Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended | |
Nov. 30, 2014 | Feb. 11, 2015 | |
Document and Entity Information: | ||
Entity Registrant Name | Global Medical REIT Inc. | |
Entity Trading Symbol | GMED | |
Document Type | 10-Q | |
Document Period End Date | 30-Nov-14 | |
Amendment Flag | FALSE | |
Entity Central Index Key | 1533615 | |
Current Fiscal Year End Date | -23 | |
Entity Common Stock, Shares Outstanding | 250,000 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Current Reporting Status | Yes | |
Entity Voluntary Filers | No | |
Entity Well-known Seasoned Issuer | No | |
Document Fiscal Year Focus | 2015 | |
Document Fiscal Period Focus | Q1 |
Balance_Sheets_unaudited
Balance Sheets (unaudited) (USD $) | Nov. 30, 2014 | Aug. 31, 2014 |
Investment in real estate: | ||
Building and improvements | $24,373,762 | $21,867,065 |
Less: accumulated depreciation | -278,801 | -129,081 |
Investment in real estate, net | 24,094,961 | 21,737,984 |
Cash | 332,576 | 162,985 |
Accounts receivable | 2,793 | 0 |
Escrow deposits | 14,940 | 14,940 |
Prepaid expense | 0 | 19,307 |
Deferred financing costs, net | 301,623 | 309,543 |
Total assets | 24,746,893 | 22,244,759 |
Liabilities: | ||
Accrued expenses | 306,459 | 176,153 |
Dividends payable | 21,300 | 0 |
Due to related party, net | 300,768 | 213,000 |
Convertible debenture, due to shareholder | 5,446,102 | 4,536,102 |
Notes payable to shareholder | 38,195 | 38,195 |
Notes payable related to acquisitions | 16,760,000 | 15,060,000 |
Total liabilities | 22,872,824 | 20,023,450 |
Shareholders' equity: | ||
Preferred stock, $0.001 par value, 100,000,000 shares authorized; no shares issued and outstanding | 0 | 0 |
Common stock $0.001 par value, 500,000,000 and 100,000,000 shares authorized at November 30, 2014 and August 31, 2014, respectively, and 250,000 shares issued and outstanding at November 30, 2014 and August 31, 2014, respectively | 250 | 250 |
Additional paid-in capital | 3,011,790 | 3,011,790 |
Accumulated deficit | -1,137,971 | -790,731 |
Total shareholders' equity | 1,874,069 | 2,221,309 |
Total liabilities and shareholders' equity | $24,746,893 | $22,244,759 |
Balance_Sheets_Parentheticals
Balance Sheets Parentheticals (USD $) | Nov. 30, 2014 | Aug. 31, 2014 |
Parentheticals | ||
Preferred Stock, par value | $0.00 | $0.00 |
Preferred Stock, shares authorized | 100,000,000 | 100,000,000 |
Common Stock, par value | $0.00 | $0.00 |
Common Stock, shares authorized | 500,000,000 | 100,000,000 |
Common Stock, shares issued | 250,000 | 250,000 |
Common Stock, shares outstanding | 250,000 | 250,000 |
Statements_of_Operations_unaud
Statements of Operations (unaudited) (USD $) | 3 Months Ended | |
Nov. 30, 2014 | Nov. 30, 2013 | |
Revenue: | ||
Rental revenue | $445,174 | $0 |
Other income | 70 | 0 |
Total revenue | 445,244 | 0 |
Expenses: | ||
Management fees | 90,000 | 0 |
General and administrative | 153,560 | 7,665 |
Depreciation expense | 149,720 | 0 |
Interest expense | 335,304 | 0 |
Total expenses | 728,584 | 7,665 |
Net loss | ($283,340) | ($7,665) |
Net loss per share - Basic and Diluted | ($1.13) | ($0.38) |
Weighted average shares outstanding - Basic and Diluted | 250,000 | 20,000 |
Statements_of_Cash_Flows_unaud
Statements of Cash Flows (unaudited) (USD $) | 3 Months Ended | |
Nov. 30, 2014 | Nov. 30, 2013 | |
Operating Activities | ||
Net loss | ($283,340) | ($7,665) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||
Depreciation expense | 149,720 | 0 |
Amortization of deferred financing costs | 29,497 | 0 |
Changes in operating assets and liabilities: | ||
Accounts receivable | -2,793 | 0 |
Prepaid expense | 19,307 | 0 |
Accrued expenses | 130,306 | 2,098 |
Due to related party, net | 87,768 | 5,514 |
Net cash provided by (used in) operating activities | 130,465 | -53 |
Investing Activities | ||
Purchase of building and improvements | -2,506,697 | 0 |
Net cash used in investing activities | -2,506,697 | 0 |
Financing Activities | ||
Proceeds from convertible debenture from shareholder | 910,000 | 0 |
Proceeds from notes payable related to acquisition | 1,700,000 | 0 |
Payment of deferred financing costs | -21,577 | 0 |
Dividends paid | -42,600 | 0 |
Net cash provided by financing activities | 2,545,823 | 0 |
Net increase (decrease) in cash | 169,591 | -53 |
Cash and cash equivalents at beginning of period | 162,985 | 3,519 |
Cash and cash equivalents at end of period | 332,576 | 3,466 |
Supplemental disclosure of cash flow information | ||
Interest paid | 206,536 | 0 |
Supplemental disclosure of non-cash financing activity | ||
Dividends payable | $21,300 | $0 |
ORGANIZATION_AND_OPERATIONS
ORGANIZATION AND OPERATIONS | 3 Months Ended |
Nov. 30, 2014 | |
ORGANIZATION AND OPERATIONS | |
ORGANIZATION AND OPERATIONS | Note 1 – Organization and Operations |
Global Medical REIT Inc. (the “Company”) was incorporated in the state of Nevada on March 18, 2011 under the name Scoop Media, Inc. (“Scoop Media”) and was acquired by the Hong Kong company known as Heng Fai Enterprises, Ltd. (“Heng Fai”) in 2013. The Company changed to its current name effective January 15, 2014 in connection with its re-domestication into a Maryland corporation. Upon its acquisition of the Company, Heng Fai changed the Company’s business focus to the acquisition, development, and management of real estate assets in the healthcare industry, which may include the real estate of hospitals, medical centers, nursing facilities and retirement homes. | |
In order to reincorporate in Maryland, we entered into an Agreement and Plan of Conversion with Scoop Media pursuant to which Scoop Media was converted into our Company effective as of January 15, 2014, whereby we exchanged one share of common stock of Scoop Media, $0.001 par value per share, into one share of common stock, $0.001 par value per share, of our Company. | |
On July 17, 2014, Heng Fai transferred its interest in the Company to its wholly owned subsidiary, HFE USA, LLC, a Delaware limited liability company. As of November 30, 2014, HFE USA, LLC owns an aggregate of 248,825 (or 99.5%) of the Company’s outstanding common stock. | |
Reverse Stock Split | |
