AVIV REIT, INC. - FORM 8-K - EX-99.3 - December 23, 2014

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8-K - 8-K - AVIV REIT, INC.d840740d8k.htm
EX-99.2 - EX-99.2 - AVIV REIT, INC.d840740dex992.htm
EX-10.1 - EX-10.1 - AVIV REIT, INC.d840740dex101.htm
EX-23.1 - EX-23.1 - AVIV REIT, INC.d840740dex231.htm
EX-99.1 - EX-99.1 - AVIV REIT, INC.d840740dex991.htm

Exhibit 99.3

AVIV REIT, INC.

AVIV HEALTHCARE PROPERTIES LIMITED PARTNERSHIP

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

On December 17, 2014, Aviv REIT, Inc. (“Aviv”), through Financing VI Healthcare Property, L.L.C., an indirect wholly-owned subsidiary of Aviv’s operating partnership, Aviv Healthcare Properties Limited Partnership (collectively, the “Company”), acquired 28 properties located in five states (“Certain Properties of Diamond Senior Living, LLC” or the “Properties”). These unaudited pro forma condensed consolidated financial statements do not purport to represent the entire portfolio of Diamond Senior Living, LLC. The Properties were acquired for $305.0 million, excluding related acquisition expenses of $1.3 million. The Company funded this acquisition with a combination of availability under its line of credit of $125.0 million and the issuance of $180.0 million of secured debt on the Properties. Effective August 4, 2014, the Properties’ master lease has a 15 year term and with two options to renew for additional periods of five years each. The lease provides for prescribed rent escalations over the life of the lease, with annualized straight line rents of $29.4 million.

The pro forma consolidated statements of operations for the year ended December 31, 2013 and for the nine months ended September 30, 2014 have been prepared to comply with Rule 3-14 of Regulation S-X, as promulgated by the Securities and Exchange Commission. The pro forma consolidated balance sheet as of September 30, 2014 and the pro forma consolidated statements of operations for the year ended December 31, 2013 and for the nine months ended September 30, 2014 are not necessarily indicative of what the actual financial position and operating results would have been had the properties acquired in the current year been acquired on January 1, 2013 nor do they purport to represent the Company’s future financial position or operating results.

The unaudited pro forma consolidated financial statements should be read in conjunction with the consolidated financial statements of Aviv REIT, Inc. and Aviv Healthcare Properties Limited Partnership and the accompanying notes thereto filed with the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 and with the Company’s Quarterly Report on Form 10-Q for the nine months ended September 30, 2014 and the statements of revenue, filed in accordance with Rule 3-14 of Regulation S-X, of Certain Properties of Diamond Senior Living, LLC for the period from January 1, 2014 through September 30, 2014 and for the year ended December 31, 2013. In the Company’s opinion, all adjustments necessary to reflect the effect of the Properties acquired and the respective debt issued.

AVIV REIT, INC. AND SUBSIDIARIES

PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

AS OF SEPTEMBER 30, 2014

(IN THOUSANDS, EXCEPT FOR SHARE DATA)

(UNAUDITED)

 

     Historical     Pro forma
Adjustments for
the Properties		          Pro Forma  

Assets

          

Income producing property

          

Land

    $ 171,098      $ 14,778      A    $ 185,876   

Buildings and improvements

      1,498,117        289,709      A      1,787,826   

Assets under direct financing leases

      11,262        —             11,262   
  

 

 

    

 

 

       

 

 

  
     1,680,477        304,487           1,984,964   

Less accumulated depreciation

      (175,983 )      —             (175,983 ) 

Construction in progress and land held for development

      34,421        —             34,421   
  

 

 

    

 

 

       

 

 

  

Net real estate

      1,538,915        304,487           1,843,402   

Cash and cash equivalents

      15,834        (2,300 )    B      13,534   

Straight-line rent receivable, net

      44,000        —             44,000   

Tenant receivables, net

      2,011        —             2,011   

Deferred finance costs, net

      17,651        2,300      B      19,951   

Loan receivables, net

      43,272        —             43,272   

Other assets

      15,805        513      A      16,318   
  

 

 

    

 

 

       

 

 

  

