UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
(Amendment No. 1)
(Amendment No. 1)
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 31, 2011
Grubb & Ellis Healthcare REIT II, Inc.
(Exact name of registrant as specified in its charter)
Maryland | 333-158111 (1933 Act) | 26-4008719 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) | (IRS Employer Identification No.) |
1551 N. Tustin Avenue, Suite 300, Santa Ana, California |
92705 |
|
(Address of principal executive offices) | (Zip Code) |
Registrants telephone number, including area code: (714) 667-8252
Not Applicable
(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:
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
INFORMATION TO BE INCLUDED IN THE REPORT
We previously filed a Current Report on Form 8-K, or the Form 8-K, on February 3, 2011,
reporting our acquisition of Columbia Long-Term Acute Care Hospital located in Columbia, Missouri,
or the Columbia property, as described in such Form 8-K. We are filing this Current Report on Form
8-K/A, Amendment No. 1, to provide the financial information required by Item 9.01.
On August 12, 2010, August 31, 2010, October 29, 2010 and January 31, 2011, we acquired the
four properties comprising the following property portfolio which were leased to majority owned
subsidiaries of Landmark Holdings of Missouri, LLC, or Landmark, whereby Landmark served as the
guarantor of the leased properties, or the Monument LTACH Portfolio.
Contract Purchase | Gross Leasable | |||||||||||||
Property Locations | Date Acquired | Price | Area | Year Built | ||||||||||
Cape Girardeau,
Missouri
|
August 12, 2010 | $ | 8,181,000 | 26,000 | 2006 | |||||||||
Joplin, Missouri
|
August 31, 2010 | $ | 9,163,000 | 26,000 | 2007 | |||||||||
Athens, Georgia
|
October 29, 2010 | $ | 12,142,000 | 32,000 | 2008 | |||||||||
Columbia, Missouri
|
January 31, 2011 | $ | 12,209,000 | 31,000 | 2009 |
Landmark operates long-term acute care hospitals, or the hospitals. Landmark Management
Services, LLC, a wholly owned subsidiary of Landmark, provides management services to the four
properties comprising the Monument LTACH Portfolio. The hospitals are either 30 or 42-bed
facilities. Patients admitted to the hospitals are generally referred by short-term, general acute
care hospitals. The hospitals are a resource to the general acute care hospitals in a market area
which typically extends out for a 75-100 mile radius.
In evaluating the Monument LTACH Portfolio as a potential acquisition and determining the
appropriate amount of consideration to be paid for the portfolio, a variety of factors were
considered, including our evaluation of property condition reports, the respective locations,
visibility and access to the four properties, the age, physical condition and curb appeal of the
four properties, neighboring property uses, local market conditions and general economic conditions
and patient demand.
Monument LTACH Portfolio is a four building portfolio consisting of one-story long-term acute
care hospital facilities. The Monument LTACH Portfolio was built between 2006 and 2009 and consists
of approximately 115,000 square feet of gross leasable area, or GLA, in the aggregate. The Monument
LTACH Portfolio is 100% leased to one tenant which has operations at each of the four property
locations. We believe that the financial condition and results of operations of the guarantor,
Landmark, are more relevant to investors than the financial statements of the individual properties
and enable investors to evaluate the credit-worthiness of the guarantor of the lease and pursuant
to the guidance provided by the United States Securities and Exchange Commission, or the SEC, we
provided the audited and unaudited financial statements of Landmark in our Current Report on Form
8-K/A, Amendment No. 1, filed on October 28, 2010.
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Item 9.01 Financial Statements and Exhibits.
