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8-K - FORM 8-K - Griffin-American Healthcare REIT II, Inc. | c21140e8vk.htm |
Exhibit 99.1
Contact:
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Damon Elder | |||
Phone:
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714.975.2659 | |||
Email:
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damon.elder@grubb-ellis.com |
Grubb & Ellis Healthcare REIT II
Reports Second Quarter 2011 Results
Reports Second Quarter 2011 Results
SANTA
ANA, Calif. (Aug. 11, 2011) Grubb & Ellis Healthcare REIT II, Inc. today announced
operating results for the companys second quarter ended June 30, 2011.
Grubb & Ellis Healthcare REIT II experienced tremendous growth during the second quarter
of 2011, said Danny Prosky, president and chief operating officer. During the quarter we
increased the size of our portfolio by approximately 78 percent since the end of the first quarter,
acquiring $180.7 million worth of accretive clinical healthcare properties and expanding our total
portfolio size to $411.5 million, based on purchase price.
Second Quarter 2011 Highlights and Recent Accomplishments
| Completed second quarter acquisitions totaling $180.7 million, based on purchase price. |
| Declared and paid quarterly distributions to stockholders of record equal to an annualized rate of 6.5 percent, or a quarterly distribution of $0.16 per share, based upon a $10.00 per share offering price. The companys board of directors intends to continue to declare distributions on a quarterly basis. |
| Second quarter modified funds from operations, or MFFO, as defined by the Investment Program Association, or IPA, was approximately $3.5 million, nearly 46 percent more than the $2.4 million in the first quarter of 2011. Funds from operations, or FFO, equaled $(3.6) million, largely due to the significant costs associated with the companys $180.7 million in acquisitions during the quarter, compared with $1.3 million in the first quarter of 2011. (Quarter-over-quarter growth in MFFO is due to the acquisition of additional properties. Please see financial reconciliation tables and notes at the end of this release for more information regarding modified funds from operations and funds from operations.) |
| Net operating income, or NOI, totaled approximately $6.9 million in the second quarter of 2011, an increase of more than 43 percent compared to the $4.8 million achieved in the first quarter of 2011. The company reported a net loss equal to $6.9 million, largely due to the significant costs associated with the companys $180.7 million in acquisitions during the quarter, compared to $885,000 in the first quarter of 2011. (Quarter-over-quarter growth in NOI is primarily due to the acquisition of additional properties. Please see financial reconciliation tables and notes at the end of this release for more information regarding NOI and net income/loss.) |
| The companys property portfolio achieved an aggregate average occupancy of 96.9 percent as of June 30, 2011 and had leverage of 43.1 percent. The portfolios average remaining lease term was 10.2 years at the close of the second quarter, based on leases in effect as of June 30, 2011. |
| In May, the company modified its secured revolving line of credit with Bank of America, N.A., expanding available credit to $45 million from $25 million and lowering the interest rate of LIBOR plus 3.50 percent from LIBOR plus 3.75 percent. An all-in interest rate floor of 5 percent was also eliminated. As of June 30, 2011, the companys aggregate borrowing capacity under the Bank of America line of credit was $31.1 million. |
| In June, the company entered into a secured revolving credit facility with KeyBank National Association of $71.5 million that can be increased to $100 million upon meeting certain conditions. As of June 30, 2011, the companys aggregate borrowing capacity under the KeyBank National Association line of credit was $71.1 million. |
Second Quarter 2011 and Recent Acquisition Highlights
| In April, the company acquired Lakewood Ranch Medical Office Building in Bradenton, Fla., for $12.5 million; Hardy Oak Medical Building in San Antonio for $8.1 million; and Yuma Skilled Nursing Facility in Yuma, Ariz. for $11.0 million. |
| In May, the company completed the $30.1 million acquisition of the 10 building Dixie-Lobo Medical Office Building Portfolio in Arkansas, Louisiana, New Mexico and Texas. |
| Also in May, the company acquired Jersey City Medical Office Building in New Jersey for $28.7 million and three medical office buildings in Benton and Bryant, Arkansas for $15.4 million. |
| In June, the company acquired the Philadelphia Skilled Nursing Facility Portfolio, a collection of five skilled nursing facilities located throughout Philadelphia for $75.0 million. |
| Total portfolio value grew to nearly $411.5 million, based on purchase price, at the close of the second quarter 2011 from $230.8 million at the close of the first quarter 2011. |
| Subsequent to the close of the second quarter, the company acquired Maxfield Medical Office Building in Sarasota, Fla. for $7.2 million. |
According to chairman and chief executive officer Jeff Hanson, As our second quarter results
demonstrate, Grubb & Ellis Healthcare REIT II continues to achieve impressive quarterly growth, and
we believe we are meeting our primary goals to provide a responsible and sustainable investor
distribution and to provide superior long-term financial performance.
