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8-K - FORM 8-K - AVIV REIT, INC.d438926d8k.htm

Exhibit 99.1

 

LOGO

AVIV REIT ANNOUNCES

THIRD QUARTER 2012 EARNINGS RESULTS

CHICAGO – November 13, 2012 – Aviv REIT, Inc. (“Aviv” or the “Company”) released its earnings for the quarter ended September 30, 2012.

Recent Highlights

 

  Adjusted EBITDA was $28.0 million;

 

  Normalized FFO was $14.5 million;

 

  Net Income was $1.8 million;

 

  Completed $25.5 million of acquisitions comprised of 3 post-acute and long-term care skilled nursing facilities and 1 long-term acute care hospital;

 

  Invested $11.0 million for property reinvestment and new construction, furthering our commitment to enhancing Aviv’s high-quality real estate portfolio.

“Our business continues to perform well. We continue to grow by furthering our relationships with many of the largest and most experienced operators in the United States. We have invested $177 million so far this year with new and existing tenant relationships, including $145 million of acquisitions and $32 million for property reinvestment and new construction,” said Craig M. Bernfield, Chairman and Chief Executive Officer of Aviv. “Aviv remains committed to investing in post-acute and long-term care SNFs because of the current and future industry prospects.”

Conference Call

A conference call to discuss the third quarter 2012 earnings will take place today at 11:00 a.m. central time / 12:00 p.m. eastern time. The dial-in number for the conference call is 877-941-8609 (480-629-9645 for international access) and a replay of the call will be available through December 13, 2012 at 800-406-7325, access code 4574430.

About Aviv

Aviv REIT, Inc., based in Chicago, is a privately-owned real estate investment trust that specializes in owning post-acute and long-term care skilled nursing facilities and other healthcare properties. Aviv is one of the largest owners of SNFs in the United States and has been in the business for over 30 years. The Company currently owns 250 properties that are triple-net leased to 37 operators in 29 states.

For more information about the Company, please visit our website at www.avivreit.com or contact:

David J. Smith, Managing Director, Investor Relations & Capital Markets at 312-855-0930.


Forward-Looking Statements

This press release may include forward-looking statements. Forward-looking statements can be identified by the use of words such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “intends,” “continue” or similar terminology. These forward-looking statements are made based on our current expectations and beliefs concerning future events affecting us and are subject to uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control, that could cause our actual results to differ materially from those matters expressed in or implied by these forward-looking statements. These uncertainties include, but are not limited to, uncertainties relating to the operations of our tenants, including those relating to reimbursement by government and other third-party payors, compliance with regulatory requirements and occupancy levels, regulatory, reimbursement and other changes in the healthcare industry, the performance and reputation of our tenants, our ability to successfully engage in strategic acquisitions and investments, the effect of general market, economic and political conditions, the availability and cost of capital, changes in tax laws and regulations affecting REITs and our ability to maintain our status as a REIT. Important factors that could cause actual results to differ materially from our expectations include those disclosed under “Risk Factors” and elsewhere in filings made by Aviv REIT, Inc. and Aviv Healthcare Properties Limited Partnership with the Securities and Exchange Commission.

Note Regarding Non-GAAP Financial Measures

This release includes financial measures, including Adjusted EBITDA and Normalized FFO, that are derived on the basis of methodologies other than in accordance with generally accepted accounting principles (GAAP). These measures are non-GAAP measures that may be calculated differently from measures used by other companies and should not be considered measures of liquidity, alternatives to net income or indicators of any other performance measure determined in accordance with GAAP, nor are they indicative of funds available to fund our cash needs, including our ability to make payments on our indebtedness. See “Supplemental Information and Reconciliation of Financial Measures” below for the definitions of, and additional information regarding, these measures and reconciliations of these measures to the GAAP measures we consider most comparable.

