Griffin-American Healthcare REIT III Reports Second Quarter 2017 Results
IRVINE, Calif., Aug. 16, 2017 /PRNewswire/ -- Griffin-American Healthcare REIT III, Inc. today announced operating results for the company's second quarter ended June 30, 2017.
"During the second quarter of 2017, Griffin-American Healthcare REIT III experienced impressive operational growth across a number of important financial performance metrics compared to the second quarter of 2016," said Jeff Hanson, chairman and chief executive officer. "Funds from operations grew by 79 percent, while both modified funds from operations and net operating income expanded by approximately 15 percent. Needless to say, we are very pleased with our performance and hope to continue to generate additional value on behalf of our fellow stockholders."
Chief financial officer Brian Peay added, "Since acquiring our first property in June 2014, our international portfolio has matured to include 207 healthcare buildings and integrated senior health campuses, as well as nine real estate-related investments, valued at approximately $2.9 billion.1 In addition to this significant expansion, we continue to experience high occupancy, impressive weighted average remaining lease term and relatively low portfolio leverage."
Second Quarter 2017 Highlights
- The company declared and paid daily distributions equal to an annualized rate of 6.0 percent to stockholders of record, based upon a $10.00 per share purchase price, from April 1 to June 30, 2017.
- As of June 30, 2017, the company's portfolio of senior housing — RIDEA2 facilities and integrated senior health campuses achieved a leased percentage of 84.3 percent and 85.5 percent, respectively, while the company's non-RIDEA property portfolio achieved a leased percentage of 94.5 percent and weighted average remaining lease term of 9.1 years. Portfolio leverage3 was 44.0 percent.
- Modified funds from operations, as defined by the Investment Program Association, or the IPA, attributable to controlling interest, or MFFO, equaled $24.9 million for the quarter ended June 30, 2017, representing a year-over-year increase of approximately 15.4 percent compared to $21.6 million during the second quarter 2016. Funds from operations, as defined by the National Association of Real Estate Investment Trusts, or NAREIT, attributable to controlling interest, or FFO, equaled $26.7 million during the second quarter 2017, as compared to $14.9 million during the second quarter 2016, representing year-over-year growth of approximately 79.0 percent. Year-over-year growth in FFO is primarily due to the capitalization of direct acquisition-related costs in connection with the purchase of the company's properties in 2017 compared to expensing such costs in connection with the purchase of the company's properties in 2016, in accordance with accounting principles generally accepted in the United States of America, or GAAP. (Please see financial reconciliation tables and notes at the end of this release for more information regarding MFFO and FFO.)
- Net income during the second quarter 2017 was $1.5 million, compared to net loss of $(51.9) million during the second quarter 2016. Net operating income, or NOI, totaled $52.4 million for the quarter ended June 30, 2017, comparable to second quarter 2016 NOI of $45.6 million, representing year-over-year growth of approximately 14.8 percent. (Please see financial reconciliation tables and notes at the end of this release for more information regarding NOI and net income (loss).)