As of July 31, 2011, Grubb & Ellis Healthcare REIT II had sold approximately 32,212,023 shares of
its common stock, excluding the shares issued under its distribution reinvestment plan, for
approximately $321,454,000 through its initial public offering.
To date, the REIT has made 23 geographically diverse acquisitions comprised of 54 buildings valued
at approximately $418.7 million, based on purchase price in the aggregate. Since March 31, 2011,
the aggregate value of the Grubb & Ellis Healthcare REIT II portfolio has increased by more than 81
percent, based on purchase price.
FINANCIAL TABLES AND NOTES FOLLOW
GRUBB & ELLIS HEALTHCARE REIT II, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
As of June 30, 2011 and December 31, 2010
(Unaudited)
CONDENSED CONSOLIDATED BALANCE SHEETS
As of June 30, 2011 and December 31, 2010
(Unaudited)
June 30, 2011 | December 31, 2010 | |||||||
ASSETS |
||||||||
Real estate investments: |
||||||||
Operating properties, net |
$ | 350,726,000 | $ | 163,335,000 | ||||
Cash and cash equivalents |
8,924,000 | 6,018,000 | ||||||
Accounts and other receivables, net |
1,050,000 | 241,000 | ||||||
Restricted cash |
2,679,000 | 2,816,000 | ||||||
Real estate and escrow deposits |
150,000 | 649,000 | ||||||
Identified intangible assets, net |
64,484,000 | 28,568,000 | ||||||
Other assets, net |
5,542,000 | 2,369,000 | ||||||
Total assets |
$ | 433,555,000 | $ | 203,996,000 | ||||
LIABILITIES AND EQUITY |
||||||||
Liabilities: |
||||||||
Mortgage loans payable, net |
$ | 83,388,000 | $ | 58,331,000 | ||||
Lines of credit |
93,139,000 | 11,800,000 | ||||||
Accounts payable and accrued liabilities |
6,285,000 | 3,356,000 | ||||||
Accounts payable due to affiliates |
1,241,000 | 840,000 | ||||||
Derivative financial instruments |
678,000 | 453,000 | ||||||
Identified intangible liabilities, net |
621,000 | 502,000 | ||||||
Security deposits, prepaid rent and other liabilities |
9,958,000 | 3,352,000 | ||||||
Total liabilities |
195,310,000 | 78,634,000 | ||||||
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;
29,784,139 and 15,452,668 shares issued and outstanding
as of June 30, 2011 and December 31, 2010, respectively |
298,000 | 154,000 | ||||||
Additional paid-in capital |
265,215,000 | 137,657,000 | ||||||
Accumulated deficit |
(27,390,000 | ) | (12,571,000 | ) | ||||
Total stockholders equity |
238,123,000 | 125,240,000 | ||||||
Noncontrolling interests |
122,000 | 122,000 | ||||||
Total equity |
238,245,000 | 125,362,000 | ||||||
Total liabilities and equity |
$ | 433,555,000 | $ | 203,996,000 | ||||
GRUBB & ELLIS HEALTHCARE REIT II, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Six Months Ended June 30, 2011 and 2010
(Unaudited)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Six Months Ended June 30, 2011 and 2010
(Unaudited)
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Revenue: |
||||||||||||||||
