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8-K - FORM 8-K - Griffin-American Healthcare REIT II, Inc. | c24711e8vk.htm |
Exhibit 99.1
Grubb & Ellis Healthcare REIT II, Inc.
(to be renamed Griffin-American Healthcare Trust, Inc.)
(to be renamed Griffin-American Healthcare Trust, Inc.)
Contact:
|
Damon Elder | |
Phone:
|
714.975.2659 | |
Email:
|
damon.elder@grubb-ellis.com |
Grubb & Ellis Healthcare REIT II
Reports Third Quarter 2011 Results
Reports Third Quarter 2011 Results
SANTA ANA, Calif. (Nov. 14, 2011) Grubb & Ellis Healthcare REIT II, Inc. today announced
operating results for the companys third quarter ended September 30, 2011.
Grubb & Ellis Healthcare REIT II continued to perform exceptionally well during the third quarter
of 2011, said Danny Prosky, president and chief operating officer. Our net operating income
totaled nearly $10 million and achieved quarterly growth of more than 40 percent for the sixth
straight quarter. Since we began acquiring assets in March 2010 the growth and financial
performance of the REIT has been phenomenal; we couldnt be more pleased.
Third Quarter 2011 Highlights and Recent Accomplishments
| Completed third quarter acquisitions totaling $19.3 million, based on purchase price. Declared and paid quarterly distributions to stockholders of record equal to an annualized rate of 6.5 percent, or a quarterly distribution of $0.16 per share, based upon a $10.00 per share offering price. The companys board of directors intends to continue to declare distributions on a quarterly basis. |
| Third quarter modified funds from operations, or MFFO, as defined by the Investment Program Association, or IPA, was $5.4 million, approximately 51 percent more than the $3.5 million in the second quarter of 2011. Funds from operations, or FFO, equaled approximately $5.0 million, compared with $(3.6) million in the second quarter of 2011. (Quarter-over-quarter growth in MFFO is primarily due to the acquisition of additional properties. Quarter-over-quarter growth in FFO is primarily due to lower acquisition related expenses in the third quarter compared to the second quarter as well as the acquisition of additional properties. Please see financial reconciliation tables and notes at the end of this release for more information regarding modified funds from operations and funds from operations.) |
| Net operating income, or NOI, totaled approximately $9.8 million in the third quarter of 2011, an increase of approximately 43 percent compared to the $6.9 million achieved in the second quarter of 2011. The company reported net income of $413,000, compared to a loss equal to $6.9 million in the second quarter, which was largely due to the significant costs associated with the companys acquisitions during the second quarter. (Quarter-over-quarter growth in NOI is primarily due to the acquisition of additional properties. Please see financial reconciliation tables and notes at the end of this release for more information regarding NOI and net income/loss.) |
| The companys property portfolio achieved an aggregate average occupancy of 97 percent as of Sept. 30, 2011 and had leverage of 25.6 percent. The portfolios average remaining lease term was 10.0 years at the close of the third quarter, based on leases in effect as of Sept. 30, 2011. |
Third Quarter 2011 and Recent Acquisition Highlights
| In July, the company acquired Maxfield Medical Office Building in Sarasota, Fla., for $7.2 million. |
| In September, the company completed the $12.1 million acquisition of Lafayette Physical Rehabilitation Hospital in Lafayette, La. |
| Total portfolio value grew to approximately $430.8 million, based on purchase price, at the close of the third quarter 2011 from $411.5 million at the close of the second quarter 2011. |
| Subsequent to the close of the third quarter, the company announced that it has entered into an agreement to acquire the $166.5 million Southeastern Skilled Nursing Facility Portfolio, comprised of 10 skilled nursing facilities in Alabama, Georgia, Louisiana and Tennessee. The acquisition is subject to customary closing conditions and the satisfaction of other requirements as detailed in the agreement. |
Subsequent Events
| On Wednesday, Nov. 9, the board of directors of Grubb & Ellis Healthcare REIT II filed an 8-K with the U.S. Securities and Exchange Commission announcing the transition of its advisory and dealer manager relationship with Grubb & Ellis Company. The termination of the underlying agreements is effective immediately with a 60-day transition period, during which Grubb & Ellis will continue to provide advisory and dealer manager services to the company. |
| Following the transition, the company will be renamed Griffin-American Healthcare Trust, Inc., and will be co-sponsored by American Healthcare Investors, LLC and Griffin Capital Corporation. Griffin Capital Securities, an affiliate of Griffin Capital, will serve as dealer manager. |
| Jeff Hanson, chairman and chief executive officer, and Danny Prosky, president and chief operating officer, will lead the transition and continue to manage the company thereafter. Hanson and Prosky founded and are principals of American Healthcare Investors. |
According to Hanson, When we launched Grubb & Ellis Healthcare REIT II in late 2009, we set a
lofty goal to become the finest performing non-traded REIT in the industry. As our quarterly
results consistently demonstrate, we continue to meet this challenge and set a high bar for the
rest of the sector.