Effective November 7, 2014, the Company amended its articles of incorporation to increase the number of authorized shares of common stock, $0.001 par value (the “common stock”), from 100,000,000 to 500,000,000 and effected a reverse stock split of the outstanding shares of its common stock at the ratio of 1-for-400 (the “Reverse Stock Split”). All references to shares of the Company’s common stock in this quarterly report on Form 10-Q refer to the number of shares of common stock after giving effect to the Reverse Stock Split (unless otherwise indicated). | |
Director and Executive Officer Appointments | |
On October 1, 2014, the board of directors appointed David Young, Tong Wan Chan, and Jeffrey Busch as directors. On the same day, the Board also appointed Donald McClure as the Chief Financial Officer. | |
Management Agreement | |
On November 10, 2014, the Company entered into a Management Agreement, with an effective date of April 1, 2014, with Inter-American Management, LLC (the “Manager”), a Delaware limited liability company and an affiliate of the Company. Under the terms of the Management Agreement, the Manager is responsible for designing and implementing our business strategy and administering our business activities and day-to-day operations. For performing these services, the Company will pay the Manager 8% of rental revenue for property management services and a base management fee equal to the greater of (a) 2.0% per annum of the Company’s net asset value (the value of the Company’s assets less the value of the Company’s liabilities), or (b) $30,000 per calendar month. For the three months ended November 30, 2014, management fees of $90,000 were incurred and expensed by the Company and owed to the Manager. As of November 30, 2014, cumulative management fees incurred of $240,000 (since April 1, 2014) were owed to the Manager and remain unpaid. Additionally, during the three months ended November 30, 2014 the Company expensed $48,400 that was paid to the Manager related to the acquisition of the Asheville facility. This expense is included in the “General and Administrative Expense” line item in the accompanying Statements of Operations for the three months ended November 30, 2014. |
SIGNIFICANT_ACCOUNTING_POLICIE
SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Nov. 30, 2014 | |
SIGNIFICANT ACCOUNTING POLICIES | |
SIGNIFICANT ACCOUNTING POLICIES | Note 2 – Significant Accounting Policies |
Use of estimates – The preparation of the financial statements in conformity with U.S. generally accepted accounting principles requires us to make estimates and assumptions that affect the amounts reported in the Company’s financial statements and accompanying notes. Actual results could differ from those estimates. | |
Income taxes – We plan on electing to be taxed as a real estate investment trust (“REIT”) for federal income tax purposes beginning in 2015. REITs are generally not subject to federal income taxes if the Company can meet many specific requirements. If the Company fails to qualify as a REIT in any taxable year, the Company will be subject to federal and state income tax (including any applicable alternative minimum tax) on the Company’s taxable income at regular corporate tax rates, and the Company may be ineligible to qualify as a REIT for subsequent tax years. Even if the Company qualifies as a REIT, it may be subject to certain state or local income taxes, and if the Company creates a Taxable REIT Subsidiary (“TRS”), the TRS will be subject to federal, state and local taxes on its income at regular corporate rates. The Company recognizes the tax effects of uncertain tax positions only if the position is more likely than not to be sustained upon audit, based on the technical merits of the position. The Company has not identified any material uncertain tax positions and recognizes interest and penalties in income tax expense, if applicable. The Company is currently not under examination by any income tax jurisdiction. | |
Purchase of real estate – Transactions in which real estate assets are purchased that are not subject to an existing significant lease or are attached or related to a major healthcare provider are treated as asset acquisitions, and as such are recorded at their purchase price, including acquisition fees, which is allocated to land and building based upon their relative fair values at the date of acquisition. Investment properties that are acquired either subject to a significant existing lease or as part of a portfolio level transaction with significant leasing activity are treated as a business combination under Accounting Standards Codification (“ASC”) 805, “Business Combinations,” which requires the purchase price of acquired properties be allocated to the acquired tangible assets and liabilities, consisting of land, building, and any identified intangible assets. Acquisition fees are expensed as incurred. Fair value is determined based on ASC 820, “Fair Value Measurements and Disclosures,” primarily based on unobservable data inputs. In making estimates of fair values for purposes of allocating the purchase price of individually acquired properties, the Company utilizes its own market knowledge and published market data. In this regard, the Company also utilizes information obtained from county tax assessment records to assist in the determination of the fair value of the land and building. The Company utilizes market comparable transactions such as price per square foot to assist in the determination of fair value for purposes of allocating the purchase price of properties acquired as part of portfolio level transactions. The value of acquired leases, if applicable, is estimated based upon the costs we would have incurred to lease the property under similar terms. | |
Impairment of long lived assets – The Company evaluates its real estate assets for impairment periodically or whenever events or circumstances indicate that its carrying amount may not be recoverable. If an impairment indicator exists, the Company compares the expected future undiscounted cash flows against the carrying amount of an asset. If the sum of the estimated undiscounted cash flows is less than the carrying amount of the asset, the Company records an impairment loss for the difference between the estimated fair value and the carrying amount of the asset. | |
Depreciation expense – Depreciation expense is computed using the straight-line method over the estimated useful lives of the buildings and improvements, which are generally between 5 and 40 years. | |
