Company Quick10K Filing
CNL Healthcare Properties
Price-0.00 EPS2
Shares174 P/E-0
MCap-0 P/FCF-0
Net Debt678 EBIT339
TEV678 TEV/EBIT2
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-14
10-K 2019-12-31 Filed 2020-03-26
10-Q 2019-09-30 Filed 2019-11-08
10-Q 2019-06-30 Filed 2019-08-14
10-Q 2019-03-31 Filed 2019-05-13
10-K 2018-12-31 Filed 2019-03-21
10-Q 2018-09-30 Filed 2018-11-14
10-Q 2018-06-30 Filed 2018-08-13
10-Q 2018-03-31 Filed 2018-05-10
10-K 2017-12-31 Filed 2018-03-16
10-Q 2017-09-30 Filed 2017-11-09
10-Q 2017-06-30 Filed 2017-08-09
10-Q 2017-03-31 Filed 2017-05-11
10-K 2016-12-31 Filed 2017-03-16
10-Q 2016-09-30 Filed 2016-11-10
10-Q 2016-06-30 Filed 2016-08-10
10-Q 2016-03-31 Filed 2016-05-11
10-K 2015-12-31 Filed 2016-03-16
10-Q 2015-09-30 Filed 2015-11-12
10-Q 2015-06-30 Filed 2015-08-13
10-Q 2015-03-31 Filed 2015-05-13
10-K 2014-12-31 Filed 2015-03-27
10-Q 2014-09-30 Filed 2014-11-13
10-Q 2014-06-30 Filed 2014-08-12
10-Q 2014-03-31 Filed 2014-05-12
10-K 2013-12-31 Filed 2014-03-27
10-Q 2013-09-30 Filed 2013-11-14
10-Q 2013-06-30 Filed 2013-08-14
10-Q 2013-03-31 Filed 2013-05-14
10-K 2012-12-31 Filed 2013-03-27
10-Q 2012-09-30 Filed 2012-11-09
10-Q 2012-06-30 Filed 2012-08-14
10-Q 2012-03-31 Filed 2012-05-11
10-K 2011-12-31 Filed 2012-02-10
10-Q 2011-09-30 Filed 2011-11-10
10-Q 2011-06-30 Filed 2011-08-12
8-K 2020-06-19
8-K 2020-04-27
8-K 2020-03-31
8-K 2020-03-23
8-K 2020-03-06
8-K 2019-12-10
8-K 2019-11-01
8-K 2019-08-27
8-K 2019-05-21
8-K 2019-05-15
8-K 2019-03-21
8-K 2019-03-13
8-K 2019-01-24
8-K 2018-12-27
8-K 2018-12-18
8-K 2018-06-22
8-K 2018-04-03
8-K 2018-02-27
8-K 2018-02-14
8-K 2018-02-07
8-K 2018-01-30
8-K 2018-01-23

CHP 10Q Quarterly Report

Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risks
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities - None
Item 4. Mine Safety Disclosure - Not Applicable
Item 5. Other Information - None
Item 6. Exhibits
EX-31.1 chp-ex311_8.htm
EX-31.2 chp-ex312_7.htm
EX-32.1 chp-ex321_6.htm

CNL Healthcare Properties Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
2.92.31.71.20.60.02012201420172020
Assets, Equity
0.40.30.20.10.0-0.12012201420172020
Rev, G Profit, Net Income
1.30.80.2-0.3-0.9-1.42012201420172020
Ops, Inv, Fin

10-Q 1 chp-10q_20200331.htm 10-Q chp-10q_20200331.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2020

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission file number:  000-54685

 

CNL Healthcare Properties, Inc.

(Exact name of registrant as specified in its charter)

  

Maryland

 

27-2876363

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

CNL Center at City Commons

450 South Orange Avenue

Orlando, Florida

 

 

 

32801

(Address of principal executive offices)

 

(Zip Code)

Registrant’s telephone number, including area code (407) 650-1000

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes     No 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

Emerging growth company

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes     No

Securities registered pursuant to Section 12(b) of the Act:

 

 

Title of each class

Trading

Symbol(s)

 

Name of each exchange on which registered

None

N/A

N/A

The number of shares of common stock of the registrant outstanding as of May 13, 2020 was 173,960,540.

