Aviv REIT, Inc. Announces Third Quarter 2012 Earnings Results

CHICAGO, Nov. 13, 2012 /PRNewswire/ -- Aviv REIT, Inc. ("Aviv" or the "Company") released its earnings for the quarter ended September 30, 2012. 

Recent Highlights

  • Adjusted EBITDA was $28.0 million;
  • Normalized FFO was $14.5 million;
  • Net Income was $1.8 million;
  • Completed $25.5 million of acquisitions comprised of 3 post-acute and long-term care skilled nursing facilities and 1 long-term acute care hospital;
  • Invested $11.0 million for property reinvestment and new construction, furthering our commitment to enhancing Aviv's high-quality real estate portfolio.

"Our business continues to perform well.  We continue to grow by furthering our relationships with many of the largest and most experienced operators in the United States.  We have invested $177 million so far this year with new and existing tenant relationships, including $145 million of acquisitions and $32 million for property reinvestment and new construction," said Craig M. Bernfield, Chairman and Chief Executive Officer of Aviv.  "Aviv remains committed to investing in post-acute and long-term care SNFs because of the current and future industry prospects."

Conference Call

A conference call to discuss the third quarter 2012 earnings will take place today at 11:00 a.m. central time / 12:00 p.m. eastern time.  The dial-in number for the conference call is 877-941-8609 (480-629-9645 for international access) and a replay of the call will be available through December 13, 2012 at 800-406-7325, access code 4574430.  

About Aviv

Aviv REIT, Inc., based in Chicago, is a privately-owned real estate investment trust that specializes in owning post-acute and long-term care skilled nursing facilities and other healthcare properties. Aviv is one of the largest owners of SNFs in the United States and has been in the business for over 30 years. The Company currently owns 250 properties that are triple-net leased to 37 operators in 29 states.

For more information about the Company, please visit our website at www.avivreit.com.

Forward-Looking Statements

This press release may include forward-looking statements. Forward-looking statements can be identified by the use of words such as "may," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "intends," "continue" or similar terminology.  These forward-looking statements are made based on our current expectations and beliefs concerning future events affecting us and are subject to uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control, that could cause our actual results to differ materially from those matters expressed in or implied by these forward-looking statements. These uncertainties include, but are not limited to, uncertainties relating to the operations of our tenants, including those relating to reimbursement by government and other third-party payors, compliance with regulatory requirements and occupancy levels, regulatory, reimbursement and other changes in the healthcare industry, the performance and reputation of our tenants, our ability to successfully engage in strategic acquisitions and investments, the effect of general market, economic and political conditions, the availability and cost of capital, changes in tax laws and regulations affecting REITs and our ability to maintain our status as a REIT.  Important factors that could cause actual results to differ materially from our expectations include those disclosed under "Risk Factors" and elsewhere in filings made by Aviv REIT, Inc. and Aviv Healthcare Properties Limited Partnership with the Securities and Exchange Commission.

Note Regarding Non-GAAP Financial Measures

This release includes financial measures, including Adjusted EBITDA and Normalized FFO, that are derived on the basis of methodologies other than in accordance with generally accepted accounting principles (GAAP).  These measures are non-GAAP measures that may be calculated differently from measures used by other companies and should not be considered measures of liquidity, alternatives to net income or indicators of any other performance measure determined in accordance with GAAP, nor are they indicative of funds available to fund our cash needs, including our ability to make payments on our indebtedness. See "Supplemental Information and Reconciliation of Financial Measures" below for the definitions of, and additional information regarding, these measures and reconciliations of these measures to the GAAP measures we consider most comparable.


Aviv REIT, Inc. and Subsidiaries

Consolidated Balance Sheets

(unaudited)






September 30,


December  31,


2012


2011

Assets




Real estate investments




Land 

$          113,563,712


$      102,925,122

Buildings and improvements 

910,201,968


777,249,381

Construction in progress

25,418,749


28,293,083

Assets under direct financing leases 

11,015,786


10,916,181


1,060,200,215


919,383,767

Less accumulated depreciation

(112,807,661)


(96,796,028)

Net real estate investments

947,392,554


822,587,739

Cash and cash equivalents 

14,942,476


40,862,023

Straight-line rent receivable, net

35,647,906


29,926,203

Tenant receivables, net

5,623,983


6,007,800

Deferred finance costs, net 

15,597,577


13,142,330

Secured loan receivables, net

34,444,718


33,031,117

Other assets 

8,923,796


5,864,045

Total assets

$       1,062,573,010


$      951,421,257





Liabilities and equity




Senior notes payable and other debt

$          664,190,571


$      600,473,578

Accounts payable and accrued expenses 

15,034,146


18,124,167

Tenant security and escrow deposits 

17,748,993


15,739,917

Other liabilities

32,116,821


34,824,629

Deferred contribution

-


35,000,000

Total liabilities 

729,090,531


704,162,291

Equity:




Stockholders' equity




Common stock (par value $0.01; 358,685 and 262,239




shares outstanding, respectively) 

3,586


2,622

Additional paid-in-capital

374,884,845


264,960,352

Accumulated deficit

(37,187,620)


(21,382,823)

Accumulated other comprehensive loss

(2,374,047)


(1,867,759)

Stockholders' equity

335,326,764


241,712,392

Noncontrolling interests

(1,844,285)


5,546,574

Total equity

333,482,479


247,258,966

Total liabilities and equity

$       1,062,573,010


$      951,421,257


Aviv REIT, Inc. and Subsidiaries

Consolidated Statements of Operations and Comprehensive Income

(unaudited)










Three Months Ended September 30, 


Nine Months Ended September 30, 


2012


2011


2012


2011

Revenues








Rental income

$       29,583,062


$       21,761,565


$       87,171,329


$       64,947,508

Interest on secured loans and financing lease

860,328


1,224,785


3,543,642


3,876,793

Interest and other income 

1,058,580


7,276


1,126,890


840,144

Total revenues 

31,501,970


22,993,626


91,841,861


69,664,445









Expenses








Interest expense

12,905,768


9,976,486


37,693,597


28,217,549

Depreciation and amortization

6,894,012


5,170,690


19,671,033


14,847,375

General and administrative

3,947,939


3,049,367


11,406,114


8,547,489

Transaction costs

1,286,425


2,609,727


3,507,057


3,421,283

Loss on impairment

1,766,873



6,145,731


Reserve for uncollectible secured loan receivables

2,833,419


926,474


6,308,408


1,336,269

Loss on extinguishment of debt




3,806,513

Other expenses

100,088


100,088


300,265


166,814

Total expenses

29,734,524


21,832,832


85,032,205


60,343,292

Income from continuing operations

1,767,446


1,160,794


6,809,656


9,321,153

Discontinued operations

-


(846,805)


4,586,692


(288,611)

Net income

1,767,446


313,989


11,396,348


9,032,542

Net income allocable to noncontrolling interests

(637,162)


(143,187)


(4,451,239)


(4,119,642)

Net income allocable to stockholders

$         1,130,284


$            170,802


$         6,945,109


$         4,912,900

Net income

$         1,767,446


$            313,989


$       11,396,348


$         9,032,542

Unrealized loss on derivative instruments

(39,482)


(4,086,047)


(820,974)


(7,164,043)

Total comprehensive income (loss)  

$         1,727,964


$        (3,772,058)


$       10,575,374


$         1,868,499

Net income allocable to stockholders

$         1,130,284


$            170,802


$         6,945,109


$         4,912,900

Unrealized loss on derivative instruments, net of noncontrolling interest portion of $14,233, $1,863,352, $314,686, and $3,306,106, respectively 

(25,249)


(2,222,695)


(506,288)


(3,857,937)

Total comprehensive income (loss) allocable to stockholders

$         1,105,035


$        (2,051,893)


$         6,438,821


$         1,054,963


Aviv REIT, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(unaudited)


Nine Months Ended September 30,


2012


2011

Operating activities




Net income

$       11,396,348


$         9,032,542

Adjustments to reconcile net income to net cash provided by




operating activities:




Depreciation and amortization

19,705,142


15,303,737

Amortization of deferred financing costs

2,626,446


1,996,845

Accretion of senior note premium

(292,423)


(129,815)

Straight-line rental income, net

(5,922,684)


1,586,497

Rental income from intangible amortization, net 

(1,149,423)


(1,044,431)

Non-cash stock-based compensation 

1,229,957


1,598,715

Gain on sale of assets, net

(4,425,246)


Non-cash loss on extinguishment of debt

13,264


3,806,513

Loss on impairment of assets

6,145,731


858,916

Reserve for uncollectible loan receivables

6,308,408


1,250,113

Accretion of earn-out provision for previously

acquired real estate investments

300,265


166,814

Changes in assets and liabilities:




Tenant receivables

(2,911,903)


(6,685,920)

Other assets 

(3,560,710)


2,070,268

Accounts payable and accrued expenses

(4,676,099)


95,433

Tenant security deposits and other liabilities 

(856,750)


1,849,652

Net cash provided by operating activities 

23,930,323


31,755,879





Investing activities




Purchase of real estate investments

(133,998,037)


(80,719,101)

Sale of real estate investments

30,542,644


Capital improvements and other developments

(31,696,657)


(17,300,401)

Loan receivables (funded to) received from others, net

(2,348,748)


6,256,744

Net cash used in investing activities 

(137,500,798)


(91,762,758)





Financing activities




Borrowings of debt 

224,761,094


328,932,727

Repayment of debt 

(172,211,473)


(243,892,020)

