425

FILED BY AVIV REIT, INC.

PURSUANT TO RULE 425 UNDER THE SECURITIES ACT OF 1933

AND DEEMED FILED PURSUANT TO RULE 14a-12

UNDER THE SECURITIES EXCHANGE ACT OF 1934

SUBJECT COMPANY: AVIV REIT, INC.

COMMISSION FILE NO. FOR REGISTRATION

STATEMENT ON FORM S-4: 333-201359

LOGO


LOGO

Fourth Quarter 2014 Results

 

Table of Contents

Earnings Release

  2-5   

Consolidated Statements of Operations

  6   

Reconciliations of Net Income to EBITDA, Adjusted EBITDA, FFO, Normalized FFO and AFFO

  7   

Consolidated Balance Sheets

  8   

Consolidated Statements of Cash Flows

  9-10   

Portfolio Summary

  11-13   

Investment Activity

  14   

Debt Summary and Capitalization

  15   

Common Share and OP Unit Weighted Average Amounts Outstanding

  16   

Definitions and Footnotes

  17-18   

Note: This earnings release and the related supplemental information contain certain non-GAAP financial measures that we believe are helpful in understanding our business, as further discussed herein. These financial measures, which include Funds From Operations, Normalized Funds From Operations, AFFO, EBITDA and Adjusted EBITDA, should not be considered as an alternative to net income, earnings per share or any other GAAP measurement of performance or as an alternative to cash flows from operating, investing or financing activities. Furthermore, these non-GAAP financial measures are not intended to be a measure of cash flow or liquidity. Information included in this supplemental package is unaudited. For a reconciliation of each such non-GAAP financial measure to the most directly comparable GAAP financial measure, please see page 7.

 

1


LOGO

AVIV REIT REPORTS FOURTH QUARTER 2014 RESULTS

$707 MILLION OF ACQUISITIONS IN 2014 AT 8.9% BLENDED INITIAL CASH YIELD

CHICAGO, IL – February 23, 2015 – Aviv REIT, Inc. (NYSE: AVIV) today reported results for the fourth quarter and year ended December 31, 2014. All per share results are reported on a fully diluted basis.

Highlights

 

   

On October 31, 2014, Aviv announced that the Boards of Directors of Aviv and Omega Healthcare Investors (NYSE:OHI) unanimously approved a definitive agreement under which Omega will acquire all of the outstanding shares of Aviv in a stock-for-stock merger.

 

   

$340.1 million of acquisitions

 

   

$33.1 million acquisition of three SNFs at a blended initial cash yield of 9.1%

 

   

$305.0 million single transaction acquisition of 23 SNFs, four ALFs, one ILF an office building at a blended initial cash yield of 8.5%

 

   

$2.0 million acquisition of two land parcels for the new construction of two ALF/ALZ facilities

 

   

Invested $17.5 million of property reinvestment and new construction

 

   

AFFO for the quarter ended December 31, 2014 of $31.3 million, or $0.51 per share, a 24% per share increase over Q4 2013

 

   

AFFO for the year ended December 31, 2014 of $110MM, or $1.88 per share, an 11.2% increase over full year 2013

 

   

Adjusted EBITDA of $46.1 million, a 38% increase over Q4 2013

Q1 2015 Highlights

 

   

$4.5 million related to one SNF acquisition at an initial cash yield of 9.0%

 

   

On February 2, 2015, AVIV announced that it has set the date of its special meeting of stockholders to consider and vote on, among other things, a proposal to approve its previously announced merger with Omega. The special meeting will be held on Friday, March 27, 2015, at 10:00 a.m. Eastern time. Aviv stockholders of record as of the close of business on February 12, 2015 will be entitled to receive notice of and to participate at the special meeting. Additional information about the special meeting is included in the preliminary joint proxy statement/prospectus filed by Omega with the Securities and Exchange Commission (the “SEC”) on January 5, 2015, as amended on February 17, 2015, and the definitive joint proxy statement/prospectus which is expected to be mailed to stockholders of record after the related registration statement is declared effective by the SEC. Completion of the transaction is subject to satisfaction of customary closing conditions, including the approval of stockholders of both companies. The transaction is currently expected to close early in the second quarter of 2015.

 

2


Fourth Quarter 2014 Results

AFFO for the quarter ended December 31, 2014 was $31.3 million, or $0.51 per share, compared to $20.9 million, or $0.41 per share, for the quarter ended December 31, 2013, an increase of 24% per share. The growth in AFFO per share was driven primarily by the Company’s strong acquisition activity partially offset by the 9.2 million of additional shares of common stock issued during the second quarter of 2014.

