EX-99.3 5 a17-14811_1ex99d3.htm EX-99.3

Exhibit 99.3

 

CARE CAPITAL PROPERTIES, INC.

 

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

As of March 31, 2017, for the Three Months Then Ended and for the Year Ended December 31, 2016

 

On April 28, 2017, Care Capital Properties, Inc. (“CCP”) completed the acquisition of six behavioral health hospitals from affiliates of Signature Healthcare Services, LLC (“SHS”) for $378.6 million in cash.  The following unaudited pro forma condensed consolidated financial statements give effect to the acquisition as if it had occurred on March 31, 2017, in the case of the unaudited pro forma condensed consolidated balance sheet, or on January 1, 2016, in the case of the unaudited pro forma condensed consolidated statements of income.  Explanations or details of the pro forma adjustments are contained in the notes to the unaudited pro forma condensed consolidated financial statements.

 

The following unaudited pro forma condensed consolidated financial statements were prepared in accordance with Article 11 of Regulation S-X, using the assumptions set forth in the notes to the unaudited pro forma condensed consolidated financial statements. The unaudited pro forma condensed consolidated financial statements are presented for illustrative purposes only and do not purport to reflect the results that CCP may achieve in future periods or the historical results that would have been achieved had the above transactions been completed on the dates noted above.

 

The unaudited pro forma condensed consolidated financial information is derived from and should be read in conjunction with CCP’s historical consolidated financial statements and notes thereto included in its Annual Report on Form 10-K for the year ended December 31, 2016 and its Quarterly Report on Form 10-Q for the quarter ended March 31, 2017.

 



 

Unaudited Pro Forma Condensed Consolidated Balance Sheet

As of March 31, 2017

(In Thousands)

 

 

 

CCP Historical

 

SHS Acquisition
 Adjustments

 

 

 

Pro Forma

 

 

 

 

 

A

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

Net real estate investments

 

$

2,486,586

 

$

382,001

 

1, 2

 

$

2,868,587

 

Loans receivable, net

 

61,522

 

 

 

 

61,522

 

Cash

 

17,891

 

 

 

 

17,891

 

Restricted cash

 

64,396

 

(64,396

)

2

 

 

Goodwill

 

123,884

 

 

 

 

123,884

 

Other assets

 

78,172

 

 

 

 

78,172

 

Total assets

 

$

2,832,451

 

$

317,605

 

 

 

$

3,150,056

 

 

 

 

 

 

 

 

 

 

 

Liabilities and equity

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

Term loans, senior notes and other debt

 

$

1,477,591

 

$

304,137

 

2

 

$

1,781,728

 

Tenant deposits

 

43,470

 

10,693

 

2

 

54,163

 

Lease intangible liabilities, net

 

99,027

 

 

 

 

99,027

 

Dividends payable

 

 

 

 

 

 

Accounts payable and other liabilities

 

25,160

 

2,774

 

2

 

27,934

 

Deferred income taxes

 

1,766

 

 

 

 

1,766

 

Total liabilities

 

1,647,014

 

317,605

 

 

 

1,964,619

 

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

 

 

Preferred stock

 

 

 

 

 

 

Common stock

 

841

 

 

 

 

841

 

Additional paid-in capital

 

1,274,079

 

 

 

 

1,274,079

 

Dividends in excess of net income

 

(102,752

)

 

 

 

(102,752

)

Treasury stock

 

(488

)

 

 

 

(488

)

Accumulated other comprehensive income

 

12,471

 

 

 

 

12,471

 

Total common stockholders’ equity

 

1,184,151

 

 

 

 

1,184,151

 

Noncontrolling interest

 

1,286

 

 

 

 

1,286

 

Total equity

 

1,185,437

 

 

 

 

1,185,437

 

Total liabilities and equity

 

$

2,832,451

 

$

317,605

 

 

 

$

3,150,056

 

 



 

Unaudited Pro Forma Condensed Consolidated Statement of Income

For the Three Months Ended March 31, 2017

(In Thousands)

 

 

 

CCP Historical

 

SHS Acquisition
 Adjustments

 

 

 

Pro Forma

 

 

 

 

 

B

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

Rental income, net

 

$

78,221

 

$

3,281

 

1

 

$

81,502

 

Income from investments in direct financing lease and loans

 

1,946

 

 

 

 

1,946

 

Real estate services fee income

 

1,226

 

 

 

 

1,226

 

Interest and other income

 

323

 

 

 

 

323

 

Net gain on lease termination

 

1,115

 

 

 

 

1,115

 

Total revenues

 

82,831

 

3,281

 

 

 

84,997

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

Interest

 

15,185

 

1,528

 

2

 

16,713

 

Depreciation and amortization

 

24,896

 