 

2


Aviv REIT, Inc. and Subsidiaries

Consolidated Balance Sheets

(unaudited)

 

     September 30,     December 31,  
     2012     2011  

Assets

    

Real estate investments

    

Land

   $ 113,563,712      $ 102,925,122   

Buildings and improvements

     910,201,968        777,249,381   

Construction in progress

     25,418,749        28,293,083   

Assets under direct financing leases

     11,015,786        10,916,181   
  

 

 

   

 

 

 
     1,060,200,215        919,383,767   

Less accumulated depreciation

     (112,807,661     (96,796,028
  

 

 

   

 

 

 

Net real estate investments

     947,392,554        822,587,739   

Cash and cash equivalents

     14,942,476        40,862,023   

Straight-line rent receivable, net

     35,647,906        29,926,203   

Tenant receivables, net

     5,623,983        6,007,800   

Deferred finance costs, net

     15,597,577        13,142,330   

Secured loan receivables, net

     34,444,718        33,031,117   

Other assets

     8,923,796        5,864,045   
  

 

 

   

 

 

 

Total assets

   $ 1,062,573,010      $ 951,421,257   
  

 

 

   

 

 

 

Liabilities and equity

    

Senior notes payable and other debt

   $ 664,190,571      $ 600,473,578   

Accounts payable and accrued expenses

     15,034,146        18,124,167   

Tenant security and escrow deposits

     17,748,993        15,739,917   

Other liabilities

     32,116,821        34,824,629   

Deferred contribution

     —          35,000,000   
  

 

 

   

 

 

 

Total liabilities

     729,090,531        704,162,291   

Equity:

    

Stockholders’ equity

    

Common stock (par value $0.01; 358,685 and 262,239 shares outstanding, respectively)

     3,586        2,622   

Additional paid-in-capital

     374,884,845        264,960,352   

Accumulated deficit

     (37,187,620     (21,382,823

Accumulated other comprehensive loss

     (2,374,047     (1,867,759
  

 

 

   

 

 

 

Stockholders’ equity

     335,326,764        241,712,392   

Noncontrolling interests

     (1,844,285     5,546,574   
  

 

 

   

 

 

 

Total equity

     333,482,479        247,258,966   
  

 

 

   

 

 

 

Total liabilities and equity

   $ 1,062,573,010      $ 951,421,257   
  

 

 

   

 

 

 

 

3


Aviv REIT, Inc. and Subsidiaries

Consolidated Statements of Operations and Comprehensive Income

(unaudited)

 

     Three Months Ended September 30,     Nine Months Ended September 30,  
     2012     2011     2012     2011  

Revenues

        

Rental income

   $ 29,583,062      $ 21,761,565      $ 87,171,329      $ 64,947,508   

Interest on secured loans and financing lease

     860,328        1,224,785        3,543,642        3,876,793   

Interest and other income

     1,058,580        7,276        1,126,890        840,144   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     31,501,970        22,993,626        91,841,861        69,664,445   

Expenses

        

Interest expense

     12,905,768        9,976,486        37,693,597        28,217,549   

Depreciation and amortization

     6,894,012        5,170,690        19,671,033        14,847,375   

General and administrative

     3,947,939        3,049,367        11,406,114        8,547,489   

Transaction costs

     1,286,425        2,609,727        3,507,057        3,421,283   

Loss on impairment

     1,766,873        —          6,145,731        —     

Reserve for uncollectible secured loan receivables

     2,833,419        926,474        6,308,408        1,336,269   

Loss on extinguishment of debt

     —          —          —          3,806,513   

Other expenses

     100,088        100,088        300,265        166,814   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     29,734,524        21,832,832        85,032,205        60,343,292   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations

     1,767,446        1,160,794        6,809,656        9,321,153   

Discontinued operations

     —          (846,805     4,586,692        (288,611
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     1,767,446        313,989        11,396,348        9,032,542   

Net income allocable to noncontrolling interests

     (637,162     (143,187     (4,451,239     (4,119,642
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income allocable to stockholders

   $ 1,130,284      $ 170,802      $ 6,945,109      $ 4,912,900   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 1,767,446      $ 313,989      $ 11,396,348      $ 9,032,542   

Unrealized loss on derivative instruments

     (39,482     (4,086,047     (820,974     (7,164,043
  

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss)

   $ 1,727,964      $ (3,772,058   $ 10,575,374      $ 1,868,499   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income allocable to stockholders

   $ 1,130,284      $ 170,802      $ 6,945,109      $ 4,912,900   

Unrealized (loss) on derivative instruments, net of noncontrolling interest portion of $14,233, $1,863,352, $314,686, and $3,306,106, respectively