Adjusted EBITDA for the quarter ended December 31, 2014 was $46.1 million, compared to $33.5 million for the quarter ended December 31, 2013, an increase of 38%. Net income for the quarter ended December 31, 2014 was $12.9 million, or $0.21 per share, compared to $11.0 million, or $0.22 per share, for the quarter ended December 31, 2013.

Full Year 2014 Results

AFFO for the year ended December 31, 2014 was $109.6 million, or $1.88 per share, compared to $79.5 million, or $1.69 per share, for the year ended December 31, 2013, an increase of 11% per share. The growth in AFFO per share was driven primarily by the Company’s strong acquisition activity.

Adjusted EBITDA for the year ended December 31, 2014 was $166.3 million, compared to $128.8 million for the year ended December 31, 2013, an increase of 29%. Net income for the year ended December 31, 2014 was $44.9 million, or $0.77 per share, compared to $23.1 million, or $0.49 per share, for the year ended December 31, 2013.

Portfolio Update

Acquisitions:

During the fourth quarter, the Company completed three transactions acquiring 34 properties in seven states with three operators for $340.1 million, comprised of the following:

 

   

One SNF in Kentucky for $4.6 million triple-net leased to existing operator Diversicare at an initial annual cash yield of 10.0%, Diversicare is an operator of 52 facilities in nine states, 13 of which they lease from Aviv

 

   

Two SNFs in Texas for $28.5 million triple-net leased to existing operator Fundamental at an initial annual cash yield of 9.0%, Fundamental is an operator of 77 facilities in eight states, 19 of which they lease from Aviv

 

   

28 properties consisting of 23 SNFs, four assisted livings facilities, one independent living facility and one office building for $305 million triple-net leased to new Aviv operator Laurel Health Care at an initial cash yield of 8.5%, Laurel is an operator of 42 facilities in five states

 

   

Two land parcels in Ohio for the new construction of two separate ALF/Memory Care facilities

For the year ended December 31, 2014, the Company has completed 19 transactions acquiring 69 properties in 15 states with 10 operators for $707 million at a blended initial annual cash yield of 8.9%. The Company also invested $58.1 million through December 31, 2014 for property reinvestment and new construction and acquired five land parcels for $11.9 million for planned new construction projects.

During the first quarter of 2015, the Company completed one transaction acquiring one SNF facility for $4.5 million.

Dispositions:

During the fourth quarter, the Company sold one SNF facility recording a net GAAP loss of $0.6 million.

 

3


As of December 31, 2014, the Company sold eight properties for $2.4 million recording $2.3 million of impairments and a net GAAP loss of $2.5 million related to such sales. Five of the eight properties were closed in conjunction with the operators agreeing to continue to pay the Company 90% of the remaining contractual rent owed of approximately $8.1 million under the cross-defaulted existing triple-net lease.

Balance Sheet and Liquidity

As of December 31, 2014, the Company had $10 million of cash and $245 million of availability on its $600 million unsecured credit facility. As of today, the Company has $440 million outstanding under its credit facility.

Dividends

On November 20, 2014, the Company announced that its Board of Directors declared a dividend for the fourth quarter of $0.36 per share. The dividend was paid in cash on December 19, 2014 to stockholders of record on December 12, 2014.

Full Year 2015 AFFO Guidance

In light of the pending merger with Omega noted above, the Company will not provide 2015 guidance.

Conference Call and Webcast Information

A conference call to review the fourth quarter 2014 earnings and year end results will take place tomorrow, February 24, 2015 at 9:00 a.m. Central time / 10:00 a.m. Eastern time. The dial-in number for the conference call is (888) 278-8471 (U.S.) or (913) 312-0693 (International). The participant passcode is 6933393. The conference call can also be accessed via webcast at www.avivreit.com under the Investor Relations tab. A replay of the call will be available for approximately two weeks on the Company’s website or by calling (888) 203-1112, access code 6933393.

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 347 properties that are triple-net leased to 37 operators in 30 states.

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

Craig 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 with Omega. 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

 

4


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 quarter ended March 31, 2014 and elsewhere in filings made by us with the Securities and Exchange Commission (the “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; the ability of Aviv and Omega to close the proposed transaction; risks relating to the integration of Aviv’s operations and employees into Omega and the possibility that the anticipated synergies and other benefits of the proposed acquisition will not be realized or will not be realized within the expected timeframe; the outcome of any legal proceedings related to the proposed transaction; and other factors identified in Aviv’s and Omega’s filings with the SEC.

