Business Context and Reporting Period
Company: Griffin-American Healthcare REIT IV, Inc. (American Healthcare REIT, Inc.)
Filing Type: Form 8-K (Current Report)
Date of Report: April 4, 2019
Valuation Date: December 31, 2018
Context: The Company announced an updated estimated per share Net Asset Value (NAV) for its Class T and Class I common stock. This valuation was performed to assist broker-dealers with FINRA obligations regarding customer account statements and to update pricing for the Distribution Reinvestment Plan (DRIP) and Share Repurchase Plan (SRP).
Key Financial Metrics
The filing focuses on asset valuation rather than operating income statements. Key metrics as of December 31, 2018, include:
- Estimated Per Share NAV: $9.54 (Class T and Class I common stock).
- Total Estimated Net Asset Value: $660,817,000.
- Fully Diluted Shares Outstanding: 69,255,179.
- Appraised Properties and Other Properties: $915,567,000 (Estimated Value).
- Debt Liabilities: $292,025,000 (Estimated Value).
- Cash and Other Assets: $32,421,000.
- Equity Investment in Trilogy: $48,000,000.
Material Changes Versus Prior Period
Comparing the valuation as of December 31, 2018, to December 31, 2017:
- NAV Per Share: Decreased from $9.65 to $9.54.
- Total Net Asset Value: Increased from $407,099,000 to $660,817,000.
- Share Count: Increased significantly from 42,207,368 to 69,255,179 fully diluted shares.
- Asset Base: Appraised properties value increased from $517,909,000 to $915,567,000, driven by in-period acquisitions and capital investments.
- Debt: Debt liabilities increased from $95,568,000 to $292,025,000.
Note: Year-over-year amounts may not be directly comparable due to changes in the equity base, share count, and acquisitions.
Guidance, Outlook, and Risks
Management Commentary and Plans:
- DRIP Update: Commencing with the May 2019 distribution, shares issued under the DRIP will be priced at $9.54 per share.
- SRP Update: Effective for the quarter ending June 30, 2019, the repurchase price will be the lesser of the stockholder's cost basis or $9.54 per share.
- Future Valuations: The Company intends to publish an updated estimated per share NAV on at least an annual basis.
Risks and Contingencies:
- Valuation Limitations: The estimated NAV is not audited, does not represent GAAP fair value, and does not reflect liquidation value or potential market trading prices.
- Sensitivity: A 2.5% change in discount rates or terminal capitalization rates could impact the estimated value per share by approximately $0.16 to $0.17.
- Assumptions: The valuation relies on forward-looking assumptions regarding occupancy, rental rates, and capitalization rates which may prove inaccurate.
- Exclusions: The NAV does not reflect a discount for external management, potential disposition costs, or a portfolio premium/discount.
Important Facts for Investor Verification
- Verify the specific composition of the 56 appraised properties and the 5 assets acquired at acquisition prices included in the $915.6 million asset value.
- Confirm the terms of the joint venture interests in the Central Florida Senior Housing Portfolio and Pinnacle Portfolio, as these were adjusted for partner interests.
- Review the specific discount rates (6.87% - 8.95%) and terminal capitalization rates (6.42% - 8.15%) used in the DCF analysis to understand valuation sensitivity.
- Note that the $9.54 NAV is the mid-point of a range ($9.29 - $9.94) provided by the independent valuation firm, CBRE Capital Advisors, Inc.
- Understand that the NAV does not account for future stockholder servicing fees or costs associated with an exit strategy (e.g., listing on an exchange).