As of Sept. 30, 2011, Grubb & Ellis Healthcare REIT II had sold approximately 39,168,803 shares of
its common stock, excluding the shares issued under its distribution reinvestment plan, for
approximately $390,864,000 through its initial public offering.
To date, the REIT has made 24 geographically diverse acquisitions comprised of 55 buildings valued
at approximately $430.8 million, based on purchase price in the aggregate.
FINANCIAL TABLES AND NOTES FOLLOW
GRUBB & ELLIS HEALTHCARE REIT II, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
As of September 30, 2011 and December 31, 2010
(Unaudited)
CONDENSED CONSOLIDATED BALANCE SHEETS
As of September 30, 2011 and December 31, 2010
(Unaudited)
September 30, 2011 | December 31, 2010 | |||||||
ASSETS |
||||||||
Real estate investments: |
||||||||
Operating properties, net |
$ | 366,402,000 | $ | 163,335,000 | ||||
Cash and cash equivalents |
8,812,000 | 6,018,000 | ||||||
Accounts and other receivables, net |
1,314,000 | 241,000 | ||||||
Restricted cash |
2,389,000 | 2,816,000 | ||||||
Real estate and escrow deposits |
3,650,000 | 649,000 | ||||||
Identified intangible assets, net |
65,778,000 | 28,568,000 | ||||||
Other assets, net |
6,194,000 | 2,369,000 | ||||||
Total assets |
$ | 454,539,000 | $ | 203,996,000 | ||||
LIABILITIES AND EQUITY |
||||||||
Liabilities: |
||||||||
Mortgage loans payable, net |
$ | 64,853,000 | $ | 58,331,000 | ||||
Lines of credit |
44,947,000 | 11,800,000 | ||||||
Accounts payable and accrued liabilities |
7,649,000 | 3,356,000 | ||||||
Accounts payable due to affiliates |
1,523,000 | 840,000 | ||||||
Derivative financial instruments |
880,000 | 453,000 | ||||||
Identified intangible liabilities, net |
652,000 | 502,000 | ||||||
Security deposits, prepaid rent and other liabilities |
10,683,000 | 3,352,000 | ||||||
Total liabilities |
131,187,000 | 78,634,000 | ||||||
Commitments and contingencies |
||||||||
Equity: |
||||||||
Stockholders equity: |
||||||||
Preferred stock, $0.01 par value; 200,000,000 shares authorized;
none issued and outstanding |
| | ||||||
Common stock, $0.01 par value; 1,000,000,000 shares authorized;
39,919,575 and 15,452,668 shares issued and outstanding
as of September 30, 2011 and December 31, 2010, respectively |
399,000 | 154,000 | ||||||
Additional paid-in capital |
355,487,000 | 137,657,000 | ||||||
Accumulated deficit |
(32,656,000 | ) | (12,571,000 | ) | ||||
Total stockholders equity |
323,230,000 | 125,240,000 | ||||||
Noncontrolling interests |
122,000 | 122,000 | ||||||
Total equity |
323,352,000 | 125,362,000 | ||||||
Total liabilities and equity |
$ | 454,539,000 | $ | 203,996,000 | ||||
GRUBB & ELLIS HEALTHCARE REIT II, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Nine Months Ended September 30, 2011 and 2010
(Unaudited)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Nine Months Ended September 30, 2011 and 2010
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Revenue: |
||||||||||||||||
Rental income |
$ | 12,504,000 | $ | 2,807,000 | $ | 27,186,000 | $ | 4,010,000 | ||||||||