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 filed with the SEC a registration statement on Form S-4 containing a preliminary joint proxy statement/prospectus. The information in the preliminary joint proxy statement/prospectus is not complete and may be changed. The definitive joint proxy statement/prospectus will be mailed to stockholders of Omega and Aviv after the registration statement is declared effective by the SEC. INVESTORS ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS (INCLUDING ALL AMENDMENTS AND SUPPLEMENTS THERETO) AND OTHER RELEVANT DOCUMENTS TO BE FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY 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.

 

5


Aviv REIT, Inc.

Consolidated Statements of Operations

(unaudited, in thousands except share and per share data)

 

     Three Months Ended December 31,     Year ended December 31,  
     2014     2013     2014     2013  

Revenues

        

Rental income

   $ 50,005      $ 37,307      $ 177,947      $ 136,513   

Interest on loans and financing lease

     1,220        1,128        4,483        4,400   

Interest and other income

     380        26        1,612        154   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     51,605        38,461        184,042        141,067   

Expenses

        

Interest expense incurred

     13,191        11,186        49,680        40,785   

Amortization of deferred financing costs

     998        943        3,942        3,459   

Depreciation and amortization

     12,553        8,826        44,023        33,226   

General and administrative

     7,079        5,737        24,039        26,886   

Transaction costs

     4,788        1,208        8,601        3,114   

Loss on impairment

     —          500        2,341        500   

Reserve for uncollectible loans and other receivables

     14        12        3,523        68   

Loss (gain) on sale of assets, net

     60        (990     2,518        (1,016

Loss on extinguishment of debt

     —          —          501        10,974   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     38,683        27,422        139,168        117,996   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     12,922        11,039        44,874        23,071   

Net income allocable to noncontrolling interests—operating partnership

     (2,398     (4,269     (9,082     (6,010
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income allocable to common stockholders

   $ 10,524      $ 6,770      $ 35,792      $ 17,061   
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per common share:

        

Basic:

        

Net income allocable to common stockholders

   $ 0.22      $ 0.22      $ 0.80      $ 0.51   

Diluted:

        

Net income allocable to common stockholders

   $ 0.21      $ 0.22      $ 0.77      $ 0.49   

Weighted average common shares outstanding:

        

Basic

     47,755,148        37,534,676        44,629,901        33,700,834   

Diluted

     61,373,736        50,950,662        58,166,924        44,324,214   

Dividends declared per common share

   $ 0.36      $ 0.36      $ 1.44      $ 1.40   

 

6


Aviv REIT, Inc.

Reconciliations of Net Income to EBITDA and Adjusted EBITDA 1

(unaudited, in thousands)

 

     Three Months Ended December 31,     Year Ended December 31,  
     2014      2013     2014      2013  

Net income

   $ 12,922       $ 11,039      $ 44,874       $ 23,071   

Interest expense, net

     13,191         11,186        49,680         40,784   

Amortization of deferred financing costs

     998         943        3,942         3,459   

Depreciation and amortization

     12,553         8,826        44,023         33,226   
  

 

 

    

 

 

   

 

 

    

 

 

 

EBITDA

     39,664         31,994        142,519         100,540   

Loss on impairment

     —           500        2,341         500   

Loss (gain) on sale of assets, net

     60         (990     2,518         (1,016

Transaction costs

     4,788         1,208        8,601         3,114   

Write-off of straight-line rents

     170         —          1,549         2,887   

Non-cash stock-based compensation

     1,258         823        4,861         11,752   

Loss on extinguishment of debt

     —           —          501         10,974   

Reserve for uncollectible loan receivables

     195         —          3,406         11   
  

 

 

    

 

 

   

 

 

    

 

 

 

Adjusted EBITDA

   $ 46,135       $ 33,535      $ 166,296       $ 128,762   
  

 

 

    

 

 

   

 

 

    

 

 

 

 

(1) See definitions and footnotes on pages 17 and 18

Aviv REIT, Inc.

