Aviv REIT Reports Third Quarter 2014 Results

CHICAGO, Oct. 31, 2014 /PRNewswire/ -- Aviv REIT, Inc. (NYSE: AVIV) today reported results for the third quarter ended September 30, 2014. All per share results are reported on a fully diluted basis.

Q3 Highlights

• $194.1 million of acquisitions
  • $99.8 million of SNF acquisitions at a blended initial cash yield of 9.2%
  • $82.0 million of ALF acquisitions at a blended initial cash yield of 8.0%
  • $12.3 million acquisition for land and entitlements for future identified new construction ALFs
• Invested $24.6 million for property reinvestment and new construction
• AFFO of $28.8 million, or $0.47 per share, a 9% increase over Q3 2013
• Adjusted EBITDA of $43.0 million, a 33% increase over Q3 2013
• Sold five properties for $0.8 million recording a net GAAP loss of $2.5 million

Q4 Quarter-to-date Highlights

• $33.1 million of acquisitions
  • $4.6 million acquisition of one SNF at an initial cash yield of 10.0%
  • $28.5 million related acquisitions of two SNFs at an initial cash yield of 9.0%

Craig M. Bernfield, Aviv's Chairman and Chief Executive Officer, said, "We are pleased with our third quarter performance.  We have produced a significant volume of attractive investments, completing over $440 million year-to-date, already the most we have ever closed in a calendar year, significantly exceeding the $239 million of investments we completed in 2013.  These investments include approximately $400 million of acquisitions and approximately $40 million of reinvestment and new construction projects, which are key to our commitment to owning high quality properties across our portfolio. We continue to acquire high-quality SNFs and ALFs with knowledgeable and experienced operators at attractive valuations, cash yields and coverages, all consistent with our track record. We are working on a number of identified acquisitions and other investments that we expect to close prior to year-end or in early 2015.  We believe that we are in a great position to continue to grow given our operator relationships, market presence, liquidity, access to capital and cost of capital."

Third Quarter 2014 Results

AFFO for the quarter ended September 30, 2014 was $28.8 million, or $0.47 per share, compared to $21.8 million, or $0.43 per share, for the quarter ended September 30, 2013, an increase of 9% per share. The growth in AFFO per share was driven primarily by the Company's strong acquisition activity offset by the additional shares of common stock issued during the second quarter of 2014.

Adjusted EBITDA for the quarter ended September 30, 2014 was $43.0 million, compared to $32.4 million for the quarter ended September 30, 2013, an increase of 33%. Net income for the quarter ended September 30, 2014 was $12.0 million, or $0.20 per share, compared to $10.1 million, or $0.20 per share, for the quarter ended September 30, 2013.

Nine Months 2014 Results

AFFO for the nine months ended September 30, 2014 was $78.3 million, or $1.37 per share, compared to $58.6 million, or $1.28 per share, for the nine months ended September 30, 2013, an increase of 7%. The growth in AFFO per share was driven primarily by the Company's strong acquisition activity.

Adjusted EBITDA for the nine months ended September 30, 2014 was $120.2 million, compared to $95.2 million for the nine months ended September 30, 2013, an increase of 26%. Net income for the nine months ended September 30, 2014 was $32.0 million, or $0.56 per share, compared to $12.0 million, or $0.26 per share, for the nine months ended September 30, 2013.

Portfolio Update

Acquisitions:

During the third quarter, the Company completed four transactions acquiring 12 properties and two land parcels in 4 states with 3 operators for $194.1 million, comprised of the following:

• Three SNFs in Missouri for $16.2 million triple-net leased to existing operator Diversicare at an initial cash yield of 10.0%.
• Two ALFs and one SNF in Massachusetts for $82.0 million triple-net leased to existing operator Maplewood Senior Living, an operator of 12 facilities in three states, at an initial cash yield of 8.0%.
• Two land parcels and entitlements for $12.3 million for future identified new construction ALFs.
• Four post-acute and long-term care SNFs in Washington, an ALF in Washington and a campus in Idaho, which includes a SNF and an ALF, for a total price of $83.6 million.  The SNF and ALF properties are triple-net leased to existing Aviv operator EmpRes at a blended initial cash yield of 9.0%.

During the fourth quarter, the Company completed two transactions acquiring three properties for $33.1 million.

Year-to-date, the Company has completed 18 transactions acquiring 41 properties in 10 states with 9 operators for $403 million at a blended initial cash yield of 9.3%. The Company has also invested $40.6 million through September 30, 2014 for property reinvestment and new construction.

Dispositions:

During the third quarter, the Company sold five properties for $763,000 recording a net GAAP loss of $2.5 million or $0.04 per share.  These five properties were previously closed in conjunction with each local existing operator agreeing to continue to pay the remaining contractual rent owed of approximately $6.9 million under the cross-defaulted existing triple-net lease. The Company also recorded an impairment charge of $1.5 million in the third quarter on a property held for sale and expected to sell in the fourth quarter.

Year-to-date, the Company sold seven properties for $1.4 million recording $0.9 million of impairments and a net GAAP loss of $2.5 million related to such sales.  Five of the seven properties were previously closed in conjunction with each local existing operator agreeing to continue to pay the remaining contractual rent owed of approximately $6.9 million under the cross-defaulted existing triple-net lease.

Balance Sheet and Liquidity

As of September 30, 2014, the Company had $16 million of cash, $425 million of availability on its $600 million unsecured credit facility and a net debt to Adjusted EBITDA ratio of 4.8.  As of today, the Company has $220 million outstanding under its credit facility.

