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During the first quarter of 2018, the Company acquired three real estate properties totaling approximately 38,000 square feet for an aggregate purchase price and cash consideration of approximately $12.7 million. Upon acquisition, the properties were 100% leased in the aggregate with lease expirations ranging from 2018 through 2033.
In addition, in late 2017, the Company purchased $11.45 million face value of certain promissory notes, secured by accounts receivable of our bankrupt borrower ("Borrower"), for $8.75 million from a syndicate of banks, a $2.7 million discount to face value, and in the first quarter of 2018, acquired $2.2 million of certain promissory notes, secured by the operations of two facilities related to our Borrower, which were not included in the bankruptcy, for a total investment in these notes of approximately $10.95 million.
On April 25, 2018, the Company provided a new $23.0 million loan to a newly formed company (Newco), secured by all assets and ownership interests in seven long-term acute care hospitals and one inpatient rehabilitation hospital that, along with a series of investments by the management of Newco, allowed Newco to acquire certain assets of the Borrower.
Also on April 25, 2018, $10.95 million for the promissory notes discussed above and approximately $0.261 million of interest on those promissory notes and approximately $0.25 million in fees and reimbursement of expenses and approximately $6.7 million principal and accrued interest related to its mortgage note receivable were satisfied with proceeds from the new loan. In addition, the Company received title to the property previously financed by the mortgage note receivable at an approximate $4.5 million valuation.
The Company has two properties under definitive purchase agreements for an aggregate expected purchase price of approximately $7.3 million. The Company's expected return on these investments range from approximately 9.0% to 9.3%. The Company anticipates these properties will close during the second quarter of 2018. However, the Company is currently performing due diligence procedures customary for these types of transactions and cannot provide assurance as to the timing of when, or whether, these transactions will actually close.
The Company also has four properties under definitive purchase agreements, to be acquired after completion and occupancy, for an aggregate expected purchase price of approximately $76.0 million. The Company's expected aggregate return on these investments in approximately 11.0%. The Company expects to close these properties through the end of 2019; however, the Company cannot provide assurance as to the timing of when, or whether, these transactions will actually close.
On March 27, 2018, the Company entered into an amendment to its credit agreement to reduce the pricing margins on its LIBOR borrowings and to increase the maximum swingline commitment from $15.0 million to $20.0 million. The amounts outstanding under the revolving facility will bear annual interest at a floating rate equal to (x) LIBOR plus (y) a margin ranging from 1.75% to 2.50% (currently, 2.00%). Payments under the credit agreement are interest only, with the full amount of the principal due at maturity and may be prepaid at any time, without penalty.
On March 29, 2018, the Company borrowed the remaining $40.0 million, under its available term loans, in equal amounts of 5 and 7-year maturities. Also, on March 29, 2018, the Company entered into interest rate swap agreements that fixed the interest rates on the term loans, resulting in fixed interest rates under the term loans ranging from 4.579% to 4.6255% depending on the maturity, the Company’s leverage, and other factors. The amounts borrowed were pursuant to a delayed draw feature available in its credit agreement. The 5-year term loan facility matures in March 2022 and the 7- year term loan facility matures in March 2024. Each of the aforementioned interest rate swaps match the maturity date of the applicable term loan.
On May 3, 2018, the Company’s Board of Directors declared a quarterly common stock dividend in the amount of $0.40 per share. The dividend is payable on June 1, 2018 to stockholders of record on May 18, 2018.
March 31, 2018
December 31, 2017
Real estate properties:
Land and land improvements
Buildings, improvements, and lease intangibles
Total real estate properties
Less accumulated depreciation
Total real estate properties, net
Cash and cash equivalents
Mortgage note receivable, net
Other assets, net
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities
Commitments and contingencies
Preferred stock, $0.01 par value; 50,000,000 shares authorized; none issued and outstanding
Common stock, $0.01 par value; 450,000,000 shares authorized; 18,179,799 and 18,085,798 shares issued and outstanding at March 31, 2018 and December 31, 2017, respectively
Additional paid-in capital
Cumulative net income
Accumulated other comprehensive loss
Total stockholders’ equity
Total liabilities and stockholders' equity
The Condensed Consolidated Balance Sheets do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.
Three Months Ended March 31,
General and administrative
Depreciation and amortization
OTHER INCOME (EXPENSE)
Interest and other income, net
NET INCOME PER COMMON SHARE:
Net income per common share – Basic
Net income per common share – Diluted
WEIGHTED AVERAGE COMMON SHARE OUTSTANDING-BASIC
WEIGHTED AVERAGE COMMON SHARE OUTSTANDING-DILUTED
The Condensed Consolidated Statements of Income do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.
Three Months Ended March 31,
Real estate depreciation and amortization
Funds From Operations / Normalized Funds From Operations
Straight line rent
Funds from Operations / Normalized Funds from Operations per Common Share-Diluted
AFFO Per Common Share-Diluted
Weighted Average Common Shares Outstanding-Diluted (2)
Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. However, since real estate values have historically risen or fallen with market conditions, many industry investors deem presentations of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. For that reason, the Company considers funds from operations ("FFO"), normalized FFO and adjusted funds from operations ("AFFO") to be appropriate measures of operating performance of an equity real estate investment trust ("REIT"). In particular, the Company believes that normalized FFO and AFFO are useful because they allow investors, analysts and Company management to compare the Company's operating performance to the operating performance of other real estate companies and between periods on a consistent basis without having to account for differences caused by unanticipated items and other events.
The Company uses the National Association of Real Estate Investment Trusts, Inc. ("NAREIT") definition of FFO. FFO and FFO per share are operating performance measures adopted by NAREIT. NAREIT defines FFO as the most commonly accepted and reported measure of a REIT's operating performance equal to "net income (computed in accordance with GAAP), excluding gains (or losses) from sales of property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures." The Company has included normalized FFO which it has defined as FFO excluding certain expenses related to closing costs of properties acquired accounted for as business combinations and mortgages funded and has included AFFO which it has defined as normalized FFO excluding straight-line rent and deferred compensation and may include other non-cash items from time to time. Normalized FFO and AFFO presented herein may not be comparable to similar measures presented by other real estate companies due to the fact that not all real estate companies use the same definitions.
FFO, normalized FFO and AFFO should not be considered as alternatives to net income (determined in accordance with GAAP) as indicators of the Company's financial performance or as alternatives to cash flow from operating activities (determined in accordance with GAAP) as measures of the Company’s liquidity, nor are they necessarily indicative of sufficient cash flow to fund all of the Company’s needs. The Company believes that in order to facilitate a clear understanding of the consolidated historical operating results of the Company, FFO, normalized FFO and AFFO should be examined in conjunction with net income as presented elsewhere herein.
Diluted weighted average common shares outstanding for FFO are calculated based on the treasury method, rather than the 2-class method used to calculate earnings per share.
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