Reconciliations of Net Income to FFO, Normalized FFO and AFFO 1

(unaudited, in thousands except per share data)

 

     Three Months Ended December 31,     Year Ended December 31,  
     2014     2013     2014     2013  

Net income

   $ 12,922      $ 11,039      $ 44,874      $ 23,071   

Depreciation and amortization

     12,553        8,826        44,023        33,226   

Loss on impairment

     —          500        2,341        500   

Loss (gain) on sale of assets, net

     60        (990     2,518        (1,016
  

 

 

   

 

 

   

 

 

   

 

 

 

FFO

     25,535        19,375        93,756        55,781   

Loss on extinguishment of debt

     —          —          501        10,974   

Reserve for uncollectible loan receivables

     195        —          3,406        11   

Severance cost

     —          276        —          276   

Transaction costs

     4,788        1,208        8,601        3,114   
  

 

 

   

 

 

   

 

 

   

 

 

 

Normalized FFO

     30,518        20,859        106,264        70,156   

Amortization of deferred financing costs

     998        943        3,942        3,459   

Non-cash stock-based compensation

     1,258        823        4,861        11,752   

Straight-line rental income, net

     (1,368     (1,480     (4,788     (4,478

Rental income from intangible amortization, net

     (127     (272     (666     (1,369
  

 

 

   

 

 

   

 

 

   

 

 

 

AFFO

   $ 31,279      $ 20,873      $ 109,613      $ 79,520   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average common shares and units outstanding, basic

     58,637        49,210        55,958        45,573   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average common shares and units outstanding, diluted

     61,374        50,951        58,167        47,104   
  

 

 

   

 

 

   

 

 

   

 

 

 

AFFO per share and unit, basic

   $ 0.53      $ 0.42      $ 1.96      $ 1.74   
  

 

 

   

 

 

   

 

 

   

 

 

 

AFFO per share and unit, diluted

   $ 0.51      $ 0.41      $ 1.88      $ 1.69   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) See definitions and footnotes on pages 17 and 18

 

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Aviv REIT, Inc.

Consolidated Balance Sheets

(unaudited, in thousands except share data)

 

     December 31,
2014
    December 31,
2013
 

Assets

    

Income producing property

    

Land

   $ 190,300      $ 138,150   

Buildings and improvements

     1,845,992        1,138,173   

Assets under direct financing leases

     11,291        11,175   
  

 

 

   

 

 

 
     2,047,583        1,287,498   

Less accumulated depreciation

     (188,286     (147,302

Construction in progress and land held for development

     23,150        23,292   
  

 

 

   

 

 

 

Net real estate

     1,882,447        1,163,488   

Cash and cash equivalents

     10,036        50,764   

Straight-line rent receivable, net

     45,368        40,580   

Tenant receivables, net

     4,095        1,647   

Deferred finance costs, net

     19,024        16,643   

Loan receivables, net

     42,697        41,686   

Other assets

     16,763        15,625   
  

 

 

   

 

 

 

Total assets

   $ 2,020,430      $ 1,330,433   
  

 

 

   

 

 

 

Liabilities and equity

    

Secured loans

   $ 193,418      $ 13,654   

Unsecured notes payable

     652,292        652,752   

Line of credit

     355,000        20,000   

Accrued interest payable

     15,126        15,284   

Dividends and distributions payable

     —          17,694   

Accounts payable and accrued expenses

     18,582        10,555   

Tenant security and escrow deposits

     26,259        21,586   

Other liabilities

     9,805        10,463   
  

 

 

   

 

 

 

Total liabilities

     1,270,482        761,988   

Equity:

    

Stockholders’ equity

    

Common stock (par value $0.01; 48,425,224 and 37,593,910 shares issued and outstanding, as of December 31, 2014 and December 31, 2013, respectively)

     484        376   

Additional paid-in-capital

     737,262        523,658   

Accumulated deficit

     (119,039     (89,742
  

 

 

   

 

 

 

Total stockholders’ equity

     618,707        434,292   

Noncontrolling interests—operating partnership

     131,241        134,153   
  

 

 

   

 

 

 

Total equity

     749,948        568,445   
  

 

 

   

 

 

 

Total liabilities and equity

   $ 2,020,430      $ 1,330,433   
  

 

 

   

 

 

 

 

8


Aviv REIT, Inc.

