Business context and reporting period
Period: Three months ended March 31, 2021; unaudited. The supplied filing is for Griffin-American Healthcare REIT IV, Inc., not American Healthcare REIT, Inc., as stated in the request metadata.
The REIT owned 89 properties comprising 94 buildings and about 4.9 million square feet, across medical office, senior housing, RIDEA senior housing and skilled nursing. It also held a 6.0% interest in a senior-health-campus joint venture.
Financial performance and position
| Metric | Q1 2021 | Q1 2020 / prior period |
|---|---|---|
| Total revenue | $37.8 million | $37.5 million; up 0.8% |
| Net loss | $4.0 million | $7.9 million loss |
| Net loss per share | $0.05 | $0.10 |
| Segment NOI | $16.6 million | $18.7 million; down 11.1% |
| Operating cash flow | $8.1 million | $9.8 million |
| Cash, including restricted cash | $19.9 million | $18.1 million at Dec. 31, 2020 |
Revenue growth in medical office buildings was partly offset by lower RIDEA resident fees. RIDEA property operating expenses rose to $15.2 million from $13.0 million; segment NOI fell to $0.7 million from $3.1 million. Total segment NOI margin was about 43.9%, compared with 49.8% a year earlier.
Net loss improved largely because derivative fair-value movements shifted from a $4.6 million loss in Q1 2020 to a $1.5 million gain in Q1 2021. Interest expense, including financing-cost amortization but before that derivative gain, was $4.7 million versus $5.3 million. FFO attributable to controlling interest increased to $9.4 million from $5.4 million, while MFFO decreased to $7.6 million from $9.1 million; both are non-GAAP measures.
At March 31, total assets were $1.09 billion and total liabilities $542.9 million. Debt comprised $481.4 million of credit-facility borrowings and $18.6 million of mortgage principal ($17.7 million net). The credit facility had $48.6 million available, carried a 2.08% weighted average rate and matured November 19, 2021. Weighted average effective interest on total debt, including swaps, was 3.35%. The company reported compliance with debt covenants and leverage of 39.7% of the stated combined market value of its real estate investments.
Material changes, outlook and risks
- COVID-19: Average RIDEA occupancy was 67.6%, down from 81.7% a year earlier. Management expected a slow recovery and said occupancy and operating costs remained pressured; labor, testing, PPE and other pandemic costs contributed to higher expenses. Non-RIDEA senior housing and skilled nursing tenants had paid 100% of contractual rent through March, and substantially all medical-office contractual rent through March had been received.
- Liquidity and debt: Management said available resources were expected to cover foreseeable requirements and it did not anticipate needing to raise funds from other sources within 12 months. However, it estimated $481.9 million of principal payments due during the remainder of 2021, primarily the November credit-facility maturity, and intended to pursue a new facility or meet conditions to extend the existing facility. Capital and tenant improvements could require up to $8.3 million for the remainder of 2021.
- Strategic review: A special committee was evaluating alternatives including an asset sale, exchange listing or merger; no transaction was assured. To facilitate a potential transaction, the board suspended the DRIP effective April 1, 2021 and suspended the share repurchase plan for requests received after February 28, 2021.
- Distributions: The annualized rate had been reduced from $0.60 to $0.40 per share. Q1 distributions declared totaled $8.0 million and were funded from operating cash flow, according to the filing. The DRIP suspension means participating investors receive cash distributions rather than reinvested shares beginning with April 2021 distributions.
- Concentration and other risks: One skilled-nursing tenant represented 11.2% of portfolio annualized base rent/NOI at March 31; Missouri and Michigan represented 12.2% and 10.4%, respectively. Variable-rate debt and swaps were LIBOR-linked, creating transition risk. Management reported no material litigation or known material environmental liability. The filing identified no material changes to previously reported risk factors beyond those discussed.
- Other valuation: The board established estimated NAV of $9.22 per share, calculated as of September 30, 2020, versus $9.54 calculated as of December 31, 2019. The filing cautions that this estimate has limitations and is not a market price.
Important facts for investors to verify
- Confirm the issuer identity: this filing is for Griffin-American Healthcare REIT IV, Inc., not the company named in the request.
- Track refinancing or extension of the $481.4 million credit facility due November 2021, including terms, covenants and available liquidity.
- Monitor RIDEA occupancy, labor and pandemic-related costs, as well as tenant rent collections and the financial condition of the concentrated skilled-nursing tenant.
- Review the strategic-alternatives process and any resulting transaction, and confirm the ongoing status of the DRIP, repurchase plan and distributions.
- Assess the basis and limitations of the $9.22 estimated NAV and distinguish GAAP results from FFO, MFFO and NOI.