Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2018 | May 01, 2018 | |
Document And Entity Information [Line Items] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 31, 2018 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q1 | |
Trading Symbol | CHPII | |
Entity Registrant Name | CNL Healthcare Properties II, Inc. | |
Entity Central Index Key | 1,648,383 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Smaller Reporting Company | |
Class A Common Stock | ||
Document And Entity Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 856,916 | |
Class T Common Stock | ||
Document And Entity Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 2,738,811 | |
Class I Common Stock | ||
Document And Entity Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 300,705 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) - USD ($) | Mar. 31, 2018 | Dec. 31, 2017 |
ASSETS | ||
Real estate investment properties, net | $ 30,826,528 | $ 31,085,939 |
Cash | 18,794,963 | 12,310,920 |
Intangibles, net | 4,458,230 | 4,653,504 |
Other assets | 199,616 | 192,423 |
Restricted cash | 139,378 | 110,999 |
Total assets | 54,418,715 | 48,353,785 |
Liabilities: | ||
Mortgages and notes payable, net | 19,554,640 | 19,532,986 |
Due to related parties | 1,165,414 | 1,023,909 |
Accounts payable and accrued liabilities | 958,637 | 836,647 |
Other liabilities | 451,519 | 450,311 |
Total liabilities | 22,130,210 | 21,843,853 |
Commitments and contingencies (Note 10) | ||
Stockholders' equity: | ||
Preferred stock, $0.01 par value per share, 10,000,000 shares authorized; none issued or outstanding | ||
Capital in excess of par value | 35,549,090 | 28,984,932 |
Accumulated loss | (2,049,215) | (1,658,977) |
Accumulated distributions | (1,248,505) | (846,200) |
Total stockholders' equity | 32,288,505 | 26,509,932 |
Total liabilities and stockholders' equity | 54,418,715 | 48,353,785 |
Class A Common Stock | ||
Stockholders' equity: | ||
Common stock value | 8,394 | 8,080 |
Total stockholders' equity | 8,394 | 8,080 |
Class T Common Stock | ||
Stockholders' equity: | ||
Common stock value | 26,206 | 20,492 |
Total stockholders' equity | 26,206 | 20,492 |
Class I Common Stock | ||
Stockholders' equity: | ||
Common stock value | 2,535 | 1,605 |
Total stockholders' equity | $ 2,535 | $ 1,605 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) - $ / shares | Mar. 31, 2018 | Dec. 31, 2017 |
Preferred stock, par value | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Class A Common Stock | ||
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 1,200,000,000 | 1,200,000,000 |
Common stock, shares issued | 839,410 | 808,011 |
Common stock, shares outstanding | 839,410 | 808,011 |
Class T Common Stock | ||
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 700,000,000 | 700,000,000 |
Common stock, shares issued | 2,623,134 | 2,049,223 |
Common stock, shares outstanding | 2,620,596 | 2,049,223 |
Class I Common Stock | ||
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 253,489 | 160,490 |
Common stock, shares outstanding | 253,489 | 160,490 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Revenues: | ||
Resident fees and services | $ 1,124,525 | $ 11,430 |
Rental income and tenant reimbursements | 408,816 | |
Total revenues | 1,533,341 | 11,430 |
Operating expenses: | ||
Property operating expenses | 788,381 | 8,686 |
General and administrative expenses | 319,684 | 234,538 |
Acquisition fees and expenses | 818 | |
Property management fees | 84,012 | |
Depreciation and amortization | 454,418 | |
Total operating expenses | 1,647,313 | 243,224 |
Operating loss | (113,972) | (231,794) |
Other income (expense): | ||
Interest and other income | 22 | |
Interest expense and loan cost amortization | (244,932) | (19,326) |
Total other expense | (244,910) | (19,326) |
Loss before income taxes | (358,882) | (251,120) |
Income tax expense | 31,356 | |
Net loss attributable to common stockholders | (390,238) | (251,120) |
Class A Common Stock | ||
Other income (expense): | ||
Net loss attributable to common stockholders | $ (96,010) | $ (94,685) |
Net loss per share of common stock outstanding (basic and diluted) | $ (0.12) | $ (0.25) |
Weighted average number of common shares outstanding (basic and diluted) | 819,613 | 377,773 |
Distributions declared per common share | $ 0.1440 | $ 0.1050 |
Class T Common Stock | ||
Other income (expense): | ||
Net loss attributable to common stockholders | $ (269,791) | $ (153,460) |
Net loss per share of common stock outstanding (basic and diluted) | $ (0.12) | $ (0.25) |
Weighted average number of common shares outstanding (basic and diluted) | 2,303,138 | 612,266 |
Distributions declared per common share | $ 0.1178 | $ 0.0750 |
Class I Common Stock | ||
Other income (expense): | ||
Net loss attributable to common stockholders | $ (24,437) | $ (2,975) |
Net loss per share of common stock outstanding (basic and diluted) | $ (0.12) | $ (0.25) |
Weighted average number of common shares outstanding (basic and diluted) | 208,616 | 11,868 |
Distributions declared per common share | $ 0.1312 | $ 0.1050 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED) - USD ($) | Total | Capital in Excess of Par Value | Accumulated Loss | Accumulated Distributions | Class A Common Stock | Class T Common Stock | Class I Common Stock |
Beginning Balance at Dec. 31, 2016 | $ 5,832,755 | $ 6,226,141 | $ (342,447) | $ (57,361) | $ 3,251 | $ 3,086 | $ 85 |
Beginning Balance (in shares) at Dec. 31, 2016 | 325,119 | 308,587 | 8,454 | ||||
Subscriptions received for common stock, including distribution reinvestments | $ 6,803,572 | 6,797,145 | $ 1,075 | $ 5,258 | $ 94 | ||
Subscriptions received for common stock, including distribution reinvestments (in shares) | 1,300,000 | 107,480 | 525,753 | 9,400 | |||
Stock dividends issued | (47) | $ 19 | $ 27 | $ 1 | |||
Stock dividends issued (in shares) | 5,000 | 1,948 | 2,698 | 48 | |||
Stock issuance and offering costs | $ (551,408) | (551,408) | |||||
Net loss | (251,120) | (251,120) | |||||
Cash distributions declared | (73,202) | (73,202) | |||||
Ending Balance at Mar. 31, 2017 | 11,760,597 | 12,471,831 | (593,567) | (130,563) | $ 4,345 | $ 8,371 | $ 180 |
Ending Balance (in shares) at Mar. 31, 2017 | 434,547 | 837,038 | 17,902 | ||||
Beginning Balance at Dec. 31, 2017 | 26,509,932 | 28,984,932 | (1,658,977) | (846,200) | $ 8,080 | $ 20,492 | $ 1,605 |
Beginning Balance (in shares) at Dec. 31, 2017 | 808,011 | 2,049,223 | 160,490 | ||||
Subscriptions received for common stock, including distribution reinvestments | $ 7,187,473 | 7,180,587 | $ 290 | $ 5,672 | $ 924 | ||
Subscriptions received for common stock, including distribution reinvestments (in shares) | 3,700,000 | 28,955 | 567,249 | 92,413 | |||
Stock dividends issued | (97) | $ 24 | $ 67 | $ 6 | |||
Stock dividends issued (in shares) | 5,000 | 2,444 | 6,662 | 586 | |||
Redemptions of common stock | $ (25,382) | (25,357) | $ (25) | ||||
Redemptions of common stock, shares | (2,538) | ||||||
Stock issuance and offering costs | (590,975) | (590,975) | |||||
Net loss | (390,238) | (390,238) | |||||
Cash distributions declared | (402,305) | (402,305) | |||||
Ending Balance at Mar. 31, 2018 | $ 32,288,505 | $ 35,549,090 | $ (2,049,215) | $ (1,248,505) | $ 8,394 | $ 26,206 | $ 2,535 |
Ending Balance (in shares) at Mar. 31, 2018 | 839,410 | 2,620,596 | 253,489 |
CONSOLIDATED STATEMENT OF CASH
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Operating activities: | ||
Net cash flows provided by (used in) operating activities | $ 156,890 | $ (154,202) |
Investing activities: | ||
Acquisition of property | (1,000) | (21,769,784) |
Capital expenditures | (9,630) | |
Net cash used in investing activities | (10,630) | (21,769,784) |
Financing activities: | ||
Subscriptions received for common stock through primary offering | 6,962,029 | 6,775,312 |
Payment of underwriting compensation | (383,228) | (403,128) |
Payment of cash distributions, net of distribution reinvestments | (176,860) | (44,942) |
Redemptions of common stock | (25,382) | |
Proceeds from mortgages and notes payable | 16,050,000 | |
Payment of loan costs | (10,397) | (177,512) |
Net cash flows provided by financing activities | 6,366,162 | 22,199,730 |
Net increase in cash and restricted cash | 6,512,422 | 275,744 |
Cash and restricted cash at beginning of period | 12,421,919 | 6,360,241 |
Cash and restricted cash at end of period | 18,934,341 | 6,635,985 |
Amounts incurred but not paid (including amounts due to related parties): | ||
Acquisition fees and expenses related to asset acquisition | 5,000 | 38,790 |
Selling commissions and Dealer Manager fees | 2,809 | |
Annual distribution and stockholder servicing fee | $ 1,031,613 | 315,386 |
Assumption of liabilities on acquisition of property | $ 170,918 |
Organization
Organization | 3 Months Ended |
Mar. 31, 2018 | |
Organization Consolidation And Presentation Of Financial Statements [Abstract] | |
