Attached files
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| 8-K - 8-K - Summit Healthcare REIT, Inc | v451964_8k.htm |
Exhibit 99.1
Unaudited Pro Forma Financial Statements
On October 31, 2016, Summit Healthcare REIT, Inc. ("Summit", “we” or the “Company”), through our consolidated subsidiary Cornerstone Healthcare Partners, LLC, sold our Farmington Square property located in Medford, Oregon (“Medford”), to Medford’s current operator, pursuant to the exercise of its option to purchase the property provided in our lease agreement with them. The total sales price was $10.8 million, and the aggregate carrying value of Medford at the date of the sale was approximately $1.3 million, (total assets were approximately $8.0 million less liabilities of approximately $6.7 million, which included approximately $6.7 million of a HUD insured loan payable). As a result of the sale, as of November 1, 2016, Medford will no longer be included in our consolidated financial statements.
The following unaudited pro forma consolidated statements of operations of the Company for the year ended December 31, 2015 and for the six month period ended June 30, 2016 are presented as if the sale had occurred as of January 1, 2015. The following unaudited pro forma consolidated balance sheet as of June 30, 2016 assumes that the sale occurred on June 30, 2016.
The unaudited pro forma consolidated financial statements are presented based on information currently available, are intended for informational purposes only, and do not purport to represent what the Summit financial position and results of operations actually would have been had the sale occurred on the dates indicated, or to project Summit's financial performance for any future period.
The unaudited pro forma consolidated financial statements and the accompanying notes should be read in conjunction with the audited consolidated financial statements and accompanying notes and “Management's Discussion and Analysis of Financial Condition and Results of Operations” included in Summit's Form 10-K for the fiscal year ended December 31, 2015 and the unaudited condensed consolidated financial statements and accompanying notes and “Management's Discussion and Analysis of Financial Condition and Results of Operations” included in Summit's Form 10-Q for the period ended June 30, 2016.
The Historical column in the Unaudited Pro Forma Consolidated Statements of Operations and in the Unaudited Pro Forma Consolidated Balance Sheet reflect Summit's historical financial statements for the period presented and does not reflect any adjustments related to the sale.
The information in the pro forma adjustments column in the Unaudited Pro Forma Consolidated Statements of Operations for the year ended December 31, 2015 was derived from the audited information supporting the Form 10-K for the fiscal year ended December 31, 2015. The information in the pro forma adjustments column in the Unaudited Pro Forma Consolidated Statements of Operations for the six months ended June 30, 2016 was derived from the unaudited information supporting the Form 10-Q for the six months ended June 30, 2016.
SUMMIT HEALTHCARE REIT, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of June 30, 2016
| Historical | Pro forma adjustments | Pro forma | |||||||||||
| ASSETS | |||||||||||||
| Cash and cash equivalents: | $ | 9,579,000 | $ | (75,000 | ) | A | $ | 9,504,000 | |||||
| Cash received from sale of Medford | - | 3,799,000 | C | 3,799,000 | |||||||||
| Restricted cash | 4,721,000 | (208,000 | ) | A | 4,513,000 | ||||||||
| Real estate properties, net | 67,632,000 | (7,419,000 | ) | A | 60,213,000 | ||||||||
| Notes receivable | 4,817,000 | - | 4,817,000 | ||||||||||
| Deferred costs and deposits | 238,000 | - | 238,000 | ||||||||||
| Tenant and other receivables, net | 4,264,000 | (273,000 | ) | A | 3,991,000 | ||||||||
| Deferred leasing commissions, net | 1,616,000 | (134,000 | ) | A | 1,482,000 | ||||||||
| Other assets, net | 404,000 | - | 404,000 | ||||||||||
| Equity-method investment | 2,322,000 | - | 2,322,000 | ||||||||||
| Total assets | $ | 95,593,000 | $ | (4,310,000 | ) | $ | 91,283,000 | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||||
| Accounts payable and accrued liabilities | 2,906,000 | (117,000 | ) | A | 2,789,000 | ||||||||
| Accrued salaries and benefits | 267,000 | - | 267,000 | ||||||||||
| Security deposits | 1,399,000 | (191,000 | ) | A | 1,208,000 | ||||||||
| Loans payable, net of debt discounts | 58,574,000 | (6,460,000 | ) | A | 52,114,000 | ||||||||
| Total liabilities | 63,146,000 | (6,768,000 | ) | 56,378,000 | |||||||||
| Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares issued or outstanding June 30, 2016 | |||||||||||||
| Common stock, $0.001 par value; 290,000,000 shares authorized; 23,027,978 shares issued and outstanding at June 30, 2016 | 23,000 | - | 23,000 | ||||||||||
| Additional paid-in capital | 117,230,000 | - | 117,230,000 | ||||||||||
| Accumulated deficit | (85,525,000 | ) | 2,458,000 | C | (83,067,000 | ) | |||||||
| Total stockholders’ equity | 31,728,000 | 2,458,000 | 34,186,000 | ||||||||||
| Noncontrolling interest | 719,000 | - | 719,000 | ||||||||||
| Total equity | 32,447,000 | 2,458,000 | 34,905,000 | ||||||||||
| Total liabilities and stockholders’ equity | $ | 95,593,000 | $ | (4,310,000 | ) | $ | 91,283,000 | ||||||
See accompanying notes to the unaudited condensed consolidated pro forma financial statements.