Consolidated Statements of Cash Flows

(unaudited, in thousands)

 

     Year Ended December 31  
     2014     2013  

Operating activities

    

Net income

   $ 44,874      $ 23,071   

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation and amortization

     44,023        33,226   

Amortization of deferred financing costs

     3,942        3,459   

Accretion of debt premium

     (539     (507

Straight-line rental income, net

     (4,788     (4,478

Rental income from intangible amortization, net

     (666     (1,369

Non-cash stock-based compensation

     4,861        11,752   

Loss (gain) on sale of assets, net

     2,518        (1,016

Non-cash loss on extinguishment of debt

     494        5,161   

Loss on impairment

     2,341        500   

Reserve for uncollectible secured loan and other receivables

     3,523        68   

Changes in assets and liabilities:

    

Tenant receivables

     (2,577     (3,511

Other assets

     (1,356     (5,229

Accounts payable and accrued expenses

     2,880        3,949   

Tenant security deposits and other liabilities

     5,079        2,277   
  

 

 

   

 

 

 

Net cash provided by operating activities

     104,609        67,353   

Investing activities

    

Purchase of real estate

     (706,737     (197,388

Proceeds from sales of real estate , net

     2,277        15,549   

Capital improvements

     (14,997     (12,003

Development projects

     (43,083     (18,738

Loan receivables received from others

     19,642        4,086   

Loan receivables funded to others

     (24,376     (10,407
  

 

 

   

 

 

 

Net cash used in investing activities

     (767,274     (218,901 )

 

9


Aviv REIT, Inc.

Consolidated Statements of Cash Flows (continued)

(unaudited, in thousands)

 

     Year Ended December 31  
     2014     2013  

Financing activities

    

Borrowings of debt

   $ 668,000      $ 470,000   

Repayment of debt

     (153,157     (488,241

Payment of financing costs

     (6,980     (10,448

Capital contributions

     60        575   

Proceeds from issuance of common stock

     221,720        303,600   

Cost of raising capital

     (10,558     (25,829

Shares issued for settlement of vested stock and exercised stock options, net

     1,707        —     

Cash distributions to partners

     (20,215     (16,314

Cash dividends to stockholders

     (78,640     (48,907
  

 

 

   

 

 

 

Net cash provided by financing activities

     621,937        184,436   
  

 

 

   

 

 

 

Net (decrease) increase in cash and cash equivalents

     (40,728     32,888   

Cash and cash equivalents:

    

Beginning of year

     50,764        17,876   
  

 

 

   

 

 

 

End of year

   $ 10,036      $ 50,764   
  

 

 

   

 

 

 

Supplemental cash flow information

    

Cash paid for interest

   $ 50,972      $ 40,008   

Supplemental disclosure of noncash activity

    

Accrued dividends payable to stockholders

   $ —        $ 13,551   

Accrued distributions payable to partners

   $ —        $ 4,143   

Write-off of straight-line rent receivable, net

   $ 1,549      $ 2,887   

Write-off of deferred financing costs, net

   $ 501      $ 5,161   

 

10


Aviv REIT, Inc.

Portfolio Summary 1

Portfolio Composition

 

Property Type

   Property
Count
     Number of
Beds
     Square
Feet
     Investment
(GBV)
     Annualized
Cash

Rent
     % of
Total Rent
 

Skilled Nursing

     285         26,879         10,225       $ 1,661,828       $ 181,184         82.8

Senior Housing

     37         2,555         1,677         291,877         29,971         13.7

Other Healthcare Properties

     24         212         255         93,878         7,588         3.5
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     346         29,646         12,157       $ 2,047,583       $ 218,743         100.0
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Portfolio Performance

 

     EBITDARM      EBITDAR            Facility Revenue Mix     EBITDAR  

Core Portfolio

   Coverage      Coverage      Occupancy     Private Pay     Medicare     Medicaid     Margin  

Skilled Nursing

     1.74x         1.35x         77.4     21.3     25.1     53.6     13.6

Senior Housing

     1.22x         1.04x         77.0     85.8     4.2     10.0     23.2

Other Healthcare Properties

     6.37x         5.70x         85.3     89.4     10.6     0.0     34.0
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     1.77x         1.39x         77.4     26.0     23.8     50.2     14.6
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

State Diversification

 

            Investment      Annualized Rent  

State

   Properties      (GBV)      $      %  

Texas

     68       $ 316,453       $ 36,832         16.8

Ohio

     38         300,867         30,621         14.0

California

     39         182,752         21,046         9.6

Conneticut

     6         109,474         11,149         5.1

Michigan

     12         124,117         10,619         4.9

Washington

     15         122,335         10,566         4.8

Massachusetts

     10         88,205         9,901         4.5

Pennsylvania

     10         79,746         9,433         4.3

Missouri

     18         93,073         9,307         4.3

Kentucky

     11         64,658         7,005         3.2

Other States

     119         565,903         62,264         28.5
  

 

 

    

 

 

    

 

 

    

 

 

 
     346       $ 2,047,583       $ 218,743         100.0
  

 

 

    

 

 

    

 

 

    

 

 

 

