SEC Filing Summary: NNN Healthcare/Office REIT, Inc. (10-Q)
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended September 30, 2006, and the period from the company's inception on April 28, 2006, through September 30, 2006. NNN Healthcare/Office REIT, Inc. is a Maryland corporation in the pre-operational stage, conducting a best-efforts initial public offering (IPO) to raise capital for the acquisition of medical office buildings and healthcare-related facilities. The company intends to elect to be treated as a Real Estate Investment Trust (REIT) for federal income tax purposes. As of the reporting date, the company has not acquired any real estate assets.
Key Financial Metrics
| Metric | Period Ended Sept 30, 2006 |
|---|---|
| Total Assets | $202,000 (Cash only) |
| Total Liabilities | $18,826 (Accrued liabilities) |
| Stockholders' Equity | $(16,826) (Deficit) |
| Net Loss | $(49,659) |
| Net Loss Per Share (Basic/Diluted) | $(141.88) |
| Cash Flow from Operations | $0 |
| Cash Flow from Financing | $202,000 |
| Debt | $0 (No outstanding debt) |
| Shares Outstanding | 15,200 |
Material Changes and Operational Status
The company is in the "offering stage" and has not yet commenced real estate operations. Consequently, there is no revenue, operating margin, or Funds From Operations (FFO) derived from property assets. The net loss of approximately $50,000 is entirely attributable to general and administrative expenses, including directors' fees ($12,000), directors' and officers' insurance ($7,000), and stock-based compensation ($31,000) related to restricted stock grants to independent directors. The company's cash balance of $202,000 consists of initial capital contributions from the Advisor ($200,000) and the company ($2,000).
Outlook, Risks, and Subsequent Events
- Offering Status: As of November 8, 2006, the company had received subscriptions for only 8,826 shares ($84,610). The minimum offering requirement is 200,000 shares ($2,000,000) by September 20, 2007. If this minimum is not met, the offering will terminate, and funds will be returned to subscribers.
- Property Acquisitions: On October 4, 2006, the board authorized the acquisition of two properties in Indiana (Crawfordsville Medical Office Park and Southpointe Office Parke) with a combined purchase price of $21.7 million. These acquisitions are contingent upon raising the minimum offering and securing debt financing.
- Distribution Policy: The board approved an initial distribution rate of 6.5% per annum, payable monthly, contingent upon the closing of property acquisitions.
- Risk Factors: Significant risks include the failure to raise the minimum offering, the lack of a public market for shares, and an ongoing SEC investigation into the company's Sponsor (Triple Net Properties, LLC) regarding prior securities offerings. Additionally, the company faces conflicts of interest as it is externally advised by an affiliate of the Sponsor.
Investor Verification Checklist
- Verify the current status of the IPO and whether the $2,000,000 minimum offering threshold has been met.
- Confirm the outcome of the SEC investigation into Triple Net Properties, LLC, and its potential impact on the Advisor's ability to manage the REIT.
- Assess the likelihood of closing the two authorized Indiana property acquisitions given the current low level of capital raised.
- Review the terms of the Advisory Agreement, specifically the subordinated participation interest that entitles the Advisor to 15% of net sales proceeds after stockholders receive an 8% cumulative return.
- Monitor the company's ability to maintain REIT qualification status once operations commence.