     (25,249     (2,222,695     (506,288     (3,857,937
  

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) allocable to stockholders

   $ 1,105,035      $ (2,051,893   $ 6,438,821      $ 1,054,963   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

4


Aviv REIT, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(unaudited)

 

     Nine Months Ended September 30,  
     2012     2011  

Operating activities

    

Net income

   $ 11,396,348      $ 9,032,542   

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation and amortization

     19,705,142        15,303,737   

Amortization of deferred financing costs

     2,626,446        1,996,845   

Accretion of senior note premium

     (292,423     (129,815

Straight-line rental income, net

     (5,922,684     1,586,497   

Rental income from intangible amortization, net

     (1,149,423     (1,044,431

Non-cash stock-based compensation

     1,229,957        1,598,715   

Gain on sale of assets, net

     (4,425,246     —     

Non-cash loss on extinguishment of debt

     13,264        3,806,513   

Loss on impairment of assets

     6,145,731        858,916   

Reserve for uncollectible loan receivables

     6,308,408        1,250,113   

Accretion of earn-out provision for previously acquired real estate investments

     300,265        166,814   

Changes in assets and liabilities:

    

Tenant receivables

     (2,911,903     (6,685,920

Other assets

     (3,560,710     2,070,268   

Accounts payable and accrued expenses

     (4,676,099     95,433   

Tenant security deposits and other liabilities

     (856,750     1,849,652   
  

 

 

   

 

 

 

Net cash provided by operating activities

     23,930,323        31,755,879   

Investing activities

    

Purchase of real estate investments

     (133,998,037     (80,719,101

Sale of real estate investments

     30,542,644        —     

Capital improvements and other developments

     (31,696,657     (17,300,401

Loan receivables (funded to) received from others, net

     (2,348,748     6,256,744   
  

 

 

   

 

 

 

Net cash used in investing activities

     (137,500,798     (91,762,758

Financing activities

    

Borrowings of debt

     224,761,094        328,932,727   

Repayment of debt

     (172,211,473     (243,892,020

Payment of financing costs

     (5,143,395     (9,429,792

Capital contributions

     109,000,000        10,419,757   

Deferred contribution

     (35,000,000     —     

Cash distributions to partners

     (12,523,881     (14,838,568

Cash dividends to stockholders

     (21,231,417     (17,949,813
  

 

 

   

 

 

 

Net cash provided by financing activities

     87,650,928        53,242,291   
  

 

 

   

 

 

 

Net decrease in cash and cash equivalents

     (25,919,547     (6,764,588

Cash and cash equivalents:

    

Beginning of period

     40,862,023        13,029,474   
  

 

 

   

 

 

 

End of period

   $ 14,942,476      $ 6,264,886   
  

 

 

   

 

 

 

Supplemental cash flow information

    

Cash paid for interest

   $ 41,967,088      $ 25,080,857   

Supplemental disclosure of noncash activity

    

Accrued dividends payable to stockholders

   $ 10,097,872      $ 5,547,639   

Accrued distributions payable to partners

   $ 4,052,974      $ 4,646,091   

Earn-out accrual and addition to real estate investments

   $ —        $ 3,332,745   

Write-off of straight-line rent receivable, net

   $ 567,745      $ 6,785,132   

Write-off of in-place lease intangibles, net

   $ 48,554      $ 35,536   

Write-off of deferred financing costs, net

   $ 13,264      $ 3,806,513   

Assumed debt

   $ 11,459,794      $ —     

 

5


Supplemental Information and Reconciliation of Financial Measures

We use financial measures in this release that are derived on the basis of methodologies other than in accordance with GAAP. We derive these measures as follows:

 

  EBITDA represents net income before interest expense (net) and depreciation and amortization.

 

  Adjusted EBITDA represents EBITDA before impairment of assets, gain on sale of assets, transaction costs, write off of straight-line rents, stock-based compensation, loss on extinguishment of debt and reserves for uncollectible loan receivables.

 

  The National Association of Real Estate Investment Trusts, or NAREIT, defines FFO as net income (computed in accordance with GAAP), excluding gains and losses from sales of property (net) and impairments of depreciated real estate, plus real estate depreciation and amortization (excluding amortization of deferred financing costs) and after adjustments for unconsolidated partnerships and joint ventures. Applying the NAREIT definition to our financial statements results in FFO representing net income before depreciation, impairments of assets and gain on sale of assets.