 

 


 

CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

 

INDEX

 

 

 

Page

PART I. FINANCIAL INFORMATION

 

 

 

 

 

Item 1.Condensed Consolidated Financial Information (unaudited):

 

2

Condensed Consolidated Balance Sheets

 

2

Condensed Consolidated Statements of Operations

 

3

Condensed Consolidated Statements of Comprehensive Income (Loss)

 

4

Condensed Consolidated Statements of Stockholders’ Equity and Redeemable Noncontrolling Interest

 

5

Condensed Consolidated Statements of Cash Flows

 

6

Notes to Condensed Consolidated Financial Statements

 

7

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

17

Item 3.Quantitative and Qualitative Disclosures about Market Risks

 

35

Item 4.Controls and Procedures

 

36

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

 

Item 1.Legal Proceedings

 

36

Item 1A.Risk Factors

 

36

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

 

36

Item 3.Defaults Upon Senior Securities

 

36

Item 4.Mine Safety Disclosures

 

36

Item 5.Other Information

 

36

Item 6.Exhibits

 

36

 

 

 

Exhibit Index

 

37

Signatures

 

38

 

 

 


 

Item 1. Condensed Consolidated Financial Information

 

CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

 

(in thousands, except per share data)

 

 

 

March 31,

 

 

December 31,

 

ASSETS

 

2020

 

 

2019

 

Real estate investment properties, net (including VIEs $44,969 and $45,329, respectively)

 

$

1,402,432

 

 

$

1,412,595

 

Assets held for sale, net  (including VIEs $0 and $0, respectively)

 

 

30,417

 

 

 

111,894

 

Restricted cash  (including VIEs $86 and $76, respectively)

 

 

5,921

 

 

 

5,997

 

Cash (including VIEs $597 and $1,024, respectively)

 

 

107,755

 

 

 

42,350

 

Deferred rent and lease incentives (including VIEs $0 and $0, respectively)

 

 

15,060

 

 

 

15,331

 

Other assets  (including VIEs $528 and $577, respectively)

 

 

24,183

 

 

 

27,049

 

Intangibles, net

 

 

1,121

 

 

 

1,220

 

Total assets

 

$

1,586,889

 

 

$

1,616,436

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

Mortgages and other notes payable, net (including VIEs $29,065 and $29,148, respectively)

 

$

352,784

 

 

$

375,928

 

Credit facilities

 

 

303,069

 

 

 

302,950

 

Liabilities associated with assets held for sale (including VIEs $0 and $0, respectively)

 

 

463

 

 

 

1,113

 

Other liabilities (including VIEs $233 and $219, respectively)

 

 

9,197

 

 

 

8,609

 

Accounts payable and accrued liabilities (including VIEs $558 and $1,286, respectively)

 

 

22,699

 

 

 

24,530

 

Due to related parties

 

 

1,804

 

 

 

2,275

 

Total liabilities

 

 

690,016

 

 

 

715,405

 

Commitments and contingencies (Note 12)

 

 

 

 

 

 

 

 

Redeemable noncontrolling interest

 

 

549

 

 

 

558

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.01 par value per share,

 

 

 

 

 

 

 

 

200,000 shares authorized; none issued or outstanding

 

 

 

 

 

 

Excess shares, $0.01 par value per share,

 

 

 

 

 

 

 

 

300,000 shares authorized; none issued or outstanding

 

 

 

 

 

 

Common stock, $0.01 par value per share, 1,120,000 shares authorized,

 

 

 

 

 

 

 

 

186,626 and 186,626 shares issued, and 173,960 and 173,960 shares outstanding,

   respectively

 

 

1,740

 

 

 

1,740

 

Capital in excess of par value

 

 

1,516,926

 

 

 

1,516,926

 

Accumulated income

 

 

125,573

 

 

 

120,831

 

Accumulated distributions

 

 

(749,145

)

 

 

(740,239

)

Accumulated other comprehensive loss

 

 

(46

)

 

 

(36

)

Total stockholders' equity

 

 

895,048

 

 

 

899,222

 

Noncontrolling interest

 

 

1,276

 

 

 

1,251

 

Total equity

 

 

896,873

 

 

 

901,031

 

Total liabilities and equity

 

$

1,586,889

 

 

$

1,616,436

 

The abbreviation VIEs above means variable interest entities.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to condensed consolidated financial statements

 

 

 

 

2


 

CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(in thousands, except per share data)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2020

