Business Context and Reporting Period
This Form 8-K, filed on September 27, 2013, by Healthcare Trust of America, Inc. (the "Company"), discloses the acquisition of three medical office building (MOB) assets and provides related historical and pro forma financial information. The report covers acquisitions closed between March 22, 2013, and September 20, 2013. The financial data presented includes historical summaries for the year ended December 31, 2012, and the six months ended June 30, 2013, alongside pro forma consolidated statements assuming the acquisitions occurred on January 1, 2012.
Key Financial Metrics
Acquisition Details
- Texas A&M MOB (Bryan-College Station, TX): Acquired March 22, 2013, for approximately $39.8 million. No debt assumed.
- Lincoln MOB (Denver, CO): Acquired July 29, 2013, for approximately $42.0 million. No debt assumed.
- South Florida MOB Portfolio (Florida): Acquired September 20, 2013, for approximately $62.9 million. Included assumption of approximately $18.0 million in mortgage loans.
Historical Property Performance (Year Ended Dec 31, 2012)
| Property | Total Revenues ($000s) | Total Certain Expenses ($000s) | Revenues in Excess of Expenses ($000s) |
|---|---|---|---|
| Texas A&M MOB | 4,115 | 1,186 | 2,929 |
| Lincoln MOB | 4,574 | 1,698 | 2,876 |
| South Florida Portfolio | 8,146 | 5,706 | 2,440 |
Pro Forma Consolidated Results (Six Months Ended June 30, 2013)
- Total Revenues: $161.1 million (As Reported: $153.7 million).
- Total Expenses: $131.5 million (As Reported: $123.2 million).
- Income from Continuing Operations: $14.0 million (As Reported: $15.3 million).
- Diluted EPS: $0.06 (As Reported: $0.07).
- Pro Forma Debt: $1.13 billion (As Reported: $1.11 billion).
Material Changes vs. Prior Period
The primary material change is the expansion of the Company's real estate portfolio by approximately 667,000 square feet through the three acquisitions. The pro forma financial statements reflect the impact of these acquisitions on the Company's consolidated results. Specifically, the pro forma adjustments for the six months ended June 30, 2013, increased total revenues by $7.4 million and total expenses by $8.3 million, resulting in a net decrease in income from continuing operations of $1.3 million compared to the as-reported figures. This decrease is primarily driven by increased depreciation and amortization ($4.9 million) and interest expense ($0.4 million) associated with the new assets, partially offset by additional rental income.
Guidance, Outlook, and Risks
The filing does not provide specific forward-looking guidance or management commentary regarding future earnings targets beyond the pro forma illustrations. The pro forma statements are explicitly noted as unaudited and subject to estimates and assumptions; they do not purport to be indicative of actual future results.
Risks and Contingencies:
- Tenant Concentration: Significant revenue concentration exists in the acquired properties. For Texas A&M MOB, three tenants represented 87% of 2012 revenues. For Lincoln MOB, two tenants represented 38% of 2012 revenues. For the South Florida Portfolio, one tenant represented 16% of 2012 revenues.
- Lease Expirations: Future minimum lease payments are disclosed, indicating varying lease terms across the portfolio.
- Environmental and Legal: Standard disclosures note potential liability for environmental matters and ordinary course litigation, though management believes these will not have a material adverse effect.
- Subsequent Leasing: New leases executed after June 30, 2013, totaling 18,000 square feet and $0.4 million in annualized base rent, are not reflected in the historical financial summaries.
Investor Verification Checklist
- Verify the final purchase price allocations and fair value assessments for the acquired properties, as the pro forma data relies on preliminary estimates.
- Review the specific lease terms and expiration dates for the major tenants identified in the concentration of credit risk disclosures.
- Confirm the interest rates and maturity dates of the $18.0 million mortgage loans assumed in the South Florida acquisition.
- Assess the impact of the $0.4 million in new annualized base rent from leases executed subsequent to June 30, 2013, on future cash flows.
- Monitor the Company's liquidity position given the cash outflows for acquisitions and the increase in debt obligations.