Organization | 1. Organization CNL Healthcare Properties II, Inc. (“Company”) is a Maryland corporation organized on July 10, 2015 that intends to qualify and may elect to be taxed as a real estate investment trust (“REIT”) for U.S. federal income tax purposes beginning with the year ending December 31, 2017 or, as determined by its board of directors, the Company’s first year of material operations. The Company is sponsored by CNL Financial Group, LLC (“Sponsor” or “CNL”) and was formed primarily to acquire and manage a diversified portfolio of healthcare real estate and real estate-related assets that it believes will generate a steady current return and provide long-term value to its stockholders. It intends to focus on investing, primarily in the United States, within the seniors housing, medical office, acute care and post-acute care sectors, as well as other types of real estate and real estate-related securities and loans. The Company is externally managed and advised by CHP II Advisors, LLC, (“Advisor”) an affiliate of CNL. The Advisor provides advisory services to the Company relating to substantially all aspects of its investments and operations, including real estate acquisitions, asset management and other operational matters. During the period from July 10, 2015 to December 31, 2015, the Company sold 20,000 shares of common stock to the Advisor for an aggregate purchase price of $0.2 million, and these shares were converted into 20,000 Class A shares upon the filing of the Company’s Articles of Amendment and Restatement in March 2016. On March 2, 2016, pursuant to a registration statement on Form S-11 under the Securities Act of 1933, the Company commenced its initial public offering of up to $1.75 billion (“Primary Offering”), in any combination, of Class A, Class T and Class I shares of common stock on a “best efforts” basis, which means that CNL Securities Corp. (“Dealer Manager”), an affiliate of the Sponsor, will use its best efforts but is not required to sell any specific amount of shares. The Company also intends to offer up to $250 million, in any combination, of Class A, Class T and Class I shares to be issued pursuant to its distribution reinvestment plan (“Reinvestment Plan” and, together with the Primary Offering, the “Offering”). The Company reserves the right to reallocate the shares offered between the Primary Offering and the Reinvestment Plan. From the time of the Company’s formation on July 10, 2015 (inception) through July 10, 2016, the Company had not commenced operations because the Company was in its development stage and had not received the minimum required offering amount of $2.0 million in shares of common stock. T through the sale of 250,000 Class A shares to and The Company contributes the net proceeds from its Offering to CHP II Partners, LP (“Operating Partnership”) in exchange for partnership interests. The Company intends to own substantially all of its assets either directly or indirectly through the Operating Partnership in which the Company is the sole limited partner and its wholly-owned subsidiary, CHP II GP, LLC, is the sole general partner. The Operating Partnership may own assets through: (1) a wholly-owned taxable REIT subsidiary (“TRS”), CHP II TRS Holding, Inc. (“TRS Holdings”) and (2) property owner subsidiaries, which are single purpose entities. The Company has and generally expects to lease its seniors housing properties to single member limited liability companies wholly-owned by TRS Holdings and engage independent third-party managers under management agreements to operate the properties as permitted under the REIT Investment Diversification and Empowerment Act of 2007 (“RIDEA”) structures; however, the Company may also lease its properties to third-party tenants under triple-net or similar lease structures, where the tenant bears all or substantially all of the costs (including cost increases for real estate taxes, utilities, insurance and ordinary repairs). Medical office, acute care and post-acute care properties have and will generally be leased on a triple-net, net or modified gross basis to third-party tenants. In addition, the Company expects most investments will be wholly-owned, although, it may invest through partnerships with other entities where the Company believes it is appropriate and beneficial. The Company expects to invest in a combination of stabilized assets, new property developments and properties which have not reached full stabilization. Finally, the Company may invest in and originate mortgage, bridge or mezzanine loans or in entities that make investments similar to the foregoing investment types. The Company would generally make loans to the owners of properties to enable them to acquire land, buildings, or to develop property. In exchange, the owner generally grants the Company a first lien or collateralized interest in a participating mortgage collateralized by the property or by interests in the entity that owns the property. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2018 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Basis of Presentation and Consolidation — The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and note disclosures required by generally accepted accounting principles in the United States (“GAAP”). The unaudited condensed consolidated financial statements reflect all normal recurring adjustments, which, in the opinion of management, are necessary for the fair statement of the Company’s results for the interim period presented. Operating results for the three months ended March 31, 2018 may not be indicative of the results that may be expected for the year ending December 31, 2018. Amounts as of December 31, 2017 included in the unaudited condensed consolidated financial statements have been derived from audited consolidated financial statements as of that date but do not include all disclosures required by GAAP. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. The accompanying condensed consolidated financial statements include the accounts of the Company, the Operating Partnership and its other subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation. Use of Estimates — The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the Company’s condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Adopted Accounting Pronouncements — In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers,” as a new ASC topic (Topic 606). The core principle of this ASU is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU further provides guidance for any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets, unless those contracts are within the scope of other standards (for example, lease contracts). The FASB subsequently issued ASU 2015-14 to defer the effective date of ASU 2014-09 until annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, with earlier adoption permitted. In addition, the FASB issued ASU 2017-05, "Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20)," which clarifies the scope of subtopic 610-20, that was issued as a part of ASU 2014-09, as it relates to in-substance nonfinancial assets and must be adopted concurrently with ASC 606. Both ASUs can be adopted using one of two retrospective transition methods: (i) retrospectively to each prior reporting period presented or (ii) as a cumulative-effect adjustment as of the date of adoption. The Company adopted these ASUs using the modified retrospective approach as its transition method on January 1, 2018; the adoption of which did not have a material impact to its consolidated financial statements. In August 2017, the FASB issued ASU 2017-12 “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities,” which amended the hedge accounting model to better reflect an entity’s risk management activities. The ASU expands an entities ability to hedge nonfinancial and financial risk components as well as reduce the complexity related to fair value hedges of interest rate risk. The ASU further eliminates the requirement to separately measure and report hedge ineffectiveness and generally requires the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item. The ASU is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2018. The Company early adopted this ASU prospectively on January 1, 2018; the adoption of which did not have a material impact on the Company’s consolidated financial statements. 2. Summary of Significant Accounting Policies (continued) Recent Accounting Pronouncements — In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842): Accounting for Leases,” which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors). The ASU requires lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases with terms of more than 12 months. The ASU further modifies lessors’ classification criteria for leases and the accounting for sales-type and direct financing leases. The ASU will also require qualitative and quantitative disclosures designed to give financial statement users additional information on the amount, timing, and uncertainty of cash flows arising from leases. The ASU is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2018 with early adoption permitted. The ASU is to be applied using a modified retrospective approach. The Company expects that adoption will impact the Company’s consolidated financial statements and related financial statement disclosures; specifically, the Company’s consolidated financial position as it relates to the required presentation for arrangements such as ground and or other leases in which the Company is the lessee. However, the Company does not expect the adoption of this ASU to have a material impact on the Company’s consolidated results of operations or cash flows. In addition, while still in exposure draft, the FASB has proposed a practical expedient for lessors allowing them to elect to not separate lease and non-lease components in a contract for the purpose of revenue recognition and disclosure if certain criteria are met. If the proposed practical expedient is finalized, the Company plans to elect the practical expedient. |