Total assets

    $ 1,677,488      $ 305,000         $ 1,982,488   
  

 

 

    

 

 

       

 

 

  

Liabilities and equity

          

Secured loan

    $ 13,478      $ 180,000      C    $ 193,478   

Unsecured notes payable

      652,410        —             652,410   

Line of credit

      175,000        125,000      D      300,000   

Accrued interest payable

      10,903        —             10,903   

Dividends and distributions payable

      21,078        —             21,078   

Accounts payable and accrued expenses

      11,894        1,300      E      13,194   

Tenant security and escrow deposits

      24,066        —             24,066   

Other liabilities

      10,419        —             10,419   
  

 

 

    

 

 

       

 

 

  

Total liabilities

      919,248        306,300           1,225,548   

Equity:

          

Stockholders’ equity

          

Common stock (par value $0.01; 47,216,963 shares issued and outstanding as of September 30, 2014)

      472        —             472   

Additional paid-in-capital

      722,030        —             722,030   

Accumulated deficit

      (112,119 )      (1,300 )    E      (113,419 ) 
  

 

 

    

 

 

       

 

 

  

Total stockholders’ equity

      610,383        (1,300 )         609,083   

Noncontrolling interests - operating partnership

      147,857        —             147,857   
  

 

 

    

 

 

       

 

 

  

Total equity

      758,240        (1,300 )         756,940   
  

 

 

    

 

 

       

 

 

  

Total liabilities and equity

    $ 1,677,488      $ 305,000         $ 1,982,488   
  

 

 

    

 

 

       

 

 

  

See accompanying notes.

 

7

AVIV REIT, INC. AND SUBSIDIARIES

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

NINE MONTHS ENDED SEPTEMBER 30, 2014

(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)

(UNAUDITED)

 

     Historical     Pro forma
Adjustments for
the Properties		          Pro Forma  

Revenues

          

Rental income

    $ 127,941      $ 22,043      A    $ 149,984   

Interest on loans and financing lease

      3,263        —             3,263   

Interest and other income

      1,232        —             1,232   
  

 

 

    

 

 

       

 

 

  

Total revenues

      132,436        22,043           154,479   

Expenses

          

Interest expense incurred

      36,489        7,275      B      43,764   

Amortization of deferred financing costs

      2,944        345      C      3,289   

Depreciation and amortization

      31,470        6,243      D      37,713   

General and administrative

      16,960        —             16,960   

Transaction costs

      3,813        —             3,813   

Loss on impairment

      2,341        —             2,341   

Reserve for uncollectible loans and other receivables

      3,509        —             3,509   

Loss (gain) on sale of assets, net

      2,458        —             2,458   

Loss on extinguishment of debt

      501        —             501   
  

 

 

    

 

 

       

 

 

  

Total expenses

      100,485        13,863           114,348   
  

 

 

    

 

 

       

 

 

  

Net income

      31,951        8,180           40,131   

Net income allocable to noncontrolling interests - operating partnership

      (6,662 )      (1,706 )    E      (8,368 ) 
  

 

 

    

 

 

       

 

 

  

Net income allocable to common stockholders

    $ 25,289      $ 6,474         $ 31,763   
  

 

 

    

 

 

       

 

 

  

Earnings per common share:

          

Basic:

          

Net income allocable to common stockholders

    $ 0.58           $ 0.73   

Diluted:

          

Net income allocable to common stockholders

    $ 0.56           $ 0.70   

Weighted average common shares outstanding:

          

Basic

      43,576,705             43,576,705   

Diluted

      57,127,784             57,127,784   

Dividends declared per common share

    $ 1.08           $ 1.08   

See accompanying notes.