Operator Diversification

 

     Properties      Investment      Annualized Rent        

Operator (Location)

   Aviv      Total      (GBV)      $      %     States  

Laurel Health Care Company

     29         42       $ 304,493       $ 26,376         12.1     5   

Daybreak (Denton, TX)

     50         69         165,122         21,949         10.0     2   

Saber (Bedford Heights, OH)

     30         79         186,043         21,538         9.8     6   

EmpRes (Vancouver, WA)

     23         49         196,267         20,348         9.3     6   

Maplewood (Westport, CT)

     14         14         203,024         18,768         8.6     3   

Fundamental (Sparks, MD)

     19         75         177,289         16,902         7.7     8   

Preferred Care (Plano, TX)

     17         111         68,982         10,761         4.9     12   

Diversicare (Brentwood, TN)

     13         52         95,139         9,554         4.4     9   

Sun Mar (Brea, CA)

     13         25         71,144         9,167         4.2     2   

Providence (National City, CA)

     10         13         48,350         5,258         2.4     5   

Other 28 Operators

     128         402         531,731         58,122         26.6  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   
     346         931       $ 2,047,583       $ 218,743         100.0  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

(1) Dollars and square feet in thousands. Data as of December 31, 2014. Coverage, occupancy, margin and revenue mix information is provided on a trailing twelve month basis through September 30, 2014. Annualized cash rent for leases in place as of December 31, 2014 and includes income from a deferred financing lease. Totals may not add due to rounding.

 

11


Aviv REIT, Inc.

Portfolio Summary

State Occupancy 1

 

State

   Aviv
Occupancy
    State
Average
    Variance  

Texas

     71.5     70.8     0.7

Ohio

     75.5     84.3     (8.8 %) 

California

     91.5     85.5     6.0

Conneticut

     70.9     87.7     N/A   

Michigan

     94.8     85.0     9.8

Washington

     84.6     80.4     4.2

Massachusetts

     79.5     87.0     (7.5 %) 

Pennsylvania

     86.1     90.4     (4.3 %) 

Missouri

     70.9     72.3     (1.4 %) 

Kentucky

     84.0     87.8     (3.8 %) 

Lease Maturity Schedule 2

 

                               

Year

   Number of
Properties
     % of
Total Rent
 

2015

     4         1.0

2016

     3         1.2

2017

     11         2.8

2018

     29         8.3

2019

     4         1.1

Thereafter

     291         85.6
  

 

 

    

 

 

 

Total

     342         100.0
  

 

 

    

 

 

 

 

(1) Occupancy information as of September 30, 2014. State occupancy represents nursing facility occupancies per American Health Care Association. Aviv only has assisted living properties in Connecticut.
(2) Excludes five development properties with rent start dates in the future and one office building with two leases.

 

12


Aviv REIT, Inc.

Portfolio Summary as of December 31, 2014

EBITDARM Coverage Distribution

 

LOGO

EBITDAR (4% Mgmt Fee) Coverage Distribution

 

LOGO

 

13


Aviv REIT, Inc.

Investment Activity as of December 31, 2014

(in thousands)

2014 Property Reinvestment and New Construction

 

Period

   Property
Reinvestment
     New
Construction
     Total  

Fourth quarter

   $ 4,704       $ 12,767       $ 17,471   

Third quarter

     5,027         19,597         24,624   

Second quarter

     3,422         5,023         8,445   

First quarter

     1,844         5,696         7,540   
        

 

 

 
         $ 58,080   
        

 

 

 

New Construction Projects

 

Operator—Location

   Property
Type
     Beds      Expected
Opening
Date
     Construction in
Progress at
12/31/2014
     Remaining
Costs to

be Spent
     Total
Expected
Cost
     Expected
Yield
 

Care Meridian—numerous locations

     —           —           —           807         2,929         3,736         9.5

Property reinvestment—numerous locations

     —           —           —           3,759         8,425         12,184         —     

Land held for development

     —           —           —           18,584         —           18,584         —     
           

 

 

    

 

 

    

 

 

    

Total

            $ 23,150       $ 11,354       $ 34,504      
           

 

 

    

 

 

    

 

 

    

2014 Acquisitions

 

Period

   Property Type    Location    Beds      Amount     Initial
Cash Yield
 

Fourth quarter

   SNF, ALF, ILF    7 states      3,211         338,100        8.5

Third quarter

   SNF, ALF    2 states      1,420       $ 181,800        8.7

Second quarter

   SNF    4 states      1,110         82,650        9.8

First quarter

   SNF, ALF, ILF    4 states      1,497         104,420        10.0
        

 

 

    

 

 

   

 

 

 

Total

           7,238       $ 706,970  (1)      8.9
        

 

 

    

 

 

   

 

 

 

 

(1) Excludes $16.4 million paid for five land parcels and entitlements for the construction of two ALFs and a 50-unit expansion to an existing ALF.