(a) | Financial statements of businesses acquired. |
|
On October 28, 2010, we filed our Current Report on Form 8-K/A, Amendment No.1, to report the
financial statements of Landmark, the guarantor of the leased properties of the Monument LTACH
Portfolio, to satisfy the reporting requirements of Item 9.01(a) pursuant to the guidance
provided by the SEC and our belief that the financial condition and results of operations of
Landmark are more relevant to investors than the financial statements of the individual
properties and enable investors to evaluate the credit-worthiness of the guarantor of the
lease. |
||
(b) | Pro forma financial information. |
|
Grubb & Ellis Healthcare REIT II, Inc. |
I. | Unaudited Pro Forma Condensed Consolidated Financial Statements as of December 31, 2010 and for the Year Ended December 31, 2010 | 4 | ||||||
II. | Unaudited Pro Forma Condensed Consolidated Balance Sheet as of December 31, 2010 | 5 | ||||||
III. | Unaudited Pro Forma Condensed Consolidated Statement of Operations for the Year Ended December 31, 2010 | 6 | ||||||
IV. | Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements as of December 31, 2010 and for the Year Ended December 31, 2010 | 7 |
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Grubb & Ellis Healthcare REIT II, Inc.
Unaudited Pro Forma Condensed Consolidated Financial Statements
As of December 31, 2010 and for the Year Ended December 31, 2010
As of December 31, 2010 and for the Year Ended December 31, 2010
The accompanying unaudited pro forma condensed consolidated financial statements (including
the notes thereto) are qualified in their entirety by reference to and should be read in
conjunction with our Annual Report on Form 10-K for the year ended December 31, 2010. In
managements opinion, all adjustments necessary to reflect the transactions have been made.
The accompanying unaudited pro forma condensed consolidated balance sheet as of December 31,
2010 is presented as if we acquired the Columbia property, the last remaining property comprising
the Monument LTACH Portfolio, on December 31, 2010. The Columbia property was acquired using a
combination of borrowings under our line of credit with Bank of America, N.A., or our line of
credit, and cash proceeds, net of offering costs, received from our initial public offering, or our
offering, through the acquisition date. However, the pro forma adjustments assume that the proceeds
from our line of credit and the offering proceeds, at a price of $10.00 per share, net of offering
costs, were raised as of December 31, 2010.
The accompanying unaudited pro forma condensed consolidated statement of operations for the
year ended December 31, 2010 is presented as if we acquired Lacombe Medical Office Building, or
the Lacombe MOB property, Center for Neurosurgery and Spine, or the Center for Neurosurgery and
Spine property, Parkway Medical Center, or the Parkway property, Highlands Ranch Medical Pavilion,
or the Highlands Ranch property, Muskogee Long-Term Acute Care Hospital, or the Muskogee LTACH
property, St. Vincent Medical Office Building, or the St. Vincent MOB property, Livingston Medical
Arts Pavilion, or the Livingston MAP property, Pocatello East Medical Office Building, or the
Pocatello East MOB property, all of the four properties comprising the Monument LTACH Portfolio:
(i) Cape Girardeau Long-Term Acute Care Hospital, or the Cape property; (ii) Joplin Long-Term Acute
Care Hospital, or the Joplin property; (iii) Athens Long-Term Acute Care Hospital, or the Athens
property; and (iv) the Columbia property, Virginia Skilled Nursing Facility Portfolio, or the Virginia
SNF Portfolio, Sylva Medical Office Building, or the Sylva property, Surgical Hospital of Humble,
or the Humble property, Ennis Medical Office Building, or the Ennis property and Lawton Medical
Office Building Portfolio, or the Lawton property, or collectively the Properties, on January 1,
2010. The Properties were acquired using a combination of debt financing from either assumed
mortgage loans, or proceeds from our line of credit or debt proceeds, and cash proceeds, net of
offering costs, received from our offering through the acquisition date. However, the pro forma
adjustments assume that the debt proceeds and the offering proceeds, at a price of $10.00 per
share, net of offering costs, were raised as of January 1, 2010.
The accompanying unaudited pro forma condensed consolidated financial statements are unaudited
and are subject to a number of estimates, assumptions, and other uncertainties, and do not purport
to be indicative of the actual results of operations that would have occurred had the acquisitions
reflected therein in fact occurred on the dates specified, nor do such financial statements purport
to be indicative of the results of operations that may be achieved in the future. In addition, the
unaudited pro forma condensed consolidated financial statements include pro forma allocations of
the purchase price of the Properties based upon preliminary estimates of the fair value of the
assets acquired and liabilities assumed in connection with the acquisitions and are subject to
change.