Cash and cash equivalents – The Company considers all demand deposits, cashier’s checks, money market accounts and certificates of deposits with a maturity of three months to be cash equivalents. The Company maintains its cash and cash equivalents and escrow deposits at financial institutions. The combined account balances may exceed the Federal Depository Insurance Corporation insurance coverage, and, as a result, there may be a concentration of credit risk related to amounts on deposit. The Company does not believe that this risk is significant. | |
Escrow deposits – Escrow deposits include refundable and non-refundable cash earnest money deposits for the purchase of properties including advances from Heng Fai. In addition, escrow deposits may include amounts paid for properties in certain states which require a judicial order when the risk and rewards of ownership of the property are transferred and the purchase is finalized. | |
Revenue recognition – The Company’s operations currently consist of rental revenue earned from two tenants under leasing arrangements which provide for minimum rent, escalations, and charges to the tenant for the real estate taxes and operating expenses. The leases have been accounted for as operating leases. For operating leases with minimum scheduled rent increases, the Company recognizes income on a straight-line basis over the lease term when collectability is reasonably assured. Recognizing rental income on a straight-line basis for leases results in recognized revenue amounts which differ from those that are contractually due from tenants. If the Company determines that collectability of straight-line rents is not reasonably assured, future revenue recognition is limited to amounts contractually owed and paid, and, when appropriate, an allowance for estimated losses is established. For additional information on our properties refer to Note 3 – “Property Acquisitions.” | |
The Company consistently assesses the need for an allowance for doubtful accounts, including an allowance for operating lease straight-line rent receivables, for estimated losses resulting from tenant defaults, or the inability of tenants to make contractual rent and tenant recovery payments. The Company also monitors the liquidity and creditworthiness of its tenants and operators on a continuous basis. This evaluation considers industry and economic conditions, property performance, credit enhancements and other factors. For operating lease straight-line rent amounts, the Company's assessment is based on amounts estimated to be recoverable over the term of the lease. As of November 30, 2014, an allowance for doubtful accounts was not recorded as it was not deemed necessary. | |
Deferred financing costs – Deferred financing costs include amounts paid to lenders to obtain financing, primarily to be used to fund the Company’s acquisitions. These costs are amortized to interest expense on a straight-line basis over the term of the related loan, which approximates the effective interest method. | |
Segment reporting – ASC Topic 280, “Segment Reporting,” establishes standards for reporting financial and other information about an entity's reportable segments. The Company has determined that it has one reportable segment, with activities related to investing in medical office buildings and related assets. Management evaluates operating performance on an individual asset level basis. | |
Fair value of financial instruments – Fair value is a market-based measurement and should be determined based on the assumptions that market participants would use in pricing an asset or liability. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels are defined as follows: | |
Level 1 – Inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets; | |
Level 2 – Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument; and | |
Level 3 – Inputs to the valuation methodology are unobservable and significant to the fair value measurement. | |
The Company considers the carrying values of cash and cash equivalents, accounts and other receivables, escrow deposits, accounts payable, and accrued liabilities to approximate their fair value due to the short period of time since origination or the short period of time between origination of the instruments and their expected realization. Due to the short-term nature of these instruments, Level 1 and Level 2 inputs are utilized to estimate the fair value of these financial instruments. The fair value of amounts due to or from related parties are deemed undeterminable due to their nature. | |
PROPERTY_ACQUISITION
PROPERTY ACQUISITION | 3 Months Ended |
Nov. 30, 2014 | |
PROPERTY ACQUISITION | |
PROPERTY ACQUISITION | Note 3 – Property Acquisitions |
On June 5, 2014, the Company completed the acquisition of a 56-bed long term acute care hospital located at 1870 S 75th Street, Omaha, Nebraska for approximately $21.7 million (approximately $21.9 million after including legal fees). The Omaha facility is operated by Select Specialty Hospital – Omaha, Inc. pursuant to a sublease which expires in 2023, with sub lessee options to renew up to 60 years (the “operating lease”). The real property where the Omaha facility and other improvements are located are subject to a land lease with Catholic Health Initiatives, a Colorado nonprofit corporation (the “land lease”). The land lease initially was to expire in 2023 with sub lessee options to renew up to 60 years. However, as of November 30, 2014, the Company exercised two five-year lease renewal options and therefore the land lease currently expires in 2033, subject to future renewal options by the Company. In connection with the acquisition of the Omaha facility in June 2014, the Company borrowed $15.06 million from Capital One, National Association. | |
On September 19, 2014, the Company closed an Agreement of Sale and Purchase to acquire an approximately 8,840 square foot medical office building known as the Orthopedic Surgery Center, located in Asheville, North Carolina for approximately $2.5 million. The Asheville facility is subject to an operating lease which expires in 2017, with lease options to renew up to five years. The property is owned fee simple. In connection with the acquisition of the Asheville facility in September 2014, the Company borrowed $1.7 million from the Bank of North Carolina and funded the remainder of the acquisition with funds in the form of a Convertible Debenture from Heng Fai in the amount of $910,000 (See Note 6 - “Related Party Transactions”) and with its existing cash. Interest on the borrowings from the Bank of North Carolina is fixed at 4.75% for the term of the loan, which is due in full, including all accrued and unpaid interest on February 15, 2017. |