Revenue
Revenue | 3 Months Ended |
Mar. 31, 2018 | |
Revenue From Contract With Customer [Abstract] | |
Revenue | 3. Revenue Resident fees and services are operating revenues relating to the Company’s managed seniors housing property, which is operated under a RIDEA structure. Resident fees and services directly relate to the provision of monthly goods and services that are generally bundled together under a single resident agreement. The Company accounts for its resident agreements as a single performance obligation under ASC 606 given the Company’s overall promise to provide a series of stand-ready goods and services to its residents each month. Resident fees and services are recorded in the period in which the goods are provided and the services performed and generally consist of (1) monthly rent, which covers occupancy of the residents’ unit as well as basic services, such as utilities, meals and certain housekeeping services, and (2) service level charges, such as assisted living care, memory care and ancillary services. Resident agreements are generally short-term in nature, billed monthly in advance and cancelable by the residents with a 30-day notice. Resident agreements may require the payment of upfront fees prior to moving into the community with any non-refundable portion of such fees being recorded as deferred revenue and amortized over the estimated resident stay. The following table represents the disaggregated revenue for resident fees and services during the three months ended March 31, 2018 and 2017: Three Months Ended March 31, Type of Investment Number of Units Revenues Percentage of Revenues Resident fees and services: 2018 2017 2018 2017 (1) 2018 2017 Assisted living 67 67 $ 818,006 $ ― 72.8 % ― % Memory care 22 22 292,786 ― 26.0 % ― % Other revenues ― ― 13,733 ― 1.2 % ― % 89 89 $ 1,124,525 $ ― 100.0 % ― % _____________ FOOTNOTE: (1) Resident fees and services of approximately $11,000 were comprised entirely of allocated pro-rations at closing as the Summer Vista Assisted Living (“Summer Vista”) acquisition occurred on the last day of March 2017. |
Acquisitions
Acquisitions | 3 Months Ended |
Mar. 31, 2018 | |
Business Combinations [Abstract] | |
Acquisitions | 4. Acquisitions The Company made no acquisitions during the three months ended March 31, 2018. During the three months ended March 31, 2017, the Company acquired Summer Vista, a seniors housing community in Pensacola, Florida, for a purchase price of approximately $21.4 million. In connection therewith, the Company incurred approximately $0.6 million of acquisition fees and expenses, which were capitalized as a component of the cost of the assets acquired and allocated on a relative fair value basis. The seniors housing community features 89 residential units and is operated under a RIDEA structure pursuant to a five-year property management agreement with SRI Management, LLC (“Superior Residences”). The following summarizes the purchase price allocation for Summer Vista, and the related assets acquired and liabilities assumed in connection with the acquisition: Land and land improvements $ 2,269,406 Buildings and building improvements 17,611,786 Furniture, fixtures and equipment 857,338 In-place lease intangibles (1) 1,286,507 Liabilities assumed (170,918) Total purchase price consideration $ 21,854,119 _____________ FOOTNOTE: (1) At the acquisition date, the weighted-average amortization period on the acquired in-place lease intangibles was approximately 2.5 years and is based on the expected unit turnover. |
Real Estate Assets, net
Real Estate Assets, net | 3 Months Ended |
Mar. 31, 2018 | |
Real Estate [Abstract] | |
Real Estate Assets, net | 5. Real Estate Assets, net The gross carrying amount and accumulated depreciation of the Company’s real estate assets as of March 31, 2018 and December 31, 2017 are as follows: March 31, December 31, 2018 2017 Land and land improvements $ 2,683,072 $ 2,683,051 Building and building improvements 28,109,623 28,109,037 Furniture, fixtures and equipment 888,102 879,288 Less: accumulated depreciation (854,269) (585,437) Real estate assets, net $ 30,826,528 $ 31,085,939 Depreciation expense on the Company’s real estate assets, net was approximately $0.3 million for the three months ended March 31, 2018. The Company had no depreciation expense during the three months ended March 31, 2017. |
Intangibles, net
Intangibles, net | 3 Months Ended |
Mar. 31, 2018 | |
Goodwill And Intangible Assets Disclosure [Abstract] | |
Intangibles, net | 6. Intangibles, net The gross carrying amount and accumulated amortization of the Company’s intangible assets and liabilities as of March 31, 2018 and December 31, 2017 are as follows: March 31, December 31, 2018 2017 In-place lease intangibles $ 3,495,754 $ 3,495,632 Below-market ground lease intangibles 1,543,910 1,543,824 Less: accumulated amortization (581,434) (385,952) Intangible assets, net $ 4,458,230 $ 4,653,504 Below-market lease intangibles $ (340,409) $ (340,390) Less: accumulated amortization 7,638 ― Intangible liabilities, net (1) $ (332,771) $ (340,390) ____________ FOOTNOTE: (1) Intangible liabilities, net are included in other liabilities in the accompanying condensed consolidated balance sheets. Amortization on the Company’s intangible assets was approximately $0.2 million for the three months ended March 31, 2018, of which approximately $9,900 was treated as an increase of property operating expenses and approximately $0.2 million was included in depreciation and amortization. There was no amortization expense on the Company’s intangible assets for the three months ended March 31, 2017. Amortization on the Company’s intangible liabilities was approximately $7,600 for the three months ended March 31, 2018, all of which was treated as an increase in rental income and tenant reimbursements. There was no amortization expense on the Company’s intangible liabilities for the three months ended March 31, 2017. |
Related Party Arrangements
Related Party Arrangements | 3 Months Ended |
Mar. 31, 2018 | |
Related Party Transactions [Abstract] | |
Related Party Arrangements | 7. Related Party Arrangements The Company is externally advised and has no direct employees. All of the Company’s executive officers are executive officers, or on the board of managers, of the Advisor. In addition, certain directors and officers hold similar positions with CNL Securities Corp., the Dealer Manager of the Offering and a wholly owned subsidiary of CNL. In connection with services provided to the Company, affiliates are entitled to the following fees: Dealer Manager — In March 2017, the Company entered into an amended and restated dealer manager agreement pursuant to which the Dealer Manager receives a combined selling commission and dealer manager fee of up to 8.5% of the sale price for each Class A share and up to 4.75% of the sale price for each Class T share sold in the Primary Offering, all or a portion of which may be reallowed to participating broker dealers. In addition, for Class T shares sold in the Primary Offering, the Dealer Manager may choose the respective amounts of the commission and dealer manager fee, provided that the selling commission shall not exceed 3.0% of the gross proceeds from the completed sale of such Class T shares. The Company has and will continue to pay a distribution and stockholder servicing fee, subject to certain underwriting compensation limits, with respect to the Class T and Class I shares sold in the Primary Offering in an annual amount equal to 1% and 0.50%, respectively, of the current gross offering price per Class T or Class I share, respectively, or if the Company is no longer offering shares in a public offering, the estimated per share value per Class T or Class I share, respectively. The annual distribution and stockholder servicing fee will continue to be calculated as a percentage of the current gross offering price per Class T or Class I share until the Company reports an estimated per share value following the termination of the Primary Offering, at which point the distribution fee will be calculated based on the new estimated per share value, until such underwriting compensation limits are met or the shares are converted to Class A shares pursuant to the terms of the securities. 