Carter Validus Mission Critical REIT 8-K Completion of Acquisition or Disposition of Assets

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________________________

FORM 8-K

___________________________________________

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): December 20, 2017

___________________________________________

CARTER VALIDUS MISSION CRITICAL REIT, INC.

(Exact Name of Registrant as Specified in Its Charter)

___________________________________________

Maryland	000-54675	27-1550167
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(I.R.S. Employer Identification No.)

4890 West Kennedy Blvd.

Suite 650

Tampa, Florida 33609

(Address of principal executive offices)

(813) 287-0101

(Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

___________________________________________

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Item 2.01    Completion of Acquisition or Disposition of Assets.

As previously disclosed in a Current Report on Form 8-K on October 24, 2017, Carter Validus Mission Critical REIT, Inc. (the "Company"), through (i) 13 wholly-owned subsidiaries of the Operating Partnership, and (ii) DC-180 Peachtree, LLC (as defined below), entered into a Purchase and Sale Agreement (the “Mapletree Sale Agreement”) with various special purpose entities of an affiliate of Mapletree Investments Pte Ltd, a Singapore headquartered real estate development, investment and capital management company and Mapletree Industrial Trust, a Singapore Exchange listed real estate investment trust (collectively, "Mapletree"), which are unaffiliated with the Company, for the sale of a 14-property data center portfolio (the “Portfolio”). One of the data centers in the Portfolio is owned by DC-180 Peachtree, LLC, an indirect, partially owned subsidiary of the Operating Partnership. DC-180 Peachtree is a wholly-owned subsidiary of a joint venture arrangement that consists of two joint venture agreements between the Operating Partnership and three non-U.S. institutional investors (the “Joint Venture”). The contractual sales price for the Portfolio was $750.0 million.

On December 20, 2017, the sale of the Portfolio was completed for $750.0 million pursuant to the terms of the Mapletree Sale Agreement. In connection with the disposition, the Company repaid its mortgage loans associated with the Portfolio for approximately $177.8 million, including accrued interest and other loan costs. The Company's net proceeds from the disposition of the Portfolio were approximately $561.6 million, after transaction costs, subject to additional transaction costs paid subsequent to the closing date.

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Item 7.01     Regulation FD Disclosure.

On December 20, 2017, the Company issued a press release announcing the sale of the Portfolio to Mapletree. The full text of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated by reference into this Item 7.01.

The information furnished under Item 7.01 of this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.

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Item 9.01    Financial Statements and Exhibits.

(b) Pro Forma Financial Information

The following financial information is submitted at the end of this Current Report on Form 8-K and is filed herewith and incorporated herein by reference:

	Page
Summary of Unaudited Pro Forma Financial Statements	5
Pro Forma Condensed Consolidated Balance Sheet as of September 30, 2017 (Unaudited)	6
Pro Forma Condensed Consolidated Statement of Comprehensive Income for the Nine Months Ended September 30, 2017 (Unaudited)	7
Pro Forma Condensed Consolidated Statement of Comprehensive Income for the Year Ended December 31, 2016 (Unaudited)	9

(d)     Exhibits

99.1 Carter Validus Mission Critical REIT, Inc. Press Release dated December 20, 2017.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	CARTER VALIDUS MISSION CRITICAL REIT II, INC.
Dated: December 20, 2017	By:	/s/ Todd M. Sakow
	Name:	Todd M. Sakow
	Title:	Chief Financial Officer

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SUMMARY OF UNAUDITED PRO FORMA FINANCIAL STATEMENTS

This pro forma information should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and notes of the Company included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, as filed with the Securities and Exchange Commission ("SEC") on March 30, 2017, and the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2017, as filed with the SEC on November 9, 2017.

The following unaudited pro forma condensed consolidated balance sheet as of September 30, 2017, has been prepared to give effect to the sale of the Portfolio as if the transaction had occurred on September 30, 2017.

The following unaudited pro forma condensed consolidated statements of comprehensive income for the nine months ended September 30, 2017, and for the year ended December 31, 2016, have been prepared to give effect to the sale of the Portfolio by the Company as if such sale had been completed on January 1, 2016.

These unaudited pro forma condensed consolidated financial statements are prepared for informational purposes only and are not necessarily indicative of future results or of actual results that would have been achieved had the sale been consummated as of the respective dates indicated; however, management is not aware of any material factors that would cause historical results not to be indicative of future results.

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CARTER VALIDUS MISSION CRITICAL REIT, INC.

PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

As of September 30, 2017

(in thousands, except share data)

(Unaudited)

	September 30, 2017 (a)			Pro Forma Adjustments For the Disposition of Mapletree Portfolio (b)				Pro Forma September 30, 2017
ASSETS
Real estate:
Land	$	181,960		$	(68,141	)		$	113,819
Buildings and improvements, less accumulated depreciation of $194,011	1,806,806			(485,263		)		1,321,543
Total real estate, net	1,988,766			(553,404		)		1,435,362
Cash and cash equivalents	42,603			37,745			(c)	80,348
Acquired intangible assets, less accumulated amortization of $66,078	165,724			(54,240		)		111,484
Other assets, net	122,070			(24,909		)		97,161
Total assets	$	2,319,163		$	(594,808	)		$	1,724,355
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Notes payable, net of deferred financing costs of $1,675	$	449,494		$	(203,186	)	(c)	$	246,308
Credit facility, net of deferred financing costs of $1,101	431,899			(431,899		)	(d)	—
Accounts payable due to affiliates	2,536			(188		)		2,348
Accounts payable and other liabilities	41,109			(12,484		)		28,625
Intangible lease liabilities, less accumulated amortization of $18,941	46,789			(27,688		)		19,101
Total liabilities	971,827			(675,445		)		296,382
Stockholders’ equity:
Preferred stock, $0.01 par value per share, 50,000,000 shares authorized; none issued and outstanding	—			—				—
Common stock, $0.01 par value per share, 300,000,000 shares authorized; 195,153,569 shares issued; 186,241,949 shares outstanding	1,862			—				1,862
Additional paid-in capital	1,636,603			—				1,636,603
Accumulated distributions in excess of earnings	(329,081		)	115,499				(213,582		)
Accumulated other comprehensive income	3,149			(59		)		3,090
Total stockholders’ equity	1,312,533			115,440				1,427,973
Noncontrolling interests	34,803			(34,803		)		—
Total equity	1,347,336			80,637				1,427,973
Total liabilities and stockholders’ equity	$	2,319,163		$	(594,808	)		$	1,724,355

(a) Historical information is derived from the unaudited condensed consolidated balance sheet included in the Company’s quarterly report on Form 10-Q as of September 30, 2017.

(b) Represents adjustments to eliminate assets, liabilities, stockholders' equity and noncontrolling interests as if the sale of the Mapletree Portfolio had occurred on September 30, 2017.

(c) The Company used net sales proceeds to payoff the associated mortgage loans in the principal amount of approximately $203.2 million.

(d) The Company used net sales proceeds to payoff the unsecured credit facility.

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CARTER VALIDUS MISSION CRITICAL REIT, INC.

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the Nine Months Ended September 30, 2017

(in thousands, except share data and per share amounts)

(Unaudited)

	Nine Months Ended September 30, 2017 (a)			Pro Forma Adjustments For the Disposition of Mapletree Portfolio				Pro Forma Nine Months Ended September 30, 2017
Revenue:
Rental and parking revenue	$	147,855		$	(45,795	)	(b)	$	102,060
Tenant reimbursement revenue	13,264			(6,616		)	(b)	6,648
Total revenue	161,119			(52,411		)		108,708
Expenses:
Rental and parking expenses	23,191			(8,602		)	(b)	14,589
General and administrative expenses	5,274			—				5,274
Change in fair value of contingent consideration	(2,920		)	2,920				—
Asset management fees	14,494			(3,576		)	(c)	10,918
Depreciation and amortization	54,491			(17,716		)	(b)	36,775
Total expenses	94,530			(26,974		)		67,556
Income from operations	66,589			(25,437		)		41,152
Other income (expense):
Other interest and dividend income	1,551			—				1,551
Interest expense, net	(26,373		)	15,834			(d)	(10,539		)
Provision for loan losses	(11,631		)	—				(11,631		)
Total other expense	(36,453		)	15,834				(20,619		)
Net income	30,136			(9,603		)		20,533
Net income attributable to noncontrolling interests in consolidated partnerships	(3,018		)	3,018			(b)	—
Net income attributable to common stockholders	$	27,118		$	(6,585	)		$	20,533
Other comprehensive income:
Unrealized income on interest rate swaps, net	$	1,326		$	(570	)	(b)	$	756
Other comprehensive income	1,326			(570		)		756
Comprehensive income	31,462			(10,173		)		21,289
Comprehensive income attributable to noncontrolling interests in consolidated partnerships	(3,018		)	3,018				—
Comprehensive income attributable to common stockholders	$	28,444		$	(7,155	)		$	21,289
Weighted average number of common shares outstanding:
Basic	185,834,940			—				185,834,940
Diluted	185,853,976			—				185,853,976
Net income per common share attributable to common stockholders:
Basic	$	0.15						$	0.11
Diluted	$	0.15						$	0.11

(a) Historical financial information is derived from the unaudited condensed consolidated statement of comprehensive income included in the Company's quarterly report on Form 10-Q for the nine months ended September 30, 2017.

