SANTA ANA, Calif., March 11, 2011 /PRNewswire/ -- Grubb & Ellis
Healthcare REIT II, Inc. today announced operating results for the
company's fourth quarter and year ended Dec.
31, 2010.
"Despite the fact that Grubb & Ellis Healthcare REIT II only
began acquiring assets in March 2010,
the company's fourth quarter modified funds from operations of
$1.8 million nearly equals our
distributions paid of $1.83 million,"
said Danny Prosky, president and
chief operating officer of Grubb & Ellis Healthcare REIT II.
"As we've often said, our focus has been, and will remain,
building and managing the best non-traded REIT in the industry that
provides its investors with distribution sustainability and
superior long-term financial performance. Our first full year of
operations has exceeded our expectations, during which we completed
14 acquisitions totaling 25 buildings for an aggregate of more than
$193 million and achieved quarterly
growth in net operating income and modified funds from operations
as a result of such acquisitions."
2010 Highlights and Recent Accomplishments
- Completed fourth quarter and 2010 acquisitions totaling
$55.4 million and $193.4 million, respectively, based on purchase
price.
- Declared and paid quarterly distributions equal to an
annualized rate of 6.5 percent to stockholders of record, based
upon a $10.00 per share offering
price. The company's board of directors intends to continue to
declare distributions on a quarterly basis.
- Company's property portfolio achieved an aggregate average
occupancy of 98 percent as of Dec. 31,
2010.
- Established a secured revolving line of credit with Bank of
America, N.A. for $25 million.
- Fourth quarter modified funds from operations, or MFFO, as
defined by the Investment Program Association, or IPA, of
approximately $1.8 million nearly
equals distributions paid of approximately $1.83 million. (Please see financial
reconciliation tables and notes at the end of this release for more
information regarding modified funds from operations.)
- Fourth quarter net operating income, or NOI, totaled
approximately $3.7 million. For the
year, NOI totaled approximately $6.5
million. (Please see financial reconciliation tables and
notes at the end of this release for more information regarding
NOI.)
Fourth Quarter and Recent Acquisition Highlights
Continued to expand assets under management with accretive
acquisitions:
- In October, the company acquired Athens Long-Term Acute Care
Hospital in Athens, Ga. for
approximately $12.3 million.
- In November, the company completed an $11.4 million acquisition of a medical office
building in Sylva, N.C.
- In December, the company acquired Humble Surgical Hospital near
Houston for $13.1 million, a medical office building in
Ennis, Texas for $7.1 million and two medical office buildings in
Lawton, Okla. for a combined total
of approximately $11.6 million.
- Total assets grew from $138
million at the close of the third quarter to more than
$193 million at the close of the
fourth quarter.
- Subsequent to the close of the fourth quarter, the company
acquired Columbia Long-Term Acute Care Hospital in Columbia, Mo. for approximately $12.4 million.
"Frankly, we are thrilled with our results for 2010," said
Prosky. "We are raising more equity each quarter and deploying it
efficiently by acquiring assets that are immediately accretive and
support our distribution rate. We are meeting or exceeding nearly
all of our projections for performance and we couldn't be more
proud to have established what is, according to widely accepted
industry standards, already among the best performing non-traded
REITs in the country."
Conference Call Information
The company has scheduled a conference call to discuss its
fourth quarter and year ended 2010 results on Thursday, March 17, 2011 at 12:30 pm Eastern Time. The conference call may be
accessed by dialing 1.800.942.7925. Callers should reference the
"Grubb & Ellis Healthcare REIT II call" to the operator when
dialing in to the conference.
FINANCIAL TABLES AND NOTES FOLLOW
GRUBB &
ELLIS HEALTHCARE REIT II, INC.