 

8

AVIV REIT, INC. AND SUBSIDIARIES

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

YEAR ENDED DECEMBER 31, 2013

(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)

(UNAUDITED)

 

     Historical     Pro forma
Adjustments for
the Properties		            Pro Forma  

Revenues

          

Rental income

    $ 136,513      $ 29,391        A       $ 165,904   

Interest on loans and financing lease

      4,400        —             4,400   

Interest and other income

      154        —             154   
  

 

 

    

 

 

       

 

 

  

Total revenues

      141,067        29,391           170,458   

Expenses

          

Interest expense incurred

      40,785        9,700        B         50,485   

Amortization of deferred financing costs

      3,459        460        C         3,919   

Depreciation and amortization

      33,226        8,323        D         41,549   

General and administrative

      26,886        —             26,886   

Transaction costs

      3,114        —             3,114   

Loss on impairment

      500        —             500   

Reserve for uncollectible loans and other receivables

      68        —             68   

Gain on sale of assets, net

      (1,016 )      —             (1,016 ) 

Loss on extinguishment of debt

      10,974        —             10,974   
  

 

 

    

 

 

       

 

 

  

Total expenses

      117,996        18,483           136,479   
  

 

 

    

 

 

       

 

 

  

Net income

      23,071        10,908           33,979   

Net income allocable to noncontrolling interests - operating partnership

      (6,010 )      (2,842 )      E         (8,852 ) 
  

 

 

    

 

 

       

 

 

  

Net income allocable to common stockholders

    $ 17,061      $ 8,066         $ 25,127   
  

 

 

    

 

 

       

 

 

  

Earnings per common share:

          

Basic:

          

Net income allocable to common stockholders

    $ 0.51           $ 0.75   

Diluted:

          

Net income allocable to common stockholders

    $ 0.49           $ 0.74   

Weighted average common shares outstanding:

          

Basic

      33,700,834             33,700,834   

Diluted

      44,324,214             44,324,214   

Dividends declared per common share

    $ 1.40           $ 1.40   

See accompanying notes.

 

9

AVIV HEALTHCARE PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

AS OF SEPTEMBER 30, 2014

(IN THOUSANDS)

(UNAUDITED)

 

     Historical     Pro forma
Adjustments for
the Properties		            Pro Forma  

Assets

          

Income producing property

          

Land

    $ 171,098      $ 14,778        A       $ 185,876   

Buildings and improvements

      1,498,117        289,709        A         1,787,826   

Assets under direct financing leases

      11,262        —             11,262   
  

 

 

    

 

 

       

 

 

  
     1,680,477        304,487           1,984,964   

Less accumulated depreciation

      (175,983 )      —             (175,983 ) 

Construction in progress and land held for development

      34,421        —             34,421   
  

 

 

    

 

 

       

 

 

  

Net real estate

      1,538,915        304,487           1,843,402   

Cash and cash equivalents

      15,834        (2,300 )      F         13,534   

Straight-line rent receivable, net

      44,000        —             44,000   

Tenant receivables, net

      2,011        —             2,011   

Deferred finance costs, net

      17,651        2,300        B         19,951   

Loan receivables, net

      43,272        —             43,272   

Other assets

      15,805        513        A         16,318   
  

 

 

    

 

 

       

 

 

  

Total assets

    $ 1,677,488      $ 305,000         $ 1,982,488   
  

 

 

    

 

 

       

 

 

  

Liabilities and partners capital

          

Secured loan

    $ 13,478      $ 180,000        C       $ 193,478   

Unsecured notes payable

      652,410        —             652,410   

Line of credit

      175,000        125,000        D         300,000   

Accrued interest payable

      10,903        —             10,903   

Dividends and distributions payable

      21,078        —             21,078   

Accounts payable and accrued expenses

      11,894        1,300        E         13,194   

Tenant security and escrow deposits

      24,066        —             24,066   

Other liabilities

      10,419        —             10,419   
  

 

 

    

 

 

       

 

 

  

Total liabilities

      919,248        308,000           1,225,548   

Partners’ capital:

          

Partners’ capital

      758,240        (1,300 )      E         765,940   
  

 

 

    

 

 

       

 

 

  

Total partners’ capital

      758,240        (1,300 )         756,940   
  

 

 

    

 

 

       

 

 

  

Total liabilities and partners’ capital

    $ 1,677,488      $ 305,000         $ 1,982,488   
  

 

 

    

 

 

       

 

 

  

See accompanying notes.