 

 

2019

 

Revenues:

 

 

 

 

 

 

 

 

Rental income and related revenues

 

$

7,748

 

 

$

8,923

 

Resident fees and services

 

 

73,622

 

 

 

71,275

 

Total revenues

 

 

81,370

 

 

 

80,198

 

Operating expenses:

 

 

 

 

 

 

 

 

Property operating expenses

 

 

48,242

 

 

 

46,015

 

General and administrative expenses

 

 

2,093

 

 

 

2,959

 

Asset management fees

 

 

4,512

 

 

 

4,593

 

Property management fees

 

 

3,528

 

 

 

3,468

 

Depreciation and amortization

 

 

12,544

 

 

 

12,334

 

Total operating expenses

 

 

70,919

 

 

 

69,369

 

Gain on sale of real estate

 

 

1,074

 

 

 

 

Operating income

 

 

11,525

 

 

 

10,829

 

Other income (expense):

 

 

 

 

 

 

 

 

Interest and other income

 

 

24

 

 

 

453

 

Interest expense and loan cost amortization

 

 

(7,076

)

 

 

(11,289

)

Equity in earnings of unconsolidated entity

 

 

206

 

 

 

96

 

Total other expense

 

 

(6,846

)

 

 

(10,740

)

Income before income taxes

 

 

4,679

 

 

 

89

 

Income tax expense

 

 

(553

)

 

 

(655

)

Income (loss) from continuing operations

 

 

4,126

 

 

 

(566

)

Income from discontinued operations

 

 

652

 

 

 

10,474

 

Net income

 

 

4,778

 

 

 

9,908

 

Less: Amounts attributable to noncontrolling interests

 

 

 

 

 

 

 

 

Net income from continuing operations

 

 

36

 

 

 

 

Net income from discontinued operations

 

 

 

 

 

8

 

Net income attributable to common stockholders

 

$

4,742

 

 

$

9,900

 

Net income (loss) per share of common stock (basic and diluted)

 

 

 

 

 

 

 

 

Continuing operations

 

$

0.03

 

 

$

(0.00)

 

Discontinued operations

 

$

0.00

 

 

$

0.06

 

Weighted average number of shares of

 

 

 

 

 

 

 

 

common stock outstanding (basic and diluted)

 

 

173,960

 

 

 

173,963

 

 

See accompanying notes to condensed consolidated financial statements.

 

3


 

CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

(in thousands)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2020

 

 

2019

 

Net income

 

$

4,778

 

 

$

9,908

 

Other comprehensive (loss) income:

 

 

 

 

 

 

 

 

Unrealized gain (loss) on derivative financial instruments, net

 

 

4

 

 

 

(892

)

Unrealized loss on derivative financial instruments of equity method

   investments

 

 

(14

)

 

 

 

Total other comprehensive loss

 

 

(10

)

 

 

(892

)

Comprehensive income

 

 

4,768

 

 

 

9,016

 

Less: Comprehensive income attributable to noncontrolling interest

 

 

36

 

 

 

8

 

Comprehensive income attributable to common stockholders

 

$

4,732

 

 

$

9,008

 

 

See accompanying notes to condensed consolidated financial statements.

 

4


 

CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND REDEEMABLE NONCONTROLLING INTEREST

THREE MONTHS ENDED MARCH 31, 2020 AND 2019 (UNAUDITED)

(in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Redeemable

 

 

 

Common Stock

 

 

Capital in

 

 

Accumulated

 

 

 

 

 

 

Other

 

 

Total

 

 

Non-

 

 

 

 

 

 

 

Noncontrolling

 

 

 

Number

 

 

Par

 

 

Excess of

 

 

Income

 

 

Accumulated

 

 

Comprehensive

 

 

Stockholders'

 

 

controlling

 

 

Total

 

 

 

Interest

 

 

 

of Shares

 

 

Value

 

 

Par Value

 

 

(Loss)

 

 

Distributions

 

 

Income (Loss)

 

 

Equity

 

 

Interest

 

 

Equity

 

Balance at December 31, 2019

 

$

558

 

 

 

 

173,960

 

 

$

1,740

 

 

$

1,516,926

 

 

$

120,831

 

 

$

(740,239

)

 

$

(36

)

 

$

899,222

 

 

$

1,251

 

 

$

901,031

 

Net income

 

 