CONSOLIDATED BALANCE
SHEETS
As of
December 31, 2010 and 2009
|
|
|
|
|
|
December
31,
|
|
|
|
|
|
2010
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
Real estate
investments:
|
|
|
|
|
|
|
|
Operating properties,
net
|
$
|
163,335,000
|
|
$
|
—
|
|
Cash and cash
equivalents
|
|
6,018,000
|
|
|
13,773,000
|
|
Accounts and other receivables,
net
|
|
241,000
|
|
|
—
|
|
Restricted cash
|
|
2,816,000
|
|
|
—
|
|
Real estate and escrow
deposits
|
|
649,000
|
|
|
—
|
|
Identified intangible assets,
net
|
|
28,568,000
|
|
|
—
|
|
Other assets, net
|
|
2,369,000
|
|
|
36,000
|
|
|
Total assets
|
$
|
203,996,000
|
|
$
|
13,809,000
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Mortgage loans payable,
net
|
$
|
58,331,000
|
|
$
|
—
|
|
|
Line of credit
|
|
11,800,000
|
|
|
—
|
|
|
Accounts payable and accrued
liabilities
|
|
3,356,000
|
|
|
178,000
|
|
|
Accounts payable due to
affiliates
|
|
840,000
|
|
|
347,000
|
|
|
Derivative financial
instruments
|
|
453,000
|
|
|
—
|
|
|
Identified intangible
liabilities, net
|
|
502,000
|
|
|
—
|
|
|
Security deposits, prepaid rent
and other liabilities
|
|
3,352,000
|
|
|
—
|
|
|
|
Total liabilities
|
|
78,634,000
|
|
|
525,000
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and
contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
|
|
|
|
Stockholders' equity:
|
|
|
|
|
|
|
|
|
Preferred stock, $0.01 par
value; 200,000,000 shares authorized; none issued and
outstanding
|
|
—
|
|
|
—
|
|
|
|
Common stock, $0.01 par
value; 1,000,000,000 shares authorized; 15,452,668 and
1,532,268 shares issued and outstanding as of December 31,
2010 and 2009, respectively
|
|
154,000
|
|
|
15,000
|
|
|
|
Additional paid-in
capital
|
|
137,657,000
|
|
|
13,549,000
|
|
|
|
Accumulated deficit
|
|
(12,571,000)
|
|
|
(281,000)
|
|
|
|
|
Total stockholders’
equity
|
|
125,240,000
|
|
|
13,283,000
|
|
|
Noncontrolling
interests
|
|
122,000
|
|
|
1,000
|
|
|
|
Total equity
|
|
125,362,000
|
|
|
13,284,000
|
|
|
|
|
Total liabilities and
equity
|
$
|
203,996,000
|
|
$
|
13,809,000
|
|
|
|
|
|
|
|
|
|
|
GRUBB &
ELLIS HEALTHCARE REIT II, INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS
For the Year
Ended December 31, 2010 and for the Period from
January 7,
2009 (Date of Inception) through December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period
from
|
|
|
|
|
|
|
|
January 7,
2009
|
|
|
|
|
|
|
|
(Date of
Inception)
|
|
|
|
|
|
Year
Ended
|
|
through
|
|
|
|
|
|
December 31,
2010
|
|
December 31,
2009
|
|
|
|
|
|
|
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
Rental income
|
$
|
8,682,000
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
Rental expenses
|
|
2,201,000
|
|
|
—
|
|
|
General and
administrative
|
|
1,670,000
|
|
|
268,000
|
|
|
Acquisition related
expenses
|
|
7,099,000
|
|
|
18,000
|
|
|
Depreciation and
amortization
|
|
3,591,000
|
|
|
—
|
|
|
|
|
Total expenses
|
|
14,561,000
|
|
|
286,000
|
|
Loss from
operations
|
|
(5,879,000)
|
|
|
(286,000)
|
|
Other income
(expense):
|
|
|
|
|
|
|
|
Interest expense (including
amortization of deferred financing costs and debt
discount):
|
|
|
|
|
|
|
|
|
Interest expense
|
|
(1,416,000)
|
|
|
—
|
|
|
|
Loss in fair value of derivative
financial instruments
|
|
(143,000)
|
|
|
—
|
|
|
Interest income
|
|
15,000
|
|
|
4,000
|
|
Net loss
|
|
(7,423,000)
|
|
|
(282,000)
|
|
|
Less: Net (income) loss
attributable to noncontrolling interests
|
|
(1,000)
|
|
|
1,000
|
|
Net loss attributable to
controlling interest
|
$
|
(7,424,000)
|
|
$
|
(281,000)
|
|
Net loss per common share
attributable to controlling interest — basic and
diluted
|
$
|
(0.99)
|
|
$
|
(1.51)
|
|
Weighted average number of
common shares outstanding — basic and diluted
|
|
7,471,184
|
|
|
186,330
|
|
|
|
|
|
|
|
|
|
|
GRUBB & ELLIS HEALTHCARE REIT II, INC.