 

10

AVIV HEALTHCARE PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

NINE MONTHS ENDED SEPTEMBER 30, 2014

(IN THOUSANDS, EXCEPT FOR UNIT AND PER UNIT DATA)

(UNAUDITED)

 

     Historical      Pro forma
Adjustments for
the Properties		             Pro Forma  

Revenues

            

Rental income

    $ 127,941       $ 22,043         A       $ 149,984   

Interest on loans and financing lease

      3,263         —              3,263   

Interest and other income

      1,232         —              1,232   
  

 

 

     

 

 

        

 

 

  

Total revenues

      132,436         22,043            154,479   

Expenses

            

Interest expense incurred

      36,489         7,275         B         43,764   

Amortization of deferred financing costs

      2,944         345         C         3,289   

Depreciation and amortization

      31,470         6,243         D         37,713   

General and administrative

      16,960         —              16,960   

Transaction costs

      3,813         —              3,813   

Loss on impairment

      2,341         —              2,341   

Reserve for uncollectible loans and other receivables

      3,509         —              3,509   

Loss (gain) on sale of assets, net

      2,458         —              2,458   

Loss on extinguishment of debt

      501         —              501   
  

 

 

     

 

 

        

 

 

  

Total expenses

      100,485         13,863            114,348   
  

 

 

     

 

 

        

 

 

  

Net income

    $ 31,951       $ 8,180          $ 40,131   
  

 

 

     

 

 

        

 

 

  

Earnings per unit:

            

Basic:

            

Net income allocable to units

    $ 0.58             $ 0.73   

Diluted:

            

Net income allocable to units

    $ 0.56             $ 0.70   

Weighted average units outstanding:

            

Basic

      55,055,248               55,055,248   

Diluted

      57,127,784               57,127,784   

Distributions declared per unit

    $ 1.08             $ 1.08   

See accompanying notes.

 

11

AVIV HEALTHCARE PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

YEAR ENDED DECEMBER 31, 2013

(IN THOUSANDS, EXCEPT FOR UNIT AND PER UNIT DATA)

(UNAUDITED)

 

     Historical     Pro forma
Adjustments for
the Properties		             Pro Forma  

Revenues

           

Rental income

    $ 136,513      $ 29,391         A       $ 165,904   

Interest on loans and financing lease

      4,400        —              4,400   

Interest and other income

      154        —              154   
  

 

 

    

 

 

        

 

 

  

Total revenues

      141,067        29,391            170,458   

Expenses

           

Interest expense incurred

      40,785        9,700         B         50,485   

Amortization of deferred financing costs

      3,459        460         C         3,919   

Depreciation and amortization

      33,226        8,323         D         41,549   

General and administrative

      26,886        —              26,886   

Transaction costs

      3,114        —              3,114   

Loss on impairment

      500        —              500   

Reserve for uncollectible loans and other receivables

      68        —              68   

Gain on sale of assets, net

      (1,016 )      —              (1,016 ) 

Loss on extinguishment of debt

      10,974        —              10,974   
  

 

 

    

 

 

        

 

 

  

Total expenses

      117,996        18,483            136,479   
  

 

 

    

 

 

        

 

 

  

Net income

    $ 23,071      $ 10,908          $ 33,979   
  

 

 

    

 

 

        

 

 

  

Earnings per unit:

           

Basic:

           

Net income allocable to units

    $ 0.51            $ 0.75   

Diluted:

           

Net income allocable to units

    $ 0.49            $ 0.74   

Weighted average units outstanding:

           

Basic

      42,792,808              42,792,808   

Diluted

      44,324,214              44,324,214   

Distributions declared per unit

    $ 1.40            $ 1.40   

See accompanying notes.

 

12

AVIV REIT, INC.

AVIV HEALTHCARE PROPERTIES LIMITED PARTNERSHIP

NOTES TO UNAUDITED PRO FORMA CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS

On December 17, 2014, Aviv REIT, Inc. (“Aviv”), through Financing VI Healthcare Property, L.L.C., an indirect wholly-owned subsidiary of Aviv’s operating partnership, Aviv Healthcare Properties Limited Partnership (collectively, the “Company”), acquired 28 properties located in five states (“Certain Properties of Diamond Senior Living, LLC” or the “Properties”). These unaudited pro forma condensed consolidated financial statements do not purport to represent the entire portfolio of Diamond Senior Living, LLC. The Properties were acquired for $305.0 million, excluding related acquisition expenses of $1.3 million. The Company funded this acquisition with a combination of availability under its line of credit of $125.0 million and the issuance of $180.0 million of secured debt on the Properties. Effective August 4, 2014, the Properties’ master lease has a 15 year term and with two options to renew for additional periods of five years each. The lease provides for prescribed rent escalations over the life of the lease, with annualized straight line rents of $29.4 million.