11

 

 

 

 

 

 

 

 

 

 

 

 

 

4,742

 

 

 

 

 

 

 

 

 

4,742

 

 

 

25

 

 

 

4,778

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(10

)

 

 

(10

)

 

 

 

 

 

(10

)

Distributions to noncontrolling interests

 

 

(20

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(20

)

Cash distributions declared ($0.05120 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,906

)

 

 

 

 

(8,906

)

 

 

 

 

 

(8,906

)

Balance at March 31, 2020

 

$

549

 

 

 

 

173,960

 

 

$

1,740

 

 

$

1,516,926

 

 

$

125,573

 

 

$

(749,145

)

 

$

(46

)

 

$

895,048

 

 

$

1,276

 

 

$

896,873

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2018

 

$

579

 

 

 

 

173,963

 

 

$

1,740

 

 

$

1,516,543

 

 

$

(233,847

)

 

$

(345,347

)

 

$

1,177

 

 

$

940,266

 

 

$

1,081

 

 

$

941,926

 

Adoption of new lease standard

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,182

 

 

 

 

 

 

 

 

 

3,182

 

 

 

 

 

 

3,182

 

Net income (loss)

 

 

(5

)

 

 

 

 

 

 

 

 

 

 

 

 

9,900

 

 

 

 

 

 

 

 

 

9,900

 

 

 

13

 

 

 

9,908

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(892

)

 

 

(892

)

 

 

 

 

 

(892

)

Distributions to holders of promoted interest

 

 

 

 

 

 

 

 

 

 

 

 

406

 

 

 

 

 

 

 

 

 

 

 

 

406

 

 

 

 

 

 

406

 

Cash distributions declared ($0.11639 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(20,246

)

 

 

 

 

 

(20,246

)

 

 

 

 

 

(20,246

)

Contribution from noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

60

 

 

 

60

 

Balance at March 31, 2019

 

$

574

 

 

 

 

173,963

 

 

$

1,740

 

 

$

1,516,949

 

 

$

(220,765

)

 

$

(365,593

)

 

$

285

 

 

$

932,616

 

 

$

1,154

 

 

$

934,344

 

 

See accompanying notes to condensed consolidated financial statements.

 

5


 

CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

March 31,

 

 

2020

 

2019

Operating activities:

 

 

 

 

 

 

 

Net cash flows provided by operating activities – continuing operations

 

$

16,976

 

$

17,822

 

Net cash flows provided by operating activities – discontinued operations

 

 

884

 

 

8,333

 

Net cash flows provided by operating activities

 

 

17,860

 

 

26,155

 

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

 

 

 

Proceeds from sale of real estate

 

 

53,712

 

 

 

 

Deposits on sale of real estate

 

 

 

 

77,500

 

 

Capital expenditures

 

 

(2,499)

 

 

(586)

 

 

Other investing activities

 

 

 

 

1,696

 

Net cash provided by investing activities – continuing operations

 

 

51,213

 

 

78,610

 

Net cash provided by (used in) investing activities – discontinued operations

 

 

28,398

 

 

(1,196)

 

Net cash provided by investing activities

 

 

79,611

 

 

77,414

 

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

 

 

 

Distributions to stockholders, net of distribution reinvestments

 

 

(8,907)

 

 

(20,246)

 

 

Draws under credit facilities

 

 

 

 

5,000

 

 

Proceeds from mortgages and other notes payable

 

 

 

 

178

 

 

Principal payments on mortgages and other notes payable

 

 

(23,313)

 

 

(4,788)

 

 

Other financing activities

 

 

(88)

 

 

(278)

 

Net cash flows used in by financing activities

 

 

(32,308)

 

 

(20,134)

 

 

 

 

 

 

 

Net increase in cash and restricted cash

 

 

65,163

 

 

83,435

Cash and restricted cash at beginning of period, including assets held for sale

 

 

48,537

 

 

65,501

Cash and restricted cash at end of period, including assets held for sale

 

$

113,700

 

$

148,936

 

 

 

 

 

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

6


CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2020 (UNAUDITED)

 

1.

