Aviv REIT, Inc. Announces Year End 2011 Earnings Results

News provided by

Aviv REIT, Inc.

Mar 13, 2012, 08:33 ET

CHICAGO, March 13, 2012 /PRNewswire/ -- Aviv REIT, Inc. ("Aviv" or the "Company") released its earnings for the year ended December 31, 2011.  

Recent Highlights

  • Total Revenues were $104.7 million;
  • Adjusted EBITDA was $91.6 million;
  • Adjusted FFO was $47.0 million;
  • Net Income for the year was $11.3 million;
  • Completed $217.9 million of investments for the year;
  • Completed $26.4 million of investments during the first quarter of 2012 through March 12.

Craig M. Bernfield, Chairman, Chief Executive Officer and President, said, "We are pleased with our fourth quarter financial performance, which was consistent with our expectations and reflects our ongoing growth and the strength of our management.  We are pleased with the $217.9 million of investments we made in 2011, consistent with our strategy of working with high quality operators, diversification and reinvesting in our properties.  We continue to identify attractive investment opportunities and have already completed $26.4 million in 2012 and have another $88.7 million under agreement.  We have also enhanced our liquidity with our new $188 million revolver led by GE as well as our ongoing support from Lindsay Goldberg.  As a result, we believe we are in a strong position to continue our growth.  Our portfolio is performing well and our operators are adapting to the reimbursement environment.  We look forward to having another successful year in 2012."

Conference Call

A conference call to discuss the 2011 fourth quarter earnings will take place on March 13, 2012 at 4:30 p.m. central time / 5:30 p.m. eastern time.  The dial-in number for the conference call is 800-762-8779 (480-629-9645 for international access) and a replay of the call will be available through April 13, 2012 at 800-406-7325, access code 4522398.

About Aviv

Aviv is one of the largest owners of skilled nursing and other healthcare properties in the United States. As of December 31, 2011, the Company's portfolio consisted of 225 properties which are triple-net leased to 35 operators in 26 states.

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 Adjusted 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

December  31

2011

2010



Assets

Cash and cash equivalents

$            40,862,023

$   13,029,474

Deferred rent receivable

29,926,203

30,660,773

Tenant receivables, net

6,007,800

1,168,842

Rental properties and financing leases, at cost:

Land

102,925,122

76,466,020

Buildings and improvements

750,130,484

568,959,630

Furniture, fixtures and equipment

55,411,980

46,846,643

Assets under direct financing leases

10,916,181

10,777,184

919,383,767

703,049,477

Less accumulated depreciation

(96,796,028)

(75,948,944)

Net rental properties

822,587,739

627,100,533



Deferred finance costs, net

13,142,330

9,957,636

Loan receivables, net

33,031,117

36,610,638

Other assets

5,864,045

12,872,323

Total assets

$          951,421,257

$ 731,400,219



Liabilities and equity

Accounts payable and accrued expenses

$            18,124,167

$     6,012,809

Tenant security and escrow deposits

15,739,917

13,658,384

Other liabilities

34,824,629

25,996,492

Deferred contribution

35,000,000

-

Mortgage and other notes payable

600,473,578

440,575,916

Total liabilities

704,162,291

486,243,601



Equity:

Stockholders' equity

Common stock (par value $0.01; 262,237 and 227,002

shares outstanding, respectively)

2,622

2,270

Additional paid-in-capital

264,960,352

223,838,999

Accumulated deficit

(21,382,823)

(2,261,839)

Accumulated other comprehensive (loss) income

(1,867,759)

2,188,155

Stockholders' equity

241,712,392

223,767,585

Noncontrolling interests

5,546,574

21,389,033

Total equity

247,258,966

245,156,618

Total liabilities and equity

$          951,421,257

$ 731,400,219


Aviv REIT, Inc. and Subsidiaries

Consolidated Statements of Operations


Year Ended December 31

2011

2010

2009

Revenues


Rental income

$           92,326,121

$       85,240,144

$       82,775,078

Tenant recoveries

7,174,851

6,441,786

6,055,703

Interest on loans to lessees - capital expenditures

1,267,275

1,779,620

1,662,107

Interest on loans to lessees - working capital and capital lease

3,978,754

3,446,226

1,830,791

Total revenues

104,747,001

96,907,776

92,323,679




Expenses


Rent and other operating expenses

890,812

574,646

612,185

General and administrative

17,589,024

11,475,122

7,741,087

Offering costs

–

–

6,863,948

Real estate taxes

7,281,628

6,475,230

6,231,776

Depreciation

20,847,084

17,853,799

17,527,656

Loss on impairment

6,091,721

96,000

–

Total expenses

52,700,269

36,474,797

38,976,652

Operating income

52,046,732

60,432,979

53,347,027




Other income and expenses:


Interest and other income

843,794

133,286

466,177

Interest expense

(36,010,044)

(22,722,785)

(26,570,071)

Change in fair value of derivatives

-

2,931,309

6,987,825

Amortization of deferred financing costs

(2,664,934)

(1,008,059)

(550,327)

Earnout accretion

(266,902)

–

–

Gain on sale of assets, net

1,170,991

511,552

–

Loss on extinguishment of debt

(3,806,513)

(2,295,562)

–

Total other income and expenses

(40,733,608)

(22,450,259)

(19,666,396)

Net income

11,313,124

37,982,720

33,680,631

Distributions and accretion on Class E Preferred Units

–

(17,371,893)

(14,569,875)

Net income allocable to common units of    

    Partnership/noncontrolling interests

(5,107,353)

(16,779,731)

(19,110,756)

Net income allocable to stockholders

$             6,205,771

$         3,831,096

$                       –




Net income

$           11,313,124

$       37,982,720

Unrealized (loss) gain on derivative instruments

(7,391,774)

4,094,432

Total comprehensive income

$             3,921,350

$       42,077,152




Net income allocable to stockholders

$             6,205,771

$         3,831,096

Unrealized (loss) gain on derivative instruments,




net of noncontrolling interest portion of $3,335,860
   and $1,906,277, respectively

(4,055,914)

2,188,155

Total comprehensive income allocable to stockholders

$             2,149,857

$         6,019,251


Aviv REIT, Inc. and Subsidiaries

Consolidated Statements of Cash Flows



Year Ended December 31

2011

2010

2009

Operating activities


Net income

$           11,313,124

$           37,982,720

$      33,680,631

Adjustments to reconcile net income to net cash provided


by operating activities:


Depreciation

20,847,084

17,853,799

17,527,656

Amortization of deferred financing costs

2,664,934

1,008,059

550,327

Accretion of bond premium

(197,873)

–

-

Change in fair value of derivatives

–

(2,931,309)

(6,987,825)

Deferred rental loss (income), net

466,595

(3,056,430)

(6,388,600)

Rental income from intangible amortization, net

(1,365,836)

(3,681,109)

(2,097,655)

Non-cash stock (unit)-based compensation

1,971,905

1,631,998

406,000

Gain on sale of assets, net

(1,170,991)

(511,552)

–

Non-cash loss on extinguishment of debt

3,806,513

1,437,233

–

Loss on impairment of assets

6,091,721

96,000

–

Reserve for uncollectible loan receivables

1,426,149

750,000

–

Accretion of earn-out provision for previously
             acquired rental properties

266,902

–

–

Changes in assets and liabilities:


Due from related parties

–

15,816

10,000

Tenant receivables

(6,103,511)

(317,123)

(365,523)

Other assets

2,596,091

177,666

3,022,578

Accounts payable and accrued expenses

6,146,173

3,357,961

145,652

Tenant security deposits and other liabilities

3,329,333

866,527

1,141,304

Due to related parties

–

–

(602,253)

Net cash provided by operating activities

52,088,313

54,680,256

40,042,292




Investing activities


Purchase of rental properties

(181,214,201)

(54,884,043)

(16,375,694)

Proceeds from sales of rental properties

1,510,000

4,085,825

–

Payment of earn-out provision for previously




acquired rental properties

–

(9,600,731)

–

Capital improvements and other developments

(30,769,934)

(7,883,130)

(13,507,673)

Loan receivables received from (funded to) others, net

3,417,924

(6,834,568)

(8,609,528)

Net cash used in investing activities

(207,056,211)

(75,116,647)

(38,492,895)








Aviv REIT, Inc. and Subsidiaries

Consolidated Statements of Cash Flows (continued)


Year Ended December 31

2011

2010

2009

Financing activities


Borrowings of debt

$         404,928,032

$         442,789,570

$      35,651,073

Repayment of debt

(244,832,497)

(482,522,690)

(19,091,756)

Payment of financing costs

(9,607,704)

(10,567,931)

(102,803)

Payment for swap termination

–

(3,380,160)

–

Capital contributions

40,419,757

235,342,892

–

Deferred contribution

35,000,000

–

–

Cost of raising capital

–

(11,475,771)

–

Redemption of Class E Preferred Units and warrants

–

(92,001,451)

–

Redemption of Class F Units

–

(23,602,649)

–

Proceeds from issuance of warrants

–

–

8,399,117

Net proceeds from issuance of Class E Preferred Units

–

–

17,898,975

Cash distributions to partners

(19,484,658)