Notes_Payable_Related_to_Acqui
Notes Payable Related to Acquisitions | 3 Months Ended | |||
Nov. 30, 2014 | ||||
Notes Payable Related to Acquisitions | ||||
Notes Payable Related to Acquisitions | Note 4 – Notes Payable Related to Acquisitions | |||
Omaha note payable – In order to finance a portion of the purchase price for the Omaha facility, on June 5, 2014 the Company entered into a Term Loan and Security Agreement with Capital One, National Association (the “Lender”) to borrower $15.06 million (the “Loan”). The Loan bears interest at 4.91% per annum and all unpaid interest and principal is due on June 5, 2017 (the “Maturity Date”). Interest is paid in arrears and payments began on August 1, 2014, and are due on the first day of each calendar month thereafter. Principal payments begin on January 1, 2015 and are due on the first day of each calendar month thereafter based on an amortization schedule with the principal balance due on the Maturity Date. Interest expense on the loan was $186,916 for the three months ended November 30, 2014. The Loan may not be prepaid in whole or in part prior to June 5, 2016, thereafter, the Company, at its option, may prepay the Loan at any time, in whole (but not in part) on at least 30 calendar days’, but not more than 60 calendar days’, advance written notice. The prepayment amount will be equal to the outstanding principal balance of the Loan, any accrued and unpaid interest and all other fees, expenses and obligations including an Early Termination Fee of $301,200. At Closing, the Company paid the Lender a non-refundable commitment fee of $150,600. | ||||
As of November 30, 2014, scheduled principal payments due each subsequent year listed below are as follows: | ||||
2015 | $ | 284,146 | ||
2016 | 323,997 | |||
2017 | 14,451,857 | |||
Total Payments | $ | 15,060,000 | ||
Asheville note payable – In order to finance a portion of the purchase price of the Asheville facility, on September 15, 2014 the Company entered into a Promissory Note with the Bank of North Carolina to borrow $1.7 million. The note bears interest on the outstanding principal balance at the simple, fixed interest rate of 4.75% per annum and all unpaid principal and interest is due on February 15, 2017. Commencing on October 15, 2014, the Company will make on the 15th of each calendar month until and including March 15, 2015, monthly payments consisting of interest only. Thereafter, commencing on April 15, 2015, the outstanding principal and accrued interest shall be payable in monthly amortizing payments of $10,986 each on the 15th day of each calendar month, until and including January 15, 2017. Interest expense on the note was $13,458 for the three months ended November 30, 2014. This note may be prepaid in part or in full at any time and no prepayment penalty will be assessed with respect to any amounts prepaid. At closing, the Company paid a loan origination fee of $17,000. | ||||
As of November 30, 2014, scheduled principal payments due each subsequent year listed below are as follows: | ||||
2015 | $ | 33,402 | ||
2016 | 52,506 | |||
2017 | 1,614,092 | |||
Total Payments | $ | 1,700,000 | ||
Deferred financing costs – As of November 30, 2014, the Company recorded deferred financing costs of $357,564 related to the Omaha and Asheville loans. Included in this amount are $21,577 in deferred financing costs incurred related to the Asheville loan during the three months ended November 30, 2014. Accumulated amortization as of November 30, 2014 was $55,941 and therefore net deferred financing costs on the accompanying Balance Sheet as of November 30, 2014 was $301,623. Amortization expense related to the deferred financing costs for the three months ended November 30, 2014 was $29,497, which is included in the “Interest Expense” line item in the accompanying Statements of Operations for the three months ended November 30, 2014. | ||||
SHAREHOLDERS_EQUITY
SHAREHOLDERS' EQUITY | 3 Months Ended |
Nov. 30, 2014 | |
SHAREHOLDERS' EQUITY | |
SHAREHOLDERS' EQUITY | Note 5 – Shareholders’ Equity |
Preferred stock – The Company’s charter authorizes the issuance of 100,000,000 shares of preferred stock, par value $0.001 per share. As of November 30, 2014 and August 31, 2014, no shares of preferred stock were issued and outstanding. | |
Common stock – Effective November 7, 2014, the Company amended its articles of incorporation to increase the number of authorized shares of common stock, $0.001 par value (the “common stock”), from 100,000,000 to 500,000,000 and effected a reverse stock split of the outstanding shares of its common stock at the ratio of 1-for-400 (the “Reverse Stock Split”). As of November 30, 2014 and August 31, 2014, there were 250,000 outstanding common shares. All references to shares of the Company’s common stock in this quarterly report on Form 10-Q refers to the number of shares of common stock after giving effect to the Reverse Stock Split (unless otherwise indicated). | |
On September 19, 2014, the Company declared a dividend of $0.0852 per share payable to the holders of its common stock of record at the close of business September 29, 2014. Dividends shall be paid no later than the 20th day of the following month subject to compliance with applicable provisions of the Maryland General Corporation Law. The aggregate amount of the dividend was $21,300. | |
On October 18, 2014, the Company declared a dividend of $0.0852 per share payable to the holders of its common stock of record at the close of business October 30, 2014. Dividends shall be paid no later than the 20th day of the following month subject to compliance with applicable provisions of the Maryland General Corporation Law. The aggregate amount of the dividend was $21,300. | |
On November 21, 2014, the Company declared a dividend of $0.0852 per share payable to the holders of its common stock of record at the close of business December 2, 2014. Dividends shall be paid no later than the 20th day of the following month subject to compliance with applicable provisions of the Maryland General Corporation Law. The aggregate amount of the dividend was $21,300. This amount was accrued as of November 30, 2014. |
RELATED_PARTY_TRANSACTIONS
