Business Context and Reporting Period
This Form 8-K, filed on July 18, 2011, by Healthcare Trust of America, Inc. (the "Company"), discloses the acquisition of four distinct real estate portfolios and provides the associated historical and pro forma financial statements. The filing covers acquisitions completed between March 31, 2010, and March 24, 2011. The primary purpose is to incorporate these financial statements into the Company's registration statements.
Key Financial Metrics and Acquisitions
The Company acquired the following properties, with historical financial data provided for specific periods:
- Triad Technology Center (Baltimore, MD): Acquired March 31, 2010, for approximately $29.3 million.
- 2009 Total Revenues: $3.22 million.
- 2009 Revenues in excess of certain expenses: $2.38 million.
- Tenant Concentration: 100% leased to the U.S. government.
- Rendina Portfolio (AZ, FL, MO, NV, NY): Acquired between September and December 2010, for approximately $83.4 million.
- 2009 Total Revenues: $7.81 million.
- 2009 Revenues in excess of certain expenses: $4.31 million.
- Debt Assumed: $18.9 million in mortgage loans (rates 5.97% and 6.49%).
- Holston Medical Portfolio (Bristol, TN): Acquired March 24, 2011, for approximately $23.4 million.
- 2010 Total Revenues: $2.21 million.
- 2010 Revenues in excess of certain expenses: $1.33 million.
- Tenant Concentration: Three tenants accounted for 17%, 16%, and 12% of revenues.
- Select Medical Portfolio (FL, GA, TX): Acquired December 17, 2010, for approximately $102.0 million.
- Consists of four long-term acute care hospitals (209 beds).
- 100% leased to Select Specialty Hospital entities, guaranteed by Select Medical Corporation.
- Historical property financial statements were not provided; instead, summary data for the guarantor (Select Medical Corporation) was included.
Pro Forma Financial Impact
The filing includes unaudited pro forma condensed consolidated statements of operations assuming all acquisitions occurred on January 1, 2010.
- Year Ended December 31, 2010:
- Pro Forma Total Revenues: $220.61 million (As Reported: $199.88 million).
- Pro Forma Income (Loss) from Continuing Operations: $(1.49) million (As Reported: $(9.42) million).
- Pro Forma Loss per Share: $(0.01) (As Reported: $(0.06)).
- Three Months Ended March 31, 2011:
- Pro Forma Total Revenues: $70.84 million (As Reported: $70.06 million).
- Pro Forma Income from Continuing Operations: $1.68 million (As Reported: $1.45 million).
- Pro Forma Income per Share: $0.01 (As Reported: $0.01).
Material Changes, Risks, and Contingencies
Material Changes: The pro forma adjustments reflect significant increases in rental income, depreciation, and amortization due to the new assets. The acquisitions were funded through a combination of debt financing and proceeds from initial and follow-on public offerings (shares offered at $10.00).
Risks and Contingencies:
- Tenant Concentration: The Triad Technology Center is 100% dependent on a single tenant (U.S. government). The Holston portfolio relies heavily on three tenants.
- Guarantor Credit Risk: The Select Medical Portfolio's performance is tied to the creditworthiness of Select Medical Corporation, the guarantor of the leases.
- Environmental and Legal: Standard disclosures note potential liability for environmental matters and ordinary course litigation, though management believes these will not have a material impact.
- Pro Forma Limitations: The pro forma financial statements are based on preliminary estimates of fair value and are not indicative of actual future results.
Investor Verification Checklist
- Verify the creditworthiness and financial stability of Select Medical Corporation, the guarantor for the $102 million Select Medical Portfolio.
- Review the lease terms and renewal options for the Triad Technology Center, given its 100% reliance on the U.S. government as a tenant.
- Confirm the final purchase price allocations for the acquired properties, as depreciation and amortization expenses are currently based on preliminary estimates.
- Assess the impact of the $18.9 million in assumed mortgage debt on the Rendina Portfolio's cash flow.
- Monitor the Company's liquidity and capitalization following the funding of these acquisitions via public offerings and debt.