Griffin-American Healthcare REIT III Suspends Distributions and Repurchases, Partially Defers Asset Management Fee
The board of Griffin-American Healthcare REIT III Inc., a publicly registered non-traded real estate investment trust, has decided to suspend the company’s monthly investor distribution payments.
Griffin-American Healthcare REIT III Inc., a publicly registered non-traded real estate investment trust, has suspended monthly distributions to shareholders after paying the May 2020 distribution on June 1, 2020. The company also suspended its distribution reinvestment plan and share repurchase plan, citing the effects of the COVID-19 pandemic on the healthcare sector and its portfolio.
In addition, the REIT’s advisor has agreed to defer 50 percent of the asset management fee for six months, effective June 1, 2020, which the company claims will further enhance its capital position in the coming months.
Griffin-American Healthcare REIT III is co-sponsored by American Healthcare Investors and Griffin Capital Company and invests in healthcare real estate assets, focusing primarily on medical office buildings, hospitals, skilled nursing facilities, senior housing and other healthcare-related facilities.
“The board and management team are very sensitive to cuts to the distributions and understand the importance of distributions to shareholders,” the company said in a letter to shareholders. “While we are optimistic that continued progress against the virus will result in improved operating results for our tenants and operators in the future, we believe the current environment requires us to act with prudence and caution.”
In late March, the company enacted a number of steps to preserve capital during the pandemic including eliminating all “unnecessary” capital expenditures, reducing its distribution rate from $0.60 per share to $0.30 per share (annualized) beginning with the April 2020 distribution, and placing limitations on its share repurchase plan.
The company indicated that its portfolio, along with the broader healthcare sector, has been negatively impacted by government stay-at-home orders, limitations on elective surgeries, and stringent regulations aimed at limiting the spread of the virus.
Occupancy at the REIT’s skilled nursing facilities dropped 16.2 percent in three months while labor costs and the costs of personal protective equipment have both increased approximately 30 percent during the pandemic, the company said.
Additionally, occupancy at its senior housing properties has decreased by 5.5 percent in three months, while labor and PPE costs have risen similarly to skilled nursing facilities.
Approximately 50 percent of the REIT’s medical office building tenants were either shut down, or had reduced operating hours, due to the postponement of all routine and non-essential visits as mandated or requested by state governments.
“Our company has low debt levels and owns a diverse portfolio of high-quality assets,” the REIT stated. “We are optimistic regarding the long-term prospects for our portfolio and the healthcare real estate market broadly. While this is a highly uncertain time, we have confidence that we will weather this unique challenge and return to a time when we can reinstate distributions.”
Griffin-American Healthcare REIT III launched its initial public offering in February 2014 and closed in March 2015 after raising more than $1.9 billion. As of June 30, 2019, the REIT owned a $3 billion portfolio of 211 assets, which include 98 properties (102 buildings) and 113 integrated senior health campuses. In addition, the REIT had invested $60.4 million in real estate-related investments.
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