Expenses: |
||||||||||||||||
Rental expenses |
2,664,000 | 834,000 | 5,684,000 | 1,241,000 | ||||||||||||
General and administrative |
1,563,000 | 503,000 | 3,942,000 | 1,048,000 | ||||||||||||
Acquisition related expenses |
913,000 | 2,847,000 | 9,698,000 | 5,179,000 | ||||||||||||
Depreciation and amortization |
4,553,000 | 1,157,000 | 10,029,000 | 1,722,000 | ||||||||||||
Total expenses |
9,693,000 | 5,341,000 | 29,353,000 | 9,190,000 | ||||||||||||
Income (loss) from operations |
2,811,000 | (2,534,000 | ) | (2,167,000 | ) | (5,180,000 | ) | |||||||||
Other income (expense): |
||||||||||||||||
Interest expense (including amortization of
deferred financing costs and
debt discount and premium): |
||||||||||||||||
Interest expense |
(2,199,000 | ) | (323,000 | ) | (4,767,000 | ) | (432,000 | ) | ||||||||
Loss in fair value of derivative
financial instruments |
(202,000 | ) | (74,000 | ) | (427,000 | ) | (194,000 | ) | ||||||||
Interest income |
3,000 | 1,000 | 9,000 | 14,000 | ||||||||||||
Net income (loss) |
413,000 | (2,930,000 | ) | (7,352,000 | ) | (5,792,000 | ) | |||||||||
Less: net income attributable to
noncontrolling interests |
| (1,000 | ) | (1,000 | ) | (1,000 | ) | |||||||||
Net income (loss) attributable to controlling interest |
$ | 413,000 | $ | (2,931,000 | ) | $ | (7,353,000 | ) | $ | (5,793,000 | ) | |||||
Net income (loss) per common share attributable to
controlling interest basic and diluted |
$ | 0.01 | $ | (0.34 | ) | $ | (0.28 | ) | $ | (1.02 | ) | |||||
Weighted average number of common shares
outstanding basic and diluted |
34,644,097 | 8,745,255 | 26,171,404 | 5,687,117 | ||||||||||||
Distributions declared per common share |
$ | 0.16 | $ | 0.16 | $ | 0.33 | $ | 0.49 | ||||||||
GRUBB & ELLIS HEALTHCARE REIT II, INC.
NET OPERATING INCOME RECONCILIATION
For the Three and Nine Months Ended September 30, 2011 and 2010
(Unaudited)
NET OPERATING INCOME RECONCILIATION
For the Three and Nine Months Ended September 30, 2011 and 2010
(Unaudited)
Net operating income is a financial measure that does not conform to accounting principles
generally accepted in the United States of America, or GAAP, or a non-GAAP measure. It is defined
as net income (loss), computed in accordance with GAAP, generated from properties before general
and administrative expenses, acquisition related expenses, depreciation and amortization, interest
expense and interest income. The company believes that net operating income is useful for investors
as it provides an accurate measure of the operating performance of its operating assets because net
operating income excludes certain items that are not associated with the management of the
properties. Additionally, the company believes that net operating income is a widely accepted
measure of comparative operating performance in the real estate community. However, the companys
use of the term net operating income may not be comparable to that of other real estate companies
as they may have different methodologies for computing this amount.