1 |
Based on aggregate contract purchase price of owned and or operated real estate and real estate-related investments, including development projects, as of June 30, 2017. |
2 |
The operation of healthcare-related facilities utilizing the structure permitted by the REIT Investment Diversification and Empowerment Act of 2007 is commonly referred to as a "RIDEA" structure. |
3 |
Total debt, excluding capital lease obligations, divided by total assets. |
FINANCIAL TABLES AND NOTES FOLLOW
GRIFFIN-AMERICAN HEALTHCARE REIT III, INC. | |||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||
As of June 30, 2017 and December 31, 2016 | |||||||
(Unaudited) | |||||||
June 30, 2017 |
December 31, 2016 | ||||||
ASSETS | |||||||
Real estate investments, net |
$ |
2,166,115,000 |
$ |
2,138,981,000 |
|||
Real estate notes receivable and debt security investment, net |
100,828,000 |
101,117,000 |
|||||
Cash and cash equivalents |
32,149,000 |
29,123,000 |
|||||
Accounts and other receivables, net |
108,311,000 |
127,684,000 |
|||||
Restricted cash |
35,543,000 |
26,554,000 |
|||||
Real estate deposits |
3,206,000 |
3,173,000 |
|||||
Identified intangible assets, net |
185,579,000 |
200,827,000 |
|||||
Goodwill |
75,265,000 |
75,265,000 |
|||||
Other assets, net |
95,951,000 |
91,794,000 |
|||||
Total assets |
$ |
2,802,947,000 |
$ |
2,794,518,000 |
|||
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY | |||||||
Liabilities: |
|||||||
Mortgage loans payable, net |
$ |
617,581,000 |
$ |
495,717,000 |
|||
Lines of credit and term loan |
591,998,000 |
649,317,000 |
|||||
Accounts payable and accrued liabilities |
115,709,000 |
105,145,000 |
|||||
Accounts payable due to affiliates |
2,050,000 |
2,186,000 |
|||||
Identified intangible liabilities, net |
1,855,000 |
2,216,000 |
|||||
Capital lease obligations |
18,720,000 |
45,295,000 |
|||||
Security deposits, prepaid rent and other liabilities |
46,781,000 |
44,582,000 |
|||||
Total liabilities |
1,394,694,000 |
1,344,458,000 |
|||||
Commitments and contingencies |
|||||||
Redeemable noncontrolling interests |
32,234,000 |
31,507,000 |
|||||
Equity: |
|||||||
Stockholders' equity: |
|||||||
Preferred stock, $0.01 par value per share; 200,000,000 shares authorized; none issued and outstanding |
— |
— |
|||||
Common stock, $0.01 par value per share; 1,000,000,000 shares authorized; 197,637,164 and 195,780,039 shares issued and outstanding as of June 30, 2017 and December 31, 2016, respectively |
1,976,000 |
1,957,000 |
|||||
Additional paid-in capital |
1,770,658,000 |
1,754,160,000 |
|||||
Accumulated deficit |
(549,165,000) |
(490,298,000) |
|||||
Accumulated other comprehensive loss |
(2,407,000) |
(3,029,000) |
|||||
Total stockholders' equity |
1,221,062,000 |
1,262,790,000 |
|||||
Noncontrolling interests |
154,957,000 |
155,763,000 |
|||||
Total equity |
1,376,019,000 |
1,418,553,000 |
|||||
Total liabilities, redeemable noncontrolling interests and equity |
$ |
2,802,947,000 |
$ |
2,794,518,000 |
GRIFFIN-AMERICAN HEALTHCARE REIT III, INC. | |||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) | |||||||||||||||
For the Three and Six Months Ended June 30, 2017 and 2016 | |||||||||||||||
(Unaudited) | |||||||||||||||
Three Months Ended June 30, |
Six Months Ended June 30, | ||||||||||||||
2017 |
2016 |
2017 |
2016 | ||||||||||||
Revenues: |
|||||||||||||||
