Carter Validus Mission Critical REIT, Inc. - FORM 8-K - December 20, 2017

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EX-99.1 - EXHIBIT 99.1 - Carter Validus Mission Critical REIT, Inc.a20178-kexhibit991reiti122.htm

 
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): December 20, 2017
___________________________________________
CARTER VALIDUS MISSION CRITICAL REIT, INC.
(Exact Name of Registrant as Specified in Its Charter)
___________________________________________
Maryland
 
000-54675
 
27-1550167
(State or other jurisdiction of
incorporation or organization)
 
(Commission
File Number)
 
(I.R.S. Employer
Identification No.)
4890 West Kennedy Blvd.
Suite 650
Tampa, Florida 33609
(Address of principal executive offices)
(813) 287-0101
(Registrant’s telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
___________________________________________
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 2.01    Completion of Acquisition or Disposition of Assets.
As previously disclosed in a Current Report on Form 8-K on October 24, 2017, Carter Validus Mission Critical REIT, Inc. (the "Company"), through (i) 13 wholly-owned subsidiaries of the Operating Partnership, and (ii) DC-180 Peachtree, LLC (as defined below), entered into a Purchase and Sale Agreement (the “Mapletree Sale Agreement”) with various special purpose entities of an affiliate of Mapletree Investments Pte Ltd, a Singapore headquartered real estate development, investment and capital management company and Mapletree Industrial Trust, a Singapore Exchange listed real estate investment trust (collectively, "Mapletree"), which are unaffiliated with the Company, for the sale of a 14-property data center portfolio (the “Portfolio”). One of the data centers in the Portfolio is owned by DC-180 Peachtree, LLC, an indirect, partially owned subsidiary of the Operating Partnership. DC-180 Peachtree is a wholly-owned subsidiary of a joint venture arrangement that consists of two joint venture agreements between the Operating Partnership and three non-U.S. institutional investors (the “Joint Venture”). The contractual sales price for the Portfolio was $750.0 million.
On December 20, 2017, the sale of the Portfolio was completed for $750.0 million pursuant to the terms of the Mapletree Sale Agreement. In connection with the disposition, the Company repaid its mortgage loans associated with the Portfolio for approximately $177.8 million, including accrued interest and other loan costs. The Company's net proceeds from the disposition of the Portfolio were approximately $561.6 million, after transaction costs, subject to additional transaction costs paid subsequent to the closing date.



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Item 7.01     Regulation FD Disclosure.
On December 20, 2017, the Company issued a press release announcing the sale of the Portfolio to Mapletree. The full text of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated by reference into this Item 7.01.
The information furnished under Item 7.01 of this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.

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Item 9.01    Financial Statements and Exhibits.
(b)
Pro Forma Financial Information
The following financial information is submitted at the end of this Current Report on Form 8-K and is filed herewith and incorporated herein by reference:
(d)     Exhibits


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SIGNATURE
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.
 
 
CARTER VALIDUS MISSION CRITICAL REIT II, INC.
 
 
 
 
Dated: December 20, 2017
 
By:
/s/ Todd M. Sakow
 
 
Name:
Todd M. Sakow
 
 
Title:
Chief Financial Officer


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SUMMARY OF UNAUDITED PRO FORMA FINANCIAL STATEMENTS
This pro forma information should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and notes of the Company included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, as filed with the Securities and Exchange Commission ("SEC") on March 30, 2017, and the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2017, as filed with the SEC on November 9, 2017.
The following unaudited pro forma condensed consolidated balance sheet as of September 30, 2017, has been prepared to give effect to the sale of the Portfolio as if the transaction had occurred on September 30, 2017.
The following unaudited pro forma condensed consolidated statements of comprehensive income for the nine months ended September 30, 2017, and for the year ended December 31, 2016, have been prepared to give effect to the sale of the Portfolio by the Company as if such sale had been completed on January 1, 2016.
These unaudited pro forma condensed consolidated financial statements are prepared for informational purposes only and are not necessarily indicative of future results or of actual results that would have been achieved had the sale been consummated as of the respective dates indicated; however, management is not aware of any material factors that would cause historical results not to be indicative of future results.

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CARTER VALIDUS MISSION CRITICAL REIT, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of September 30, 2017
(in thousands, except share data)
(Unaudited)
 
September 30, 2017 (a)
 
Pro Forma Adjustments
For the Disposition of Mapletree Portfolio (b)
 
Pro Forma
September 30, 2017
ASSETS
Real estate:
 
 
 
 
 
Land
$
181,960

 
$
(68,141
)
 
$
113,819

Buildings and improvements, less accumulated depreciation of $194,011
1,806,806

 
(485,263
)
 
1,321,543

Total real estate, net
1,988,766

 
(553,404
)
 
1,435,362

Cash and cash equivalents
42,603

 
37,745

(c) 
80,348

Acquired intangible assets, less accumulated amortization of $66,078
165,724

 
(54,240
)
 
111,484

Other assets, net
122,070

 
(24,909
)
 