The following is a reconciliation of net income (loss), which is the most directly comparable GAAP
financial measure, to net operating income for the three and nine months ended September 30, 2011
and 2010:
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Net income (loss) |
$ | 413,000 | $ | (2,930,000 | ) | $ | (7,352,000 | ) | $ | (5,792,000 | ) | |||||
Add: |
||||||||||||||||
General and administrative |
1,563,000 | 503,000 | 3,942,000 | 1,048,000 | ||||||||||||
Acquisition related expenses |
913,000 | 2,847,000 | 9,698,000 | 5,179,000 | ||||||||||||
Depreciation and amortization |
4,553,000 | 1,157,000 | 10,029,000 | 1,722,000 | ||||||||||||
Interest expense |
2,401,000 | 397,000 | 5,194,000 | 626,000 | ||||||||||||
Less: |
||||||||||||||||
Interest income |
(3,000 | ) | (1,000 | ) | (9,000 | ) | (14,000 | ) | ||||||||
Net operating income |
$ | 9,840,000 | $ | 1,973,000 | $ | 21,502,000 | $ | 2,769,000 | ||||||||
GRUBB & ELLIS HEALTHCARE REIT II, INC.
FFO AND MFFO RECONCILIATION
For the Three and Nine Months Ended September 30, 2011 and 2010
(Unaudited)
FFO AND MFFO RECONCILIATION
For the Three and Nine Months Ended September 30, 2011 and 2010
(Unaudited)
Due to certain unique operating characteristics of real estate companies, the National Association
of Real Estate Investment Trusts, or NAREIT, an industry trade group, has promulgated a measure
known as funds from operations, or FFO, which the company believes to be an appropriate
supplemental measure to reflect the operating performance of a real estate investment trust, or
REIT. The use of FFO is recommended by the REIT industry as a supplemental performance measure. FFO
is not equivalent to our net income or loss as determined under GAAP.
The company defines FFO, a non-GAAP measure, consistent with the standards established by the White
Paper on FFO approved by the Board of Governors of NAREIT, as revised in February 2004, or the
White Paper. The White Paper defines FFO as net income or loss computed in accordance with GAAP,
excluding gains or losses from sales of property but including asset impairment writedowns, plus
depreciation and amortization, and after adjustments for unconsolidated partnerships and joint
ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect
FFO. The companys FFO calculation complies with NAREITs policy described above.
The historical accounting convention used for real estate assets requires straight-line
depreciation of buildings and improvements, which implies that the value of real estate assets
diminishes predictably over time. Since real estate values historically rise and fall with market
conditions, presentations of operating results for a REIT, using historical accounting for
depreciation, the company believes, may be less informative. As a result, the company believes that
the use of FFO, which excludes the impact of real estate related depreciation and amortization,
provides a more complete understanding of the companys performance to investors and to management,
and when compared year over year, reflects the impact on the companys operations from trends in
occupancy rates, rental rates, operating costs, general and administrative expenses, and interest
costs, which is not immediately apparent from net income or loss.
However, changes in the accounting and reporting rules under GAAP (for acquisition fees and
expenses from a capitalization/depreciation model to an expensed-as-incurred model) that have been
put into effect since the establishment of NAREITs definition of FFO have prompted an increase in
the non-cash and non-operating items included in FFO. In addition, the company views fair value
adjustments of derivatives, and impairment charges and gains and losses from dispositions of assets
as items which are typically adjusted for when assessing operating performance. Lastly, publicly
registered, non-listed REITs typically have a significant amount of acquisition activity and are
substantially more dynamic during their initial years of investment and operation and therefore
require additional adjustments to FFO in evaluating performance. Due to these and other unique
features of publicly registered, non-listed REITs, the Investment Program Association, or IPA,
an industry trade group, has standardized a measure known as modified funds from operations,
or MFFO, which the company believes to be another appropriate supplemental measure to reflect the
operating performance of a REIT. The use of MFFO is recommended by the IPA as a supplemental performance
measure for publicly registered, non-listed REITs. MFFO is a metric used by management to evaluate
sustainable performance and distribution policy. In evaluating the performance of our portfolio
over time, management employs business models and analyses that differentiate the costs to acquire
investments from the investments revenues and expenses. Management believes that excluding
acquisition costs from MFFO provides investors with supplemental performance information that is
consistent with the performance models and analysis used by management, and provides investors a
view of the performance of our portfolio over time, including after the time we cease to acquire
properties on a frequent and regular basis. MFFO may provide investors with a useful indication of
our future performance, particularly after our acquisition stage, and of the sustainability of our
current distribution policy upon completion of our acquisition stage. However, because MFFO
excludes acquisition expenses, which are an important component in an analysis of historical
performance, MFFO should not be construed as a historical performance measure. MFFO is not
equivalent to the companys net income or loss as determined under GAAP.