Resident fees and services |
$ |
226,479,000 |
$ |
215,103,000 |
$ |
451,532,000 |
$ |
433,458,000 |
|||||||
Real estate revenue |
32,094,000 |
26,218,000 |
63,442,000 |
56,368,000 |
|||||||||||
Total revenues |
258,573,000 |
241,321,000 |
514,974,000 |
489,826,000 |
|||||||||||
Expenses: |
|||||||||||||||
Property operating expenses |
197,953,000 |
188,486,000 |
397,052,000 |
381,486,000 |
|||||||||||
Rental expenses |
8,231,000 |
7,200,000 |
16,626,000 |
13,929,000 |
|||||||||||
General and administrative |
7,509,000 |
7,253,000 |
15,372,000 |
14,147,000 |
|||||||||||
Acquisition related expenses |
143,000 |
4,833,000 |
461,000 |
8,248,000 |
|||||||||||
Depreciation and amortization |
31,041,000 |
70,316,000 |
60,863,000 |
141,212,000 |
|||||||||||
Total expenses |
244,877,000 |
278,088,000 |
490,374,000 |
559,022,000 |
|||||||||||
Other income (expense): |
|||||||||||||||
Interest expense: |
|||||||||||||||
Interest expense (including amortization of deferred financing costs, debt discount/premium and loss on debt extinguishment) |
(15,988,000) |
(9,788,000) |
(30,583,000) |
(19,323,000) |
|||||||||||
(Loss) gain in fair value of derivative financial instruments |
(233,000) |
(871,000) |
103,000 |
(1,043,000) |
|||||||||||
Gain on dispositions of real estate investments |
3,606,000 |
— |
3,379,000 |
— |
|||||||||||
Impairment of real estate investments |
(914,000) |
— |
(4,883,000) |
— |
|||||||||||
Loss from unconsolidated entities |
(1,212,000) |
(1,945,000) |
(2,174,000) |
(4,561,000) |
|||||||||||
Foreign currency gain (loss) |
1,800,000 |
(3,567,000) |
2,313,000 |
(5,042,000) |
|||||||||||
Other income |
203,000 |
145,000 |
463,000 |
369,000 |
|||||||||||
Income (loss) before income taxes |
958,000 |
(52,793,000) |
(6,782,000) |
(98,796,000) |
|||||||||||
Income tax benefit (expense) |
565,000 |
884,000 |
778,000 |
(175,000) |
|||||||||||
Net income (loss) |
1,523,000 |
(51,909,000) |
(6,004,000) |
(98,971,000) |
|||||||||||
Less: net loss attributable to noncontrolling interests |
1,867,000 |
12,529,000 |
5,875,000 |
25,324,000 |
|||||||||||
Net income (loss) attributable to controlling interest |
$ |
3,390,000 |
$ |
(39,380,000) |
$ |
(129,000) |
$ |
(73,647,000) |
|||||||
Net income (loss) per common share attributable to controlling interest — basic and diluted |
$ |
0.02 |
$ |
(0.20) |
$ |
— |
$ |
(0.38) |
|||||||
Weighted average number of common shares outstanding — basic and diluted |
197,845,193 |
193,698,615 |
197,374,156 |
192,969,733 |
|||||||||||
Distributions declared per common share |
$ |
0.15 |
$ |
0.15 |
$ |
0.30 |
$ |
0.30 |
|||||||
Net income (loss) |
$ |
1,523,000 |
$ |
(51,909,000) |
$ |
(6,004,000) |
$ |
(98,971,000) |
|||||||
Other comprehensive income (loss): |
|||||||||||||||
Foreign currency translation adjustments |
480,000 |
(988,000) |
622,000 |
(1,489,000) |
|||||||||||
Total other comprehensive income (loss) |
480,000 |
(988,000) |
622,000 |
(1,489,000) |
|||||||||||
Comprehensive income (loss) |
2,003,000 |
(52,897,000) |
(5,382,000) |
(100,460,000) |
|||||||||||
Less: comprehensive loss attributable to noncontrolling interests |
1,867,000 |
12,529,000 |
5,875,000 |
25,324,000 |
|||||||||||
Comprehensive income (loss) attributable to controlling interest |
$ |
3,870,000 |
$ |
(40,368,000) |
$ |
493,000 |
$ |
(75,136,000) |
GRIFFIN-AMERICAN HEALTHCARE REIT III, INC.
