The board of CNL Healthcare Properties, a non-traded real estate investment trust focused on seniors housing and healthcare facilities, has approved an estimated net asset value per share of $10.01 for the company’s common stock as of December 31, 2018. The REIT’s previous estimated NAV per share was $10.32 as of December 31, 2017, and shares were originally priced at $10.00 each.
The REIT said that while the value of its real estate portfolio remained relatively unchanged, the NAV was impacted by incremental borrowings that principally funded property-level capital and expansion projects within the portfolio.
The estimated NAV was also affected by higher estimated transaction costs related to a hypothetical sale of the company’s assets now that the company is further along in the process of providing liquidity for shareholders.
“In spite of the slight decrease in our estimated NAV per share, we remain very confident in the portfolio we have assembled since 2012. The pending sale of our 55 medical office buildings to Welltower at a premium price is a tangible example of asset quality and performance leading to value creation for our shareholders,” said Stephen Mauldin, president and CEO of CNL Healthcare Properties. “Our seniors housing portfolio consists of newer, well-positioned communities that overall experienced same-store cash flow growth that, in our estimation, was higher than many other comparable industry participants last year.
“We believe this year’s NAV in large part is reflective of 2018’s industry-wide softening of seniors housing fundamentals. Our mid and long-term outlook for the sector and our portfolio remains positive due to a continued favorable demographic backdrop, abating development and new supply trends and our expected ability to actively drive operational performance and occupancy with our seasoned tenants and operators,” added Mauldin.
For the current valuation, the 142 properties in CNL Healthcare Properties’ portfolio were divided into two groups. The 55 medical office buildings being acquired by Welltower Inc. (NYSE: WELL) were valued at the contractual gross sale price of $1.25 billion net of certain closing credits and adjustments in accordance with the sale agreement. This transaction is expected to close by mid-2019 and is the first sizable transaction as part of the company’s announced strategic alternatives process.
The company’s other assets, largely consisting of its seniors housing holdings, were appraised individually, without any portfolio premium ascribed to the valuations. Consistent with performance of the broader domestic seniors housing sector in 2018, the REIT noted that the valuation of its seniors communities, compared to the prior year, were impacted by the effects of oversupply in certain markets, labor and wage pressures at the property level and the lingering effect of a severe 2017-2018 flu season, which impacted occupancies, operating cash flow growth and resulting appraised values as of calendar-year end.
The 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 with a NAV per share range of $9.55 to $10.50. The valuation committee recommended the midpoint of $10.01 as the estimated NAV per share, which was unanimously adopted by the board.
CNL Healthcare Properties focuses on acquiring properties in the seniors housing and healthcare sectors, including stabilized, value-add and development assets, as well as other income-producing properties, real-estate related securities and loans. The company closed its offering in September 2015 after raising more than $1.7 billion in investor equity, according to Summit Investment Research.