parties or the Company’s analysis of comparable properties. Depreciation is computed using the straight-line method over the estimated lives of fifteen years for land improvements, forty years for buildings and generally five years for fixtures.

The aggregate value of intangible assets related to in-place leases is primarily the difference between the property valued with existing in-place leases adjusted to market rental rates and the property valued as if vacant. Factors considered in the analysis of the in-place lease intangibles include an estimate of carrying costs during the expected lease-up period for each property, taking into account current market conditions and costs to execute similar leases. In estimating carrying costs, the Company includes real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up period, which is estimated to be nine months. Estimates of costs to execute similar leases including leasing commissions, legal and other related expenses are also utilized.  The value of in-place lease is amortized to expense over the initial term of the respective lease, which is approximately 10 years. If a tenant terminates its lease, the unamortized portion of the in-place lease value intangibles is charged to expense.

In making estimates of fair values for purposes of allocating purchase price, the Company utilizes a number of sources, including independent appraisals that may be obtained in connection with the acquisition or financing of the respective property and other market data. The Company also considers information obtained about each property as a result of pre-acquisition due diligence, as well as subsequent marketing and leasing activities, in estimating the fair value of the tangible and intangible assets acquired and intangible liabilities assumed, as applicable. The allocations presented in the accompanying unaudited pro forma consolidated balance sheet are substantially complete; however, there are certain items that will be finalized once additional information is received. Accordingly, these allocations are subject to revision when final information is available, although the Company does not expect future revisions to have a significant impact on its financial position or results of operations.

 
8
 

 
AMERICAN REALTY CAPITAL HEALTHCARE TRUST, INC.
  
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2010
AND THE THREE MONTHS ENDED MARCH 31, 2011

The following unaudited pro forma Consolidated Statements of Operations for the year ended December 31, 2010 and the three months ended March 31, 2011, are presented as if American Realty Capital Healthcare Trust, Inc. (“the Company”) had acquired the Texarkana Property as of the beginning of each period presented. This financial statement should be read in conjunction with the unaudited pro forma Consolidated Balance Sheet and the Company’s historical financial statements and notes thereto included in the Company’s March 31, 2011 Form 10-Q. The pro forma Consolidated Statements of Operations are unaudited and are not necessarily indicative of what the actual results of operations would have been had the Company acquired the property at the beginning of each period presented, nor does it purport to present the future results of operations of the Company.
 
Unaudited Pro forma Consolidated Statement of Operation for the year ended December 31, 2010:
   
American Realty Capital Healthcare Trust, Inc. (1)
    
Texarkana Property (2)
    
Pro Forma Adjustments Texarkana Property
    
Pro Forma American Realty Capital Healthcare Trust, Inc.
  
                         
Total revenues
  
$
-
    
$
402,982
    
$
27,539
(3)
  
$
430,521
  
                                 
Operating expenses:
                                
   Property operating
    
-
      
1,209
      
-
      
1,209
  
   General and administrative
    
1,186
      
-
      
-
      
1,186
  
   Depreciation and amortization
    
-
      
-
      
243,792
(4)
    
243,792
  
Total operating expenses
    
1,186
      
1,209
      
243,792
      
246,187
  
                                 
Operating income (loss)
    
(1,186
)
    
401,773
      
(216,253
)
    
184,334
  
                                 
Interest expense
    
-
      
-
      
(132,237
)(5)
    
(132,237
)
                                 
Net income (loss)
  
$
(1,186
)
  
$
401,773
    
$
(348,490
)
  
$
52,097
  
                                 


 
9
 
 
Unaudited Pro forma Consolidated Statement of Operations for the three months ended March 31, 2011:
   
American Realty Capital Healthcare Trust, Inc. (1)
    
Texarkana Property (2)
    
Pro Forma Adjustments Texarkana Property
    
Pro Forma American Realty Capital Healthcare Trust, Inc.
  
                         
Total revenues
  
$
-
    
$
104,808
    
$
2,822
(3)
  
$
107,630
  
                                 
Operating expenses:
                                
   Property operating
    
-
      
401
      
-
      
401
  
   General and administrative
    
35,565
      
-
      
-
      
35,565
  
   Depreciation and amortization
    
-
      
-
      
60,948
(4)
    
60,948
  
Total operating expenses
    
35,565
      
401
      
60,948
      
96,914
  
                                 
Operating income (loss)
    
(35,565
)
    
104,407
      
(58,126
)
    
10,716
  
                                 
Interest expense
    
-
      
-
      
(32,630
)(5)
    
(32,630
)
                                 
Net income (loss)
  
$
(35,565
)
  
$
104,407
    
$
(90,756
)
  
$
(21,914
)
                                 


 
10
 
 
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
 
Unaudited Pro Forma Consolidated Statement of Operations for the year ended December 31, 2010 and the three months ended March 31, 2011.
 
 
(1)
Reflects the Company’s historical operations for the period indicated as previously filed.
 
 
(2)
Reflects the operations of the Texarkana Property for the period indicated.
 
 
(3)
Represents adjustment to straight-line rent for lease terms as of the acquisition date.
     
 
(4)
Represents the estimated depreciation and amortization of real estate investments and intangible lease assets had the property been acquired at the beginning of the period.  Depreciation is computed using the straight-line method over the estimated lives of fifteen years for land improvements, forty years for buildings and five years for fixtures.  The value of in-place lease is amortized to expense over the initial term of the respective lease, which is approximately 10 years.
 
 
(5)
Represents interest expense that would have been recorded on debt incurred in connection with the acquisition had the property been acquired at the beginning of the period. The Company financed a portion of the acquisition with a first mortgage non-recourse loan in the amount of $2,250,000 at an annual fixed interest rate of 5.50%.
     
   
Note: Pro forma adjustments exclude one-time acquisition costs of $141,191 representing mainly acquisition fees to the advisor, legal fees and deed transfer fees for the acquisition of the Texarkana Property.
 

 
11
 
 
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 REALTY CAPITAL HEALTHCARE TRUST, INC.
     
Date: July 8, 2011
By:  
/s/ Brian S. Block
 
Brian S. Block
 
Executive Vice President and
Chief Financial Officer
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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