(b) These amounts represent the elimination of the operations on the completed sale of the Portfolio from the historical amounts for the nine months ended September 30, 2017, to give effect to the completed sale of the Portfolio as if the sale occurred on January 1, 2016.

(c) Represents the elimination of asset management fee expenses calculated on a monthly basis equal to 0.07083% of the aggregate asset value as of the last day of the immediately preceding month. These fees were historically paid by the

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Company to Carter/Validus Advisors, LLC and would not have been incurred subsequent to the disposition of the Portfolio.

(d) Amount represents the elimination of interest expense on the Portfolio's mortgage loans originated in the amount of $220,910,000 at a weighted average interest rate of 4.36% per annum as of September 30, 2017, amortization of the deferred financing costs related to the mortgage loans, payment related to the swap agreements associated with the mortgage loans and interest expense on the amount of the paydown on the unsecured credit facility, to reflect the the use of net cash proceeds from the sale of the Portfolio, assuming the sale had occurred on January 1, 2016.

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CARTER VALIDUS MISSION CRITICAL REIT, INC.

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the Year Ended December 31, 2016

(in thousands, except share data and per share amounts)

(Unaudited)

	Year Ended December 31, 2016 (a)			Pro Forma Adjustments For the Disposition of Mapletree Portfolio				Pro Forma Year Ended December 31, 2016
Revenue:
Rental and parking revenue	$	189,428		$	(60,929	)	(b)	$	128,499
Tenant reimbursement revenue	17,765			(9,462		)	(b)	8,303
Real estate-related notes receivable and interest income	63			—				63
Total revenue	207,256			(70,391		)		136,865
Expenses:
Rental and parking expenses	29,131			(12,048		)	(b)	17,083
General and administrative expenses	6,251			—				6,251
Change in fair value of contingent consideration	300			(300		)		—
Acquisition related expenses	1,667			—				1,667
Asset management fees	19,505			(4,768		)	(c)	14,737
Depreciation and amortization	86,335			(23,760		)	(b)	62,575
Total expenses	143,189			(40,876		)		102,313
Income from operations	64,067			(29,515		)		34,552
Other income (expense):
Other interest and dividend income	13,239			—				13,239
Interest expense, net	(37,855		)	20,069			(d)	(17,786		)
Provision for loan losses	(4,294		)	—				(4,294		)
Total other expense	(28,910		)	20,069				(8,841		)
Net income	35,157			(9,446		)		25,711
Net income attributable to noncontrolling interests in consolidated partnerships	(3,921		)	3,921			(b)	—
Net income attributable to common stockholders	$	31,236		$	(5,525	)		$	25,711
Other comprehensive income:
Unrealized income on interest rate swaps, net	$	4,403		$	(428	)	(b)	$	3,975
Other comprehensive income	4,403			(428		)		3,975
Comprehensive income	39,560			(9,874		)		29,686
Comprehensive income attributable to noncontrolling interests in consolidated partnerships	(3,921		)	3,921				—
Comprehensive income attributable to common stockholders	$	35,639		$	(5,953	)		$	29,686
Weighted average number of common shares outstanding:
Basic	183,279,872			—				183,279,872
Diluted	183,297,662			—				183,297,662
Net income per common share attributable to common stockholders:
Basic	$	0.17						$	0.14
Diluted	$	0.17						$	0.14

(a) Historical financial information is derived from the consolidated statement of comprehensive income included in the Company's annual report on Form 10-K for the year ended December 31, 2016.

(b) These amounts represent the elimination of the operations on the completed sale of the Portfolio from the historical amounts for the year ended December 31, 2016, to give effect to the completed sale of the Portfolio as if the sale occurred on January 1, 2016.

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(c) Represents the elimination of asset management fee expenses calculated on a monthly basis equal to 0.07083% of the aggregate asset value as of the last day of the immediately preceding month. These fees were historically paid by the Company to Carter/Validus Advisors, LLC and would not have been incurred subsequent to the disposition of the Portfolio.

(d) Amount represents the elimination of interest expense on the Portfolio's mortgage loans originated in the amount of $220,910,000 at a weighted average interest rate of 4.35% per annum as of December 31, 2016, amortization of the deferred financing costs related to the mortgage loans, payment related to the swap agreements associated with the mortgage loans and interest expense on the amount of the paydown on the unsecured credit facility, to reflect the the use of net cash proceeds from the sale of the Portfolio, assuming the sale had occurred on January 1, 2016.

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