RELATED PARTY TRANSACTIONS | 3 Months Ended |
Nov. 30, 2014 | |
RELATED PARTY TRANSACTIONS | |
RELATED PARTY TRANSACTIONS | Note 6 – Related Party Transactions |
Convertible debenture – During the three months ended November 30, 2014, Heng Fai loaned the Company $910,000 to assist in the acquisition of the Asheville facility and pay closing costs. Additionally, during the fiscal year ended August 31, 2014, Heng Fai loaned the Company $7,468,142 to assist in the acquisition of the Omaha facility and pay closing costs. The loans are classified as a Convertible Debenture (the “Convertible Debenture”) totaling $8,378,142, and were assigned by Heng Fai to HFE USA, LLC. The Convertible Debenture bears interest at 8.0% per annum and all unpaid interest and principal is due on June 30, 2015. Interest is paid monthly in arrears and are due on the last day of each calendar month thereafter. The Company may prepay the note at any time, in whole or in part. HFE USA, LLC may elect to convert all or a portion of the outstanding principal amount of the note into shares of common stock in an amount equal to the principal amount of the note, together with accrued but unpaid interest, divided by $0.03187. | |
On July 17, 2014, HFE USA, LLC converted $2,932,040 of the principal and accrued interest under the note into 230,000 shares of our unregistered common stock. Shares of our unregistered common stock issued to HFE USA, LLC as a result of these conversions will be subject to customary anti-dilution rights in the event of stock splits, stock dividends and similar corporate events. | |
Accordingly, as of November 30, 2014, the outstanding principal balance of the Convertible Debenture was $5,446,102. Interest expense on the Convertible Debenture was $105,433 for the three months ended November 30, 2014. | |
Notes payable to shareholder – During the fiscal year ended August 31, 2014, Heng Fai loaned $345,053 to the Company for general corporate purposes, of which the Company repaid $306,858 during that fiscal year. Heng Fai assigned the notes payable to HFE USA, LLC. As of November 30, 2014, the notes payable to shareholder balance was $38,195. | |
Due to related party, net – As of November 30, 2014, the Company owes the Manager $240,000 for cumulative incurred but unpaid management fees. Additionally, the Company owes the Manager $103,683 for funds loaned by the Manager to be used by the Company for general corporate purposes. These amounts are recorded net of $42,915 that the Manager owes the Company for funds paid by the Company related to the Asheville facility acquisition. The net due to related party balance as of November 30, 2014 was $300,768. | |
Management agreement – On November 10, 2014, the Company entered into a Management Agreement, with an effective date of April 1, 2014, with the Manager, a Delaware limited liability company and an affiliate of the Company. Under the terms of the Management Agreement, the Manager is responsible for designing and implementing our business strategy and administering our business activities and day-to-day operations. For performing these services, the Company will pay the Manager 8% of rental revenue for property management services and a base management fee equal to the greater of (a) 2.0% per annum of the Company’s net asset value (the value of the Company’s assets less the value of the Company’s liabilities), or (b) $30,000 per calendar month. For the three months ended November 30, 2014, management fees of $90,000 were incurred and expensed by the Company and due to the Manager. As of November 30, 2014, cumulative management fees incurred of $240,000 (since April 1, 2014) were due to the Manager and remain unpaid. Additionally, during the three months ended November 30, 2014 the Company expensed $48,400 that was paid to the Manager related to the acquisition of the Asheville facility in September 2014. This expense is included in the “General and Administrative Expense” line item in the accompanying Statements of Operations for the three months ended November 30, 2014. |
RENTAL_REVENUE
RENTAL REVENUE | 3 Months Ended | |||
Nov. 30, 2014 | ||||
RENTAL REVENUE | ||||
RENTAL REVENUE | Note 7 – Rental Revenue | |||
The aggregate annual minimum cash to be received by the Company on the noncancelable operating leases related to the Omaha and Asheville facilities, in effect as of November 30, 2014, are as follows for the subsequent years listed below. For additional information refer to Note 3 – “Property Acquisitions.” | ||||
2015 | $ | 1,783,426 | ||
2016 | 1,836,929 | |||
2017 | 1,892,037 | |||
2018 | 1,711,177 | |||
2019 | 1,762,512 | |||
Thereafter | 6,603,041 | |||
Total Receipts | $ | 15,589,122 | ||
Omaha_Land_Lease_Rent_Expense
Omaha Land Lease Rent Expense | 3 Months Ended | |||
Nov. 30, 2014 | ||||
Omaha Land Lease Rent Expense | ||||
Omaha Land Lease Rent Expense | Note 8 – Omaha Land Lease Rent Expense | |||
The Omaha facility land lease initially was to expire in 2023 with options to renew up to 60 years. However, as of November 30, 2014 the Company exercised two five-year lease renewal options and therefore the land lease currently expires in 2033, subject to future renewal options by the Company. Under the terms of the land lease, annual rents increase 12.5% every fifth anniversary of the lease. The initial land lease increase will occur in April 2017. The aggregate minimum cash payments to be made by the Company on the non-cancelable Omaha facility related land lease in effect as of November 30, 2014, are as follows for the subsequent years listed below. For additional information refer to Note 3 – “Property Acquisitions.” | ||||
2015 | $ | 59,876 | ||
2016 | 59,876 | |||
2017 | 65,493 | |||
2018 | 67,365 | |||
2019 | 67,365 | |||
Thereafter | 1,088,889 | |||
Total Receipts | $ | 1,408,864 | ||
COMMITMENTS_AND_CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Nov. 30, 2014 | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | Note 9 – Commitments and Contingencies |
Litigation – The Company is not presently subject to any material litigation nor, to its knowledge, is any material litigation threatened against the Company, which if determined unfavorably to the Company, would have a material adverse effect on the Company’s financial position, results of operations, or cash flows. | |
