Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2019 | Oct. 31, 2019 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2019 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q3 | |
Trading Symbol | CHPII | |
Entity Registrant Name | CNL Healthcare Properties II, Inc. | |
Entity Central Index Key | 0001648383 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | true | |
Entity Common Stock, Shares Outstanding | 4,899,139 | |
Entity Shell Company | false | |
Entity Current Reporting Status | Yes | |
Entity File Number | 000-55777 | |
Entity Incorporation State Country Code | MD | |
Entity Tax Identification Number | 47-4524619 | |
Entity Address, Address Line One | CNL Center at City Commons | |
Entity Address, Address Line Two | 450 South Orange Avenue | |
Entity Address, City or Town | Orlando | |
Entity Address, State or Province | FL | |
Entity Address, Postal Zip Code | 32801 | |
City Area Code | 407 | |
Local Phone Number | 650-1000 | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Entity Interactive Data Current | Yes | |
Title of 12(b) Security | None |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENT OF NET ASSETS (Liquidation Basis) (Unaudited) | Sep. 30, 2019USD ($) |
LIABILITIES | |
Mortgage loans | $ 6,150,000 |
Liability for estimated costs in excess of estimated receipts during liquidation | 2,369,538 |
Liquidation Basis | |
ASSETS | |
Real estate investment properties | 48,000,000 |
Cash | 4,652,043 |
Restricted cash | 321,115 |
Other assets | 249,320 |
Total assets | 53,222,478 |
LIABILITIES | |
Mortgage loans | 6,150,000 |
Liability for estimated costs in excess of estimated receipts during liquidation | 2,369,538 |
Accounts payable and accrued liabilities | 908,002 |
Other liabilities | 38,495 |
Due to related parties | 78,079 |
Total liabilities | 9,544,114 |
Commitments and contingencies (Note 13) | |
Net assets in liquidation | $ 43,678,364 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) | Dec. 31, 2018USD ($) |
ASSETS | |
Real estate investment properties, net | $ 42,969,180 |
Assets held for sale, net | 14,202,202 |
Cash | 8,003,576 |
Intangibles, net | 1,497,809 |
Other assets | 382,637 |
Restricted cash | 233,971 |
Total assets | 67,289,375 |
Liabilities: | |
Mortgage loans, net | 18,665,013 |
Liabilities associated with assets held for sale | 6,247,187 |
Accounts payable and accrued liabilities | 497,081 |
Other liabilities | 128,957 |
Due to related parties | 85,902 |
Total liabilities | 25,624,140 |
Commitments and contingencies (Note 13) | |
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 | 48,039,220 |
Accumulated loss | (3,464,160) |
Accumulated distributions | (2,958,820) |
Total stockholders' equity | 41,665,235 |
Total liabilities and stockholders' equity | 67,289,375 |
Class A Common Stock | |
Stockholders' equity: | |
Common stock value | 48,995 |
Total stockholders' equity | $ 48,995 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) | Dec. 31, 2018$ / sharesshares |
Preferred stock, par value | $ / shares | $ 0.01 |
Preferred stock, shares authorized | 10,000,000 |
Preferred stock, shares issued | 0 |
Preferred stock, shares outstanding | 0 |
Class A Common Stock | |
Common stock, par value | $ / shares | $ 0.01 |
Common stock, shares authorized | 1,200,000,000 |
Common stock, shares issued | 4,899,139 |
Common stock, shares outstanding | 4,899,139 |
Class T Common Stock | |