NET OPERATING INCOME RECONCILIATION
For the Quarter Ended December 31,
2010, For the Year Ended December 31,
2010 and For the Period from January
7, 2009 (Date of Inception) through December 31, 2009
Net operating income is a financial measure that does not
conform to accounting principles generally accepted in the United States of America, or GAAP, or a
non-GAAP measure. It is defined as net income, computed in
accordance with GAAP, generated from properties before general and
administrative expenses, acquisition related expenses, depreciation
and amortization, interest expense and interest income. The company
believes that net operating income is useful for investors as it
provides an accurate measure of the operating performance of its
operating assets because net operating income excludes certain
items that are not associated with the management of the
properties. Additionally, the company believes that net operating
income is a widely accepted measure of comparative operating
performance in the real estate community. However, the company's
use of the term net operating income may not be comparable to that
of other real estate companies as they may have different
methodologies for computing this amount.
The following is a reconciliation of net loss, which is the most
directly comparable GAAP financial measure, to net operating income
for the quarter ended December 31,
2010, for the year ended December 31,
2010 and for the period from January 7, 2009 (Date of
Inception) through December 31,
2009:
|
|
|
|
|
|
Period
from
|
|
|
|
|
|
|
|
January 7,
2009
|
|
|
|
Quarter
Ended
|
|
|
|
(Date of
Inception)
|
|
|
|
December 31,
2010
|
|
Year
Ended
|
|
through
|
|
|
|
(unaudited)
|
|
December 31,
2010
|
|
December 31,
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(1,631,000)
|
|
$
|
(7,423,000)
|
|
$
|
(282,000)
|
|
Add:
|
|
|
|
|
|
|
|
|
|
|
General and
administrative
|
|
622,000
|
|
|
1,670,000
|
|
|
268,000
|
|
Acquisition related
expenses
|
|
1,920,000
|
|
|
7,099,000
|
|
|
18,000
|
|
Depreciation and
amortization
|
|
1,869,000
|
|
|
3,591,000
|
|
|
—
|
|
Interest expense
|
|
933,000
|
|
|
1,559,000
|
|
|
—
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
(1,000)
|
|
|
(15,000)
|
|
|
(4,000)
|
|
Net operating income
|
$
|
3,712,000
|
|
$
|
6,481,000
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
GRUBB & ELLIS HEALTHCARE REIT II, INC.
FFO AND MFFO RECONCILIATION
For the Quarter Ended December 31,
2010, For the Year Ended December 31,
2010 and For the Period from January
7, 2009 (Date of Inception) through December 31, 2009
Due to certain unique operating characteristics of real estate
companies, the National Association of Real Estate Investment
Trusts, or NAREIT, an industry trade group, has promulgated a
measure known as funds from operations, or FFO, which the company
believes to be an appropriate supplemental measure to reflect the
operating performance of a real estate investment trust, or REIT.
The use of FFO is recommended by the REIT industry as a
supplemental performance measure. FFO is not equivalent to our net
income or loss as determined under GAAP.
The company defines FFO, a non-GAAP measure, consistent with the
standards established by the White Paper on FFO approved by the
Board of Governors of NAREIT, as revised in February 2004, or
the White Paper. The White Paper defines FFO as net income or loss
computed in accordance with GAAP, excluding gains or losses from
sales of property but including asset impairment writedowns, plus
depreciation and amortization, and after adjustments for
unconsolidated partnerships and joint ventures. Adjustments for
unconsolidated partnerships and joint ventures are calculated to
reflect FFO. The company's FFO calculation complies with NAREIT's
policy described above.
The historical accounting convention used for real estate assets
requires straight-line depreciation of buildings and improvements,
which implies that the value of real estate assets diminishes
predictably over time. Since real estate values historically rise
and fall with market conditions, presentations of operating results
for a REIT, using historical accounting for depreciation, the
company believes, may be less informative. As a result, the company
believes that the use of FFO, which excludes the impact of real
estate related depreciation and amortization, provides a more
complete understanding of the company's performance to investors
and to management, and when compared year over year, reflects the
impact on the company's operations from trends in occupancy rates,
rental rates, operating costs, general and administrative expenses,
and interest costs, which is not immediately apparent from net
income.
However, changes in the accounting and reporting rules under
GAAP (for acquisition fees and expenses from a
capitalization/depreciation model to an expensed-as-incurred model)
that have been put into effect since the establishment of NAREIT's
definition of FFO have prompted an increase in the non-cash and
non-operating items included in FFO. In addition, the company views
fair value adjustments of derivatives, and impairment charges and
gains and losses from dispositions of assets as items which are
typically adjusted for when assessing operating performance.