Environmental matters – The Company follows a policy of monitoring its properties for the presence of hazardous or toxic substances. While there can be no assurance that a material environmental liability does not exist at its properties, the Company is not currently aware of any environmental liability with respect to its properties that would have a material effect on its financial position, results of operations, or cash flows. Additionally, the Company is not aware of any material environmental liability or any unasserted claim or assessment with respect to an environmental liability that management believes would require additional disclosure or the recording of a loss contingency. | |
SUBSEQUENT_EVENTS
SUBSEQUENT EVENTS | 3 Months Ended |
Nov. 30, 2014 | |
SUBSEQUENT EVENTS | |
SUBSEQUENT EVENTS | Note 10 – Subsequent Events |
On December 18, 2014, the Company declared a dividend of $0.0852 per share payable to the holders of its common stock of record at the close of business December 30, 2014. Dividends shall be paid no later than the 20th day of the following month subject to compliance with applicable provisions of the Maryland General Corporation Law. The aggregate amount of the dividend was $21,300. | |
On January 21, 2015, the Company declared a dividend of $0.0852 per share payable to the holders of its common stock of record at the close of business February 2, 2015. Dividends shall be paid no later than the 20th day of the following month subject to compliance with applicable provisions of the Maryland General Corporation Law. The aggregate amount of the dividend was $21,300. | |
Accounting_Policies_Policies
Accounting Policies (Policies) | 3 Months Ended |
Nov. 30, 2014 | |
Accounting Policies: | |
Use of estimates | Use of estimates – The preparation of the financial statements in conformity with U.S. generally accepted accounting principles requires us to make estimates and assumptions that affect the amounts reported in the Company’s financial statements and accompanying notes. Actual results could differ from those estimates. |
Income taxes, Policy | Income taxes – We plan on electing to be taxed as a real estate investment trust (“REIT”) for federal income tax purposes beginning in 2015. REITs are generally not subject to federal income taxes if the Company can meet many specific requirements. If the Company fails to qualify as a REIT in any taxable year, the Company will be subject to federal and state income tax (including any applicable alternative minimum tax) on the Company’s taxable income at regular corporate tax rates, and the Company may be ineligible to qualify as a REIT for subsequent tax years. Even if the Company qualifies as a REIT, it may be subject to certain state or local income taxes, and if the Company creates a Taxable REIT Subsidiary (“TRS”), the TRS will be subject to federal, state and local taxes on its income at regular corporate rates. The Company recognizes the tax effects of uncertain tax positions only if the position is more likely than not to be sustained upon audit, based on the technical merits of the position. The Company has not identified any material uncertain tax positions and recognizes interest and penalties in income tax expense, if applicable. The Company is currently not under examination by any income tax jurisdiction. |
Purchase of real estate | Purchase of real estate – Transactions in which real estate assets are purchased that are not subject to an existing significant lease or are attached or related to a major healthcare provider are treated as asset acquisitions, and as such are recorded at their purchase price, including acquisition fees, which is allocated to land and building based upon their relative fair values at the date of acquisition. Investment properties that are acquired either subject to a significant existing lease or as part of a portfolio level transaction with significant leasing activity are treated as a business combination under Accounting Standards Codification (“ASC”) 805, “Business Combinations,” which requires the purchase price of acquired properties be allocated to the acquired tangible assets and liabilities, consisting of land, building, and any identified intangible assets. Acquisition fees are expensed as incurred. Fair value is determined based on ASC 820, “Fair Value Measurements and Disclosures,” primarily based on unobservable data inputs. In making estimates of fair values for purposes of allocating the purchase price of individually acquired properties, the Company utilizes its own market knowledge and published market data. In this regard, the Company also utilizes information obtained from county tax assessment records to assist in the determination of the fair value of the land and building. The Company utilizes market comparable transactions such as price per square foot to assist in the determination of fair value for purposes of allocating the purchase price of properties acquired as part of portfolio level transactions. The value of acquired leases, if applicable, is estimated based upon the costs we would have incurred to lease the property under similar terms. |
Impairment of long lived assets | Impairment of long lived assets – The Company evaluates its real estate assets for impairment periodically or whenever events or circumstances indicate that its carrying amount may not be recoverable. If an impairment indicator exists, the Company compares the expected future undiscounted cash flows against the carrying amount of an asset. If the sum of the estimated undiscounted cash flows is less than the carrying amount of the asset, the Company records an impairment loss for the difference between the estimated fair value and the carrying amount of the asset. |
Depreciation expense | Depreciation expense – Depreciation expense is computed using the straight-line method over the estimated useful lives of the buildings and improvements, which are generally between 5 and 40 years. |
Cash and Cash Equivalents, Policy | Cash and cash equivalents – The Company considers all demand deposits, cashier’s checks, money market accounts and certificates of deposits with a maturity of three months to be cash equivalents. The Company maintains its cash and cash equivalents and escrow deposits at financial institutions. The combined account balances may exceed the Federal Depository Insurance Corporation insurance coverage, and, as a result, there may be a concentration of credit risk related to amounts on deposit. The Company does not believe that this risk is significant. |