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Grubb & Ellis Healthcare REIT II, Inc.
Unaudited Pro Forma Condensed Consolidated Balance Sheet
As of December 31, 2010
As of December 31, 2010
Company Historical(A) |
Acquisition of the the Columbia Property(B) | Company Pro Forma |
||||||||||||||
ASSETS |
||||||||||||||||
Real estate investments: |
||||||||||||||||
Operating properties, net |
$ | 163,335,000 | $ | 11,040,000 | $ | 174,375,000 | ||||||||||
Cash and cash equivalents |
6,018,000 | | 6,018,000 | |||||||||||||
Accounts and other receivables, net |
241,000 | | 241,000 | |||||||||||||
Restricted cash |
2,816,000 | | 2,816,000 | |||||||||||||
Real estate and escrow deposits |
649,000 | (399,000 | ) | 250,000 | ||||||||||||
Identified intangible assets, net |
28,568,000 | 1,383,000 | 29,951,000 | |||||||||||||
Other assets, net |
2,369,000 | | 2,369,000 | |||||||||||||
Total assets |
$ | 203,996,000 | $ | 12,024,000 | $ | 216,020,000 | ||||||||||
LIABILITIES AND EQUITY |
||||||||||||||||
Liabilities: |
||||||||||||||||
Mortgage loans payable, net |
$ | 58,331,000 | $ | | $ | 58,331,000 | ||||||||||
Line of credit |
11,800,000 | 10,800,000 | 22,600,000 | |||||||||||||
Accounts payable and accrued liabilities |
3,356,000 | | 3,356,000 | |||||||||||||
Accounts payable due to affiliates |
840,000 | | 840,000 | |||||||||||||
Derivative financial instruments |
453,000 | | 453,000 | |||||||||||||
Identified intangible liabilities, net |
502,000 | | 502,000 | |||||||||||||
Security deposits, prepaid rent and other liabilities |
3,352,000 | 3,000 | 3,355,000 | |||||||||||||
Total liabilities |
78,634,000 | 10,803,000 | 89,437,000 | |||||||||||||
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;
15,452,668 issued and outstanding |
154,000 | 2,000 | (C | ) | 156,000 | |||||||||||
Additional paid-in capital |
137,657,000 | 1,576,000 | (C | ) | 139,233,000 | |||||||||||
Accumulated deficit |
(12,571,000 | ) | (357,000 | ) | (D | ) | (12,928,000 | ) | ||||||||
Total stockholders equity |
125,240,000 | 1,221,000 | 126,461,000 | |||||||||||||
Noncontrolling interests |
122,000 | | 122,000 | |||||||||||||
Total equity |
125,362,000 | 1,221,000 | 126,583,000 | |||||||||||||
Total liabilities and equity |
$ | 203,996,000 | $ | 12,024,000 | $ | 216,020,000 | ||||||||||
The accompanying notes are an integral part of the unaudited pro forma condensed consolidated financial statements.
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Grubb & Ellis Healthcare REIT II, Inc.