Lastly, publicly registered, non-listed REITs typically have a
significant amount of acquisition activity and are substantially
more dynamic during their initial years of investment and operation
and therefore require additional adjustments to FFO in evaluating
performance. Due to these and other unique features of publicly
registered, non-listed REITs, the Investment Program Association,
an industry trade group, has standardized a measure known as MFFO,
which the company believes to be another appropriate supplemental
measure to reflect the operating performance of a REIT. The use of
MFFO is recommended by the IPA as a supplemental performance
measure for publicly registered, non-listed REITs. MFFO is a metric
used by management to evaluate sustainable performance and dividend
policy. MFFO is not equivalent to the company's net income or loss
as determined under GAAP.
The company defines MFFO, a non-GAAP measure, consistent with
the IPA's Guideline 2010-01, Supplemental Performance Measure for
Publicly Registered, Non-Listed REITs: Modified Funds from
Operations, or the Practice Guideline, issued by the IPA in
November 2010. The Practice Guideline
defines MFFO as FFO further adjusted for the following items
included in the determination of GAAP net income: acquisition fees
and expenses; amounts relating to deferred rent receivables and
amortization of above and below market leases and liabilities;
accretion of discounts and amortization of premiums on debt
investments; nonrecurring impairments of real estate-related
investments; mark-to-market adjustments included in net income;
nonrecurring gains or losses included in net income from the
extinguishment or sale of debt, hedges, foreign exchange,
derivatives or securities holdings where trading of such holdings
is not a fundamental attribute of the business plan, unrealized
gains or losses resulting from consolidation from, or
deconsolidation to, equity accounting, and after adjustments for
consolidated and unconsolidated partnerships and joint ventures,
with such adjustments calculated to reflect MFFO on the same basis.
The company's MFFO calculation complies with the IPA's Practice
Guideline described above. In calculating MFFO, the company
excludes acquisition related expenses, amortization of above and
below market leases, fair value adjustments of derivative financial
instruments, deferred rent receivables and the adjustments of such
items related to noncontrolling interests. The other adjustments
included in the IPA's Practice Guideline are not applicable to the
company for the quarter ended December 31,
2010, for the year ended December 31,
2010 and for the period from January
7, 2009 (Date of Inception) through December 31, 2009.
Presentation of this information is intended to assist in
comparing the operating performance of different REITs, although it
should be noted that not all REITs calculate FFO and MFFO the same
way, so comparisons with other REITs may not be meaningful.
Furthermore, FFO and MFFO are not necessarily indicative of cash
flow available to fund cash needs and should not be considered as
an alternative to net income (loss) as an indication of the
company's performance, as an indication of its liquidity, or
indicative of funds available to fund its cash needs including its
ability to make distributions to its stockholders. FFO and MFFO
should be reviewed in conjunction with other measurements as an
indication of our performance.
The following is a reconciliation of net loss, which is the most
directly comparable GAAP financial measure, to FFO and MFFO for the
quarter ended December 31, 2010, for
the year ended December 31, 2010 and
for the period from January 7, 2009 (Date of Inception)
through December 31, 2009.