Payment of financing costs

(5,143,395)


(9,429,792)

Capital contributions

109,000,000


10,419,757

Deferred contribution

(35,000,000)


Cash distributions to partners

(12,523,881)


(14,838,568)

Cash dividends to stockholders

(21,231,417)


(17,949,813)

Net cash provided by financing activities 

87,650,928


53,242,291

Net decrease in cash and cash equivalents

(25,919,547)


(6,764,588)

Cash and cash equivalents:




Beginning of period

40,862,023


13,029,474

End of period

$       14,942,476


$         6,264,886

Supplemental cash flow information




Cash paid for interest

$       41,967,088


$       25,080,857

Supplemental disclosure of noncash activity




Accrued dividends payable to stockholders

$       10,097,872


$         5,547,639

Accrued distributions payable to partners

$         4,052,974


$         4,646,091

Earn-out accrual and addition to real estate investments

$                       –


$         3,332,745

Write-off of straight-line rent receivable, net

$            567,745


$         6,785,132

Write-off of in-place lease intangibles, net

$              48,554


$              35,536

Write-off of deferred financing costs, net

$              13,264


$         3,806,513

Assumed debt

$       11,459,794


$                      –

Supplemental Information and Reconciliation of Financial Measures

We use financial measures in this release that are derived on the basis of methodologies other than in accordance with GAAP. We derive these measures as follows:

  • EBITDA represents net income before interest expense (net) and depreciation and amortization.
  • Adjusted EBITDA represents EBITDA before impairment of assets, gain on sale of assets, transaction costs, write off of straight-line rents, stock-based compensation, loss on extinguishment of debt and reserves for uncollectible loan receivables.
  • The National Association of Real Estate Investment Trusts, or NAREIT, defines FFO as net income (computed in accordance with GAAP), excluding gains and losses from sales of property (net) and impairments of depreciated real estate, plus real estate depreciation and amortization (excluding amortization of deferred financing costs) and after adjustments for unconsolidated partnerships and joint ventures. Applying the NAREIT definition to our financial statements results in FFO representing net income before depreciation, impairments of assets and gain on sale of assets.
  • Normalized FFO represents FFO before loss on extinguishment of debt, reserves for uncollectible loan receivables and transaction costs.

Our management uses FFO, Normalized FFO, EBITDA and Adjusted EBITDA as important supplemental measures of our operating performance and liquidity. FFO is intended to exclude GAAP historical cost depreciation and amortization of real estate and related assets, which assumes that the value of real estate assets diminishes ratably over time. Historically, however, real estate values have risen or fallen with market conditions. The term FFO was designed by the real estate industry to address this issue and as an indicator of our ability to incur and service debt. Because FFO and Normalized FFO exclude depreciation and amortization unique to real estate, gains and losses from property dispositions and extraordinary items and because EBITDA and Adjusted EBITDA exclude certain non-cash charges and adjustments and amounts spent on interest and taxes, they provide our management with performance measures that, when compared year over year or with other real estate investment trusts, or REITs, reflect the impact to operations from trends in occupancy rates, rental rates, operating costs, development activities and, with respect to FFO and Normalized FFO, interest costs, in each case providing perspective not immediately apparent from net income. In addition, we believe that FFO, Normalized FFO, EBITDA and Adjusted EBITDA are frequently used by securities analysts, investors and other interested parties in the evaluation of REITs.

We offer these measures to assist the users of our financial statements in assessing our financial performance and liquidity under GAAP, but these measures are non-GAAP measures and should not be considered measures of liquidity, alternatives to net income or indicators of any other performance measure determined in accordance with GAAP, nor are they indicative of funds available to fund our cash needs, including our ability to make payments on our indebtedness. In addition, our calculations of these measures are not necessarily comparable to similar measures as calculated by other companies that do not use the same definition or implementation guidelines or interpret the standards differently from us. Investors should not rely on these measures as a substitute for any GAAP measure, including net income or revenues.

In addition to these non-GAAP financial measures, we present certain statistics in this release regarding our portfolio of properties. These statistics include EBITDAR coverage, EBITDARM coverage, Portfolio Occupancy and Quality Mix, which are derived as follows:

  • EBITDARM coverage represents EBITDARM, which we define as earnings before interest, taxes, depreciation, amortization, rent expense and management fees charged by the operator, of our operators for the applicable period, divided by the rent paid to us by our operators during such period.
  • EBITDAR coverage represents EBITDAR, which we define as earnings before interest, taxes, depreciation, amortization and rent expense, of our operators for the applicable period, divided by the rent paid to us by our operators during such period.
  • Portfolio occupancy represents the average daily number of beds at our properties that are occupied during the applicable period divided by the total number of beds at our properties that are available for use during the applicable period.
  • Quality mix represents total revenues from all payor sources, excluding Medicaid revenues, divided by the total revenue of our operators for the applicable period.