2,746

 

3

 

27,642

 

General, administrative and professional fees

 

8,729

 

 

 

 

8,729

 

Deal costs

 

197

 

 

 

 

197

 

Other expenses, net

 

913

 

 

 

 

913

 

Total expenses

 

49,920

 

4,274

 

 

 

54,194

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes, real estate dispositions and noncontrolling interests

 

32,911

 

(993

)

 

 

31,918

 

Income tax expense

 

(239

)

 

 

 

(239

)

Gain on real estate dispositions

 

32,245

 

 

 

 

32,245

 

Net income

 

64,917

 

(993

)

 

 

63,924

 

Net income attributable to noncontrolling interests

 

8

 

 

 

 

8

 

Net income attributable to common stockholders

 

$

64,909

 

$

(993

)

 

 

$

63,916

 

 



 

Unaudited Pro Forma Condensed Consolidated Statement of Income

For the Year Ended December 31, 2016

(In Thousands)

 

 

 

CCP Historical

 

SHS Acquisition
 Adjustments

 

 

 

Pro Forma

 

 

 

 

 

B

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

Rental income, net

 

$

325,464

 

$

13,122

 

1

 

$

338,586

 

Income from investments in direct financing lease and loans

 

6,474

 

 

 

 

6,474

 

Real estate services fee income

 

6,595

 

 

 

 

6,595

 

Interest and other income

 

2,073

 

 

 

 

2,073

 

Net gain on lease termination

 

7,298

 

 

 

 

7,298

 

Total revenues

 

347,904

 

13,122

 

 

 

353,728

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

Interest

 

50,168

 

6,110

 

2

 

56,278

 

Depreciation and amortization

 

107,561

 

10,986

 

3

 

118,547

 

Impairment on real estate investments and goodwill

 

21,794

 

 

 

 

21,794

 

General, administrative and professional fees

 

34,827

 

 

 

 

34,827

 

Deal costs

 

3,086

 

 

 

 

3,086

 

Loss on extinguishment of debt

 

5,461

 

 

 

 

5,461

 

Other expenses, net

 

4,384

 

 

 

 

4,384

 

Total expenses

 

227,281

 

17,096

 

 

 

244,377

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes, real estate dispositions and noncontrolling interests

 

120,623

 

(3,974

)

 

 

116,649

 

Income tax expense

 

(752

)

 

 

 

(752

)

Gain on real estate dispositions

 

2,894

 

 

 

 

2,894

 

Net income

 

122,765

 

(3,974

)

 

 

118,791

 

Net income attributable to noncontrolling interests

 

22

 

 

 

 

22

 

Net income attributable to common stockholders

 

$

122,743

 

$

(3,974

)

 

 

$

118,769

 

 



 

NOTES AND MANAGEMENT’S ASSUMPTIONS TO UNAUDITED PRO FORMA

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

 

A.

 

1.              CCP accounted for the acquisition as an asset acquisition and recorded the cost of the property acquired among tangible and recognized intangible assets and liabilities based upon their estimated fair values as of the acquisition date.  The purchase price allocation adjustments are preliminary and have been made for the purpose of preparing these unaudited pro forma condensed consolidated financial statements.

 

2.              The properties were acquired for $382.0 million, including $3.4 million of related acquisition costs.  CCP funded the acquisition with borrowings under its revolving credit facility and funds previously held as restricted cash.  In addition, the tenants deposited $10.7 million of cash as security pursuant to the terms of the lease and for other tenant escrows and prepaid approximately $2.8 million of May rent, which is reflected as other liabilities.

 

ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME

 

B.

 

1.              Rental income consists of the rent received from the SHS-affiliated tenants of the behavioral health hospitals.  The rental income is not indicative of CCP’s future rental income from the acquired assets because the historical lease arrangements between the seller and its affiliated tenants may not represent market rates.  Concurrent with the acquisition, CCP entered into a long-term triple-net lease with affiliates of SHS at an initial contractual annual base rent of $30.3 million. The future rental income is not reflected in the pro forma condensed consolidated statements of income for the three months ended March 31, 2017 and for the year ended December 31, 2016.

 

2.              Interest expense was estimated on borrowings under the revolving credit facility to acquire the assets.  CCP’s unsecured revolving credit facility bears interest at LIBOR plus a spread of 1.30%.  The average underlying variable rate (1 month LIBOR), as used in the pro forma adjustments, was 0.70912%.

 

3.              Amount represents the estimated depreciation and amortization of the building and related improvements, leasing commissions and in place lease intangibles resulting from the preliminary estimated purchase price.  The building and site improvements are being depreciated on a straight-line basis over their estimated useful life of up to 35 years.  The in place lease intangible is amortized on a straight-line basis over the term of the lease.