 

  Normalized FFO represents FFO before loss on extinguishment of debt, reserves for uncollectible loan receivables and transaction costs.

Our management uses FFO, Normalized FFO, EBITDA and Adjusted EBITDA as important supplemental measures of our operating performance and liquidity. FFO is intended to exclude GAAP historical cost depreciation and amortization of real estate and related assets, which assumes that the value of real estate assets diminishes ratably over time. Historically, however, real estate values have risen or fallen with market conditions. The term FFO was designed by the real estate industry to address this issue and as an indicator of our ability to incur and service debt. Because FFO and Normalized FFO exclude depreciation and amortization unique to real estate, gains and losses from property dispositions and extraordinary items and because EBITDA and Adjusted EBITDA exclude certain non-cash charges and adjustments and amounts spent on interest and taxes, they provide our management with performance measures that, when compared year over year or with other real estate investment trusts, or REITs, reflect the impact to operations from trends in occupancy rates, rental rates, operating costs, development activities and, with respect to FFO and Normalized FFO, interest costs, in each case providing perspective not immediately apparent from net income. In addition, we believe that FFO, Normalized FFO, EBITDA and Adjusted EBITDA are frequently used by securities analysts, investors and other interested parties in the evaluation of REITs.

We offer these measures to assist the users of our financial statements in assessing our financial performance and liquidity under GAAP, but these measures are non-GAAP measures and should not be considered measures of liquidity, alternatives to net income or indicators of any other performance measure determined in accordance with GAAP, nor are they indicative of funds available to fund our cash needs, including our ability to make payments on our indebtedness. In addition, our calculations of these measures are not necessarily comparable to similar measures as calculated by other companies that do not use the same definition or implementation guidelines or interpret the standards differently from us. Investors should not rely on these measures as a substitute for any GAAP measure, including net income or revenues.

In addition to these non-GAAP financial measures, we present certain statistics in this release regarding our portfolio of properties. These statistics include EBITDAR coverage, EBITDARM coverage, Portfolio Occupancy and Quality Mix, which are derived as follows:

 

  EBITDARM coverage represents EBITDARM, which we define as earnings before interest, taxes, depreciation, amortization, rent expense and management fees charged by the operator, of our operators for the applicable period, divided by the rent paid to us by our operators during such period.

 

  EBITDAR coverage represents EBITDAR, which we define as earnings before interest, taxes, depreciation, amortization and rent expense, of our operators for the applicable period, divided by the rent paid to us by our operators during such period.

 

  Portfolio occupancy represents the average daily number of beds at our properties that are occupied during the applicable period divided by the total number of beds at our properties that are available for use during the applicable period.

 

  Quality mix represents total revenues from all payor sources, excluding Medicaid revenues, divided by the total revenue of our operators for the applicable period.

We derive these statistics from reports that we receive from our operators pursuant to our triple-net leases. As a result, our portfolio statistics typically lag our own financial statements by approximately one quarter. In order to determine EBITDARM and EBITDAR coverage for the period presented, EBITDARM and EBITDAR coverage is stated only with respect to properties owned by us and operated by the same tenant for the portion of the period we owned the properties and excludes assets held for sale, properties under construction and, with certain exceptions for shorter periods, properties within 24 months of completion of construction. Accordingly, EBITDARM and EBITDAR coverage for the twelve months ended June 30, 2012 and portfolio occupancy and quality mix for the three months ended June 30, 2012 included 221 of the 247 properties in our portfolio as of June 30, 2012. When we refer to the contractual rent of our portfolio, we are referring to the total monthly rent due under all of our triple-net leases as of the date specified.

 

6


Aviv REIT, Inc.                          