We derive these statistics from reports that we receive from our operators pursuant to our triple-net leases. As a result, our portfolio statistics typically lag our own financial statements by approximately one quarter. In order to determine EBITDARM and EBITDAR coverage for the period presented, EBITDARM and EBITDAR coverage is stated only with respect to properties owned by us and operated by the same tenant for the portion of the period we owned the properties and excludes assets held for sale, properties under construction and, with certain exceptions for shorter periods, properties within 24 months of completion of construction. Accordingly, EBITDARM and EBITDAR coverage for the twelve months ended June 30, 2012 and portfolio occupancy and quality mix for the three months ended June 30, 2012 included 221 of the 247 properties in our portfolio as of June 30, 2012.  When we refer to the contractual rent of our portfolio, we are referring to the total monthly rent due under all of our triple-net leases as of the date specified.  









Aviv REIT, Inc.








($'s)









Three Months Ended September 30,


Nine Months Ended September 30,


2012


2011


2012


2011

EBITDA








Net income

$1,767,446


$313,989


$11,396,348


$9,032,542

Adjusted For:








Interest expense, net 

12,905,571


9,973,176


37,690,117


28,204,990

Depreciation and amortization

6,894,012


5,170,690


19,671,033


14,847,375

EBITDA

$21,567,029


$15,457,855


$68,757,499


$52,084,907

















Adjusted EBITDA








EBITDA

$21,567,029


$15,457,855


$68,757,499


$52,084,907

Adjusted for:








Loss on impairment of assets

1,766,873


-


6,145,731


-

Gain on sale of assets, net

-


-


(4,425,246)


-

Transaction costs

1,286,425


2,609,727


3,507,057


3,421,283

Write off of straight-line rents

-


3,165,518


567,745


6,446,893

Stock-based compensation 

513,260


517,630


1,229,957


1,598,715

Loss on extinguishment of debt

-


-


-


3,806,513

Reserve for uncollectible loan receivables

2,833,419


926,474


6,308,408


1,336,269

Adjusted EBITDA

$27,967,006


$22,677,205


$82,091,150


$68,694,580

















FFO








Net Income

$1,767,446


$313,989


$11,396,348


$9,032,542

Adjusted For:








Depreciation and amortization

6,894,012


5,170,690


19,671,033


14,847,375

Loss on impairment of assets

1,766,873


-


6,145,731


-

Gain on sale of assets, net

-


-


(4,425,246)


-

FFO

$10,428,331


$5,484,679


$32,787,867


$23,879,917

















Normalized FFO








FFO

$10,428,331


$5,484,679


$32,787,867


$23,879,917

Adjusted For:








Loss on extinguishment of debt

-


-


-


3,806,513

Reserve for uncollectible loan receivables

2,833,419


926,474


6,308,408


1,336,269

Transaction costs

1,286,425


2,609,727


3,507,057


3,421,283

Normalized FFO

$14,548,175


$9,020,880


$42,603,331


$32,443,982

















Balance Sheet Metrics

As of 9/30/2012




As of 6/30/2012











Cash & cash equivalents

$14,942,476




$13,042,659











Debt (1)








  Secured - Term Loan

212,990,146




200,195,362



  Secured - 2016 Revolver

26,368,589




26,368,589



  Secured - Other

19,035,238




19,096,893



  Unsecured Notes

400,000,000




400,000,000



Total Debt

$658,393,972




$645,660,843











Total Assets (2)

$1,167,839,992




$1,148,334,507



Total Undepreciated Book Value  of Property

1,060,200,215




1,025,783,013



















Total Unencumbered Assets (2)

$677,367,318




$643,157,685



Unencumbered Assets / Unsecured Debt (2)

169.3%




160.8%











(1) Debt is presented exclusive of debt premiums.

(2) Calculated per bond covenant definitions.

















Portfolio Information

















Number of


% Contractual





Rent Concentration by Operator 

Properties


Rent













Daybreak

47


16.1%





Saber

25


13.8%





EmpRes

18


10.5%





Sun Mar

13


7.5%





Benchmark

15


6.0%





All Others (32 Operators)

132


46.1%





Total

250


100.0%





















Rent Concentration by State

Number of


% Contractual






Properties


Rent





Texas                                   

57


19.4%





California                              

33


17.1%





Ohio                                    

16


9.8%





Arkansas                                

11


6.8%





Missouri                                

15


6.0%





All Others (24 States)

118


40.9%





Total

250


100.0%





















Rent Coverage








(for 12 months ended June 30, 2012)








EBITDARM

2.0x







EBITDAR

1.6x























Occupancy








(for 3 months ended June 30, 2012)

80.6%























Quality Mix








(for 3 months ended June 30, 2012)

47.4%







SOURCE Aviv REIT, Inc.



RELATED LINKS
http://www.avivreit.com

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