(36,658,452)

(38,122,989)

Cash dividends to stockholders

(23,622,483)

–

–

Net cash provided by financing activities

182,800,447

17,923,358

4,631,617

Net increase (decrease) in cash and cash equivalents

27,832,549

(2,513,033)

6,181,014

Cash and cash equivalents:


Beginning of year

13,029,474

15,542,507

9,361,493

End of year

$           40,862,023

$           13,029,474

$      15,542,507








Supplemental cash flow information


Cash paid for interest

$           29,025,490

$           20,983,000

$      27,771,260




Supplemental disclosure of noncash activity


Accrued dividends payable to stockholders

$             8,383,836

$             6,092,935

$                      –

Accrued distributions payable to partners

$             4,646,091

$             5,246,840

$        3,650,000

Write-off of deferred rent receivable

$             7,093,438

$             3,367,164

$                      –

Write-off of in-place lease intangibles, net

$                  35,536

$             1,392,034

$                      –

Write-off of deferred finance costs, net

$             3,806,513

$             1,235,969

$                      –

Write-off of debt discount

$                           –

$                202,307

$                      –

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), taxes, depreciation and amortization of deferred financing costs.  
  • Adjusted EBITDA represents EBITDA before stock-based compensation, amortization of intangible income, offering costs, indemnity expense, acquisition transaction costs, loss on impairment of assets, loss on extinguishment of debt, deferred rent write-offs, change in fair value of derivatives and gain on sale of assets (net).
  • 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 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, loss on impairment of depreciated real estate assets and gain/loss on sale of assets.  
  • Adjusted FFO represents FFO before deferred rental income, stock-based compensation, amortization of intangible income, amortization of deferred financing costs, offering costs, indemnity expense, loss on impairment of assets, loss on extinguishment of debt and change in fair value of derivatives.

Our management uses FFO, Adjusted 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 Adjusted 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 Adjusted FFO, interest costs, in each case providing perspective not immediately apparent from net income. In addition, we believe that FFO, Adjusted 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:

  • 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.  
  • 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.  
  • 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, at our properties divided by the total revenue at our properties 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 EBITDAR and EBITDARM coverage for the period presented, EBITDAR and EBITDARM coverage is stated only with respect to properties owned by us and operated by the same operator for the entire period. Accordingly, EBITDAR and EBITDARM coverage for the twelve months ended September 30, 2011 included 157 of the 225 properties in our portfolio as of September 30, 2011.

Aviv REIT, Inc.




($'s)





3 Months Ended

12 Months Ended

12/31/2011

12/31/2010

12/31/2011

12/31/2010

Cash Rental & Loan Interest Income




Total Revenues (1)

29,384,631

24,182,411

104,747,001

96,907,776

Adjusted For:




Deferred Rental Loss (Income) (1)

(1,119,902)

(456,015)

466,595

(3,056,430)

Rental Income from Intangible Amortization

(321,405)

(362,196)

(1,365,836)

(3,681,109)

Real Estate Tax Escrows

(1,848,892)

(1,590,265)

(7,174,851)

(6,441,786)

Cash Rental & Loan Interest Income

26,094,432

21,773,935

96,672,909

83,728,451







(1)     Includes $7.1 million non-cash charges to Deferred Rents Receivable in 2011 relating to the transition of 9 facilities to a new operator and the restructuring of certain leases.






EBITDA




Net (Loss) Income (2)

2,280,579

6,020,400

11,313,124

37,982,720

Adjusted For:




Interest Expense, net

9,783,265

6,599,061

35,166,250

22,589,499

Depreciation

5,543,347

4,605,399

20,847,084

17,853,799

Amortization of Deferred Financing Fees

668,090

535,145

2,664,934

1,008,059

EBITDA

18,275,281

17,760,005

69,991,392

79,434,077







(2)     2011 net income was reduced by a $2.4 million charge ($1.5 million non-cash) for indemnity payment obligations relating to certain liabilities incurred by former operators of certain facilities, $2.8 million of transaction costs associated with new acquisitions in 2011, a $6.1 million loss on impairment associated with the write down in book value of two facilities intended for sale, and a $7.1 million charge to deferred rent receivable in Footnote (1) above. 2011 net income was also reduced by $3.8 million non-cash loss on debt extinguishment relating to write-off of deferred financing fees associated with the repayment of approximately $194.5 million of our mortgage term loan and acquisition line with proceeds from our $300 million issuance of unsecured notes in 2011.