Rental income |
$ | 8,675,000 | $ | 1,142,000 | $ | 14,682,000 | $ | 1,203,000 | ||||||||
Expenses: |
||||||||||||||||
Rental expenses |
1,817,000 | 390,000 | 3,020,000 | 407,000 | ||||||||||||
General and administrative |
1,458,000 | 360,000 | 2,379,000 | 545,000 | ||||||||||||
Acquisition related expenses |
7,236,000 | 1,695,000 | 8,785,000 | 2,332,000 | ||||||||||||
Depreciation and amortization |
3,274,000 | 536,000 | 5,476,000 | 565,000 | ||||||||||||
Total expenses |
13,785,000 | 2,981,000 | 19,660,000 | 3,849,000 | ||||||||||||
Loss from operations |
(5,110,000 | ) | (1,839,000 | ) | (4,978,000 | ) | (2,646,000 | ) | ||||||||
Other income (expense): |
||||||||||||||||
Interest expense (including amortization of
deferred financing costs and
debt discount and premium): |
||||||||||||||||
Interest expense |
(1,473,000 | ) | (108,000 | ) | (2,568,000 | ) | (109,000 | ) | ||||||||
Loss in fair value of derivative
financial instruments |
(299,000 | ) | (120,000 | ) | (225,000 | ) | (120,000 | ) | ||||||||
Interest income |
2,000 | 8,000 | 6,000 | 13,000 | ||||||||||||
Net loss |
(6,880,000 | ) | (2,059,000 | ) | (7,765,000 | ) | (2,862,000 | ) | ||||||||
Less: net income attributable to
noncontrolling interests |
(1,000 | ) | | (1,000 | ) | | ||||||||||
Net loss attributable to controlling interest |
$ | (6,881,000 | ) | $ | (2,059,000 | ) | $ | (7,766,000 | ) | $ | (2,862,000 | ) | ||||
Net loss per common share attributable to
controlling interest basic and diluted |
$ | (0.27 | ) | $ | (0.37 | ) | $ | (0.36 | ) | $ | (0.69 | ) | ||||
Weighted average number of common shares
outstanding basic and diluted |
25,543,273 | 5,558,762 | 21,864,450 | 4,132,705 | ||||||||||||
Distributions declared per common share |
$ | 0.16 | $ | 0.16 | $ | 0.33 | $ | 0.33 | ||||||||
GRUBB & ELLIS HEALTHCARE REIT II, INC.
NET OPERATING INCOME RECONCILIATION
For the Three and Six Months Ended June 30, 2011 and 2010
(Unaudited)
NET OPERATING INCOME RECONCILIATION
For the Three and Six Months Ended June 30, 2011 and 2010
(Unaudited)
Net operating income is a financial measure that does not conform to accounting principles
generally accepted in the United States of America, or GAAP, or a non-GAAP measure. It 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 and interest income. The company believes that net operating
income is useful for investors as it provides an accurate measure of the operating performance
of its operating assets because net operating income excludes certain items that are not
associated with the management of the properties. Additionally, the company believes that net
operating income is a widely accepted measure of comparative operating performance in the real
estate community. However, the companys use of the term net operating income may not be
comparable to that of other real estate companies as they may have different methodologies for
computing this amount.
