CNL HEALTHCARE PROPERTIES, INC. Item 7.01 Regulation FD Disclosure.
On or around
Pursuant to the rules and regulations of the
By furnishing the information contained in this Item 7.01 disclosure, including Exhibits 99.1 and 99.2, the Company makes no admission as to the materiality of such information.
Item 8.01 Other Events. Background and Conclusion
On
To assist the Board and the Company's valuation committee, which is comprised
solely of the Company's independent directors (the "Valuation Committee"), in
establishing a new estimated NAV per share of the Company's common stock as of
The Valuation Committee and the Board reviewed the Valuation Report and
considered the material assumptions and valuation methodologies applied and
described therein. Upon due consideration, on
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Other than the adjustment for estimated property-level transaction costs, the
Board's determination of the 2022 NAV was undertaken in accordance with the
Company's valuation policy and the recommendations and methodologies of the
The 2022 NAV represents a snapshot in time as of
The Company will hold a webinar on
Valuation Methodologies and Major Assumptions
As of the Valuation Date, the Company's real estate portfolio consisted of
interests in 70 properties, including 69 seniors housing communities and one
vacant land parcel (the "
As of the Valuation Date, the aggregate estimated value of the
For properties in which a DCF analysis was utilized, pro forma statements of operations for such properties including revenues, expenses and capital expenditures, were analyzed and projected over a multi-year period (typically ten years). Projected operating expenses in the DCF analysis included estimated COVID-19 related expenses. A reversion value is estimated after the holding period and then capitalized at an appropriate terminal capitalization rate reflecting the age and anticipated functional and economic obsolescence and competitive position of such properties to determine their reversion value. Net proceeds to owners are determined by deducting appropriate costs of sale in the reversion year. The discount rate selected for the DCF analysis is based upon estimated target rates of return for buyers of similar properties with consideration given to unique property-related factors, lease-up projections, location and age. The discount rate is then applied to the projected cash flows to derive a net present value.
The direct capitalization analysis was performed by applying a market capitalization rate for each applicable Appraised Property to the estimated stabilized forward-year annual net operating income at each such property. In selecting each capitalization rate, Stanger considered, among other factors, prevailing capitalization rates in the applicable property sector, the property's location, age and condition, the property's operating trends, the anticipated year of stabilization, the lease coverage ratios and other unique property factors.
As applicable, Stanger adjusted the capitalized value of each Appraised Property
for any excess land, deferred maintenance or capital needs and lease-up costs to
estimate the "as-is" value of each Appraised Property as of the Valuation Date.
Stanger then adjusted the "as-is" property values, as appropriate, for the
Company's allocable ownership interest in the
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In providing a valuation for the land parcels owned by the Company (which
includes the one vacant land parcel and excess or surplus land parcels deemed
contributory in value within five seniors communities) that are part of the
Debt: The Company determined the fair market value of its debt liabilities by applying a discounted cash flow analysis over the projected remaining term of each debt liability and reflecting the debt's contractual agreement and corresponding interest and principal payments. The expected debt payments were then discounted to present value at an interest rate the Company deemed appropriate and reflective of market interest rates as of the Valuation Date for debt instruments with similar collateral, anticipated duration and prepayment terms. While Stanger did not determine the value of the Company's debt liabilities, Stanger did review the market interest rates used by the Company in determining the debt fair market value and, based upon a summary of the loan terms as provided by the Company, determined that in the aggregate, the market interest rates utilized by the Company were reasonable.
Cash, Other Tangible Assets and Other Liabilities: The fair value of the Company's cash, other tangible assets and liabilities was estimated by the Company to approximate net realizable value as of the Valuation Date based upon the values of these assets and liabilities on the Company's balance sheet, and Stanger reviewed and relied upon and utilized such amounts in its Valuation Report.