Adjusted EBITDA




EBITDA

18,275,281

17,760,005

69,991,392

79,434,077

Adjusted for:




Non-cash stock (unit)-based compensation

373,191

1,286,897

1,971,905

1,631,998

Indemnity expense (3)

84,976

(30)

2,407,342

1,003,353

Acquisition transaction costs

1,839,342

570,877

2,823,807

617,522

Loss on Impairment of long lived assets (3)

5,232,805

-

6,091,721

96,000

Loss on Debt Extinguishment (3)

-

10,535

3,806,513

2,295,562

Gain on Sale of Assets

(1,170,991)

70,181

(1,170,991)

(511,552)

Less:




Rental Income from Intangible Amortization

(321,405)

(362,196)

(1,365,836)

(3,681,109)

Write-off of deferred rents

308,307

7,093,438

3,367,164

Change in Fair Value of Derivatives

-

-

-

(2,931,309)

Adjusted EBITDA

24,621,505

19,336,269

91,649,291

81,321,706







(3)     See Footnote (2) above.






FFO




Net (Loss) Income

2,280,579

6,020,400

11,313,124

37,982,720

Adjusted For:




Depreciation

5,543,347

4,605,399

20,847,084

17,853,799

Loss on Impairment of depreciated real estate assets

5,232,805

-

6,091,721

96,000

Gain on Sale of Assets

(1,170,991)

70,181

(1,170,991)

(511,552)

FFO

11,885,740

10,695,980

37,080,938

55,420,967






AFFO




FFO

11,885,740

10,695,980

37,080,938

55,420,967

Adjusted For:




Deferred Rental Loss (Income)

(1,119,902)

(456,015)

466,595

(3,056,430)

Rental Income from Intangible Amortization

(321,405)

(362,196)

(1,365,836)

(3,681,109)

Amortization of Deferred Financing Fees

668,090

535,145

2,664,934

1,008,059

Loss on Debt Extinguishment

-

10,535

3,806,513

2,295,562

Indemnity Payments

84,976

(30)

2,407,342

1,003,353

Non-cash stock (unit)-based compensation

373,191

1,286,897

1,971,905

1,631,998

Change in Fair Value of Derivatives

-

-

-

(2,931,309)

AFFO

11,570,690

11,710,316

47,032,391

51,691,091






Balance Sheet Metrics

At 12/31/2011

At 12/31/2010












Cash & Cash Equivalents

           40,862,023



             13,029,474








Debt

% Total

% Total

 Secured - GE Mortgage Term Loan

         284,159,963

47.5%

           431,471,341

91.4%

 Secured - Other

           13,761,488

2.3%

               9,104,575

8.6%

 Unsecured Notes (4)

         300,000,000

50.2%

                             -  

0.0%

Total Debt

         597,921,451

100.0%

          440,575,916

100.0%






Total Assets - Book Value

         951,374,506



          731,400,219


Total Undepreciated Book Value  of Property

         919,383,767



          703,049,477








Total Unencumbered Assets

         526,368,045



NA

Unencumbered Assets / Unsecured Debt

175.5%

NA







(4)     Unsecured Notes are presented exclusive of the debt premium of $2,552,127.






General & administrative expense


At 12/31/2011

At 12/31/2010






Core general & administrative expense


                8,873,665

           7,472,249

Indemnity payments


                2,407,342

            1,003,353

Acquisition transaction costs


                2,823,807

               617,522

Bad debt expense/loan impairment


                1,512,305

               750,000

Non-cash stock based compensation


                1,971,905

           1,631,998

Total general & administrative expense


              17,589,024

          11,475,122















Portfolio Information








Rent Concentration by  Operator


No.


% Total

Operator

Properties

Rents (1)






Saber Health Group

25

15.8%

Evergreen Healthcare

17

10.9%

Daybreak Partners, LLC

32

10.0%

Sun Mar Healthcare

13

8.2%

Benchmark

14

6.3%

All Others (30 Operators)

124

48.8%

Total

225

100.0%















Rent Concentration by State

No.


% Total

State

Properties

Rents (1)






California

32

16.9%

Texas

43

13.4%

Ohio

16

8.7%

Arkansas

14

7.6%

Pennsylvania

10

7.6%

All Others (21 States)

110

45.8%

Total

225

100.0%















Rent Coverage (1)



(for 12 months ended September 30, 2011)



EBITDAR

1.5

x

EBITDARM

2.0

x





(1) Based on properties operated by the same operator for the entire 12 month period.






Occupancy (1)



(for 12 months ended September 30, 2011)



Occupancy

73.9%






(1) Based on beds available for use.








Quality Mix (1)



(for 12 months ended September 30, 2011)



Quality Mix

45.8%






(1) Based on total revenues from all payor sources excluding Medicaid revenues.


SOURCE Aviv REIT, Inc.

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