Carter Validus Mission Critical REIT II Releases 2Q20 Financial Results
Carter Validus Mission Critical REIT II Inc. has released its operating results for the second quarter of 2020.
Carter Validus Mission Critical REIT II Inc., a publicly registered non-traded real estate investment trust focused on net-leased data center and healthcare properties, has released its operating results for the second quarter of 2020.
Quarter Ended June 30, 2020 and Subsequent Highlights
- Net income attributable to common stockholders totaled $11.1 million; net income attributable to common stockholders per diluted share totaled $0.05.
- Net operating income, or NOI, totaled $58 million.
- Funds from operations, or FFO, attributable to common stockholders equaled $33.7 million; FFO attributable to common stockholders per diluted share totaled $0.15.
- Modified funds from operations, or MFFO, attributable to common stockholders equaled $27.7 million; MFFO attributable to common stockholders per diluted share totaled $0.13.
- Adjusted funds from operations, or AFFO, attributable to common stockholders equaled $28.6 million; AFFO attributable to common stockholders per diluted share totaled $0.13.
- On May 28, 2020, the company sold one healthcare property and recognized an aggregate gain on sale of $2.7 million.
- On July 28, 2020, the company entered into a definitive agreement to provide for the internalization of its external management functions for approximately $40 million, payable over an approximately two-year period. The internalization is expected to close on September 30, 2020.
- On July 29, 2020, the company announced that it intends to change its name to Sila Realty Trust, Inc. immediately following the closing of the internalization.
“We are working diligently to close the recently announced internalization transaction…,” said Michael Seton, chief executive officer and president. “Although interest costs and an increase in third-party fees related to the internalization impacted the quarter’s per share results, our same store portfolio results remained strong as our experienced team continues to anticipate and proactively resolve COVID-19 driven tenant issues.”
Financial Results
- Net income attributable to common stockholders was $11.1 million for the second quarter of 2020, an increase of 76 percent compared to net income attributable to common stockholders of $6.3 million for the same period in 2019.
- FFO attributable to common stockholders was $33.7 million for the quarter ended June 30, 2020, an increase of 54 percent compared to $21.9 million for the same period in 2019.
- MFFO attributable to common stockholders was $27.7 million for the quarter ended June 30, 2020, an increase of 55 percent compared to $17.9 million for the same period in 2019.
- AFFO attributable to common stockholders was $28.6 million for the quarter ended June 30, 2020, an increase of 54 percent compared to $18.6 million for the same period in 2019.
Operating Results
- NOI was $58 million for the quarter ended June 30, 2020, an increase of 58 percent compared to $36.8 million for the same period in 2019.
- Rental revenue was $68.9 million for the quarter ended June 30, 2020, an increase of 47 percent compared to $46.9 million for the same period in 2019.
- Same store NOI was $37.1 million for the quarter ended June 30, 2020, an increase of 0.8 percent compared to $36.8 million for the same period in 2019.
The company said that the increases in financial and operating results (excluding same store NOI) during the periods presented above are primarily the result of 66 operating property acquisitions, inclusive of 60 properties acquired in the merger with Carter Validus Mission Critical REIT, since April 1, 2019, one of which was sold on May 28, 2020.
Portfolio Overview
During the second quarter of 2020, the company disposed of one healthcare property, located in the San Antonio market, for $35 million, consisting of $7 million cash paid at closing and the origination of a $28 million note receivable, which generated net proceeds of $6.1 million. The company said that the aggregate gain on sale was $2.7 million.
As of June 30, 2020, the company owned 152 real estate properties, located in 69 markets, comprising approximately 8.6 million rentable square feet with a total purchase price of approximately $3.1 billion. The company’s properties had a weighted average occupancy of 93.7 percent and weighted average remaining lease term of 9.6 years.
As of June 30, 2020, the company entered into 29 rent concessions and lease modifications with tenants impacted by COVID-19 and collected approximately 97 percent of rental revenue originally contracted for such period.
Balance Sheet and Liquidity
As of June 30, 2020, the company had total principal debt outstanding of nearly $1.4 billion, consisting of $455.6 million of notes payable and $938 million of the credit facility with a net debt leverage ratio of 41 percent.
The company’s outstanding debt was comprised of 61 percent fixed rate debt (including debt fixed through the use of interest rate swaps) and 39 percent variable rate debt.
During the second quarter of 2020, the company repaid $65 million on its credit facility.
As of June 30, 2020, the company had liquidity of approximately $266.3 million, consisting of $74.8 million in cash and cash equivalents and $191.5 million in borrowing base availability on the credit facility.
Internalization Transaction
On July 28, 2020, the company entered into a definitive agreement to purchase all assets from Carter Validus REIT Management Company II LLC, Carter Validus Advisors II LLC and their affiliates necessary to operate the business of the company and its subsidiaries for approximately $40 million, payable over an approximately two-year period, with $25 million to be paid at closing, $7.5 million to be paid on March 31, 2021, and $7.5 million to be paid on March 31, 2022. The internalization is expected to close on September 30, 2020.
In May 2020, the REIT partially suspended its share repurchase program, citing the uncertainty surrounding the coronavirus (COVID-19) pandemic. The suspension affects repurchase requests that would otherwise be processed on the third quarter repurchase date of July 30, 2020.
The REIT will continue to process repurchases due to death in accordance with the terms of its share repurchase program. The company said that unprocessed requests will automatically roll over to be considered for repurchase when it fully reopens its share repurchase program, unless withdrawn.
Carter Validus Mission Critical REIT II raised approximately $1.2 billion in investor equity after launching its initial primary offering in May 2014, and its follow-on offering closed in November 2018 and raised $129.3 million. As of June 30, 2020, the company owned 152 real estate properties, consisting of 29 data centers and 123 healthcare properties located in 69 markets across the United States.