Dividends

On July 29, 2014, the Company announced that its Board of Directors declared a dividend for the third quarter of $0.36 per share. The dividend was paid in cash on October 10, 2014 to stockholders of record on September 26, 2014.

Full Year 2014 AFFO Guidance

The Company is reaffirming its AFFO guidance range of $1.89 to $1.93 per share for the full year 2014. The details underlying this guidance can be found on page 17 of this earnings release and supplemental information.

Conference Call and Webcast Information

In a separate press release issued today, Aviv announced that it has entered into a definitive agreement to merge with Omega Healthcare Investors, Inc.

In lieu of Aviv's previously scheduled call to discuss third quarter earnings, Omega and Aviv will hold a joint conference call to discuss this transaction at 8:30 a.m. Eastern Time (7:30 a.m. Central Time). The conference call is being webcast and can be accessed at Omega's website at www.omegahealthcare.com and at Aviv's website at www.avivreit.com or by dialing (877) 511-2891 for those within the United States. The Canadian toll-free dial-in number is (855) 669-9657. All other international participants can use the dial-in number (412) 902-4140. Ask the operator to be connected to the "Omega Healthcare Investors, Inc. and Aviv REIT, Inc. Merger Call". A replay of the webcast will be available at approximately 11:30 a.m. Eastern Time today on Omega and Aviv's websites or by calling (877) 344-7529, passcode 10055663. The webcast will be archived for 30 days.

About Aviv

Aviv REIT, Inc., based in Chicago, is a real estate investment trust that specializes in owning post-acute and long-term care SNFs 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. As of today, the Company owns 316 properties that are triple-net leased to 38 operators in 29 states.

For more information about the Company and the proposed merger transaction, please visit our website at www.avivreit.com or contact: Craig M. Bernfield, Chairman & Chief Executive Officer at 312-855-0930.

Forward-Looking Statements

The information presented herein includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements provide our current expectations or forecasts of future events. Forward-looking statements include statements about our expectations, beliefs, intentions, plans, objectives, goals, strategies, future events, performance and underlying assumptions and other statements that are not historical facts. Examples of forward-looking statements include all statements regarding our expected future financial position, results of operations, cash flows, liquidity, business strategy, projected growth opportunities and potential acquisitions and plans, objectives of management for future operations and completion of the proposed merger transaction. You can identify forward-looking statements by their use of forward-looking words, such as "may," "will," "anticipate," "expect," "believe," "estimate," "intend," "plan," "should," "seek" or comparable terms, or the negative use of those words, but the absence of these words does not necessarily mean that a statement is not forward-looking.

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. Important factors, risks and uncertainties that could cause actual results to differ materially from our expectations include those disclosed under Part I, Item 1A, "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2013, Part II, Item 1A, "Risk Factors" in our Quarterly Report on Form 10-Q for the period ended March 31, 2014 and elsewhere in filings made by us with the Securities and Exchange Commission (SEC). These factors include, among others: uncertainties relating to the operations of our operators, including those relating to reimbursement by government and other third-party payors, compliance with regulatory requirements and occupancy levels; our ability to successfully engage in strategic acquisitions and investments; competition in the acquisition and ownership of healthcare properties; our ability to monitor our portfolio; environmental liabilities associated with our properties; our ability to re-lease or sell any of our properties; the availability and cost of capital;  changes in interest rates; the amount and yield of any additional investments; changes in tax laws and regulations affecting real estate investment trusts (REITs); our ability to maintain our status as a REIT; and the other factors relating to the proposed merger transaction set forth in the press release relating to the proposed merger transaction issued on the date hereof.

There may be additional risks of which we are presently unaware or that we currently deem immaterial. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date as of which such statements are made. Forward-looking statements are not guarantees of future performance. Except as required by law, we do not undertake any responsibility to release publicly any revisions to these forward-looking statements to take into account events or circumstances that occur after the date as of which such statements are made or to update you on the occurrence of any unanticipated events which may cause actual results to differ from those expressed or implied by the forward-looking statements contained herein.

Additional Information about the Proposed Transaction and Where to Find It

This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any proxy, vote or approval.  In connection with the proposed transaction, Omega and Aviv expect to prepare and file with the SEC a registration statement on Form S-4 containing a joint proxy statement/prospectus and other documents with respect to Omega's proposed acquisition of Aviv.  INVESTORS ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS (INCLUDING ALL AMENDMENTS AND SUPPLEMENTS THERETO) AND OTHER RELEVANT DOCUMENTS FILED WITH THE SEC IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION.

Investors may obtain free copies of the registration statement, the joint proxy statement/prospectus and other relevant documents filed by Omega and Aviv with the SEC (if and when they become available) through the website maintained by the SEC at www.sec.gov.  Copies of the documents filed by Omega with the SEC will also be available free of charge on Omega's website at www.omegahealthcare.com and copies of the documents filed by Aviv with the SEC are available free of charge on Aviv's website at www.avivreit.com.

Omega, Aviv and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from Omega's and Aviv's shareholders in respect of the proposed transaction.  Information regarding Omega's directors and executive officers can be found in Omega's definitive proxy statement filed with the SEC on April 29, 2014.  Information regarding Aviv's directors and executive officers can be found in Aviv's definitive proxy statement filed with the SEC on April 15, 2014.  Additional information regarding the interests of such potential participants will be included in the joint proxy statement/prospectus and other relevant documents filed with the SEC in connection with the proposed transaction if and when they become available.  These documents are available free of charge on the SEC's website and from Omega and Aviv, as applicable, using the sources indicated above.