Common stock, par value | $ / shares | $ 0.01 |
Common stock, shares authorized | 700,000,000 |
Common stock, shares issued | 0 |
Common stock, shares outstanding | 0 |
Class I Common Stock | |
Common stock, par value | $ / shares | $ 0.01 |
Common stock, shares authorized | 100,000,000 |
Common stock, shares issued | 0 |
Common stock, shares outstanding | 0 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS (Liquidation Basis) (Unaudited) - Liquidation Basis | 1 Months Ended |
Sep. 30, 2019USD ($) | |
Net assets in liquidation, beginning of period | $ 43,796,825 |
Changes in net assets in liquidation: | |
Cash payments net of cash receipts | (118,461) |
Net assets in liquidation, end of period | $ 43,678,364 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) | 2 Months Ended | 3 Months Ended | 8 Months Ended | 9 Months Ended |
Aug. 31, 2019 | Sep. 30, 2018 | Aug. 31, 2019 | Sep. 30, 2018 | |
Revenues: | ||||
Resident fees and services | $ 1,490,631 | $ 1,483,924 | $ 5,841,081 | $ 3,748,684 |
Type of Revenue [Extensible List] | us-gaap:HealthCareResidentServiceMember | us-gaap:HealthCareResidentServiceMember | us-gaap:HealthCareResidentServiceMember | us-gaap:HealthCareResidentServiceMember |
Total revenues | $ 1,490,631 | $ 1,483,924 | $ 5,841,081 | $ 3,748,684 |
Operating expenses: | ||||
Property operating expenses | 1,020,058 | 942,446 | 3,735,511 | 2,181,612 |
General and administrative expenses | 371,795 | 300,989 | 1,197,034 | 905,686 |
Acquisition fees and expenses | 818 | |||
Property management fees | $ 74,216 | $ 73,996 | $ 291,842 | $ 228,318 |
Type of Cost, Good or Service [Extensible List] | us-gaap:ManagementServiceMember | us-gaap:ManagementServiceMember | us-gaap:ManagementServiceMember | us-gaap:ManagementServiceMember |
Depreciation and amortization | $ 451,154 | $ 438,469 | $ 1,795,444 | $ 1,087,147 |
Total operating expenses | 1,917,223 | 1,755,900 | 7,019,831 | 4,403,581 |
Operating loss | (426,592) | (271,976) | (1,178,750) | (654,897) |
Other income (expense): | ||||
Interest and other income | 8,744 | 9,884 | 27,004 | 9,946 |
Interest expense and loan cost amortization | (51,505) | (220,314) | (567,415) | (595,497) |
Total other expense | (42,761) | (210,430) | (540,411) | (585,551) |
Loss before income taxes | (469,353) | (482,406) | (1,719,161) | (1,240,448) |
Income tax benefit (expense) | 9,938 | (30,533) | (35,245) | |
Loss from continuing operations | (469,353) | (472,468) | (1,749,694) | (1,275,693) |
Income from discontinued operations | 13,781 | 1,666,868 | 76,575 | |
Net loss attributable to common stockholders | (469,353) | (458,687) | (82,826) | (1,199,118) |
Class A Common Stock | ||||
Other income (expense): | ||||
Net loss attributable to common stockholders | $ (469,353) | $ (87,907) | $ (82,826) | $ (257,552) |
Net loss per share of common stock outstanding (basic and diluted) | $ (0.10) | $ (0.10) | $ (0.02) | $ (0.30) |
Weighted average number of common shares outstanding (basic and diluted) | 4,899,139 | 879,674 | 4,899,139 | 857,729 |
Distributions declared per common share | $ 0.1440 | $ 0.1440 | $ 0.4320 | |
Class T Common Stock | ||||
Other income (expense): | ||||
Net loss attributable to common stockholders | $ (327,896) | $ (845,906) | ||
Net loss per share of common stock outstanding (basic and diluted) | $ (0.10) | $ (0.30) | ||