|
|
|
|
|
|
Period
from
|
|
|
|
|
|
|
|
January 7,
2009
|
|
|
|
Quarter
Ended
|
|
|
|
(Date of
Inception)
|
|
|
|
December 31,
2010
|
|
Year
Ended
|
|
through
|
|
|
|
(unaudited)
|
|
December 31,
2010
|
|
December 31,
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(1,631,000)
|
|
$
|
(7,423,000)
|
|
$
|
(282,000)
|
|
Add:
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
|
|
|
|
|
|
|
|
— consolidated
properties
|
|
1,869,000
|
|
|
3,591,000
|
|
|
—
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
Net (income) loss attributable
to noncontrolling interests
|
|
—
|
|
|
(1,000)
|
|
|
1,000
|
|
Depreciation and amortization
related to noncontrolling interests
|
|
(2,000)
|
|
|
(4,000)
|
|
|
—
|
|
FFO
|
|
$
|
236,000
|
|
$
|
(3,837,000)
|
|
$
|
(281,000)
|
|
|
|
|
|
|
|
|
|
|
|
|
Add:
|
|
|
|
|
|
|
|
|
|
|
Acquisition related
expenses
|
$
|
1,920,000
|
|
$
|
7,099,000
|
|
$
|
18,000
|
|
Amortization of above and below
market leases
|
|
30,000
|
|
|
79,000
|
|
|
—
|
|
Loss in fair value of derivative
financial instruments
|
|
(51,000)
|
|
|
143,000
|
|
|
—
|
|
Deferred rent receivables
related to noncontrolling interests
|
|
1,000
|
|
|
1,000
|
|
|
—
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
Deferred rent
receivables
|
|
(335,000)
|
|
|
(576,000)
|
|
|
—
|
|
MFFO
|
|
$
|
1,801,000
|
|
$
|
2,909,000
|
|
$
|
(263,000)
|
|
Weighted average common shares
outstanding — basic and diluted
|
|
12,765,174
|
|
|
7,471,184
|
|
|
186,330
|
|
|
|
|
|
|
|
|
|
|
|
|
FFO per common share — basic and
diluted
|
$
|
0.02
|
|
$
|
(0.51)
|
|
$
|
(1.51)
|
|
|
|
|
|
|
|
|
|
|
|
|
MFFO per common share — basic
and diluted
|
$
|
0.14
|
|
$
|
0.39
|
|
$
|
(1.41)
|
|
|
|
|
|
|
|
|
|
|
|
About Grubb & Ellis Healthcare REIT II
Grubb & Ellis Healthcare REIT II, Inc. intends to qualify as
a real estate investment trust that seeks to preserve, protect and
return investors' capital contributions, pay regular cash
distributions, and realize growth in the value of its investments
upon the ultimate sale of such investments. Grubb & Ellis
Healthcare REIT II is seeking to raise up to approximately
$3 billion in equity and to acquire a
diversified portfolio of real estate assets, focusing primarily on
medical office buildings and other healthcare-related facilities.
Grubb & Ellis Healthcare REIT II is sponsored by Grubb &
Ellis Company (NYSE: GBE). Grubb & Ellis is one of the largest
and most respected commercial real estate services and investment
companies in the world. Grubb & Ellis Company's 5,200
professionals in more than 100 company-owned and affiliate offices
draw from a unique platform of real estate services, practice
groups and investment products to deliver comprehensive, integrated
solutions to real estate owners, tenants and investors. The firm's
transaction, management, consulting and investment services are
supported by highly regarded proprietary market research and
extensive local expertise. Through its investment subsidiaries, the
company is a leading sponsor of real estate investment programs
that provide individuals and institutions the opportunity to invest
in a broad range of real estate investment vehicles, including
publicly registered non-traded REITs, mutual funds, separate
accounts and other real estate investment funds. For more
information, visit www.grubb-ellis.com.
This release contains certain forward-looking statements (under
Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended) with
respect to the success of our company, our ability to provide our
investors distribution sustainability and superior long-term
financial performance, whether we will be able to maintain our
current distribution rate, whether we can continue to improve our
net operating income and modified funds of operations, whether we
can maintain the financial results experienced in the year ended
December 31, 2010, and whether we can
continue to raise sufficient equity in our initial public offering
and deploy it efficiently by acquiring assets. Because such
statements include risks, uncertainties and contingencies, actual
results may differ materially from those expressed or implied by
such forward-looking statements. These risks, uncertainties and
contingencies include, but are not limited to, the following: our
strength and financial condition and uncertainties relating to the
financial strength of our current and future real estate
investments; uncertainties relating to our ability to continue to
maintain the current coverage of our investor distributions;
uncertainties relating to the local economies where our real estate
investments are located; uncertainties relating to changes in
general economic and real estate conditions; uncertainties
regarding changes in the healthcare industry; uncertainties
relating to the implementation of recent healthcare legislation;
the uncertainties relating to the implementation of our real estate
investment strategy; and other risk factors as outlined in the
company's prospectus, as amended from time to time, and as detailed
from time to time in our periodic reports, as filed with the U.S.
Securities and Exchange Commission. Forward-looking statements in
this document speak only as of the date on which such statements
were made, and we undertake no obligation to update any such
statements that may become untrue because of subsequent events.
THIS IS NEITHER AN OFFER TO SELL NOR AN OFFER TO BUY ANY
SECURITIES DESCRIBED HEREIN. OFFERINGS ARE MADE ONLY BY MEANS
OF A PROSPECTUS OR OFFERING MEMORANDUM.
SOURCE Grubb & Ellis Healthcare REIT II, Inc.