7. Related Party Arrangements (continued) The Company records the annual distribution and stockholder servicing fees as a reduction to capital in excess of par value and measures the related liability in an amount equal to the maximum fees owed in relation to the Class T and Class I shares on the shares’ issuance date. The liability is relieved over time, as the fees are paid to the Dealer Manager, or is adjusted if the fees are no longer owed on any Class T or Class I share that is redeemed or repurchased, as well as upon the earliest occurrence of: (i) a listing on a national securities exchange; (ii) a merger or consolidation of the Company with or into another entity, or the sale or other disposition of all or substantially all of the Company’s assets; (iii) after the termination of the Primary Offering in which the initial shares in the account were sold, the end of the month in which total underwriting compensation paid in the Primary Offering is not less than 10% of the gross proceeds from all share classes of the Primary Offering; (iv) the end of the month in which the total underwriting compensation paid in a Primary Offering with respect to shares purchased in a Primary Offering is not less than 8.5% of the gross offering price of those shares purchased in such Primary Offering (excluding shares purchased through the Reinvestment Plan and those received as stock dividends); or (v) any other conditions described in the Company’s prospectus. CNL Capital Markets Corp. — The Company will pay CNL Capital Markets Corp., an affiliate of CNL, an annual fee payable monthly based on the average number of total investor accounts that will be open during the term of the capital markets service agreement pursuant to which certain administrative services are provided to the Company. These services may include, but are not limited to, the facilitation and coordination of the transfer agent’s activities, client services and administrative call center activities, financial advisor administrative correspondence services, material distribution services and various reporting and troubleshooting activities. Advisor — The Company will pay the Advisor a monthly asset management fee in an amount equal to 0.0667% of the monthly average of the sum of the Company’s and the Operating Partnership’s respective daily real estate asset value, without duplication, plus the outstanding principal amount of any loans made, plus the amount invested in other permitted investments. For this purpose, “real estate asset value” equals the amount invested in wholly-owned properties, determined on the basis of cost, and in the case of properties owned by any joint venture or partnership in which the Company is a co-venturer or partner the portion of the cost of such properties paid by the Company, exclusive of acquisition fees and acquisition expenses and will not be reduced for any recognized impairment. Any recognized impairment loss will not reduce the real estate asset value for the purposes of calculating the asset management fee. The asset management fee, which will not exceed fees which are competitive for similar services in the same geographic area, may or may not be taken, in whole or in part as to any year, in the Advisor’s sole discretion. All or any portion of the asset management fee not taken as to any fiscal year shall be deferred without interest and may be taken in such other fiscal year as the Advisor shall determine. The Company will pay the Advisor a construction management fee of up to 1% of hard and soft costs associated with the initial construction or renovation of a property, or with the management and oversight of expansion projects and other capital improvements, in those cases in which the value of the construction, renovation, expansion or improvements exceeds (i) 10% of the initial purchase price of the property and (ii) $1 million in which case such fee will be due and payable as draws are funded for such projects. The Advisor will receive an investment services fee of 2.25% of the purchase price of properties and funds advanced for loans or the amount invested in the case of other assets for services in connection with the selection, evaluation, structure and purchase of assets. No investment services fee will be paid to the Advisor in connection with the Company’s purchase of securities. 7. Related Party Arrangements (continued) The Advisor, its affiliates and related parties also are entitled to reimbursement of certain operating expenses in connection with their provision of services to the Company, including personnel costs, subject to the limitation that the Company will not reimburse the Advisor for any amount by which operating expenses exceed the greater of 2% of its average invested assets or 25% of its net income in any four consecutive fiscal quarters (“Expense Year”) unless approved by the independent directors. The Company commenced its Primary Offering in March 2016 and made its first investment in March 2017. For the Expense Year ended March 31, 2018, the Company’s total operating expenses were in excess of this limitation by approximately $0.5 million. As of March 31, 2018, the Company had received cumulative approvals from its independent directors for total operating expenses in excess of this limitation of approximately $0.7 million. The Company’s independent directors determined that the higher relationship of operating expenses to average invested assets was justified based on the Company being in the early stages of raising and deploying capital and the limited number of investments to date, both of which were impacted by the downtime required to modify the dealer manager agreement to reduce overall underwriting compensation as discussed above, and the cost of operating a public company. The Advisor will pay all other organizational and offering expenses incurred in connection with the formation of the Company, without reimbursement by the Company. These expenses include, but are not limited to, Security and Exchange Commission (“SEC”) registration fees, Financial Industry Regulatory Authority (“FINRA”) filing fees, printing and mailing expenses, blue sky fees and expenses, legal fees and expenses, accounting fees and expenses, advertising and sales literature, transfer agent fees, due diligence expenses, personnel costs associated with processing investor subscriptions, escrow fees and other administrative expenses of the Offering. For the three months ended March 31, 2018 and 2017, the Company paid cash distributions of approximately $38,000 and $29,000, respectively, and issued stock dividends of approximately 7,400 shares and 1,500 shares, respectively, to the Advisor. Pursuant to an expense support arrangement, the Advisor has agreed to accept payment in restricted stock in lieu of cash for services rendered, in the event that the Company does not achieve established distribution coverage targets (“Expense Support Agreement”). Under the terms of the Expense Support Agreement, for each quarter within a calendar expense support year, the Company will record a proportional estimate of the cumulative year-to-date period based on an estimate of the annual expense support expected for the calendar expense support year. In exchange for services rendered and in consideration of the expense support provided under this arrangement, the Company shall issue, following each determination date, a number of shares of restricted stock equal to the quotient of the expense support amount provided by the Advisor for the preceding year divided by the board of directors’ most recent determination of net asset value (“NAV”) per share of the Class A common shares, if the board has made such a determination, or otherwise the most recent public offering price per Class A common share, on the terms and conditions and subject to the restrictions set forth in the Expense Support Agreement. The restricted stock is subordinated and forfeited to the extent that shareholders do not receive a Priority Return on their Invested Capital (as such terms are defined in the Company’s prospectus), excluding for the purposes of calculating this threshold any shares of restricted stock owned by the Advisor. 7. Related Party Arrangements (continued) The following fees for services rendered are expected to be settled in the form of restricted stock pursuant to the Expense Support Agreement for the three months ended March 31, 2018 and 2017 and cumulatively as of March 31, 2018: Three Months Ended As of March 31, March 31, 2018 2017 2018 Fees for services rendered: Asset management fees $ 70,800 $ 460 $ 201,166 Advisor personnel expenses (1) 126,629 102,263 563,032 Total fees for services rendered $ 197,429 $ 102,723 $ 764,198 Then-current offering price or NAV $ 10.06 $ 10.93 $ 10.06 Restricted stock shares (2) 19,625 9,398 75,964 _____________ FOOTNOTES: (1) Amounts consist of personnel and related overhead costs of the Advisor or its affiliates (which, in general, are those expenses relating to the Company’s administration on an on-going basis) that are reimbursable by the Company. (2) Represents restricted stock shares issued or expected to be issued to the Advisor as of March 31, 2018 pursuant to the Expense Support Agreement. No fair value was assigned to the restricted stock shares as the shares are expected to be valued at zero upon issuance, which represents the lowest possible value estimated at vesting. In addition, the restricted stock shares will be treated as unissued for financial reporting purposes until the vesting criteria are met. The fees payable to the Dealer Manager for the three months ended March 31, 2018 and 2017, and related amounts unpaid as of March 31, 2018 and December 31, 2017 are as follows: Three Months Ended Unpaid amounts as of (1) March 31, March 31, December 31, 2018 2017 2018 2017 Selling commissions (2) $ 131,841 $ 192,876 $ 1,109 $ 10,000 Dealer manager fees ( 2) 165,756 183,736 1,700 18,150 Distribution and stockholder servicing fees (2) 293,378 174,796 1,031,612 798,524 $ 590,975 $ 551,408 $ 1,034,421 $ 826,674 The expenses incurred by and reimbursable to the Company’s related parties for the three months ended March 31, 2018 and 2017, and related amounts unpaid as of March 31, 2018 and December 31, 2017 are as follows: Three Months Ended Unpaid amounts as of (1) March 31, March 31, December 31, 2018 2017 2018 2017 Reimbursable expenses: Operating expenses (3) $ 274,844 $ 190,526 $ 130,993 $ 197,235 Acquisition fees and expenses 901 1,889 ― ― 275,745 192,415 130,993 197,235 Investment service fees (4) ― 481,500 ― ― Asset management fees (5) 70,800 460 ― ― $ 346,545 $ 674,375 $ 130,993 $ 197,235 7. Related Party Arrangements (continued) _____________ FOOTNOTES: (1) Amounts