 

14


Aviv REIT, Inc.

Debt Summary and Capitalization as of December 31, 2014

Debt Maturities

 

Year

   Senior Unsecured
Notes
     Line of Credit      Mortgage
Debt (1)
     GE Debt      Total
Debt
 

2015

   $ —         $ —         $ 165       $ —         $ 165   

2016

     —           —           174         —           174   

2017

     —           —           183         2,021         2,204   

2018

     —           355,000         192         2,335         357,527   

2019

     400,000         —           202         175,644         575,846   

Thereafter

     250,000         —           10,165         —           260,165   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Subtotal

     650,000         355,000         11,081         180,000         1,196,081   

(Discounts) and premiums, net

     2,292         —           2,337         —           4,629   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total debt

   $ 652,292       $ 355,000       $ 13,418       $ 180,000       $ 1,200,710   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average interest rate

                 5.1
              

 

 

 

Weighted average maturity in years

                 4.8   
              

 

 

 

Fixed and Floating Rate Debt

 

     Amount      % of Total  

Fixed rate debt

     

Senior unsecured notes

   $ 652,292         54.3

Mortgage debt

     13,418         1.1
  

 

 

    

 

 

 

Total fixed rate debt

     665,710         55.4

Floating rate debt

     

Revolver

     355,000         29.6

GE debt

     180,000         15.0
  

 

 

    

 

 

 

Total floating rate debt

     535,000         44.6
  

 

 

    

 

 

 

Total debt

   $ 1,200,710         100.0
  

 

 

    

 

 

 

Covenants for Senior Unsecured Notes (2)

 

Covenant

   Requirement   Q4 2014     Q4 2013  

Total debt / total assets

   No greater than 60%     54     46

Secured debt / total assets

   No greater than 40%     9     2

Interest coverage

   No less than 2.00x     3.30x        3.16x   

Unencumbered assets / unsecured debt

   No less than 150%     181     185

Total Market Capitalization

 

     Shares/units
Outstanding
     12/31/2014
Closing Price
     Value  

Common stock and OP units

     58,729       $ 34.48       $ 2,024,976   

Total debt

           1,200,710   
        

 

 

 

Total market capitalization

         $ 3,225,686   
        

 

 

 

Dollars and shares/units in thousands

 

(1) Mortgage debt was paid in full in January 2015.
(2) Covenants are calculated in accordance with the indenture governing the senior unsecured notes.

 

15


Aviv REIT, Inc.

Common Share and OP Unit

Weighted Average Amounts Outstanding

 

     Q4 2014      Q4 2013      YTD
Q4 2014
     YTD
Q4 2013
 

Weighted Average Amounts Outstanding for EPS Purposes:

           

Common shares—basic

     47,755,148         37,534,676         44,629,901         33,700,834   

Effect of dilutive securities:

           

OP units

     10,881,474         11,675,517         11,328,049         9,091,974   

Stock options

     2,581,412         1,696,726         2,136,040         1,518,813   

Restricted stock units

     155,702         43,714         72,934         12,568   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total common shares—diluted

     61,373,736         50,950,633         58,166,924         44,324,189   
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted Average Amounts Outstanding for FFO, Normalized FFO and AFFO Purposes:

           

Common shares—basic

     47,755,148         37,534,676         44,629,901         33,700,834   

OP units

     10,881,474         11,675,517         11,328,049         11,872,154   

Total common shares and OP units

     58,636,622         49,210,193         55,957,950         45,572,988   

Effect of dilutive securities:

           

Stock options

     2,581,412         1,696,726         2,136,040         1,518,813   

Restricted stock units

     155,702         43,714         72,934         12,568   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total common shares and units—diluted

     61,373,736         50,950,633         58,166,924         47,104,369   
  

 

 

    

 

 

    

 

 

    

 

 

 

Period Ending Amounts Outstanding:

           

Common shares (includes restricted stock)

     48,456,724         37,641,160         

OP units

     10,272,374         11,616,283         
  

 

 

    

 

 

       

Total common shares and units

     58,729,098         49,257,443         
  

 

 

    

 

 

       

 

16


Aviv REIT, Inc.