Adjustments to Unaudited Pro Forma Condensed Consolidated Balance Sheet

The unaudited pro forma condensed consolidated balance sheet as of September 30, 2014 reflects the following adjustments:

 

(A) The acquisition of the Properties is reflected in the unaudited pro forma condensed consolidated balance sheet of the Company at fair market value. The below table is a preliminary estimate of the allocated values. Real estate and lease intangibles (included in Other assets) are comprised of the following (in thousands):

 

Land

    $ 14,778   

Building and improvements

      289,709   
  

 

 

  

Real estate, net

      304,487   

Above market leases

      123   

In-place leases

      154   

Leasing costs

      236   
  

 

 

  

Lease intangibles, net

      513   
  

 

 

  

Total purchase price allocation

    $ 305,000   
  

 

 

  

The value allocated to building and improvements is depreciated on a straight-line basis over an estimated useful life. The building and furniture, fixtures and equipment are depreciated over a 40 year and 10 year useful life, respectively. In-place leases and leasing costs are amortized over the shorter of the estimated useful life and remaining contractual, non-cancelable term of the in-place lease. The value of above-market leases are amortized over the remaining contractual, non-cancelable term of the in-place lease and recorded as a decrease to rental income.

 

(B) Deferred financing costs totaled $2.3 million, consisting of various lender and legal fees, which were capitalized, assuming the debt was acquired on September 30, 2014.

 

(C) In connection with the acquisition of the Properties, the Company issued $180.0 million of secured debt.

 

(D) In connection with the acquisition of the Properties, the Company drew $125.0 million from its $600.0 million line of credit.

 

(E) In connection with the acquisition of the Properties, the Company incurred transaction costs of approximately $1.3 million. These transaction costs are not included in the unaudited pro forma condensed consolidated statements of operations as they are not recurring costs.

 

13

Adjustments to Unaudited Pro Forma Condensed Consolidated Statements of Operations

The adjustments to the pro forma condensed consolidated statements of operations for the year ended December 31, 2013 and the nine months ended September 30, 2014 are as follows:

 

(A) The pro forma adjustment for rental income for the year ended December 31, 2013 consists of two parts: (a) $29.4 million to reflect the terms of the acquired lease that became effective August 4, 2014 as if it had been in place for the full year 2013 and (b) a de minimis adjustment attributable to the effect of acquiring an above market lease, which reduces rental income.

The pro forma adjustment for rental income for the nine months ended September 30, 2014 consists of two parts: (a) $22.0 million to reflect the terms of the acquired lease that became effective August 4, 2014 as if it had been in place for the nine months ended September 30, 2014 and (b) a de minimis adjustment attributable to the effect of acquiring an above market lease, which reduces rental income.

 

(B) The pro forma adjustment to interest expense is the Company’s estimate of expense incurred on the secured debt and line of credit financings used to acquire the Properties. The debt was assumed to have been issued as of January 1, 2013.

 

(C) The pro forma adjustment to amortization of deferred financing costs is the Company’s estimate of expense incurred for the secured debt used to acquire the Properties. The deferred financing costs were assumed to have been incurred as of January 1, 2013.

 

(D) The pro forma adjustments for depreciation and amortization expense are the Company’s estimate of the depreciation and amortization charges that would have been recorded assuming the Properties were acquired effective January 1, 2013.

 

(E) The pro forma adjustments for net income allocable to noncontrolling interests—operating partnership represent the effect of the pro forma adjustments to net income, allocated based on the actual noncontrolling ownership of the Partnership of 20.9% and 26.1% as of September 30, 2014 and December 31, 2013, respectively.

 

14

AVIV REIT, INC. Reports