Escrow Deposits Policy | Escrow deposits – Escrow deposits include refundable and non-refundable cash earnest money deposits for the purchase of properties including advances from Heng Fai. In addition, escrow deposits may include amounts paid for properties in certain states which require a judicial order when the risk and rewards of ownership of the property are transferred and the purchase is finalized. |
Revenue recognition | Revenue recognition – The Company’s operations currently consist of rental revenue earned from two tenants under leasing arrangements which provide for minimum rent, escalations, and charges to the tenant for the real estate taxes and operating expenses. The leases have been accounted for as operating leases. For operating leases with minimum scheduled rent increases, the Company recognizes income on a straight-line basis over the lease term when collectability is reasonably assured. Recognizing rental income on a straight-line basis for leases results in recognized revenue amounts which differ from those that are contractually due from tenants. If the Company determines that collectability of straight-line rents is not reasonably assured, future revenue recognition is limited to amounts contractually owed and paid, and, when appropriate, an allowance for estimated losses is established. For additional information on our properties refer to Note 3 – “Property Acquisitions.” |
The Company consistently assesses the need for an allowance for doubtful accounts, including an allowance for operating lease straight-line rent receivables, for estimated losses resulting from tenant defaults, or the inability of tenants to make contractual rent and tenant recovery payments. The Company also monitors the liquidity and creditworthiness of its tenants and operators on a continuous basis. This evaluation considers industry and economic conditions, property performance, credit enhancements and other factors. For operating lease straight-line rent amounts, the Company's assessment is based on amounts estimated to be recoverable over the term of the lease. As of November 30, 2014, an allowance for doubtful accounts was not recorded as it was not deemed necessary. | |
Deferred financing costs | Deferred financing costs – Deferred financing costs include amounts paid to lenders to obtain financing, primarily to be used to fund the Company’s acquisitions. These costs are amortized to interest expense on a straight-line basis over the term of the related loan, which approximates the effective interest method. |
Segment Reporting | Segment reporting – ASC Topic 280, “Segment Reporting,” establishes standards for reporting financial and other information about an entity's reportable segments. The Company has determined that it has one reportable segment, with activities related to investing in medical office buildings and related assets. Management evaluates operating performance on an individual asset level basis. |
Fair Value of Financial Instruments | Fair value of financial instruments – Fair value is a market-based measurement and should be determined based on the assumptions that market participants would use in pricing an asset or liability. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels are defined as follows: |
Level 1 – Inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets; | |
Level 2 – Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument; and | |
Level 3 – Inputs to the valuation methodology are unobservable and significant to the fair value measurement. | |
The Company considers the carrying values of cash and cash equivalents, accounts and other receivables, escrow deposits, accounts payable, and accrued liabilities to approximate their fair value due to the short period of time since origination or the short period of time between origination of the instruments and their expected realization. Due to the short-term nature of these instruments, Level 1 and Level 2 inputs are utilized to estimate the fair value of these financial instruments. The fair value of amounts due to or from related parties are deemed undeterminable due to their nature. |
Scheduled_of_principal_payment
Scheduled of principal payments due (Tables) | 3 Months Ended | |||
Nov. 30, 2014 | ||||
Scheduled of principal payments due | ||||
Scheduled of principal payments due | As of November 30, 2014, scheduled principal payments due each subsequent year listed below are as follows: | |||
2015 | $ | 284,146 | ||
2016 | 323,997 | |||
2017 | 14,451,857 | |||
Total Payments | $ | 15,060,000 | ||
As of November 30, 2014, scheduled principal payments due each subsequent year listed below are as follows: | ||||
2015 | $ | 33,402 | ||
2016 | 52,506 | |||
2017 | 1,614,092 | |||
Total Payments | $ | 1,700,000 | ||
Schedule_Of_Rental_Revenue_Tab
Schedule Of Rental Revenue (Tables) | 3 Months Ended | |||
Nov. 30, 2014 | ||||
Schedule Of Rental Revenue | ||||
Schedule Of Rental Revenue | . For additional information refer to Note 3 – “Property Acquisitions.” | |||
2015 | $ | 1,783,426 | ||
2016 | 1,836,929 | |||
2017 | 1,892,037 | |||
2018 | 1,711,177 | |||
2019 | 1,762,512 | |||
Thereafter | 6,603,041 | |||
Total Receipts | $ | 15,589,122 | ||
Schedule_of_rent_expense_Table
Schedule of rent expense (Tables) | 3 Months Ended | |||
Nov. 30, 2014 | ||||
Schedule of rent expense | ||||
Schedule of rent expense | For additional information refer to Note 3 – “Property Acquisitions.” | |||
2015 | $ | 59,876 | ||
2016 | 59,876 | |||
2017 | 65,493 | |||
2018 | 67,365 | |||
2019 | 67,365 | |||
Thereafter | 1,088,889 | |||
Total Receipts | $ | 1,408,864 | ||
ORGANIZATION_AND_OPERATIONS_De
ORGANIZATION AND OPERATIONS (Details) (USD $) | Nov. 30, 2014 | Nov. 10, 2014 | Nov. 07, 2014 | Jul. 17, 2014 | Jan. 15, 2014 |
ORGANIZATION AND OPERATIONS DETAILS | |||||
Number of sharees exchanged for one share of Scoop Media | 1 | ||||
Exchange price per share of Scoop Media | $0.00 | ||||
LLC owns an aggregate of the Company's outstanding common stock. | 248,825 | ||||
Increase the number of authorized shares of common stock | 500,000,000 | ||||
Par value of authorized shares of common stock | $0.00 | ||||
Company will pay rental revenue to the Manager for property management services | 8.00% | ||||
Base management fee equal to Company's net asset value payable per annum in percentage | 2.00% | ||||