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended December 31, 2010
For the Year Ended December 31, 2010
Company Historical(E) | 2010 Transactions(F) |
Acquisition of the Columbia Property(G) | Company Pro Forma | |||||||||||||||||||||||||
Revenue: |
||||||||||||||||||||||||||||
Rental income |
$ | 8,682,000 | $ | 13,506,000 | $ | 1,209,000 | $ | 23,397,000 | ||||||||||||||||||||
Expenses: |
||||||||||||||||||||||||||||
Rental expenses |
2,201,000 | 1,981,000 | 150,000 | (H) | 4,332,000 | |||||||||||||||||||||||
General and administrative |
1,670,000 | 993,000 | 101,000 | (I) | 2,764,000 | |||||||||||||||||||||||
Acquisition related expenses |
7,099,000 | (6,945,000 | ) | (J) | (48,000 | ) | (J) | 106,000 | ||||||||||||||||||||
Depreciation and amortization |
3,591,000 | 4,980,000 | 405,000 | (K) | 8,976,000 | |||||||||||||||||||||||
Total expenses |
14,561,000 | 1,009,000 | 608,000 | 16,178,000 | ||||||||||||||||||||||||
(Loss) income from operations |
(5,879,000 | ) | 12,497,000 | 601,000 | 7,219,000 | |||||||||||||||||||||||
Other income (expense): |
||||||||||||||||||||||||||||
Interest expense (including amortization of deferred
financing costs and debt discount): |
||||||||||||||||||||||||||||
Interest expense |
(1,416,000 | ) | (3,655,000 | ) | | (L) | (5,071,000 | ) | ||||||||||||||||||||
Loss in fair value of derivative financial instrument |
(143,000 | ) | | | (143,000 | ) | ||||||||||||||||||||||
Interest income |
15,000 | | | 15,000 | ||||||||||||||||||||||||
Net (loss) income |
(7,423,000 | ) | 8,842,000 | 601,000 | 2,020,000 | |||||||||||||||||||||||
Less: Net income attributable to
noncontrolling interests |
(1,000 | ) | | | (1,000 | ) | ||||||||||||||||||||||
Net (loss) income attributable to controlling interest |
$ | (7,424,000 | ) | $ | 8,842,000 | $ | 601,000 | $ | 2,019,000 | |||||||||||||||||||
Net (loss) income per common share attributable to controlling
interest basic and diluted |
$ | (0.99 | ) | $ | 0.13 | |||||||||||||||||||||||
Weighted average number of common shares
outstanding basic and diluted |
7,471,184 | 15,811,161 | (M) | |||||||||||||||||||||||||
The accompanying notes are an integral part of the unaudited pro forma condensed consolidated financial statements.
6
Grubb & Ellis Healthcare REIT II, Inc.
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
1. Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet as of December 31, 2010
(A) As reported in our Annual Report on Form 10-K for the year ended December 31, 2010.
(B) Amounts represent the purchase price of the assets acquired and liabilities incurred or
assumed by us in connection with the acquisition of the Columbia property. The purchase price, plus
closing costs and acquisition fees, was financed using $11,000,000 in borrowings under our line of
credit, and proceeds, net of offering costs, received from our offering. Borrowings under our line
of credit are limited to the availability of credit remaining on our line of credit, which as of
December 31, 2010, was limited to $22,600,000. Therefore, we
have assumed $10,800,000 in borrowings
under our line of credit were used to finance the acquisition of the Columbia property, such that
the aggregate balance of our line of credit as of December 31, 2010 was $22,600,000. The remaining
funds needed to purchase the Columbia property are assumed financed from proceeds from our
offering.
In connection with the acquisition, we paid an acquisition fee of approximately $336,000, or
2.75% of the contract purchase price, to Grubb & Ellis Equity Advisors, LLC, the managing member of
our advisor, Grubb & Ellis Healthcare REIT II Advisor, LLC.
We allocated the purchase price to the fair value of the assets acquired and liabilities
assumed as follows: $1,433,000 to land, $9,607,000 to building and improvements, $967,000 to
in-place leases and $416,000 to tenant relationships. The difference in the purchase price
allocation of $12,423,000 and the contract purchase price of $12,209,000 is due to the allocation
to operating properties and identified intangible assets of $214,000 of real estate deposits
related to the acquisitions of the Cape property, the Joplin property and the Athens property,
three of the four properties comprising the Monument LTACH Portfolio.
(C) The Columbia property was acquired using proceeds, net of offering costs, received from
our offering through the acquisition date at $10.00 per share. The pro forma adjustments assume the
proceeds were raised as of December 31, 2010.
(D) Amount represents the one-time acquisition related expenses incurred in connection with
the acquisition of the Columbia property, not included in the historical results.
2. Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations for the Year Ended
December 31, 2010
(E) As reported in our Annual Report on Form 10-K for the year ended December 31, 2010.