Organization

CNL Healthcare Properties, Inc. (“Company”) is a Maryland corporation that incorporated on June 8, 2010 and elected to be taxed as a real estate investment trust (“REIT”) for United States (“U.S.”) federal income tax purposes beginning with the year ended December 31, 2012.  The Company’s intention is to be organized and operate in a manner that allows it to remain qualified as a REIT for U.S. federal income tax purposes.  The Company conducts substantially all of its operations either directly or indirectly through: (1) an operating partnership, CHP Partners, LP (“Operating Partnership”), in which the Company is the sole limited partner and its wholly-owned subsidiary, CHP GP, LLC, is the sole general partner; (2) a wholly-owned taxable REIT subsidiary (“TRS”), CHP TRS Holding, Inc.; (3) property owner and lender subsidiaries, which are single purpose entities; and (4) investments in joint ventures.

The Company is externally managed and advised by CNL Healthcare Corp. (“Advisor”), which is an affiliate of CNL Financial Group, LLC (“Sponsor”).  The Sponsor is an affiliate of CNL Financial Group, Inc. (“CNL”). The Advisor is responsible for managing the Company’s day-to-day operations, serving as a consultant in connection with policy decisions to be made by the board of directors, and for identifying, recommending and executing on possible strategic alternatives and dispositions on the Company’s behalf pursuant to an advisory agreement among the Company, the Operating Partnership and the Advisor.  Substantially all of the Company’s operating, administrative and certain property management services are, provided by affiliates of the Advisor.  In addition, certain property management services are provided by third-party property managers.  

On September 30, 2015, the Company completed its public offerings (“Offerings”) having received aggregate subscription proceeds of approximately $1.7 billion.  In October 2015, the Company deregistered the unsold shares of its common stock under its previous registration statement on Form S-11, except for 20 million shares that it registered on Form S-3 under the Securities Exchange Act of 1933 with the Securities and Exchange Commission (“SEC”) for the sale of additional shares of common stock through its distribution reinvestment plan (“Reinvestment Plan”).  Effective July 11, 2018, the Company suspended both its Reinvestment Plan and its stock redemption plan (“Redemption Plan”).

In 2017, the Company began evaluating possible strategic alternatives to provide liquidity to the Company’s stockholders.  In April 2018, the Company’s board of directors formed a special committee consisting solely of its independent directors (“Special Committee”) to consider possible strategic alternatives, including, but not limited to (i) the listing of the Company’s or one of its subsidiaries’ common stock on a national securities exchange, (ii) an orderly disposition of the Company’s assets or one or more of the Company’s asset classes and the distribution of the net sale proceeds thereof to the stockholders of the Company and (iii) a potential business combination or other transaction with a third party or parties that provides the stockholders of the Company with cash and/or securities of a publicly traded company (collectively, among other options, “Possible Strategic Alternatives”). During 2018, the Special Committee engaged HFF Securities L.P. (through June 2019) and KeyBanc Capital Markets Inc. to act as financial advisors to the aforementioned Special Committee.  As of December 2018, as part of executing on Possible Strategic Alternatives, the Company had committed to a plan to sell a total of 70 properties including the sale of 63 properties consisting of 53 medical office buildings (“MOBs”), five post-acute care facilities and five acute care hospitals across the US (collectively, the “MOB/Healthcare Portfolio”), a skilled nursing facility in Colorado (“Welbrook Senior Living Grand Junction”) and six skilled nursing facilities in Arkansas (the “Perennial Communities”).  During the year ended December 31, 2019, the Company sold 61 of the properties and during the three months ended March 31, 2020, the Company sold seven additional properties.  As of March 31, 2020, the Company had two remaining acute care properties classified as held for sale.

7


CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2020 (UNAUDITED)

 

1.

Organization (continued)

As of March 31, 2020, , the Company’s healthcare investment portfolio was geographically diversified with properties in 27 states and consisted of interests in 74 properties, including 71 senior housing communities, one vacant land parcel and two acute care hospitals classified as held for sale.  The Company has primarily leased its seniors housing properties to wholly-owned TRS entities and engaged independent third-party managers under management agreements to operate the properties under the REIT Investment Diversification and Empowerment Act of 2007 (“RIDEA”) structures; however, the Company has also leased its properties to third-party tenants under triple-net or similar lease structures, where the tenant bears all or substantially all of the costs (including cost increases, for real estate taxes, utilities, insurance and ordinary repairs).  In addition, although most of the Company’s investments are wholly owned, it invested in three properties through partnerships with other entities where it is believed to be appropriate and beneficial.

2.