97,161

Total assets
$
2,319,163

 
$
(594,808
)
 
$
1,724,355

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
 
 
 
 
 
Notes payable, net of deferred financing costs of $1,675
$
449,494

 
$
(203,186
)
(c) 
$
246,308

Credit facility, net of deferred financing costs of $1,101
431,899

 
(431,899
)
(d) 
—

Accounts payable due to affiliates
2,536

 
(188
)
 
2,348

Accounts payable and other liabilities
41,109

 
(12,484
)
 
28,625

Intangible lease liabilities, less accumulated amortization of $18,941
46,789

 
(27,688
)
 
19,101

Total liabilities
971,827

 
(675,445
)
 
296,382

Stockholders’ equity:
 
 
 
 
 
Preferred stock, $0.01 par value per share, 50,000,000 shares authorized; none issued and outstanding
—

 
—

 
—

Common stock, $0.01 par value per share, 300,000,000 shares authorized; 195,153,569 shares issued; 186,241,949 shares outstanding
1,862

 
—

 
1,862

Additional paid-in capital
1,636,603

 
—

 
1,636,603

Accumulated distributions in excess of earnings
(329,081
)
 
115,499

 
(213,582
)
Accumulated other comprehensive income
3,149

 
(59
)
 
3,090

Total stockholders’ equity
1,312,533

 
115,440

 
1,427,973

Noncontrolling interests
34,803

 
(34,803
)
 
—

Total equity
1,347,336

 
80,637

 
1,427,973

Total liabilities and stockholders’ equity
$
2,319,163

 
$
(594,808
)
 
$
1,724,355

(a)
Historical information is derived from the unaudited condensed consolidated balance sheet included in the Company’s quarterly report on Form 10-Q as of September 30, 2017.
(b)
Represents adjustments to eliminate assets, liabilities, stockholders' equity and noncontrolling interests as if the sale of the Mapletree Portfolio had occurred on September 30, 2017.
(c)
The Company used net sales proceeds to payoff the associated mortgage loans in the principal amount of approximately $203.2 million.
(d)
The Company used net sales proceeds to payoff the unsecured credit facility.

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CARTER VALIDUS MISSION CRITICAL REIT, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the Nine Months Ended September 30, 2017
(in thousands, except share data and per share amounts)
(Unaudited)
 
Nine Months Ended
September 30, 2017 (a)
 
Pro Forma Adjustments
For the Disposition of Mapletree Portfolio
 
Pro Forma
Nine Months Ended
September 30, 2017
Revenue:
 
 
 
 
 
Rental and parking revenue
$
147,855

 
$
(45,795
)
(b) 
$
102,060

Tenant reimbursement revenue
13,264

 
(6,616
)
(b) 
6,648

Total revenue
161,119

 
(52,411
)
 
108,708

Expenses:
 
 
 
 
 
Rental and parking expenses
23,191

 
(8,602
)
(b) 
14,589

General and administrative expenses
5,274

 
—

 
5,274

Change in fair value of contingent consideration
(2,920
)
 
2,920

 
—

Asset management fees
14,494

 
(3,576
)
(c) 
10,918

Depreciation and amortization
54,491

 
(17,716
)
(b) 
36,775

Total expenses
94,530

 
(26,974
)
 
67,556

Income from operations
66,589

 
(25,437
)
 
41,152

Other income (expense):
 
 
 
 
 
Other interest and dividend income
1,551

 
—

 
1,551

Interest expense, net
(26,373
)
 
15,834

(d) 
(10,539
)
Provision for loan losses
(11,631
)
 
—

 
(11,631
)
Total other expense
(36,453
)
 
15,834

 
(20,619
)
Net income
30,136

 
(9,603
)
 
20,533

Net income attributable to noncontrolling interests in consolidated partnerships
(3,018
)
 
3,018

(b) 
—

Net income attributable to common stockholders
$
27,118

 
$
(6,585
)
 
$
20,533

Other comprehensive income:
 
 
 
 
 
Unrealized income on interest rate swaps, net
$
1,326

 
$
(570
)
(b) 
$
756

Other comprehensive income
1,326

 
(570
)
 
756

Comprehensive income
31,462

 
(10,173
)
 
21,289

Comprehensive income attributable to noncontrolling interests in consolidated partnerships
(3,018
)
 
3,018

 
—

Comprehensive income attributable to common stockholders
$
28,444

 
$
(7,155
)
 
$
21,289

Weighted average number of common shares outstanding:
 
 
 
 
 
Basic
185,834,940

 
—

 
185,834,940

Diluted
185,853,976

 
—

 
185,853,976

Net income per common share attributable to common stockholders:
 
 
 
 
 
Basic
$
0.15

 
 
 
$
0.11

Diluted
$
0.15

 
 