($’s)

         
     Three Months Ended September 30,      Nine Months Ended September 30,  
     2012     2011      2012     2011  

EBITDA

         

Net income

   $ 1,767,446      $ 313,989       $ 11,396,348      $ 9,032,542   

Adjusted For:

         

Interest expense, net

     12,905,571        9,973,176         37,690,117        28,204,990   

Depreciation and amortization

     6,894,012        5,170,690         19,671,033        14,847,375   
  

 

 

   

 

 

    

 

 

   

 

 

 

EBITDA

   $ 21,567,029      $ 15,457,855       $ 68,757,499      $ 52,084,907   

Adjusted EBITDA

         

EBITDA

   $ 21,567,029      $ 15,457,855       $ 68,757,499      $ 52,084,907   

Adjusted for:

         

Loss on impairment of assets

     1,766,873        —           6,145,731        —     

Gain on sale of assets, net

     —          —           (4,425,246     —     

Transaction costs

     1,286,425        2,609,727         3,507,057        3,421,283   

Write off of straight-line rents

     —          3,165,518         567,745        6,446,893   

Stock-based compensation

     513,260        517,630         1,229,957        1,598,715   

Loss on extinguishment of debt

     —          —           —          3,806,513   

Reserve for uncollectible loan receivables

     2,833,419        926,474         6,308,408        1,336,269   
  

 

 

   

 

 

    

 

 

   

 

 

 

Adjusted EBITDA

   $ 27,967,006      $ 22,677,205       $ 82,091,150      $ 68,694,580   

FFO

         

Net Income

   $ 1,767,446      $ 313,989       $ 11,396,348      $ 9,032,542   

Adjusted For:

         

Depreciation and amortization

     6,894,012        5,170,690         19,671,033        14,847,375   

Loss on impairment of assets

     1,766,873        —           6,145,731        —     

Gain on sale of assets, net

     —          —           (4,425,246     —     
  

 

 

   

 

 

    

 

 

   

 

 

 

FFO

   $ 10,428,331      $ 5,484,679       $ 32,787,867      $ 23,879,917   

Normalized FFO

         

FFO

   $ 10,428,331      $ 5,484,679       $ 32,787,867      $ 23,879,917   

Adjusted For:

         

Loss on extinguishment of debt

     —          —           —          3,806,513   

Reserve for uncollectible loan receivables

     2,833,419        926,474         6,308,408        1,336,269   

Transaction costs

     1,286,425        2,609,727         3,507,057        3,421,283   
  

 

 

   

 

 

    

 

 

   

 

 

 

Normalized FFO

   $ 14,548,175      $ 9,020,880       $ 42,603,331      $ 32,443,982   
Balance Sheet Metrics    As of 9/30/2012            As of 6/30/2012        

Cash & cash equivalents

   $ 14,942,476         $ 13,042,659     

Debt (1)

         
         

Secured—Term Loan

     212,990,146           200,195,362     

Secured—2016 Revolver

     26,368,589           26,368,589     

Secured—Other

     19,035,238           19,096,893     

Unsecured Notes

     400,000,000           400,000,000     
  

 

 

      

 

 

   

Total Debt

   $ 658,393,972         $ 645,660,843     

Total Assets (2)

   $ 1,167,839,992         $ 1,148,334,507     

Total Undepreciated Book Value of Property

     1,060,200,215           1,025,783,013     

Total Unencumbered Assets (2)

   $ 677,367,318         $ 643,157,685     

Unencumbered Assets / Unsecured Debt (2)

     169.3        160.8  

 

(1) Debt is presented exclusive of debt premiums.
(2) Calculated per bond covenant definitions.

 

7


Portfolio Information

 

     Number of     % Contractual  

Rent Concentration by Operator

   Properties     Rent  

Daybreak

     47        16.1

Saber

     25        13.8

EmpRes

     18        10.5

Sun Mar

     13        7.5

Benchmark

     15        6.0

All Others (32 Operators)

     132        46.1
  

 

 

   

 

 

 

Total

     250        100.0
     Number of     % Contractual  

Rent Concentration by State

   Properties     Rent  

Texas

     57        19.4

California

     33        17.1

Ohio

     16        9.8

Arkansas

     11        6.8

Missouri

     15        6.0

All Others (24 States)

     118        40.9
  

 

 

   

 

 

 

Total

     250        100.0

Rent Coverage

    

(for 12 months ended June 30, 2012)

    

EBITDARM

     2.0  

EBITDAR

     1.6  

Occupancy

    

(for 3 months ended June 30, 2012)

     80.6  

Quality Mix

    

(for 3 months ended June 30, 2012)

     47.4  

 

8