SUMMIT HEALTHCARE REIT, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 2016
| Historical | Pro forma adjustments | Pro forma | |||||||||||
| Revenues: | |||||||||||||
| Rental revenues | $ | 3,544,000 | $ | (433,000 | ) | B | $ | 3,111,000 | |||||
| Resident services and fee income | 4,145,000 | - | 4,145,000 | ||||||||||
| Tenant reimbursements and other income | 448,000 | (50,000 | ) | B | 398,000 | ||||||||
| Acquisition and asset management fees | 132,000 | - | 132,000 | ||||||||||
| Interest income from notes receivable | 75,000 | - | 75,000 | ||||||||||
| 8,344,000 | (483,000 | ) | 7,861,000 | ||||||||||
| Expenses: | |||||||||||||
| Property operating costs | 928,000 | (58,000 | ) | B | 870,000 | ||||||||
| Resident services costs | 3,517,000 | - | 3,517,000 | ||||||||||
| General and administrative | 2,113,000 | - | 2,113,000 | ||||||||||
| Depreciation and amortization | 1,893,000 | (152,000 | ) | B | 1,741,000 | ||||||||
| 8,451,000 | (210,000 | ) | 8,241,000 | ||||||||||
| Operating loss | (107,000 | ) | (273,000 | ) | B | (380,000 | ) | ||||||
| Income from equity-method investee | 99,000 | - | 99,000 | ||||||||||
| Other income | 72,000 | - | 72,000 | ||||||||||
| Interest expense | (1,589,000 | ) | 152,000 | B | (1,437,000 | ) | |||||||
| Loss from continuing operations | $ | (1,525,000 | ) | $ | (121,000 | ) | $ | (1,646,000 | ) | ||||
| Basic and diluted loss per common share from continuing operations applicable to common stockholders | $ | (0.07 | ) | $ | (0.07 | ) | |||||||
| Weighted average shares used to calculate basic and diluted net loss per common share | 23,027,978 | 23,027,978 | |||||||||||
See accompanying notes to the unaudited condensed consolidated pro forma financial statements.