 
$
0.11

(a)
Historical financial information is derived from the unaudited condensed consolidated statement of comprehensive income included in the Company's quarterly report on Form 10-Q for the nine months ended September 30, 2017.
(b)
These amounts represent the elimination of the operations on the completed sale of the Portfolio from the historical amounts for the nine months ended September 30, 2017, to give effect to the completed sale of the Portfolio as if the sale occurred on January 1, 2016.
(c)
Represents the elimination of asset management fee expenses calculated on a monthly basis equal to 0.07083% of the aggregate asset value as of the last day of the immediately preceding month. These fees were historically paid by the

7

Company to Carter/Validus Advisors, LLC and would not have been incurred subsequent to the disposition of the Portfolio.
(d)
Amount represents the elimination of interest expense on the Portfolio's mortgage loans originated in the amount of $220,910,000 at a weighted average interest rate of 4.36% per annum as of September 30, 2017, amortization of the deferred financing costs related to the mortgage loans, payment related to the swap agreements associated with the mortgage loans and interest expense on the amount of the paydown on the unsecured credit facility, to reflect the the use of net cash proceeds from the sale of the Portfolio, assuming the sale had occurred on January 1, 2016.

8

CARTER VALIDUS MISSION CRITICAL REIT, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the Year Ended December 31, 2016
(in thousands, except share data and per share amounts)
(Unaudited)
 
Year Ended
December 31, 2016 (a)
 
Pro Forma Adjustments
For the Disposition of Mapletree Portfolio
 
Pro Forma
Year Ended
December 31, 2016
Revenue:
 
 
 
 
 
Rental and parking revenue
$
189,428

 
$
(60,929
)
(b) 
$
128,499

Tenant reimbursement revenue
17,765

 
(9,462
)
(b) 
8,303

Real estate-related notes receivable and interest income
63

 
—

 
63

Total revenue
207,256

 
(70,391
)
 
136,865

Expenses:
 
 
 
 
 
Rental and parking expenses
29,131

 
(12,048
)
(b) 
17,083

General and administrative expenses
6,251

 
—

 
6,251

Change in fair value of contingent consideration
300

 
(300
)
 
—

Acquisition related expenses
1,667

 
—

 
1,667

Asset management fees
19,505

 
(4,768
)
(c) 
14,737

Depreciation and amortization
86,335

 
(23,760
)
(b) 
62,575

Total expenses
143,189

 
(40,876
)
 
102,313

Income from operations
64,067

 
(29,515
)
 
34,552

Other income (expense):
 
 
 
 
 
Other interest and dividend income
13,239

 
—

 
13,239

Interest expense, net
(37,855
)
 
20,069

(d) 
(17,786
)
Provision for loan losses
(4,294
)
 
—

 
(4,294
)
Total other expense
(28,910
)
 
20,069

 
(8,841
)
Net income
35,157

 
(9,446
)
 
25,711

Net income attributable to noncontrolling interests in consolidated partnerships
(3,921
)
 
3,921

(b) 
—

Net income attributable to common stockholders
$
31,236

 
$
(5,525
)
 
$
25,711

Other comprehensive income:
 
 
 
 
 
Unrealized income on interest rate swaps, net
$
4,403

 
$
(428
)
(b) 
$
3,975

Other comprehensive income
4,403

 
(428
)
 
3,975

Comprehensive income
39,560

 
(9,874
)
 
29,686

Comprehensive income attributable to noncontrolling interests in consolidated partnerships
(3,921
)
 
3,921

 
—

Comprehensive income attributable to common stockholders
$
35,639

 
$
(5,953
)
 
$
29,686

Weighted average number of common shares outstanding:
 
 
 
 
 
Basic
183,279,872

 
—

 
183,279,872

Diluted
183,297,662

 
—

 
183,297,662

Net income per common share attributable to common stockholders:
 
 
 
 
 
Basic
$
0.17

 
 
 
$
0.14

Diluted
$
0.17

 
 
 
$
0.14

(a)
Historical financial information is derived from the consolidated statement of comprehensive income included in the Company's annual report on Form 10-K for the year ended December 31, 2016.
(b)
These amounts represent the elimination of the operations on the completed sale of the Portfolio from the historical amounts for the year ended December 31, 2016, to give effect to the completed sale of the Portfolio as if the sale occurred on January 1, 2016.

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(c)
Represents the elimination of asset management fee expenses calculated on a monthly basis equal to 0.07083% of the aggregate asset value as of the last day of the immediately preceding month. These fees were historically paid by the Company to Carter/Validus Advisors, LLC and would not have been incurred subsequent to the disposition of the Portfolio.
(d)
Amount represents the elimination of interest expense on the Portfolio's mortgage loans originated in the amount of $220,910,000 at a weighted average interest rate of 4.35% per annum as of December 31, 2016, amortization of the deferred financing costs related to the mortgage loans, payment related to the swap agreements associated with the mortgage loans and interest expense on the amount of the paydown on the unsecured credit facility, to reflect the the use of net cash proceeds from the sale of the Portfolio, assuming the sale had occurred on January 1, 2016.

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Carter Validus Mission Critical REIT, Inc. Reports