are recorded as due to related parties in the accompanying condensed consolidated balance sheets. (2) Amounts are recorded as stock issuance and offering costs in the accompanying condensed consolidated statements of stockholders’ equity. (3) Amounts are recorded as general and administrative expenses in the accompanying condensed consolidated statements of operations unless such amounts represent prepaid expenses, which are capitalized in the accompanying condensed consolidated balance sheets. For the three months ended March 31, 2018 and 2017, approximately $0.1 million and $0.1 million, respectively, of personnel expenses of affiliates of the Advisor are expected to be or were settled in accordance with the terms of the Expense Support Agreement and as such our general and administrative expenses were reduced by approximately $0.1 million and $0.1 million, respectively. (4) For the three months ended March 31, 2018 the Company did not incur any investment services fees. For the three months ended March 31, 2017 the Company incurred approximately $0.5 million in investment services fees all of which was capitalized and included in real estate investment properties, net in the accompanying condensed consolidated balance sheet. (5) For the three months ended March 31, 2018 and 2017, the Company incurred asset management fees of approximately $0.1 million and $460, respectively, all of which are expected to be or were settled in accordance with the terms of the Expense Support Agreement and as such asset management fees were reduced by approximately $0.1 million and $460, respectively. |
Equity
Equity | 3 Months Ended |
Mar. 31, 2018 | |
Equity [Abstract] | |
Equity | 8. Equity Subscription Proceeds — As of March 31, 2018 and 2017, the Company had received aggregate subscription proceeds of approximately $38.6 million (3.7 million shares) and $13.4 million (1.3 million shares), respectively, both of which include $200,000 (20,000 shares) of subscription proceeds received from the Advisor prior to the commencement of the Offering, approximately $251,250 (25,125 shares) of subscription proceeds received in connection with a private placement made in 2016 and approximately $0.6 million (0.06 million shares) and $32,000 (3,000 shares), respectively, of subscription proceeds pursuant to the Reinvestment Plan. Distributions — For the three months ended March 31, 2018 and 2017, the Company declared and paid cash distributions of approximately $0.4 million and $73,000, respectively, which were net of class-specific expenses. In addition, the Company declared and issued stock dividends of approximately 34,700 and 5,000 shares of common stock during the three months ended March 31, 2018 and 2017, respectively. For the three months ended March 31, 2018 and 2017, 100.0% of the cash distributions paid to stockholders were considered a return of capital to stockholders for federal income tax purposes. No amounts distributed to stockholders for the three months ended March 31, 2018 and 2017 were required to be or have been treated by the Company as a return of capital for purposes of calculating the stockholders’ return on their invested capital as described in the Company’s advisory agreement. The distribution of new common stock shares to recipients is non-taxable. In March 2018, the Company’s board of directors declared a monthly cash distribution of $0.0480, less class-specific expenses, and a monthly stock dividend of 0.00100625 shares on each outstanding share of common stock on April 1, 2018, May 1, 2018 and June 1, 2018. These distributions and dividends are to be paid and distributed by June 30, 2018. Redemptions — During the three months ended March 31, 2018, the Company received a request for the redemption of common stock of approximately $25,000 in Class T shares, which was approved for redemption at an average price of $10 and paid in March 2018. There were no redemptions requested during the three months ended March 31, 2017. |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | 9. Income Taxes The accompanying condensed consolidated financial statements include an interim tax provision for the three months ended March 31, 2018 of approximately $31,000. Of the approximate $31,000 in income tax expense for the three months ended March 31, 2018, approximately $30,000 represents current income tax expense, and approximately $1,000 represents a decrease to the Company’s net deferred tax assets which is primarily due to the reversal of the existing taxable temporary differences. |
Commitment and Contingencies
Commitment and Contingencies | 3 Months Ended |
Mar. 31, 2018 | |
Commitments And Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | 10. Commitments and Contingencies From time to time, the Company may be a party to legal proceedings in the ordinary course of, or incidental to the normal course of, its business, including proceedings to enforce its contractual or statutory rights. While the Company cannot predict the outcome of these legal proceedings with certainty, based upon currently available information, the Company does not believe the final outcome of any pending or threatened legal proceeding will have a material adverse effect on its results of operations or financial condition. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events | 11. Subsequent Events During the period from April 1, 2018 through May 1, 2018, the Company received additional subscription proceeds of approximately $1.9 million (0.2 million shares). |
Summary of Significant Accoun18
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2018 | |
Accounting Policies [Abstract] | |
Basis of Presentation and Consolidation | Basis of Presentation and Consolidation — The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and note disclosures required by generally accepted accounting principles in the United States (“GAAP”). The unaudited condensed consolidated financial statements reflect all normal recurring adjustments, which, in the opinion of management, are necessary for the fair statement of the Company’s results for the interim period presented. Operating results for the three months ended March 31, 2018 may not be indicative of the results that may be expected for the year ending December 31, 2018. Amounts as of December 31, 2017 included in the unaudited condensed consolidated financial statements have been derived from audited consolidated financial statements as of that date but do not include all disclosures required by GAAP. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. The accompanying condensed consolidated financial statements include the accounts of the Company, the Operating Partnership and its other subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation. |
Use of Estimates | Use of Estimates — The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the Company’s condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates. |
Adopted Accounting Pronouncements | Adopted Accounting Pronouncements — In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers,” as a new ASC topic (Topic 606). The core principle of this ASU is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU further provides guidance for any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets, unless those contracts are within the scope of other standards (for example, lease contracts). The FASB subsequently issued ASU 2015-14 to defer the effective date of ASU 2014-09 until annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, with earlier adoption permitted. In addition, the FASB issued ASU 2017-05, "Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20)," which clarifies the scope of subtopic 610-20, that was issued as a part of ASU 2014-09, as it relates to in-substance nonfinancial assets and must be adopted concurrently with ASC 606. Both ASUs can be adopted using one of two retrospective transition methods: (i) retrospectively to each prior reporting period presented or (ii) as a cumulative-effect adjustment as of the date of adoption. The Company adopted these ASUs using the modified retrospective approach as its transition method on January 1, 2018; the adoption of which did not have a material impact to its consolidated financial statements. In August 2017, the FASB issued ASU 2017-12 “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities,” which amended the hedge accounting model to better reflect an entity’s risk management activities. The ASU expands an entities ability to hedge nonfinancial and financial risk components as well as reduce the complexity related to fair value hedges of interest rate risk. The ASU further eliminates the requirement to separately measure and report hedge ineffectiveness and generally requires the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item. The ASU is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2018. The Company early adopted this ASU prospectively on January 1, 2018; the adoption of which did not have a material impact on the Company’s consolidated financial statements. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements — In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842): Accounting for Leases,” which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors). The ASU requires lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases with terms of more than 12 months. The ASU further modifies lessors’ classification criteria for leases and the accounting for sales-type and direct financing leases. The ASU will also require qualitative and quantitative disclosures designed to give financial statement users additional information on the amount, timing, and uncertainty of cash flows arising from leases. The ASU is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2018 with early adoption permitted. The ASU is to be applied using a modified retrospective approach. The Company expects that adoption will impact the Company’s consolidated financial statements and related financial statement disclosures; specifically, the Company’s consolidated financial position as it relates to the required presentation for arrangements such as ground and or other leases in which the Company is the lessee. However, the Company does not expect the adoption of this ASU to have a material impact on the Company’s consolidated results of operations or cash flows. In addition, while still in exposure draft, the FASB has proposed a practical expedient for lessors allowing them to elect to not separate lease and non-lease components in a contract for the purpose of revenue recognition and disclosure if certain criteria are met. If the proposed practical expedient is finalized, the Company plans to elect the practical expedient. |