SUMMIT HEALTHCARE REIT, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 2015
| Historical | Pro forma adjustments | Pro forma | |||||||||||
| Revenues: | |||||||||||||
| Rental revenues | $ | 8,344,000 | $ | (866,000 | ) | B | $ | 7,478,000 | |||||
| Resident services and fee income | 9,182,000 | - | 9,182,000 | ||||||||||
| Tenant reimbursements and other income | 944,000 | (112,000 | ) | B | 832,000 | ||||||||
| Acquisition and asset management fees | 598,000 | - | 598,000 | ||||||||||
| Interest income from notes receivable | 177,000 | - | 177,000 | ||||||||||
| 19,245,000 | (978,000 | ) | 18,267,000 | ||||||||||
| Expenses: | |||||||||||||
| Property operating costs | 1,933,000 | (119,000 | ) | B | 1,814,000 | ||||||||
| Resident services costs | 7,538,000 | - | 7,538,000 | ||||||||||
| General and administrative | 4,313,000 | - | 4,313,000 | ||||||||||
| Depreciation and amortization | 4,085,000 | (304,000 | ) | B | 3,781,000 | ||||||||
| 17,869,000 | (423,000 | ) | 17,446,000 | ||||||||||
| Operating income (loss) | 1,376,000 | (555,000 | ) | B | 821,000 | ||||||||
| Income from equity-method investee | 88,000 | - | 88,000 | ||||||||||
| Other income | 46,000 | - | 46,000 | ||||||||||
| Interest expense | (3,744,000 | ) | 308,000 | B | (3,436,000 | ) | |||||||
| Gain on disposition of real estate properties | 971,000 | - | 971,000 | ||||||||||
| Loss from continuing operations | $ | (1,263,000 | ) | $ | (247,000 | ) | $ | (1,510,000 | ) | ||||
| Basic and diluted loss per common share from continuing operations applicable to common stockholders | $ | (0.06 | ) | $ | (0.07 | ) | |||||||
| Weighted average shares used to calculate basic and diluted net loss per common share | 23,027,978 | 23,027,978 | |||||||||||
See accompanying notes to the unaudited
condensed consolidated pro forma financial statements.
SUMMIT HEALTHCARE REIT, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PROFORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
Note A:
The following assets and liabilities related to the Medford property were included in the consolidated balance sheet as of June 30, 2016 and are being removed in the unaudited pro forma balance sheet as a result of the sale of the property:
| ASSETS | ||||
| Cash and cash equivalents | $ | 75,000 | ||
| Restricted cash | 208,000 | |||
| Real estate properties, net | 7,419,000 | |||
| Tenant and other receivables, net | 273,000 | |||
| Deferred leasing commissions, net | 134,000 | |||
| Total assets | $ | 8,109,000 | ||
| LIABILITIES | ||||
| Accounts payable and accrued liabilities | $ | 117,000 | ||
| Security deposits | 191,000 | |||
| Loan payable, net of debt discount | 6,460,000 | |||
| Total liabilities | $ | 6,768,000 | ||
| Net carrying value | $ | 1,341,000 | ||
Note B:
The following operations for the year ended December 31, 2015 and the six months ended June 30, 2016 related to Medford property have been removed from the historical balances for pro forma purposes:
| For the Year Ended December 31, 2015 | For the Six Months Ended June 30, 2016 | |||||||
| Revenues: | ||||||||
| Rental revenues | $ | 866,000 | $ | 433,000 | ||||
| Tenant reimbursements and other income | 112,000 | 50,000 | ||||||
| 978,000 | 483,000 | |||||||
| Expenses: | ||||||||
| Property operating costs | 119,000 | 58,000 | ||||||
| Depreciation and amortization | 304,000 | 152,000 | ||||||
| 423,000 | 210,000 | |||||||
| Operating income | 555,000 | 273,000 | ||||||
| Interest expense | (308,000 | ) | (152,000 | ) | ||||
| Income from continuing operations | $ | 247,000 | $ | 121,000 | ||||
Note C:
The following computes the net proceeds from, and the estimated gain on the sale of the Medford property as of June 30, 2016. The estimated gain on the sale is reflected as an adjustment to accumulated deficit in the unaudited pro forma condensed consolidated balance sheet and is not reflected in the unaudited pro forma condensed consolidated statements of operations as it is nonrecurring.
| Total purchase price. | $ | 10,800,000 | ||
| Less: Tenant liabilities and security deposit refunded | (283,000 | ) | ||
| Less: Loan payable | (6,718,000 | ) | ||
| Net cash received from sale | 3,799,000 | |||
| Less: Carrying value of Medford as of June 30, 2016 | (1,341,000 | ) | ||
| Estimated gain on sale of property as of June 30, 2016 | $ | 2,458,000 |
The following computes the net proceeds from, and the estimated gain on the sale of the Medford property as of October 31, 2016:
| Total purchase price | $ | 10,800,000 | ||
| Less: Tenant liabilities and security deposit refunded | (249,000 | ) | ||
| Less: Loan payable | (6,684,000 | ) | ||
| Net cash received from sale | 3,867,000 | |||
| Less: Carrying value of Medford as of October 31, 2016 | (1,279,000 | ) | ||
| Estimated gain on sale of property as of October 31, 2016 | $ | 2,588,000 |
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