The following is a reconciliation of net loss, which is the most directly comparable GAAP
financial measure, to net operating income for the three and six months ended June 30, 2011 and
2010:
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Net loss |
$ | (6,880,000 | ) | $ | (2,059,000 | ) | $ | (7,765,000 | ) | $ | (2,862,000 | ) | ||||
Add: |
||||||||||||||||
General and administrative |
1,458,000 | 360,000 | 2,379,000 | 545,000 | ||||||||||||
Acquisition related expenses |
7,236,000 | 1,695,000 | 8,785,000 | 2,332,000 | ||||||||||||
Depreciation and amortization |
3,274,000 | 536,000 | 5,476,000 | 565,000 | ||||||||||||
Interest expense |
1,772,000 | 228,000 | 2,793,000 | 229,000 | ||||||||||||
Less: |
||||||||||||||||
Interest income |
(2,000 | ) | (8,000 | ) | (6,000 | ) | (13,000 | ) | ||||||||
Net operating income |
$ | 6,858,000 | $ | 752,000 | $ | 11,662,000 | $ | 796,000 | ||||||||
GRUBB & ELLIS HEALTHCARE REIT II, INC.
FFO AND MFFO RECONCILIATION
For the Three and Six Months Ended June 30, 2011 and 2010
(Unaudited)
FFO AND MFFO RECONCILIATION
For the Three and Six Months Ended June 30, 2011 and 2010
(Unaudited)
Due to certain unique operating characteristics of real estate companies, the National Association
of Real Estate Investment Trusts, or NAREIT, an industry trade group, has promulgated a measure
known as funds from operations, or FFO, which the company believes to be an appropriate
supplemental measure to reflect the operating performance of a real estate investment trust, or
REIT. The use of FFO is recommended by the REIT industry as a supplemental performance measure. FFO
is not equivalent to our net income or loss as determined under GAAP.
The company defines FFO, a non-GAAP measure, consistent with the standards established by the White
Paper on FFO approved by the Board of Governors of NAREIT, as revised in February 2004, or the
White Paper. The White Paper defines FFO as net income or loss computed in accordance with GAAP,
excluding gains or losses from sales of property but including asset impairment writedowns, plus
depreciation and amortization, and after adjustments for unconsolidated partnerships and joint
ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect
FFO. The companys FFO calculation complies with NAREITs policy described above.
The historical accounting convention used for real estate assets requires straight-line
depreciation of buildings and improvements, which implies that the value of real estate assets
diminishes predictably over time. Since real estate values historically rise and fall with market
conditions, presentations of operating results for a REIT, using historical accounting for
depreciation, the company believes, may be less informative. As a result, the company believes that
the use of FFO, which excludes the impact of real estate related depreciation and amortization,
provides a more complete understanding of the companys performance to investors and to management,
and when compared year over year, reflects the impact on the companys operations from trends in
occupancy rates, rental rates, operating costs, general and administrative expenses, and interest
costs, which is not immediately apparent from net income or loss.
However, changes in the accounting and reporting rules under GAAP (for acquisition fees and
expenses from a capitalization/depreciation model to an expensed-as-incurred model) that have been
put into effect since the establishment of NAREITs definition of FFO have prompted an increase in
the non-cash and non-operating items included in FFO. In addition, the company views fair value
adjustments of derivatives, and impairment charges and gains and losses from dispositions of assets
as items which are typically adjusted for when assessing operating performance. Lastly, publicly
registered, non-listed REITs typically have a significant amount of acquisition activity and are
substantially more dynamic during their initial years of investment and operation and therefore
require additional adjustments to FFO in evaluating performance. Due to these and other unique
features of publicly registered, non-listed REITs, the Investment Program Association, or IPA, an industry
trade group, has standardized a measure known as modified funds from operations, or MFFO, which the company believes to be another
appropriate supplemental measure to reflect the operating performance of a REIT. The use of MFFO is
recommended by the IPA as a supplemental performance measure for publicly registered, non-listed
REITs. MFFO is a metric used by management to evaluate sustainable performance and distribution
policy. In evaluating the performance of our portfolio over time, management employs business
models and analyses that differentiate the costs to acquire investments from the investments
revenues and expenses. Management believes that excluding acquisition costs from MFFO provides
investors with supplemental performance information that is consistent with the performance models
and analysis used by management, and provides investors a view of the performance of our portfolio
over time, including after the time we cease to acquire properties on a frequent and regular basis.