Summary of Significant Accounting Policies

Basis of Presentation and Consolidation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and note disclosures required by generally accepted accounting principles in the U.S. (“GAAP”).  The unaudited condensed consolidated financial statements reflect all normal recurring adjustments, which, in the opinion of management, are necessary for the fair statement of the Company’s results for the interim period presented.  Operating results for the three months ended March 31, 2020 may not be indicative of the results that may be expected for the year ending December 31, 2020.  Amounts as of December 31, 2019 included in the unaudited condensed consolidated financial statements have been derived from audited consolidated financial statements as of that date but do not include all disclosures required by GAAP.  These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

The accompanying unaudited condensed consolidated financial statements include the Company’s accounts, the accounts of wholly owned subsidiaries or subsidiaries for which the Company has a controlling interest, the accounts of two variable interest entities (“VIEs”) in which the Company is the primary beneficiary, and the accounts of other subsidiaries over which the Company has a controlling financial interest.  All material intercompany accounts and transactions have been eliminated in consolidation.

Risks and Uncertainties The recent outbreak of the novel coronavirus (“COVID-19”) pandemic around the globe continues to adversely impact global commercial activity and has contributed to significant volatility in financial markets. The global impact of the outbreak has been rapidly evolving and many countries, including the United States, have reacted by, among other things, instituting quarantines, mandating business and school closures and restricting travel. Such actions are creating significant disruption in global supply chains, and adversely impacting a number of industries.

The major disruption caused by COVID-19 brought to a halt most economic activity in most of the United States resulting in a significant increase in unemployment claims and will likely result in a significant decline in the U.S. Gross Domestic Product. COVID-19 could have a continued and prolonged adverse impact on economic and market conditions and trigger a period of global economic slowdown which could have a material adverse effect on the Company’s results and financial condition.

The full impact of COVID-19 on the financial and credit markets and consequently on the Company’s financial condition and results of operations is uncertain and cannot be predicted at the current time as it depends on several factors beyond the control of the Company including, but not limited to (i) the uncertainty around the severity and duration of the outbreak, (ii) the effectiveness of the United States public health response, (iii) the pandemic’s impact on the U.S. and global economies, (iv) the timing, scope and effectiveness of additional governmental responses to the pandemic and (v) the timing and speed of economic recovery, including the availability of a treatment or vaccination for COVID-19.

8


CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2020 (UNAUDITED)

 

Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated financial statements, the reported amounts of revenues and expenses during the reporting periods and the disclosure of contingent liabilities. For example, significant assumptions are made in the analysis of real estate impairments, the valuation of contingent assets and liabilities, and the valuation of restricted common stock (“Restricted Stock”) shares issued to the Advisor.  The uncertainty surrounding the COVID-19 pandemic may materially impact the accuracy of the estimates and assumptions used in the financial statements and related footnotes and accordingly, actual results could differ from those estimates.

Adopted Accounting Pronouncements — In June 2016, the FASB issued ASU No. 2016-13, “Measurement of Credit Losses on Financial Instruments (Topic 326),” which requires a new forward-looking expected loss model to be used for receivables, held-to-maturity debt, loans and other financial instruments.  Previously, when credit losses were measured under current GAAP, an entity generally only considered past events and current conditions in measuring the incurred loss.  The amendments eliminate the probable initial threshold for recognition of credit losses in current GAAP and, instead, reflect an entity’s current estimate of all expected credit losses over the life of the financial instrument.  The ASU is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2019.  The Company adopted this ASU prospectively on January 1, 2020; the adoption of which did not have a material impact on the Company’s consolidated results of operations.

3.

Revenue

The following table presents disaggregated revenue related to the Company’s resident fees and services during the three months ended March 31, 2020 and 2019:

 

 

 

Number of Units

 

 

Revenues

(in millions)

 

 

Percentage

of Revenues

 

Resident fees and services:

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Independent living

 

 

2,261

 

 

 

2,261

 

 

$

19.3

 

 

$

18.5

 

 

 

26.2

%

 

 

25.9

%

Assisted living

 

 

2,966

 

 

 

2,966

 

 

 

36.4

 

 

 

35.0

 

 

 

49.5

%

 

 

49.1

%

Memory care

 

 

853

 

 

 

853

 

 

 

14.6

 

 

 

14.4

 

 

 

19.8

%

 

 

20.2

%

Other revenues

 

 

 

 

 

 

 

 

3.3

 

 

 

3.4

 

 

 

4.5

%

 

 

4.8

%

 

 

 

6,080

 

 

 

6,080

 

 

$

73.6

 

 

$

71.3

 

 

 

100.0

%

 

 

100.0

%

 

 

4.

