Business Context and Reporting Period
This Form 8-K filing by Griffin-American Healthcare REIT IV, Inc. (American Healthcare REIT, Inc.) covers events occurring on September 28, 2018, and October 1, 2018. The registrant is an emerging growth company focused on acquiring and leasing healthcare real estate, specifically skilled nursing facilities (SNFs).
Key Financial Metrics and Transactions
- Missouri SNF Portfolio Acquisition: Acquired 8 skilled nursing facilities for a contract purchase price of $88,200,000 plus closing costs. The portfolio includes approximately 385,000 square feet and 1,112 beds.
- Missouri Master Lease: Entered into a 15-year absolute net lease with RC Tier Properties, L.L.C. (affiliate of Reliant Care Management Group). Initial annual base rent is $7,629,000.
- Trilogy Joint Venture Investment: Acquired a 6% membership interest in Trilogy REIT Holdings, LLC for $48,000,000 in cash. The estimated gross enterprise value of the Joint Venture is $93,154,000.
- Debt and Liquidity: Entered into a Second Amendment to the Credit Agreement, increasing the term loan commitment by $150,000,000. Total aggregate borrowing capacity is now $350,000,000. As of September 28, 2018, outstanding borrowings were $200,000,000 with $150,000,000 remaining available.
- Advisor Fees: Paid base acquisition fees of approximately $1,985,000 for the Missouri portfolio and $2,096,000 for the Trilogy investment. Contingent fees of equal amounts have been accrued.
Material Changes and Pending Transactions
- Songbird SNF Portfolio: Entered into a fourth amendment to the purchase agreement extending the due diligence period to October 5, 2018. The acquisition of 24 healthcare facilities for $78,500,000 is anticipated to close in the fourth quarter of 2018, though no assurance is given.
- Capital Structure: The credit facility expansion supports the recent acquisitions and future growth, increasing total capacity from $200,000,000 to $350,000,000.
Outlook, Risks, and Management Commentary
- Financing Strategy: Recent acquisitions were financed using a combination of cash on hand and borrowings under the amended Credit Facilities with Bank of America and KeyBank.
- Joint Venture Governance: The 6% stake in the Trilogy Joint Venture does not initially provide board representation or voting rights unless the registrant becomes a "Qualifying Member." The registrant is subject to drag-along and forced sale rights.
- Risks: The closing of the Songbird SNF Portfolio acquisition is subject to substantial conditions and is not guaranteed. The Missouri Master Lease includes rent escalations tied to the Consumer Price Index (CPI) with a 2% floor and 3% cap.
Investor Verification Checklist
- Verify the final closing status and date of the Songbird SNF Portfolio acquisition ($78.5M).
- Confirm the specific interest rates and covenants associated with the $150M increase to the term loan facility.
- Review the conditions precedent required to trigger the accrued contingent advisor fees ($1.985M for Missouri, $2.096M for Trilogy).
- Assess the creditworthiness of the new tenant, RC Tier Properties, L.L.C., and its guarantors for the Missouri portfolio.
- Monitor the registrant's ability to achieve "Qualifying Member" status in the Trilogy Joint Venture to secure board representation.