Business Context and Reporting Period
This Form 8-K, filed on March 18, 2021, by Griffin-American Healthcare REIT IV, Inc. (the "Company"), reports on strategic developments and financial updates. The Company, a non-listed real estate investment trust, announced the formation of a Special Committee in October 2020 to investigate strategic alternatives, including a potential sale of assets, a listing on a national securities exchange, or a merger. The filing also details the suspension of the Distribution Reinvestment Plan (DRIP) and Share Repurchase Plan (SRP) effective April 1, 2021, to facilitate these strategic reviews.
Key Financial Metrics
The filing provides an updated estimated Net Asset Value (NAV) per share and distribution details rather than standard GAAP revenue or profit metrics for a specific reporting period.
- Estimated NAV per Share: $9.22 (Class T and Class I common stock) as of September 30, 2020.
- Previous Estimated NAV: $9.54 as of December 31, 2019.
- Annualized Distribution Rate: $0.40 per share (daily rate of $0.001095890).
- Total Estimated Asset Value: Approximately $1,203.9 million (Appraised Properties and Other Properties).
- Total Debt Liabilities: Approximately $508.6 million.
- Fully Diluted Shares Outstanding: 80,987,994.
| Item | Sept 30, 2020 (Est. Value) | Dec 31, 2019 (Est. Value) |
|---|---|---|
| Appraised Properties and Other Properties | $1,203,878,000 | $1,130,167,000 |
| Cash and Other Assets | $78,112,000 | $77,724,000 |
| Debt Liabilities | ($508,612,000) | ($421,055,000) |
| Other Liabilities | ($24,411,000) | ($24,591,000) |
| Estimated Net Asset Value | $746,967,000 | $762,245,000 |
| NAV Per Share | $9.22 | $9.54 |
Material Changes Versus Prior Period
- NAV Decline: The estimated NAV per share decreased from $9.54 (Dec 31, 2019) to $9.22 (Sept 30, 2020), a reduction of approximately 3.4%.
- Debt Increase: Estimated debt liabilities increased from $421.1 million to $508.6 million, contributing to the lower NAV.
- Asset Valuation: The estimated value of appraised properties increased by approximately $73.7 million, but this was offset by the increase in debt and other liabilities.
- Operational Changes: The Board suspended the DRIP and SRP, meaning future distributions will be paid in cash rather than reinvested or used for share repurchases.
Guidance, Outlook, Risks, and Unusual Items
Strategic Review: The Company is actively exploring strategic alternatives. Truist Securities is acting as the financial advisor. There is no assurance that a transaction will be consummated.
Valuation Methodology: The updated NAV was determined by Jones Lang LaSalle Securities, LLC (JLLS) using a discounted cash flow (DCF) analysis. The Board selected the mid-point ($9.22) of the JLLS valuation range ($8.83 to $9.65).
Risks and Contingencies:
- COVID-19 Impact: The filing explicitly notes that the pandemic continues to disrupt financial markets and may materially adversely impact the Company's business, tenants, and asset values. The NAV may need to be reevaluated sooner if the pandemic's impact worsens.
- Valuation Limitations: The estimated NAV is not audited, does not represent GAAP book value, and does not reflect a liquidation value or potential market trading price. It excludes potential portfolio premiums or discounts.
- Sensitivity: A 2.5% increase in discount rates or terminal capitalization rates could decrease the estimated NAV per share by approximately $0.22.
Key Facts for Investor Verification
- Verify the status of the strategic review process and whether a transaction (sale, listing, or merger) has been identified or pursued since March 2021.
- Confirm the impact of the DRIP and SRP suspensions on cash flow for current shareholders.
- Review the specific assumptions regarding the COVID-19 pandemic used in the JLLS valuation report to assess the risk of future NAV adjustments.
- Monitor the Company's debt levels, which increased significantly between late 2019 and late 2020, and the associated interest rate risks.
- Understand that the $9.22 NAV is an estimate as of September 30, 2020, and may not reflect current market conditions or the price at which shares could be sold.