(F) Amounts represent the estimated operations, including pro forma adjustments, based on
historical operations of the Lacombe MOB property, the Center for Neurosurgery and Spine property,
the Parkway property, the Highlands Ranch property, the Muskogee LTACH property, the St. Vincent
MOB property, the Livingston MAP property, the Pocatello East MOB property, the Cape property, the
Joplin property and the Athens property, three of the four properties comprising the Monument LTACH
Portfolio, the Virginia SNF Portfolio, the Sylva property, the Humble property, the Ennis property
and the Lawton property which were acquired in 2010.
(G) The Columbia property acquisition was a sale leaseback transaction and the related pro
forma adjustments include the rental revenues, tenant recoveries and rental expenses directly
attributable to the sale leaseback of the owner occupied property based on the lease entered into
on January 31, 2011.
(H) Amount represents the estimated rental expenses of the Columbia property. We entered into
an advisory agreement with our advisor, or our advisory agreement. Pursuant to our advisory
agreement, our advisor or its affiliates are entitled to receive, for services in managing each of
our properties, either a monthly property management fee or a monthly oversight fee of up to 4.0%
or 1.0%, respectively, of the gross monthly cash receipts
of the property depending on the level of the services our advisor or its affiliates provide in
managing a particular property. As a result, the pro forma amounts shown are reflective of our
current advisory agreement and the 1.0% oversight fee paid for management services provided at the
Columbia property.
7
Grubb & Ellis Healthcare REIT II, Inc.
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements (Continued)
Also, adjustments were made for an incremental property tax expense assuming the acquisition
price and historical property tax rate.
(I) Pursuant to our advisory agreement, our advisor or its affiliates are entitled to receive
a monthly asset management fee for services rendered in connection with the management of our
assets equal to one-twelfth of 0.85% of average invested assets, subject to our stockholders
receiving distributions in an amount equal to 5.0% per annum, cumulative, non-compounded, of
invested capital. At the time of the acquisition of the Columbia property, our stockholders had
received annualized distributions greater than 5.0% per annum. As such, we assumed an asset
management fee was incurred for the year ended December 31, 2010.
(J) We incurred a total of $1,534,000 in acquisition related expenses, $1,177,000 of which was
incurred during the year ended December 31, 2010 in connection with the acquisition of the Monument
LTACH Portfolio, which is reflected in the 2010 Transactions column and the Acquisition of the
Columbia Property column. $357,000 in acquisition related expenses were incurred subsequent to
December 31, 2010. As these are nonrecurring charges, they have been excluded from the unaudited
pro forma condensed consolidated statement of operations for the year ended December 31, 2010.
(K) Amount represents depreciation and amortization expense on the allocation of the purchase
price. Depreciation and amortization expense is recognized using the straight-line method over an
estimated useful life of 39.0 years, 8.0 to 15.0 years, 15.0 years and 30.0 years for building,
improvements, in-place leases and tenant relationships, respectively.
The purchase price allocations, and therefore, depreciation and amortization expense are
preliminary and subject to change.
(L) We financed the purchase price, plus closing costs, using $11,000,000 in borrowings under
our line of credit. We have reflected the amount of interest expense calculated on $22,600,000 (our
maximum availability as of December 31, 2010) in borrowings under our line of credit in the amounts
listed in the 2010 Transactions column and the Company Historical column. Therefore, we have
assumed the purchase price, plus closing costs was financed using proceeds from our offering and
interest expense for the year ended December 31, 2010 was $0.
(M) Amount represents the weighted average number of shares of our common stock from our
offering, at $10.00 per share, required to generate sufficient offering proceeds, net of offering
costs, to fund the purchase of the Properties. The calculation assumes these proceeds were raised
as of January 1, 2010.
8
SIGNATURES
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.
Grubb & Ellis Healthcare REIT II, Inc. |
||||
Date: April 11, 2011 | By: | /s/ Jeffrey T. Hanson | ||
Name: | Jeffrey T. Hanson | |||
Title: | Chief Executive Officer | |||
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