Stanger prepared an appraisal report (the "Appraisal Report") summarizing key
information and assumptions and provided an appraised value on the
Valuation Summary
The following is a summary of the direct capitalization rates, discount rates and terminal capitalization rates used to arrive at the value of theAppraised Properties : 2022 Range Min Max W. Avg (a) RIDEA Direct Capitalization Rate Not Utilized Discount Rate 7.50 % 9.50 % 8.48 % Terminal Capitalization Rate 6.25 % 8.00 % 7.04 % NNN Leased Direct Capitalization Rate 7.00 % 7.50 % 7.33 % Discount Rate 10.25 % 11.25 % 10.74 % Terminal Capitalization Rate 8.50 % 9.25 % 8.87 %
(a) The weighted average capitalization rate, discount rates and terminal
capitalization rates are weighted on stabilized net operating income.
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In comparison to last year's valuation, the comparable set of RIDEA properties had an increase in the weighted average discount rate of 44 basis points, to 8.48%, and an increase in the terminal capitalization rate of 9 basis points, to 7.04% in the DCF analyses. The two triple-net leased properties that also utilized DCF had an increase in the weighted average discount rate of 56 basis points, to 10.74%, and a decline in the terminal capitalization rate of 31 basis points, to 8.87%. The thirteen triple-net leased properties utilizing direct cap analyses had an increase in the weighted average direct capitalization rate of 25 basis points, to 7.33%.
The Valuation Report contained a range for the Company's estimated 2022 NAV of
The valuation range was calculated by varying the direct capitalization rates,
discount rates and terminal capitalization rates by 25 basis points in either
direction. Stanger also varied the price per square foot value for the one
undeveloped land parcel by
Item 9.01 Financial Statements and Exhibits
(d) Exhibits.
99.1 Text of correspondence from the Company to Stockholders regarding the
2022 NAV.
99.2 Text of correspondence from the Company to Financial Professionals
regarding the 2022 NAV.
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document)
Caution Concerning Forward-Looking Statements
Statements in this Current Report on Form 8-K that are not statements of historical fact, including statements about the purported value of the Company's common stock, constitute "forward-looking statements" within the meaning of the Federal Private Securities Litigation Reform Act of 1995. The Company intends that such forward-looking statements be subject to the safe harbors created by Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are statements that do not relate strictly to historical or current facts, but reflect management's current understandings, intentions, beliefs, plans, expectations, assumptions and/or predictions regarding the future of the Company's business and its performance, statements of future economic performance, and other future conditions and forecasts of future events and circumstances. Forward-looking statements are typically identified by words such as "believes," "expects," "anticipates," "intends," "estimates," "plans," "continues," "pro forma," "may," "will," "seeks," "should" and "could," and words and terms of similar substance in connection with discussions of future operating or financial performance, business strategy and portfolios, projected growth prospects, cash flows, costs and financing needs, legal proceedings, amount and timing of anticipated future distributions, estimated per share value of the Company's common stock, and other matters. The Company's forward-looking statements are not guarantees of future performance. While the Company's management believes its forward-looking statements are reasonable, such statements are inherently susceptible to uncertainty and changes in circumstances. As with any projection or forecast, forward-looking statements are necessarily dependent on assumptions, data and/or methods that may be incorrect or imprecise and may not be realized. The Company's forward-looking statements are based on management's current expectations and a variety of risks, uncertainties and other factors, many of which are beyond the Company's inability to control or accurately predict. Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, the Company's actual results could differ materially from those set forth in the forward-looking statements due to a variety of risks, uncertainties and other factors.
For further information regarding risks and uncertainties associated with the
Company's business, and important factors that could cause the Company's actual
results to vary materially from those expressed or implied in its
forward-looking statements, please refer to the factors listed and described
under "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and the "Risk Factors" sections of the Company's documents filed
from time to time with the
All written and oral forward-looking statements attributable to the Company or persons acting on its behalf are qualified in their entirety by these cautionary statements. Forward-looking statements speak only as of the date on which they are made; the Company undertakes no obligation to, and expressly disclaims any obligation to, update or revise its forward-looking statements to reflect new information, changed assumptions, the occurrence of subsequent events, or changes to future operating results over time unless otherwise required by law.
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