MFFO may provide investors with a useful indication of our future performance, particularly after
our acquisition stage, and of the sustainability of our current distribution policy. However,
because MFFO excludes acquisition expenses, which are an important component in an analysis of
financial performance, MFFO should not be construed as a historical performance measure. MFFO is not
equivalent to the companys net income or loss as determined under GAAP.
The company defines MFFO, a non-GAAP measure, consistent with the IPAs Guideline 2010-01,
Supplemental Performance Measure for Publicly Registered, Non-Listed REITs: Modified Funds from
Operations, or the Practice Guideline, issued by the IPA in November 2010. The Practice Guideline
defines MFFO as FFO further adjusted for the following items included in the determination of GAAP
net income (loss): acquisition fees and expenses; amounts relating to deferred rent receivables and
amortization of above and below market leases and liabilities; accretion of discounts and
amortization of premiums on debt investments; nonrecurring impairments of real estate-related
investments; mark-to-market adjustments included in net income; nonrecurring gains or losses
included in net income from the extinguishment or sale of debt, hedges, foreign exchange,
derivatives or securities holdings where trading of such holdings is not a fundamental attribute of
the business plan, unrealized gains or losses resulting from consolidation from, or deconsolidation
to, equity accounting, and after adjustments for consolidated and unconsolidated partnerships and
joint ventures, with such adjustments calculated to reflect MFFO on the same basis. The companys
MFFO calculation complies with the IPAs Practice Guideline described above. In calculating MFFO,
the company excludes acquisition related expenses, amortization of above and below market leases,
fair value adjustments of derivative financial instruments, gains or losses from the extinguishment
of debt, deferred rent receivables and the adjustments of such items related to noncontrolling
interests. The other adjustments included in the IPAs Practice Guideline are not applicable to the
company for the three and six months ended June 30, 2011 and 2010.
Presentation of this information is intended to assist in comparing the operating performance of
different REITs, although it should be noted that not all REITs calculate FFO and MFFO the same
way, so comparisons with other REITs may not be meaningful. Furthermore, FFO and MFFO are 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 the companys performance, as an indication of
its liquidity, or indicative of funds available to fund its cash needs including its ability to
make distributions to its stockholders. FFO and MFFO should be reviewed in conjunction with other
measurements as an indication of the companys performance.
The following is a reconciliation of net loss, which is the most directly comparable GAAP financial
measure, to FFO and MFFO for the three and six months ended June 30, 2011 and 2010 (unaudited):
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Net loss |
$ | (6,880,000 | ) | $ | (2,059,000 | ) | $ | (7,765,000 | ) | $ | (2,862,000 | ) | ||||
Add: |
||||||||||||||||
Depreciation and amortization
consolidated properties |
3,274,000 | 536,000 | 5,476,000 | 565,000 | ||||||||||||
Less: |
||||||||||||||||
Net income attributable to
noncontrolling interests |
(1,000 | ) | | (1,000 | ) | | ||||||||||
Depreciation and amortization related to
noncontrolling interests |
(3,000 | ) | | (5,000 | ) | | ||||||||||
FFO |
$ | (3,610,000 | ) | $ | (1,523,000 | ) | $ | (2,295,000 | ) | $ | (2,297,000 | ) | ||||
Add: |
||||||||||||||||
Acquisition related expenses |
$ | 7,236,000 | $ | 1,695,000 | $ | 8,785,000 | $ | 2,332,000 | ||||||||
Amortization of above and below market leases |
80,000 | 21,000 | 125,000 | 21,000 | ||||||||||||
Loss in fair value of derivative financial instruments |
299,000 | 120,000 | 225,000 | 120,000 | ||||||||||||
Loss on extinguishment of debt |
| | 42,000 | | ||||||||||||
Deferred rent receivables related to
noncontrolling interests |
| | 1,000 | | ||||||||||||
Less: |
||||||||||||||||
Deferred rent receivables |
(464,000 | ) | (73,000 | ) | (913,000 | ) | (84,000 | ) | ||||||||
MFFO |