Revenue (Tables)
Revenue (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Revenue From Contract With Customer [Abstract] | |
Schedule of Disaggregated Revenue for Resident Fees and Services | The following table represents the disaggregated revenue for resident fees and services during the three months ended March 31, 2018 and 2017: Three Months Ended March 31, Type of Investment Number of Units Revenues Percentage of Revenues Resident fees and services: 2018 2017 2018 2017 (1) 2018 2017 Assisted living 67 67 $ 818,006 $ ― 72.8 % ― % Memory care 22 22 292,786 ― 26.0 % ― % Other revenues ― ― 13,733 ― 1.2 % ― % 89 89 $ 1,124,525 $ ― 100.0 % ― % _____________ FOOTNOTE: (1) Resident fees and services of approximately $11,000 were comprised entirely of allocated pro-rations at closing as the Summer Vista Assisted Living (“Summer Vista”) acquisition occurred on the last day of March 2017. |
Acquisitions (Tables)
Acquisitions (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Summer Vista | |
Business Acquisition [Line Items] | |
Summary of Purchase Price Allocation and Related Assets Acquired and Liabilities Assumed | The following summarizes the purchase price allocation for Summer Vista, and the related assets acquired and liabilities assumed in connection with the acquisition: Land and land improvements $ 2,269,406 Buildings and building improvements 17,611,786 Furniture, fixtures and equipment 857,338 In-place lease intangibles (1) 1,286,507 Liabilities assumed (170,918) Total purchase price consideration $ 21,854,119 _____________ FOOTNOTE: (1) At the acquisition date, the weighted-average amortization period on the acquired in-place lease intangibles was approximately 2.5 years and is based on the expected unit turnover. |
Real Estate Assets, net (Tables
Real Estate Assets, net (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Real Estate [Abstract] | |
Schedule of Real Estate Assets | The gross carrying amount and accumulated depreciation of the Company’s real estate assets as of March 31, 2018 and December 31, 2017 are as follows: March 31, December 31, 2018 2017 Land and land improvements $ 2,683,072 $ 2,683,051 Building and building improvements 28,109,623 28,109,037 Furniture, fixtures and equipment 888,102 879,288 Less: accumulated depreciation (854,269) (585,437) Real estate assets, net $ 30,826,528 $ 31,085,939 |
Intangibles, net (Tables)
Intangibles, net (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Goodwill And Intangible Assets Disclosure [Abstract] | |
Schedule of Gross Carrying Amount and Accumulated Amortization of Intangibles | The gross carrying amount and accumulated amortization of the Company’s intangible assets and liabilities as of March 31, 2018 and December 31, 2017 are as follows: March 31, December 31, 2018 2017 In-place lease intangibles $ 3,495,754 $ 3,495,632 Below-market ground lease intangibles 1,543,910 1,543,824 Less: accumulated amortization (581,434) (385,952) Intangible assets, net $ 4,458,230 $ 4,653,504 Below-market lease intangibles $ (340,409) $ (340,390) Less: accumulated amortization 7,638 ― Intangible liabilities, net (1) $ (332,771) $ (340,390) ____________ FOOTNOTE: (1) Intangible liabilities, net are included in other liabilities in the accompanying condensed consolidated balance sheets. |
Related Party Arrangements (Tab
Related Party Arrangements (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Related Party Arrangement, Fees and Expenses Incurred By, Reimbursable, Settled and Paid | The expenses incurred by and reimbursable to the Company’s related parties for the three months ended March 31, 2018 and 2017, and related amounts unpaid as of March 31, 2018 and December 31, 2017 are as follows: Three Months Ended Unpaid amounts as of (1) March 31, March 31, December 31, 2018 2017 2018 2017 Reimbursable expenses: Operating expenses (3) $ 274,844 $ 190,526 $ 130,993 $ 197,235 Acquisition fees and expenses 901 1,889 ― ― 275,745 192,415 130,993 197,235 Investment service fees (4) ― 481,500 ― ― Asset management fees (5) 70,800 460 ― ― $ 346,545 $ 674,375 $ 130,993 $ 197,235 7. Related Party Arrangements (continued) _____________ FOOTNOTES: (1) Amounts are recorded as due to related parties in the accompanying condensed consolidated balance sheets. (2) Amounts are recorded as stock issuance and offering costs in the accompanying condensed consolidated statements of stockholders’ equity. (3) Amounts are recorded as general and administrative expenses in the accompanying condensed consolidated statements of operations unless such amounts represent prepaid expenses, which are capitalized in the accompanying condensed consolidated balance sheets. For the three months ended March 31, 2018 and 2017, approximately $0.1 million and $0.1 million, respectively, of personnel expenses of affiliates of the Advisor are expected to be or were settled in accordance with the terms of the Expense Support Agreement and as such our general and administrative expenses were reduced by approximately $0.1 million and $0.1 million, respectively. (4) For the three months ended March 31, 2018 the Company did not incur any investment services fees. For the three months ended March 31, 2017 the Company incurred approximately $0.5 million in investment services fees all of which was capitalized and included in real estate investment properties, net in the accompanying condensed consolidated balance sheet. (5) For the three months ended March 31, 2018 and 2017, the Company incurred asset management fees of approximately $0.1 million and $460, respectively, all of which are expected to be or were settled in accordance with the terms of the Expense Support Agreement and as such asset management fees were reduced by approximately $0.1 million and $460, respectively. |
Dealer Manager | |
Related Party Arrangement, Fees and Expenses Incurred By, Reimbursable, Settled and Paid | The fees payable to the Dealer Manager for the three months ended March 31, 2018 and 2017, and related amounts unpaid as of March 31, 2018 and December 31, 2017 are as follows: Three Months Ended Unpaid amounts as of (1) March 31, March 31, December 31, 2018 2017 2018 2017 Selling commissions (2) $ 131,841 $ 192,876 $ 1,109 $ 10,000 Dealer manager fees ( 2) 165,756 183,736 1,700 18,150 Distribution and stockholder servicing fees (2) 293,378 174,796 1,031,612 798,524 $ 590,975 $ 551,408 $ 1,034,421 $ 826,674 |
Expense Support Agreement | |
Related Party Arrangement, Fees and Expenses Incurred By, Reimbursable, Settled and Paid | 7. Related Party Arrangements (continued) The following fees for services rendered are expected to be settled in the form of restricted stock pursuant to the Expense Support Agreement for the three months ended March 31, 2018 and 2017 and cumulatively as of March 31, 2018: Three Months Ended As of March 31, March 31, 2018 2017 2018 Fees for services rendered: Asset management fees $ 70,800 $ 460 $ 201,166 Advisor personnel expenses (1) 126,629 102,263 563,032 Total fees for services rendered $ 197,429 $ 102,723 $ 764,198 Then-current offering price or NAV $ 10.06 $ 10.93 $ 10.06 Restricted stock shares (2) 19,625 9,398 75,964 _____________ FOOTNOTES: (1) Amounts consist of personnel and related overhead costs of the Advisor or its affiliates (which, in general, are those expenses relating to the Company’s administration on an on-going basis) that are reimbursable by the Company. (2) Represents restricted stock shares issued or expected to be issued to the Advisor as of March 31, 2018 pursuant to the Expense Support Agreement. No fair value was assigned to the restricted stock shares as the shares are expected to be valued at zero upon issuance, which represents the lowest possible value estimated at vesting. In addition, the restricted stock shares will be treated as unissued for financial reporting purposes until the vesting criteria are met. |
Organization - Additional Infor
Organization - Additional Information (Details) - USD ($) | 1 Months Ended | 3 Months Ended | 6 Months Ended | ||||
May 01, 2018 | Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2015 | Dec. 31, 2017 | Jul. 11, 2016 | Mar. 02, 2016 | |
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items] | |||||||
Common stock, shares sold | 200,000 | 3,700,000 | 1,300,000 | ||||