NET OPERATING INCOME RECONCILIATION
For the Three and Six Months Ended June 30, 2017 and 2016
NOI is a non-GAAP financial measure that 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, gain or loss on dispositions, impairment of real estate investments, loss from unconsolidated entities, foreign currency gain or loss, other income and income tax benefit (expense). Acquisition fees and expenses are paid in cash by us, and we have not set aside cash on hand to be used to fund acquisition fees and expenses. The purchase of real estate and real estate-related investments, and the corresponding expenses associated with that process, is a key operational feature of our business plan in order to generate operating revenues and cash flows to make distributions to our stockholders. Acquisition fees and expenses include payments to our advisor or its affiliates and third parties. Such fees and expenses are not reimbursed by our advisor or its affiliates and third parties, and therefore, if there is no further cash on hand to fund future acquisition fees and expenses, such fees and expenses will need to be paid from additional debt. As a result, the amount of proceeds available for investment, operations and non-operating expenses would be reduced, or we may incur additional interest expense as a result of borrowed funds. Nevertheless, our advisor or its affiliates will not accrue any claim on our assets if acquisition fees and expenses are not paid from cash on hand. Certain acquisition related expenses under GAAP, such as expenses incurred in connection with property acquisitions accounted for as business combinations, are considered operating expenses and as expenses included in the determination of net income (loss), which is a performance measure under GAAP. All paid and accrued acquisition fees and expenses have negative effects on returns to investors, the potential for future distributions and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of other properties are generated to cover the purchase price of the property, these fees and expenses and other costs related to such property.
NOI is not equivalent to our net income (loss) as determined under GAAP and may not be a useful measure in measuring operational income or cash flows. Furthermore, NOI is 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 our performance, as an alternative to cash flows from operations, which is an indication of our liquidity, or indicative of funds available to fund our cash needs including our ability to make distributions to our stockholders. NOI should not be construed to be more relevant or accurate than the current GAAP methodology in calculating net income (loss) or in its applicability in evaluating our operating performance. Investors are also cautioned that NOI should only be used to assess our operational performance in periods in which we have not incurred or accrued any acquisition related expenses.
We believe that NOI is an appropriate supplemental performance measure to reflect the operating performance of our operating assets because NOI excludes certain items that are not associated with the management of the properties. We believe that NOI is a widely accepted measure of comparative operating performance in the real estate community. However, our use of the term NOI may not be comparable to that of other real estate companies as they may have different methodologies for computing this amount.
To facilitate understanding of this financial measure, the following is a reconciliation of net income (loss), which is the most directly comparable GAAP financial measure, to NOI for the three and six months ended June 30, 2017 and 2016:
Three Months Ended June 30, |
Six Months Ended June 30, | ||||||||||||||
2017 |
2016 |
2017 |
2016 | ||||||||||||
Net income (loss) |
$ |
1,523,000 |
$ |
(51,909,000) |
$ |
(6,004,000) |
$ |
(98,971,000) |
|||||||
General and administrative |
7,509,000 |
7,253,000 |
15,372,000 |
14,147,000 |
|||||||||||
Acquisition related expenses |
143,000 |
4,833,000 |
461,000 |
8,248,000 |
|||||||||||
Depreciation and amortization |
31,041,000 |
70,316,000 |
60,863,000 |
141,212,000 |
|||||||||||
Interest expense |
16,221,000 |
10,659,000 |
30,480,000 |
20,366,000 |
|||||||||||
Gain on dispositions of real estate investments |
(3,606,000) |
— |
(3,379,000) |
— |
|||||||||||
Impairment of real estate investments |
914,000 |
— |
4,883,000 |
— |
|||||||||||
Loss from unconsolidated entities |
1,212,000 |
1,945,000 |
2,174,000 |
4,561,000 |
|||||||||||
Foreign currency (gain) loss |
(1,800,000) |
3,567,000 |
(2,313,000) |
5,042,000 |
|||||||||||
Other income |
(203,000) |
(145,000) |
(463,000) |
(369,000) |
|||||||||||
Income tax (benefit) expense |
(565,000) |
(884,000) |
(778,000) |
175,000 |
|||||||||||
Net operating income |
$ |
52,389,000 |
$ |
45,635,000 |
$ |
|