The company defines MFFO, a non-GAAP measure, consistent with the IPAs Guideline 2010-01,
Supplemental Performance Measure for Publicly Registered, Non-Listed REITs: Modified Funds from
Operations, or the Practice Guideline, issued by the IPA in November 2010. The Practice Guideline
defines MFFO as FFO further adjusted for the following items included in the determination of GAAP
net income (loss): acquisition fees and expenses; amounts relating to deferred rent receivables and
amortization of above and below market leases and liabilities; accretion of discounts and
amortization of premiums on debt investments; nonrecurring impairments of real estate-related
investments; mark-to-market adjustments included in net income; nonrecurring gains or losses
included in net income from the extinguishment or sale of debt, hedges, foreign exchange,
derivatives or securities holdings where trading of such holdings is not a fundamental attribute of
the business plan, unrealized gains or losses resulting from consolidation from, or deconsolidation
to, equity accounting, and after adjustments for consolidated and unconsolidated partnerships and
joint ventures, with such adjustments calculated to reflect MFFO on the same basis. The companys
MFFO calculation complies with the IPAs Practice Guideline described above. In calculating MFFO,
the company excludes acquisition related expenses, amortization of above and below market leases,
fair value adjustments of derivative financial instruments, gains or losses from the extinguishment
of debt, change in deferred rent receivables and the adjustments of such items related to
noncontrolling interests. The other adjustments included in the IPAs Practice Guideline are not
applicable to the company for the three and nine months ended September 30, 2011 and 2010.
Presentation of this information is intended to assist in comparing the operating performance of
different REITs, although it should be noted that not all REITs calculate FFO and MFFO the same
way, so comparisons with other REITs may not be meaningful. Furthermore, FFO and MFFO are not
necessarily indicative of cash flow available to fund cash needs and should not be considered as an
alternative to net income (loss) as an indication of the companys performance, as an indication of
its liquidity, or indicative of funds available to fund its cash needs including its ability to
make distributions to its stockholders. FFO and MFFO should be reviewed in conjunction with other
measurements as an indication of the companys performance. MFFO has limitations as a
performance measure in an offering such as ours where the price of a share of common stock is a
stated value and there is no net asset value determination during the offering stage and for a
period thereafter. MFFO is useful in
assisting management and investors in assessing the sustainability of operating performance in
future operating periods, and in particular, after the offering and acquisition stages are complete
and net asset value is disclosed. MFFO is not a useful measure in evaluating net asset value
because impairments are taken into account in determining net asset value but not in determining
MFFO.