Aggregate purchase price | $ 7,187,473 | $ 6,803,572 | |||||
Minimum offering amount | $ 2,000,000 | ||||||
Initial Public Offering | |||||||
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items] | |||||||
Common stock, value authorized | $ 1,750,000,000 | ||||||
Reinvestment Plan | |||||||
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items] | |||||||
Common stock, value authorized | $ 250,000,000 | ||||||
Advisor | |||||||
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items] | |||||||
Common stock, shares sold | 20,000 | ||||||
Aggregate purchase price | $ 200,000 | ||||||
Class A Common Stock | |||||||
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items] | |||||||
Common stock, shares sold | 28,955 | 107,480 | |||||
Aggregate purchase price | $ 290 | $ 1,075 | |||||
Sale of common stock, shares | 839,410 | 808,011 | |||||
Sale of common stock, value | $ 8,394 | $ 8,080 | |||||
Class A Common Stock | Advisor | |||||||
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items] | |||||||
Conversion of shares | 20,000 | ||||||
Sale of common stock, shares | 250,000 | ||||||
Sale of common stock, value | $ 2,500,000 |
Revenue - Schedule of Disaggreg
Revenue - Schedule of Disaggregated Revenue for Resident Fees and Services (Details) | 3 Months Ended | |
Mar. 31, 2018USD ($)ResidentialUnit | Mar. 31, 2017USD ($)ResidentialUnit | |
Disaggregation Of Revenue [Line Items] | ||
Resident fees and services: Number of Units | ResidentialUnit | 89 | 89 |
Resident fees and services: Revenues | $ 1,124,525 | $ 11,430 |
Resident fees and services: Percentage of Revenues | 100.00% | |
Assisted Living | ||
Disaggregation Of Revenue [Line Items] | ||
Resident fees and services: Number of Units | ResidentialUnit | 67 | 67 |
Resident fees and services: Revenues | $ 818,006 | |
Resident fees and services: Percentage of Revenues | 72.80% | |
Memory Care | ||
Disaggregation Of Revenue [Line Items] | ||
Resident fees and services: Number of Units | ResidentialUnit | 22 | 22 |
Resident fees and services: Revenues | $ 292,786 | |
Resident fees and services: Percentage of Revenues | 26.00% | |
Other Revenues | ||
Disaggregation Of Revenue [Line Items] | ||
Resident fees and services: Revenues | $ 13,733 | |
Resident fees and services: Percentage of Revenues | 1.20% |
Revenue - Schedule of Disaggr26
Revenue - Schedule of Disaggregated Revenue for Resident Fees and Services (Parenthetical) (Details) - USD ($) | Mar. 31, 2017 | Mar. 31, 2018 | Mar. 31, 2017 |
Disaggregation Of Revenue [Line Items] | |||
Resident fees and services | $ 1,124,525 | $ 11,430 | |
Summer Vista | |||
Disaggregation Of Revenue [Line Items] | |||
Resident fees and services | $ 11,000 |
Acquisitions - Additional Infor
Acquisitions - Additional Information (Details) | 3 Months Ended | |
Mar. 31, 2018USD ($)PropertyResidential | Mar. 31, 2017USD ($) | |
Business Acquisition [Line Items] | ||
Number of properties acquired | Property | 0 | |
Acquisition fees and expenses | $ 818 | |
Superior Residences | ||
Business Acquisition [Line Items] | ||
Property management agreement period | 5 years | |
Summer Vista | ||
Business Acquisition [Line Items] | ||
Purchase price | $ 21,400,000 | |
Acquisition fees and expenses | $ 600,000 | |
Number of residential units | Residential | 89 |
Acquisitions - Summary of Purch
Acquisitions - Summary of Purchase Price Allocation and Related Assets Acquired and Liabilities Assumed (Details) - Mid America Surgery Institute and Summer Vista Assisted Living | Mar. 31, 2017USD ($) | |
Business Acquisition [Line Items] | ||
Land and land improvements | $ 2,269,406 | |
Buildings and building improvements | 17,611,786 | |
Furniture, fixtures and equipment | 857,338 | |
In-place lease intangibles | 1,286,507 | [1] |
Liabilities assumed | (170,918) | |
Total purchase price consideration | $ 21,854,119 | |
[1] | At the acquisition date, the weighted-average amortization period on the acquired in-place lease intangibles was approximately 2.5 years and is based on the expected unit turnover. |
Acquisitions - Summary of Pur29
Acquisitions - Summary of Purchase Price Allocation and Related Assets Acquired and Liabilities Assumed (Parenthetical) (Details) | 3 Months Ended |
Mar. 31, 2017 | |
Summer Vista | |
Business Acquisition [Line Items] | |
Weighted average amortization period on acquired in-place lease intangibles | 2 years 6 months |
Real Estate Assets, net - Sched
Real Estate Assets, net - Schedule of Real Estate Assets (Details) - USD ($) | Mar. 31, 2018 | Dec. 31, 2017 |
Real Estate [Abstract] | ||
Land and land improvements | $ 2,683,072 | $ 2,683,051 |
Building and building improvements | 28,109,623 | 28,109,037 |
Furniture, fixtures and equipment | 888,102 | 879,288 |
Less: accumulated depreciation | (854,269) | (585,437) |
Real estate assets, net | $ 30,826,528 | $ 31,085,939 |
Real Estate Assets, net - Addit
Real Estate Assets, net - Additional Information (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Real Estate Assets,Net [Member] | ||
Real Estate Properties [Line Items] | ||
Depreciation expense | $ 300,000 | $ 0 |
Intangibles, net - Schedule of
Intangibles, net - Schedule of Gross Carrying Amount and Accumulated Amortization of Intangibles (Details) - USD ($) | Mar. 31, 2018 | Dec. 31, 2017 |
Goodwill And Intangible Assets Disclosure [Abstract] | ||
In-place lease intangibles | $ 3,495,754 | $ 3,495,632 |
Below-market ground lease intangibles | 1,543,910 | 1,543,824 |
Less: accumulated amortization | (581,434) | (385,952) |
Intangible assets, net | 4,458,230 | 4,653,504 |
Below-market lease intangibles | (340,409) | (340,390) |
Less: accumulated amortization | 7,638 | |
Intangible liabilities, net | $ (332,771) | $ (340,390) |
Intangibles, net - Additional I
Intangibles, net - Additional Information (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Finite Lived Intangible Assets And Liabilities [Line Items] | ||
Amortization expense on intangible assets | $ 200,000 | $ 0 |
Amortization of intangible liabilities | $ 0 | |
Property Operating Expenses | ||
Finite Lived Intangible Assets And Liabilities [Line Items] | ||
Amortization expense on intangible assets | 9,900 | |
Depreciation And Amortization | ||
Finite Lived Intangible Assets And Liabilities [Line Items] | ||
Amortization expense on intangible assets | 200,000 | |
Rental Income from Operating Leases | ||
Finite Lived Intangible Assets And Liabilities [Line Items] | ||
Amortization of intangible liabilities | $ 7,600 |
Related Party Arrangements - Ad
Related Party Arrangements - Additional Information (Details) - USD ($) | 1 Months Ended | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2018 | Mar. 31, 2017 | |
Related Party Transaction [Line Items] | |||
Cash distributions paid | $ 176,860 | $ 44,942 | |
Stock dividends issued | 5,000 | 5,000 | |
Advisor | |||
Related Party Transaction [Line Items] | |||
Monthly asset management fee as percentage of real estate value | 0.0667% | ||
Initial purchase price of property percentage | 10.00% | ||
Property management fee due and payable | $ 1,000,000 | ||
Investment service fee as percentage of purchase price of properties | 2.25% | ||
Investment services fee | $ 0 | ||
Operating expenses in excess of limitation | 500,000 | ||
Operating expenses in excess of limitation approved | 700,000 | ||
Cash distributions paid | $ 38,000 | $ 29,000 | |
Stock dividends issued | 7,400 | 1,500 | |
Class A Common Stock | |||
Related Party Transaction [Line Items] | |||
Stock dividends issued | 2,444 | 1,948 | |
Class T Common Stock | |||
Related Party Transaction [Line Items] | |||
Distribution and stockholder servicing fee | 1.00% | ||
Stock dividends issued | 6,662 | 2,698 | |
Class I Common Stock | |||
Related Party Transaction [Line Items] | |||
Distribution and stockholder servicing fee | 0.50% | ||
Stock dividends issued | 586 | 48 | |
Maximum | Advisor | |||
Related Party Transaction [Line Items] | |||
Construction management fee as percentage of hard and soft costs | 1.00% | ||
Operating expenses reimbursement percentage of average invested assets | 2.00% | ||
Operating expenses reimbursement percentage of net income | 25.00% | ||
Maximum | Class A Common Stock | |||
Related Party Transaction [Line Items] | |||
Selling commission and dealer manager fee | 8.50% | ||
Maximum | Class T Common Stock | |||
Related Party Transaction [Line Items] | |||
Selling commission and dealer manager fee | 4.75% | ||
Selling commission | 3.00% | ||
Minimum | |||
Related Party Transaction [Line Items] | |||
Underwriting compensation percentage on gross proceeds from shares of primary offering | 10.00% | ||
Underwriting compensation percentage on gross offering price from shares of primary offering | 8.50% |
Related Party Arrangements - Su
Related Party Arrangements - Summary of Fees for Services Rendered Expected to be Settled in Restricted Stock (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | ||
Fees for services rendered: | |||
Asset management fees | [1] | $ 70,800 | $ 460 |
Expense Support Agreement | |||
Fees for services rendered: | |||
Asset management fees | 70,800 | 460 | |
Advisor personnel expenses | [2] | 126,629 | 102,263 |
Total fees for services rendered | 197,429 | $ 102,723 | |
Asset management fees | 201,166 | ||
Advisor personnel expenses | [2] | 563,032 | |
Total fees for services rendered | $ 764,198 | ||
Then-current offering price or NAV | $ 10.06 | $ 10.93 | |
Then-current offering price or NAV | $ 10.06 | ||
Expense Support Agreement | Restricted Stock | |||
