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CNL Healthcare Properties II Suspends Distributions, Evaluates Strategic Alternatives

March 21, 2019

CNL Healthcare Properties II Suspends Distributions, Evaluates Strategic Alternatives

March 20, 2019 | James Sprow | Blue Vault

CNL Healthcare Properties II Inc.‘s board suspended the nontraded healthcare real estate investment trust’s cash distribution on its common stock, effective April 1.

The REIT said the suspension follows the recent engagement of SunTrust Robinson Humphrey Inc. as financial adviser to its special committee of independent directors that was tasked with evaluating strategic alternatives for CNL Healthcare Properties II.

The suspension also comes in light of CNL Healthcare Properties II’s planned sale of a medical office building in Overland Park, Kan., to HCP Medical Office Buildings LLC in a cash deal worth approximately $15.4 million, with closing expected in mid-2019, according to a March 19 filing with the SEC.

Related: CNL Healthcare Properties Agrees to Sale of 55 Medical Properties to Welltower

Based upon the original share prices the annualized distribution yield for Q4 2018 was 5.24%, 4.45%, and 5.22% for Class A, Class T, and Class I, respectively. The Company’s board of directors declared monthly cash distributions of $0.0480, less class-specific expenses, for October, November and December 2018 which were paid and distributed by December 31, 2018.

In a letter to shareholders, President and CEO Stephen H. Mauldin reported that the sale of the HCP Medical Office Buildings LLC was at a sales price that represents a meaningful premium to the REIT’s acquisition cost in December 2017. 

The REIT on March 13, 2019, concluded its annual net asset valuation process with the assistance of Robert A. Stanger, Inc.  The estimated net asset value was as of December 31, 2018. According to the letter to shareholders, “The valuation resulted in an estimated net asset value (NAV) per share. The per share value of $9.92 represents the midpoint of the Stanger-provided NAV per share range of $9.40 to $10.49. The updated appraised value of the company’s real estate assets rose from prior valuations, yet the most recent NAV per share now reflects the inclusion of hypothetical property transaction costs related to the potential future sale of company assets. We believe that the inclusion of these hypothetical costs in this year’s NAV are entirely appropriate now that we have shifted into the strategic alternatives phase of the company’s life cycle. The estimated transaction costs reduced our estimated 2018 NAV by $0.26 per share.”

For details on the valuation process, please refer to the 8-K filed by the REIT on March 19, 2019.

Sources:  SEC, Blue Vault, CNL Healthcare Properties II, Inc.

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