The board of CNL Healthcare Properties Inc., a publicly registered non-traded real estate investment trust focused on senior housing, has approved an estimated net asset value per share of $7.37 for the company’s common stock as of December 31, 2021. In addition, the REIT reduced its first quarter 2022 cash distribution by 50 percent.
CNL Healthcare’s previous NAV per share was $7.38, as of December 31, 2020. The company indicated that the $0.01 per share decrease was due in part from “a slight decline in balance sheet assets, partially offset by lower estimated transaction costs.”
Robert A. Stanger & Co. Inc., a third-party valuation firm, assisted with the valuation process and provided a range of values ($6.99 to $7.78 per share), with an approximate midpoint of $7.37 per share.
“An essentially unchanged NAV per share value during what is unquestionably a volatile and dynamic time supports the company’s ongoing belief in its national seniors housing portfolio quality,” the REIT said in a letter to shareholders and their financial advisers.
Shares were originally priced at $10.00 each, however, in 2018, the REIT adjusted its $10.01 NAV per share to $7.99 per share following a $2.00 special distribution and $0.02 adjustment relating to closing costs from sales of certain assets.
“The economic effects of the COVID-19 pandemic continue to be palpable and widespread, negatively impacting many industries, and certainly including the seniors housing segment,” stated CNL Healthcare. “As the company enters year three of the pandemic, it has gleaned measurable insight into its properties’ operational performance under highly strained and variable conditions, which has helped quell some of the uncertainty that existed earlier in the pandemic.”
Total real estate asset values decreased slightly from $1.854 billion in 2020 to $1.847 billion in 2021. Cash and cash equivalents decreased from $66 million in 2020 to $57.7 million in 2021. The fair market value of the REIT’s debt decreased from ($604.4 million) to ($593.4 million), year-over-year.
“Although property cash flows continued to recede over 2021 due primarily to the Delta and Omicron waves, occupancy within the company’s portfolio improved meaningfully over the year. Increases to asking rents and normalizing expenses in the near-to-midterm are expected to lift future property cash flows, resulting in forward-looking improved property projections in the 2021 valuation exercise. That said, there remains uncertainty about the pandemic’s continued effects on operating costs, labor challenges and other trends, particularly regarding new variants of COVID-19,” the REIT said.
In addition, the board approved a first quarter 2022 cash distribution of $0.0256 per share, a 50 percent reduction from the previous quarter. The distribution will be paid around March 31, 2022 to shareholders of record as of March 22.
The company said that the dividend reduction is “the direct result of various factors including persistent COVID-19 impacts on industry performance, magnified and real-time inflation levels that we are all experiencing, plus overarching geopolitical and broader market concerns stemming from the troubling Ukraine/Russia state of affairs.”
In 2017, the REIT began evaluating and exploring strategic alternatives to provide liquidity to stockholders. The following year, the board committed to a plan to sell the company’s medical office and healthcare portfolio. However, due to “pandemic-related market disruptions,” the company said that it has shifted much of its focus away from pursuing strategic initiatives, but has been “actively studying and pursuing select market opportunities and potential liquidity outcomes that are judged to be in [its] shareholders’ best interests.”
CNL Healthcare Properties closed its offering in September 2015 after raising more than $1.7 billion in investor equity. The company’s real estate portfolio consisted of interests in 72 properties, including 71 senior housing communities, one vacant land parcel.