Fees for services rendered: | |||
Restricted stock shares | [3] | 19,625 | 9,398 |
Restricted stock shares | [3] | 75,964 | |
[1] | For the three months ended March 31, 2018 and 2017, the Company incurred asset management fees of approximately $0.1 million and $460, respectively, all of which are expected to be or were settled in accordance with the terms of the Expense Support Agreement and as such asset management fees were reduced by approximately $0.1 million and $460, respectively. | ||
[2] | Amounts consist of personnel and related overhead costs of the Advisor or its affiliates (which, in general, are those expenses relating to the Company’s administration on an on-going basis) that are reimbursable by the Company. | ||
[3] | Represents restricted stock shares issued or expected to be issued to the Advisor as of March 31, 2018 pursuant to the Expense Support Agreement. No fair value was assigned to the restricted stock shares as the shares are expected to be valued at zero upon issuance, which represents the lowest possible value estimated at vesting. In addition, the restricted stock shares will be treated as unissued for financial reporting purposes until the vesting criteria are met. |
Related Party Arrangements - 36
Related Party Arrangements - Summary of Fees for Services Rendered Expected to be Settled in Restricted Stock (Parenthetical) (Details) | 3 Months Ended |
Mar. 31, 2018USD ($) | |
Related Party Transactions [Abstract] | |
Restricted stock fair value | $ 0 |
Related Party Arrangements - Fe
Related Party Arrangements - Fees and Expenses Incurred and Reimbursable to Affiliates and Related Parties (Details) - USD ($) | 3 Months Ended | |||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | ||
Related Party Transaction [Line Items] | ||||
Distribution and stockholder servicing fees | $ 1,031,613 | $ 315,386 | ||
Acquisition fees and expenses | 818 | |||
Total reimbursable expenses | 275,745 | 192,415 | ||
Investment service fees | [1] | 481,500 | ||
Asset management fees | [2] | 70,800 | 460 | |
Total reimbursable expenses, net | 346,545 | 674,375 | ||
Operating expenses, Unpaid amount | [3],[4] | 130,993 | $ 197,235 | |
Total reimbursable expenses due | [3] | 130,993 | 197,235 | |
Related parties, Unpaid amount | [3] | 130,993 | 197,235 | |
Reimbursable Expense | ||||
Related Party Transaction [Line Items] | ||||
Operating expenses | [4] | 274,844 | 190,526 | |
Acquisition fees and expenses | 901 | 1,889 | ||
Dealer Manager | ||||
Related Party Transaction [Line Items] | ||||
Selling commissions | [5] | 131,841 | 192,876 | |
Dealer manager fees | [5] | 165,756 | 183,736 | |
Distribution and stockholder servicing fees | [5] | 293,378 | 174,796 | |
Total offering expenses | 590,975 | $ 551,408 | ||
Selling commissions, Unpaid amount | [3],[5] | 1,109 | 10,000 | |
Dealer Manager fees, Unpaid amount | [3],[5] | 1,700 | 18,150 | |
Distribution and stockholder servicing fees, Unpaid amount | [3],[5] | 1,031,612 | 798,524 | |
Total offering expenses unpaid | [3] | $ 1,034,421 | $ 826,674 | |
[1] | For the three months ended March 31, 2018 the Company did not incur any investment services fees. For the three months ended March 31, 2017 the Company incurred approximately $0.5 million in investment services fees all of which was capitalized and included in real estate investment properties, net in the accompanying condensed consolidated balance sheet. | |||
[2] | For the three months ended March 31, 2018 and 2017, the Company incurred asset management fees of approximately $0.1 million and $460, respectively, all of which are expected to be or were settled in accordance with the terms of the Expense Support Agreement and as such asset management fees were reduced by approximately $0.1 million and $460, respectively. | |||
[3] | Amounts are recorded as due to related parties in the accompanying condensed consolidated balance sheets. | |||
[4] | Amounts are recorded as general and administrative expenses in the accompanying condensed consolidated statements of operations unless such amounts represent prepaid expenses, which are capitalized in the accompanying condensed consolidated balance sheets. For the three months ended March 31, 2018 and 2017, approximately $0.1 million and $0.1 million, respectively, of personnel expenses of affiliates of the Advisor are expected to be or were settled in accordance with the terms of the Expense Support Agreement and as such our general and administrative expenses were reduced by approximately $0.1 million and $0.1 million, respectively. | |||
[5] | Amounts are recorded as stock issuance and offering costs in the accompanying condensed consolidated statements of stockholders’ equity. |
Related Party Arrangements - 38
Related Party Arrangements - Fees and Expenses Incurred and Reimbursable to Affiliates and Related Parties (Parenthetical) (Details) - USD ($) | 3 Months Ended | |||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | ||
Related Party Transaction [Line Items] | ||||
Investment services fees | [1] | $ 481,500 | ||
Investment service fees capitalized | $ 30,826,528 | $ 31,085,939 | ||
Asset management fees | [2] | 70,800 | 460 | |
Investment Services Fees | ||||
Related Party Transaction [Line Items] | ||||
Investment services fees | 0 | 500,000 | ||
Investment service fees capitalized | 500,000 | |||
Expense Support Agreement | ||||
Related Party Transaction [Line Items] | ||||
Advisor personnel expenses | 100,000 | 100,000 | ||
Reduction in general and administrative expenses | 100,000 | 100,000 | ||
Asset management fees | 70,800 | 460 | ||
Reduction in asset management fees | $ 100,000 | $ 460 | ||
[1] | For the three months ended March 31, 2018 the Company did not incur any investment services fees. For the three months ended March 31, 2017 the Company incurred approximately $0.5 million in investment services fees all of which was capitalized and included in real estate investment properties, net in the accompanying condensed consolidated balance sheet. | |||
[2] | For the three months ended March 31, 2018 and 2017, the Company incurred asset management fees of approximately $0.1 million and $460, respectively, all of which are expected to be or were settled in accordance with the terms of the Expense Support Agreement and as such asset management fees were reduced by approximately $0.1 million and $460, respectively. |
Equity - Additional Information
Equity - Additional Information (Details) - USD ($) | Jun. 01, 2018 | May 01, 2018 | Apr. 01, 2018 | May 01, 2018 | Mar. 31, 2018 | Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2015 | Dec. 31, 2016 |
Class Of Stock [Line Items] | |||||||||
Aggregate proceeds from public offering | $ 38,600,000 | $ 13,400,000 | |||||||
Common stock, shares sold | 200,000 | 3,700,000 | 1,300,000 | ||||||
Subscription proceeds pursuant to the Reinvestment Plan | $ 600,000 | $ 32,000 | |||||||
Subscription proceeds pursuant to the Reinvestment Plan, shares | 60,000 | 3,000 | |||||||
Cash distributions declared net of class-specific expenses | $ 400,000 | $ 73,000 | |||||||
Cash distributions paid net of class-specific expenses | $ 400,000 | $ 73,000 | |||||||
Stock dividends declared | 34,700 | 34,700 | |||||||
Stock dividends issued (in shares) | 5,000 | 5,000 | |||||||
Percentage of cash distributions considered as return on capital for income tax purposes | 100.00% | 100.00% | |||||||
Amount of distributions to stockholders considered as return of capital by the company | $ 0 | $ 0 | |||||||
Monthly cash distributions less class-specific expenses per share | $ 0.0480 | $ 0.0480 | |||||||
Monthly stock dividend, shares | $ 0.00100625 | ||||||||
Distributions to be paid and distributed date | Jun. 30, 2018 | ||||||||
Dividends payable, date declared | 2018-03 | 2018-03 | |||||||
Redemption of common stock, per share | $ 10 | $ 10 | |||||||
Redemptions of common stock | $ 25,382 | ||||||||
Class T Common Stock | |||||||||
Class Of Stock [Line Items] | |||||||||
Redemptions of common stock | $ 25,000 | $ 0 | |||||||
Subsequent Event | |||||||||
Class Of Stock [Line Items] | |||||||||
Cash distribution and stock dividend declared date | May 1, 2018 | Apr. 1, 2018 | |||||||
Scenario Forecast | |||||||||
Class Of Stock [Line Items] | |||||||||
Cash distribution and stock dividend declared date | Jun. 1, 2018 | ||||||||
Private Placement | |||||||||
Class Of Stock [Line Items] | |||||||||
Aggregate proceeds from public offering | $ 251,250 | ||||||||
Common stock, shares sold | 25,125 | ||||||||
Advisor | |||||||||
Class Of Stock [Line Items] | |||||||||
Common stock, shares sold | 20,000 | ||||||||
Stock dividends issued (in shares) | 7,400 | 1,500 | |||||||
Advisor | Prior to Commencement of Offering | |||||||||
Class Of Stock [Line Items] | |||||||||
Aggregate proceeds from public offering | $ 200,000 | $ 200,000 | |||||||
Common stock, shares sold | 20,000 | 20,000 |
Income Taxes - Additional Infor
Income Taxes - Additional Information (Details) | 3 Months Ended |
Mar. 31, 2018USD ($) | |
Income Tax Disclosure [Abstract] | |
Interim tax provision | $ 31,000 |
Current income tax expense | 30,000 |
Decrease to net deferred tax assets | $ (1,000) |
Subsequent Events - Additional
Subsequent Events - Additional Information (Details) - USD ($) shares in Millions | 1 Months Ended | 3 Months Ended | |
May 01, 2018 | Mar. 31, 2018 | Mar. 31, 2017 | |
Subsequent Events [Abstract] | |||
Aggregate proceeds from offering | $ 1,900,000 | $ 6,962,029 | $ 6,775,312 |
Common stock, shares sold | 0.2 | 3.7 | 1.3 |