The board of CNL Healthcare Properties II, a publicly registered non-traded real estate investment trust focused on seniors housing and healthcare properties, has approved a new estimated net asset value per share of $9.92 as of December 31, 2018. This compares with the previous NAV per share of $10.06 as of December 31, 2017.
The REIT has also agreed to sell its Mid-America Surgery Center property for $15.4 million, with the sale expected to close in the second quarter of 2019. CNL Healthcare Properties II plans to use the net proceeds to satisfy debt secured by the property. The remaining proceeds, pending board approval, are expected to be used to make a special distribution to shareholders or for other corporate purposes.
Earlier this year and following the close of its offering, CNL Healthcare Properties II formed a special committee of its board to begin exploring strategic alternatives that could include selling the company’s assets and distributing net sales proceeds to shareholders, or a potential business combination or transaction with an unrelated third party or an affiliated party of the company’s sponsor.
Given that the company is actively selling or evaluating the sale of its assets as a part of this process, the board unanimously voted to suspend quarterly distributions effective April 1.
“This is a dynamic and transitional time for the company and our shareholders as we earnestly begin the process of studying and executing on strategic alternatives,” said Stephen H. Mauldin, president and CEO of CNL Healthcare Properties II. “The pending sale of our medical office building as well as the increased appraised value of our portfolio both underscore the quality of the assets we have acquired. While our NAV per share decreased this year, we remain optimistic relative to potential outcomes as we pursue opportunities to maximize value for our shareholders.”
The net asset valuation work was performed by Robert A. Stanger & Co. Inc., an independent third-party valuation firm, in accordance with Institute for Portfolio Alternatives guidelines. Stanger provided CNL Healthcare Properties II with a NAV per share range of $9.40 to $10.49. The board’s valuation committee recommended the midpoint of $9.92 as the estimated NAV per share, which was unanimously adopted by the board.
The most recent appraised value of CNL Healthcare Properties II’s three assets was $66.6 million, up from the estimated value of $38.9 million for two properties in the 2017 NAV. However, the 2018 estimated NAV calculation includes a deduction for transaction costs related to the potential future sale of the company’s assets as part of the company’s recently launched strategic alternatives process.
Estimated transaction costs were not included in the 2017 NAV calculation. Furthermore, the company noted that to more accurately reflect the per share estimated value and an expected economic outcome for shareholders, restricted shares currently held by the company’s advisor were not included in the calculation of the 2018 NAV per share.
CNL Healthcare Properties II commenced its $1.75 billion initial public offering in March 2016 and raised $50 million in investor equity before closing the offering in October 2018, according to Summit Investment Research. The company oversees a portfolio of three properties with an investment cost of approximately $61.7 million.