Business Context and Reporting Period
This Form 8-K, filed on December 21, 2012 (reporting date January 13, 2012), discloses the acquisition of three healthcare real estate properties by Healthcare Trust of America, Inc. The filing includes audited historical financial statements for the properties for the year ended December 31, 2011, and unaudited pro forma financial information for the Company for the nine months ended September 30, 2012, and the year ended December 31, 2011.
Key Financial Metrics
Acquisition Details
- St. John Providence MOB (Novi, MI): Acquired Jan 13, 2012, for approx. $51.3 million. 203,000 sq. ft.
- Penn Avenue Place (Pittsburgh, PA): Acquired Mar 1, 2012, for approx. $54.0 million. 558,000 sq. ft.
- Rush MOB (Oak Park, IL): Acquired Aug 14, 2012, for approx. $54.0 million. 139,000 sq. ft.
Historical Property Performance (Year Ended Dec 31, 2011)
| Property | Total Revenues ($000s) | Certain Expenses ($000s) | Net Operating Income ($000s) |
|---|---|---|---|
| St. John Providence MOB | 6,621 | 2,220 | 4,401 |
| Penn Avenue Place | 8,099 | 3,283 | 4,816 |
| Rush MOB | 5,359 | 1,179 | 4,180 |
Pro Forma Company Performance
Nine Months Ended Sept 30, 2012: Pro Forma Net Loss attributable to controlling interest was $(21.7) million, compared to an As Reported loss of $(22.6) million. Pro Forma Total Revenues were $228.3 million.
Year Ended Dec 31, 2011: Pro Forma Net Income attributable to controlling interest was $4.7 million, compared to As Reported income of $5.5 million. Pro Forma Total Revenues were $292.7 million.
Material Changes and Financing
The acquisitions were funded using unsecured debt financing from Healthcare Trust of America, Inc. and a note receivable secured by the Rush MOB. No mortgage loans were assumed in the acquisitions. The pro forma adjustments reflect increased rental income, depreciation, amortization, and interest expense associated with the new properties.
Tenant Concentration Risks
- St. John Providence MOB: One tenant accounted for approximately 31% of total revenues in 2011.
- Penn Avenue Place: One tenant accounted for approximately 97% of total revenues in 2011.
- Rush MOB: 100% leased to a single tenant for the periods presented.
Outlook, Risks, and Contingencies
Management states that after reasonable inquiry, they are not aware of any material factors that would cause the reported financial information to be not indicative of future operating results. The pro forma financial statements are unaudited and subject to estimates regarding fair value allocations.
Contingencies: The properties may be subject to ordinary course legal claims and environmental liabilities. Management believes these will not have a material adverse effect on operations. No environmental non-compliance has been notified by governmental authorities.
Investor Verification Checklist
- Verify the creditworthiness of the single tenants controlling 97% (Penn Avenue) and 100% (Rush MOB) of revenues.
- Review the terms of the unsecured debt financing used to acquire the properties to assess interest rate exposure.
- Confirm the status of the ground lease obligation for St. John Providence MOB, which has significant future minimum payments ($24.3 million for 2017 and thereafter).
- Monitor the impact of increased depreciation and amortization on future Net Income per share.