The following is a reconciliation of net income (loss), which is the most directly comparable GAAP
financial measure, to FFO and MFFO for the three and nine months ended September 30, 2011 and 2010
(unaudited):
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Net income (loss) |
$ | 413,000 | $ | (2,930,000 | ) | $ | (7,352,000 | ) | $ | (5,792,000 | ) | |||||
Add: |
||||||||||||||||
Depreciation and amortization
consolidated properties |
4,553,000 | 1,157,000 | 10,029,000 | 1,722,000 | ||||||||||||
Less: |
||||||||||||||||
Net income attributable to
noncontrolling interests |
| (1,000 | ) | (1,000 | ) | (1,000 | ) | |||||||||
Depreciation and amortization related to
noncontrolling interests |
(2,000 | ) | (2,000 | ) | (7,000 | ) | (2,000 | ) | ||||||||
FFO |
$ | 4,964,000 | $ | (1,776,000 | ) | $ | 2,669,000 | $ | (4,073,000 | ) | ||||||
Add: |
||||||||||||||||
Acquisition related expenses |
$ | 913,000 | $ | 2,847,000 | $ | 9,698,000 | $ | 5,179,000 | ||||||||
Amortization of above and below market leases |
81,000 | 28,000 | 206,000 | 49,000 | ||||||||||||
Loss in fair value of derivative financial instruments |
202,000 | 74,000 | 427,000 | 194,000 | ||||||||||||
Loss on extinguishment of debt |
2,000 | | 44,000 | | ||||||||||||
Change in deferred rent receivables related to
noncontrolling interests |
| | 1,000 | | ||||||||||||
Less: |
||||||||||||||||
Change in deferred rent receivables |
(806,000 | ) | (157,000 | ) | (1,719,000 | ) | (241,000 | ) | ||||||||
MFFO |
$ | 5,356,000 | $ | 1,016,000 | $ | 11,326,000 | $ | 1,108,000 | ||||||||
Weighted average common shares
outstanding basic and diluted |
34,644,097 | 8,745,255 | 26,171,404 | 5,687,117 | ||||||||||||
Net income (loss) per common share basic and diluted |
$ | 0.01 | $ | (0.34 | ) | $ | (0.28 | ) | $ | (1.02 | ) | |||||
FFO per common share basic and diluted |
$ | 0.14 | $ | (0.20 | ) | $ | 0.10 | $ | (0.72 | ) | ||||||
MFFO per common share basic and diluted |
$ | 0.15 | $ | 0.12 | $ | 0.43 | $ | 0.19 | ||||||||
About Grubb & Ellis Healthcare REIT II
Grubb & Ellis Healthcare REIT II, Inc. is a real estate investment trust that seeks to preserve,
protect and return investors capital contributions, pay regular cash distributions, and realize
growth in the value of its investments upon the ultimate sale of such investments. Grubb & Ellis
Healthcare REIT II is seeking to raise up to approximately $3 billion in equity and to acquire a
diversified portfolio of real estate assets, focusing primarily on medical office buildings and
other healthcare-related facilities.
* * *
This release contains certain forward-looking statements with respect to the success of our
company, our ability to provide our investors distribution sustainability and superior long-term
financial performance, whether we will be able to maintain our current distribution rate, whether
we can continue to improve our net operating income, funds from operations and modified funds from
operations, whether we can maintain the financial results experienced in the quarter ended
September 30, 2011, whether we can continue to achieve impressive quarter-over-quarter growth,
whether we can become the finest performing non-traded REIT in the industry and whether we can
transition our advisory and dealer manager relationship with Grubb & Ellis Company. Because such
statements include risks, uncertainties and contingencies, actual results may differ materially
from those expressed or implied by such forward-looking statements. These risks, uncertainties and
contingencies include, but are not limited to, the following: our strength and financial condition
and uncertainties relating to the financial strength of our current and future real estate
investments; uncertainties relating to our ability to continue to maintain the current coverage of
our investor distributions; uncertainties relating to the local economies where our real estate
investments are located; uncertainties relating to changes in general economic and real estate
conditions; uncertainties regarding changes in the healthcare industry; uncertainties relating to
the implementation of recent healthcare legislation; the uncertainties relating to the
implementation of our real estate investment strategy; uncertainties related to the transition of
our advisory and dealer manager relationship from Grubb & Ellis Company to American Healthcare
Investors and Griffin Capital and the success of such transition; and other risk factors as
outlined in the companys prospectus, as amended from time to time, and as detailed from time to
time in our periodic reports, as filed with the U.S. Securities and Exchange Commission.
Forward-looking statements in this document speak only as of the date on which such statements were
made, and we undertake no obligation to update any such statements that may become untrue because
of subsequent events.
THIS IS NEITHER AN OFFER TO SELL NOR AN OFFER TO BUY ANY SECURITIES DESCRIBED HEREIN.
OFFERINGS ARE MADE ONLY BY MEANS OF A PROSPECTUS.
###