Real Estate Assets, net

The gross carrying amount and accumulated depreciation of the Company’s real estate assets as of March 31, 2020 and December 31, 2019 are as follows, excluding assets held for sale (in thousands):

 

 

 

March 31,

 

 

December 31,

 

 

 

2020

 

 

2019

 

Land and land improvements

 

$

130,386

 

 

$

130,371

 

Building and building improvements

 

 

1,479,704

 

 

 

1,478,111

 

Furniture, fixtures and equipment

 

 

86,651

 

 

 

85,977

 

Less: accumulated depreciation

 

 

(294,309

)

 

 

(281,864

)

Real estate investment properties, net

 

$

1,402,432

 

 

$

1,412,595

 

 

Depreciation expense on the Company’s real estate investment properties, net was approximately $12.4 million and $12.2 million for the three months ended March 31, 2020 and 2019, respectively. These amounts include depreciation through the determination date on assets held for sale; refer to Note 6. “Assets and Associated Liabilities Held For Sale and Discontinued Operations” for additional information.

9


CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2020 (UNAUDITED)

 

4.

Intangibles, net

The gross carrying amount and accumulated amortization of the Company’s intangible assets as of March 31, 2020 and December 31, 2019 are as follows (in thousands):

 

 

 

As of

 

 

 

March 31,

 

 

December 31,

 

 

 

2020

 

 

2019

 

In-place lease intangibles

 

$

3,943

 

 

$

83,113

 

Less: accumulated amortization

 

 

(2,822

)

 

 

(81,893

)

Intangible assets, net

 

$

1,121

 

 

$

1,220

 

 

For the three months ended March 31, 2020 and 2019, amortization on the Company’s intangible assets was approximately $0.1 million and $0.1 million, respectively, all of which were included in depreciation and amortization.

10


CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2020 (UNAUDITED)

 

6.

Assets and Associated Liabilities Held For Sale and Discontinued Operations

As part of executing on Possible Strategic Alternatives, the Company had committed to a plan to sell a total of 70 properties, including: (1) the 63 property MOB/Healthcare Portfolio, (2) the six properties in the Perennial Communities and (3) Welbrook Senior Living Grand Junction.  As such, the Company classified the 70 properties as held for sale.  The Company believed the sale of the MOB/Healthcare Portfolio would cause a strategic shift in the Company’s operations and therefore classified the operations of those properties as discontinued operations.  The sale of the other seven properties would not cause a strategic shift in the Company’s operations and were not considered individually significant; therefore, those properties did not qualify as discontinued operations.

During the year ended December 31, 2019, the Company sold 61 of the properties and as of December 31, 2019, had nine properties classified as held for sale.  As of December 31, 2019, the Company had entered into a purchase and sale agreement for its acute care property in New Orleans (the “New Orleans Sale Agreement”) and had entered into a purchase and sale agreement for the Perennial Communities (the “Perennial Sale Agreement”) with unrelated third party buyers.  During the three months ended March 31, 2020, the Company sold the seven properties in accordance with the New Orleans Sale Agreement and the Perennial Sale Agreement and recorded gain on sale of $1.1 million  for financial reporting purposes.  As of March 31, 2020, the Company had two acute care properties remaining from the MOB/Healthcare Portfolio classified as assets held for sale. The two assets held for sale, and the liabilities associated with those assets held for sale, consisted of the following (in thousands):

 

 

 

As of March 31, 2020

 

 

 

MOB/Healthcare

Portfolio

 

 

Other

 

 

Total

 

Real estate investment properties, net

 

$

25,981

 

 

$

 

 

$

25,981

 

Intangibles, net

 

 

1,583

 

 

 

 

 

1,583

 

Deferred rent and lease incentives

 

 

1,813

 

 

 

 

 

1,813

 

Other assets

 

 

1,016

 

 

 

 

 

1,016

 

Restricted cash

 

 

24

 

 

 

 

 

24

 

Assets held for sale, net

 

$

30,417

 

 

$

 

 

$

30,417

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other liabilities

 

$

430