Definitions and Footnotes

EBITDARM Coverage: Represents EBITDARM, which the Company defines as earnings before interest, taxes, depreciation, amortization, rent expense and management fees allocated by the operator to one of its affiliates, of our operators for the applicable period, divided by the rent paid to the Company by its operators during each period.

EBITDAR Coverage: Represents EBITDAR, which the Company defines as earnings before interest, taxes, depreciation, amortization and rent expense, of its operators for the applicable period, divided by the rent paid to Aviv by its operators during such period. Assumes a management fee of 4%.

EBITDAR Margin: Represents the operator’s EBITDAR for the applicable period divided by the operator’s total revenue for the applicable period.

Enterprise Value: Represents equity market capitalization plus net debt. Equity market capitalization is calculated as the number of shares of common stock and units multiplied by the closing price of the Company’s common stock on the last day of the period presented. Net debt represents total debt less cash and cash equivalents.

Portfolio Occupancy: Represents the average daily number of beds at the Company’s properties that are occupied during the applicable period divided by the total number of beds at the Company’s properties that are available for use during the applicable period.

Property Type: ALF = assisted living facility; LTACH = long-term acute care hospital; MOB = medical office building; TBI = traumatic brain injury facility; SNF = skilled nursing facility

State Average Occupancy: Represents the Nursing Facility State Occupancy Rate as reported by American Health Care Association (AHCA). AHCA occupancy data is calculated by dividing the sum of all facility patients in the state occupying certified beds by the sum of all the certified beds in the state reported at the time of the survey corresponding to the period presented. Aviv occupancy represents the state occupancy for the entire portfolio.

Yield: Represents annualized contractual or projected income to be received in cash divided by investment amount.

Portfolio metrics and other statistics are not derived from Aviv’s financial statements but are operating statistics that the Company derives from reports that it receives from its operators pursuant to Aviv’s triple-net leases. As a result, the Company’s portfolio metrics typically lag its own financial statements by approximately one quarter. In order to determine Aviv’s portfolio metrics for the period presented, the metrics are stated only with respect to properties owned by the Company and operated by the same operator for the portion of the period Aviv owned the properties and exclude assets held for sale, closed properties, properties under construction and, with certain exceptions for shorter periods, properties within 24 months of completion of construction. Accordingly, EBITDARM coverage, EBITDAR coverage, EBITDAR margin, portfolio occupancy and quality mix for the twelve months ended September 30, 2014 included 289 core properties of the 313 properties in the Company’s portfolio as of September 30, 2014.

When Aviv refers to the “total rent” of its portfolio, the Company is referring to the total monthly rent due under all of its triple-net leases as of the date specified, calculated based on the first full month following the specified date. Aviv calculates “annualized rent” for properties during a period by utilizing the amount of rent under contract as of the last day of the period and assume that amount of rent was received in respect of such property throughout the entire period.

Non-GAAP Financial Measures

In addition to the results of operations presented in this release, we use financial measures in this release that are derived on the basis of methodologies other than in accordance with United States generally accepted accounting principles (GAAP). We derive these non-GAAP measures as follows:

 

 

FFO is defined by the National Association of Real Estate Investment Trusts, or NAREIT, 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 and amortization, loss on impairment, and loss (gain) on sale of assets (net).

 

 

Normalized FFO represents FFO before loss on extinguishment of debt, reserve for uncollectible loan receivables, transaction costs and severance costs.

 

 

AFFO represents Normalized FFO before amortization of deferred financing costs, non-cash stock-based compensation, straight-line rental income (net) and rental income from intangible amortization (net).

 

 

EBITDA represents net income before interest expense (net), amortization of deferred financing costs and depreciation and amortization.

 

 

Adjusted EBITDA represents EBITDA before loss on impairment, loss (gain) on sale of assets (net), transaction costs, write-off of straight-line rents, non-cash stock-based compensation, loss on extinguishment of debt and reserve for uncollectible loan receivables.

 

17


Aviv REIT, Inc.

Definitions and Footnotes

Our management uses FFO, Normalized FFO, AFFO, 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, Normalized FFO and AFFO exclude depreciation and amortization unique to real estate, impairment, 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 REITs, reflect the impact to operations from trends in occupancy rates, rental rates, operating costs, development activities and, with respect to FFO, Normalized FFO and AFFO, interest costs, in each case providing perspective not immediately apparent from net income. In addition, we believe that FFO, Normalized FFO, AFFO, 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, cash flows provided by operating activities or revenues.

 

18