Base management fee equal to Company's net asset value payable per calendar month | $30,000 | ||||
Management fees were incurred and expensed for property management services | 90,000 | ||||
Cumulative management fees incurred | 240,000 | ||||
Company expensed that was paid to the Manager related to the acquisition of the Asheville facility | $48,400 |
PROPERTY_ACQUISITION_Details
PROPERTY ACQUISITION (Details) (USD $) | Sep. 19, 2014 | Jun. 05, 2014 |
PROPERTY ACQUISITION DETAILS | ||
Acquisition of a 56-bed long term acute care hospital | $21,700,000 | |
Acquisition of a 56-bed long term acute care hospital approximately after including legal fees | 21,900,000 | |
Company borrowed from Capital One, National Association | 15,060,000 | |
Sale and Purchase to acquire medical office building in value | 2,500,000 | |
Company borrowed from the Bank of North Carolina | 1,700,000 | |
Convertible Debenture from Heng Fai | $910,000 | |
Interest on the borrowings from the Bank of North Carolina | 4.75% |
DEBT_Details
DEBT (Details) (USD $) | Apr. 15, 2015 | Nov. 30, 2014 | Sep. 15, 2014 | Jun. 05, 2014 |
DEBT DETAILS | ||||
Term Loan | $15,060,000 | |||
Loan bears interest per annum | 4.91% | |||
Early Termination Fee | 301,200 | |||
Interest expense on the loan | 186,916 | |||
Non-refundable commitment fee | 150,600 | |||
Asheville note payable | ||||
Promissory Note with the Bank to borrow | 1,700,000 | |||
Note bears interest on the outstanding principal balance per annum | 4.75% | |||
Amortizing payments monthly | 10,986 | |||
Interest expense on the note | 13,458 | |||
Company paid a loan origination fee | 17,000 | |||
Deferred financing costs | ||||
Net deferred financing costs | 301,623 | |||
Accumulated amortization deferred financing costs | 55,941 | |||
Total deferred financing costs | $357,564 |
Deferred_financing_costs_relat
Deferred financing costs related to the Asheville loan (Details) (USD $) | 3 Months Ended |
Nov. 30, 2014 | |
Deferred financing costs related to the Asheville loan | |
Incurred deferred financing costs | $21,577 |
Amortization expense related to the deferred financing costs | $29,497 |
Scheduled_principal_payments_d
Scheduled principal payments due on Omaha note payable (Details) (USD $) | Nov. 30, 2014 |
Scheduled principal payments due on Omaha note payable | |
Principal payments due on Omaha note payable 2015 | $284,146 |
Principal payments due on Omaha note payable 2016 | 323,997 |
Principal payments due on Omaha note payable 2017 | 14,451,857 |
Total Payments of Omaha note payable | $15,060,000 |
Scheduled_principal_payments_d1
Scheduled principal payments due on Asheville note payable (Details) (USD $) | Nov. 30, 2014 |
Scheduled principal payments due on Asheville note payable | |
Principal payments due on Asheville note payable 2015 | $33,402 |
Principal payments due on Asheville note payable 2016 | 52,506 |
Principal payments due on Asheville note payable 2017 | 1,614,092 |
Total Payments of Asheville note payable | $1,700,000 |
STOCK_TRANSACTIONS_Details
STOCK TRANSACTIONS (Details) (USD $) | Nov. 30, 2014 | Nov. 21, 2014 | Oct. 18, 2014 | Sep. 19, 2014 | Aug. 31, 2014 | Jul. 17, 2014 |
STOCK TRANSACTIONS DETAILS | ||||||
Shares of preferred stock authorized | 100,000,000 | |||||
Shares of preferred stock, par value | $0.00 | |||||
Increase Shares of common stock authorized | 500,000,000 | |||||
Shares of common stock, par value | $0.00 | |||||
Outstanding common stock shares | 250,000 | 250,000 | ||||
Issued shares of unregister common stock upon conversion | 230,000 | |||||
One-time dividend per share payable | $0.09 | $0.09 | $0.09 | |||
One-time dividend per share payable value | $21,300 | $21,300 | $21,300 |
Convertible_debenture_Details
Convertible debenture (Details) (USD $) | 3 Months Ended | 12 Months Ended |
Nov. 30, 2014 | Aug. 31, 2014 | |
Convertible debenture | ||
Heng Fai loaned to assist in the acquisition of the Asheville facility ,Omaha facility | $910,000 | $7,468,142 |
Total of convertible debenture | 8,378,142 | |
Convertible Debenture interest per annum | 8.00% | |
Convertible Debenture accrued but unpaid interest | 0.03187 | |
Management agreement | ||
Management fees were incurred and expensed for property management services | 90,000 | |
Cumulative management fees incurred | 240,000 | |
Company expensed that was paid to the Manager related to the acquisition of the Asheville facility | $48,400 |
Related_Party_Transactions_Det
Related Party Transactions (Details) (USD $) | Nov. 30, 2014 | Nov. 10, 2014 | Jul. 17, 2014 |
RELATED PARTY TRANSACTIONS DETAILS | |||
Elected to convert principal and accrued interest | $2,932,040 | ||
Outstanding principal balance of the Convertible Debenture | 5,446,102 | ||
Interest expense for the Three months ended | 105,433 | ||
loaned to the Company to be used for general corporate purposes | 345,053 | ||
Loan repaid | 306,858 | ||
Note payable to shareholder balance | 38,195 | ||
Management fees due | 240,000 | ||
Due to related parties | 300,768 | ||
Unsecured loan | 103,683 | ||
Funds paid by the company related to the Asheville facility acquisition | 42,915 | ||
Company will pay rental revenue to the Manager for property management services | 8.00% | ||
Base management fee equal to Company's net asset value per annum in percentage | 2.00% | ||
Base management fee equal to Company's net asset value payable per calendar month | $30,000 |
RENTAL_REVENUE_Details
RENTAL REVENUE (Details) (USD $) | Nov. 30, 2014 |
RENTAL REVENUE DETAILS | |
Operating lease 2015 | $1,783,426 |
Operating lease 2016 | 1,836,929 |
Operating lease 2017 | 1,892,037 |
Operating lease 2018 | 1,711,177 |
Operating lease 2019 | 1,762,512 |
Thereafter | 6,603,041 |
Total Payments | $15,589,122 |
RENT_EXPENSE_Details
RENT EXPENSE (Details) (USD $) | Nov. 30, 2014 |
RENT EXPENSE DETAILS | |
Annual rents increase | 12.50% |
Future minimum lease payments 2015 | $59,876 |
Future minimum lease payments 2016 | 59,876 |
Future minimum lease payments 2017 | 65,493 |
Future minimum lease payments 2018 | 67,365 |
Future minimum lease payments 2019 | 67,365 |
Thereafter | 1,088,889 |
Total Payments | $1,408,864 |
Subsequent_Events_Details
Subsequent Events (Details) (USD $) | Jan. 21, 2015 | Dec. 18, 2014 |
SUBSEQUENT EVENTS TRANSACTIONS | ||
Company declared a dividend per share payable to the holders of its common stock | 0.0852 | 0.0852 |
Aggregate amount of the dividend | $21,300 | $21,300 |