$ | 3,541,000 | $ | 240,000 | $ | 5,970,000 | $ | 92,000 | ||||||||
Weighted average common shares
outstanding basic and diluted |
25,543,273 | 5,558,762 | 21,864,450 | 4,132,705 | ||||||||||||
Net loss per common share basic and diluted |
$ | (0.27 | ) | $ | (0.37 | ) | $ | (0.36 | ) | $ | (0.69 | ) | ||||
FFO per common share basic and diluted |
$ | (0.14 | ) | $ | (0.27 | ) | $ | (0.10 | ) | $ | (0.56 | ) | ||||
MFFO per common share basic and diluted |
$ | 0.14 | $ | 0.04 | $ | 0.27 | $ | 0.02 | ||||||||
About Grubb & Ellis Healthcare REIT II
Grubb & Ellis Healthcare REIT II, Inc. intends to qualify as a real estate investment trust that
seeks to preserve, protect and return investors capital contributions, pay regular cash
distributions, and realize growth in the value of its investments upon the ultimate sale of such
investments. Grubb & Ellis Healthcare REIT II is seeking to raise up to approximately $3 billion in
equity and to acquire a diversified portfolio of real estate assets, focusing primarily on medical
office buildings and other healthcare-related facilities.
Grubb & Ellis Healthcare REIT II is sponsored by Grubb & Ellis Company (NYSE: GBE). Grubb & Ellis
is one of the largest and most respected commercial real estate services and investment companies
in the world. Grubb & Ellis Companys 5,000 professionals in more than 109 company-owned and
affiliate offices draw from a unique platform of real estate services, practice groups and
investment products to deliver comprehensive, integrated solutions to real estate owners, tenants
and investors. The firms transaction, management, consulting and investment services are supported
by highly regarded proprietary market research and extensive local expertise. Through its
investment subsidiaries, the
company is a leading sponsor of real estate investment programs that provide individuals and
institutions the opportunity to invest in a broad range of real estate investment vehicles,
including publicly registered non-traded REITs, mutual funds, separate accounts and other real
estate investment funds. For more information, visit
www.grubb-ellis.com.
www.grubb-ellis.com.
* * *
This release contains certain forward-looking statements with
respect to the success of our company, our ability to provide our investors distribution
sustainability and superior long-term financial performance, whether we will be able to maintain
our current distribution rate, whether we can continue to improve our net operating income, funds
from operations and modified funds from operations, whether we can maintain the financial results
experienced in the quarter ended June 30, 2011, whether we can continue to achieve impressive
quarter-over-quarter growth, and whether we can continue to raise sufficient equity in our initial
public offering and deploy it efficiently by acquiring assets. Because such statements include
risks, uncertainties and contingencies, actual results may differ materially from those expressed
or implied by such forward-looking statements. These risks, uncertainties and contingencies
include, but are not limited to, the following: our strength and financial condition and
uncertainties relating to the financial strength of our current and future real estate investments;
uncertainties relating to our ability to continue to maintain the current coverage of our investor
distributions; uncertainties relating to the local economies where our real estate investments are
located; uncertainties relating to changes in general economic and real estate conditions;
uncertainties regarding changes in the healthcare industry; uncertainties relating to the
implementation of recent healthcare legislation; the uncertainties relating to the implementation
of our real estate investment strategy; and other risk factors as outlined in the companys
prospectus, as amended from time to time, and as detailed from time to time in our periodic
reports, as filed with the U.S. Securities and Exchange Commission. Forward-looking statements in
this document speak only as of the date on which such statements were made, and we undertake no
obligation to update any such statements that may become untrue because of subsequent events.
THIS IS NEITHER AN OFFER TO SELL NOR AN OFFER TO BUY ANY SECURITIES DESCRIBED HEREIN. OFFERINGS
ARE MADE ONLY BY MEANS OF A PROSPECTUS.
###