Weighted average number of common shares outstanding (basic and diluted) | 3,281,231 | 2,817,132 | ||
Distributions declared per common share | $ 0.1177 | $ 0.3530 | ||
Class I Common Stock | ||||
Other income (expense): | ||||
Net loss attributable to common stockholders | $ (42,884) | $ (95,660) | ||
Net loss per share of common stock outstanding (basic and diluted) | $ (0.10) | $ (0.30) | ||
Weighted average number of common shares outstanding (basic and diluted) | 429,142 | 318,577 | ||
Distributions declared per common share | $ 0.1310 | $ 0.3936 |
CONDENSED CONSOLIDATED STATEM_4
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, 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 | $ 19,752,438 | 19,733,531 | $ 937 | $ 14,803 | $ 3,167 | ||
Subscriptions received for common stock, including distribution reinvestments (in shares) | 700,000 | 93,663 | 1,480,250 | 316,665 | |||
Stock dividends issued | (352) | $ 80 | $ 245 | $ 27 | |||
Stock dividends issued (in shares) | 8,021 | 24,541 | 2,696 | ||||
Redemptions of common stock | $ (185,460) | (185,276) | $ (126) | $ (58) | |||
Redemptions of common stock, shares | (12,614) | (5,836) | |||||
Stock issuance and offering costs | (1,594,920) | (1,594,920) | |||||
Net loss | (1,199,118) | (1,199,118) | |||||
Cash distributions declared | (1,440,153) | (1,440,153) | |||||
Ending Balance at Sep. 30, 2018 | 41,842,719 | 46,937,915 | (2,858,095) | (2,286,353) | $ 8,971 | $ 35,482 | $ 4,799 |
Ending Balance (in shares) at Sep. 30, 2018 | 897,081 | 3,548,178 | 479,851 | ||||
Beginning Balance at Jun. 30, 2018 | 36,267,211 | 40,355,933 | (2,399,408) | (1,731,573) | $ 8,663 | $ 30,109 | $ 3,487 |
Beginning Balance (in shares) at Jun. 30, 2018 | 866,325 | 3,010,868 | 348,644 | ||||
Subscriptions received for common stock, including distribution reinvestments | $ 7,204,269 | 7,197,379 | $ 280 | $ 5,310 | $ 1,300 | ||
Subscriptions received for common stock, including distribution reinvestments (in shares) | 700,000 | 27,937 | 530,986 | 129,978 | |||
Stock dividends issued | (136) | $ 28 | $ 96 | $ 12 | |||
Stock dividends issued (in shares) | 2,819 | 9,622 | 1,229 | ||||
Redemptions of common stock | $ (33,179) | (33,146) | $ (33) | ||||
Redemptions of common stock, shares | (3,298) | ||||||
Stock issuance and offering costs | (582,115) | (582,115) | |||||
Net loss | (458,687) | (458,687) | |||||
Cash distributions declared | (554,780) | (554,780) | |||||
Ending Balance at Sep. 30, 2018 | 41,842,719 | 46,937,915 | (2,858,095) | (2,286,353) | $ 8,971 | $ 35,482 | $ 4,799 |
Ending Balance (in shares) at Sep. 30, 2018 | 897,081 | 3,548,178 | 479,851 | ||||
Beginning Balance at Dec. 31, 2018 | 41,665,235 | 48,039,220 | (3,464,160) | (2,958,820) | $ 48,995 | ||
Beginning Balance (in shares) at Dec. 31, 2018 | 4,899,139 | 0 | 0 | ||||
Net loss | (82,826) | (82,826) | |||||
Cash distributions declared | (705,473) | (705,473) | |||||
Ending Balance at Aug. 31, 2019 | 40,876,936 | 48,039,220 | (3,546,986) | (3,664,293) | $ 48,995 | ||
Ending Balance (in shares) at Aug. 31, 2019 | 4,899,139 | ||||||
Beginning Balance at Jun. 30, 2019 | 41,346,289 | 48,039,220 | (3,077,633) | (3,664,293) | $ 48,995 | ||
Beginning Balance (in shares) at Jun. 30, 2019 | 4,899,139 | ||||||
Net loss | (469,353) | (469,353) | |||||
Ending Balance at Aug. 31, 2019 | $ 40,876,936 | $ 48,039,220 | $ (3,546,986) | $ (3,664,293) | $ 48,995 | ||
Ending Balance (in shares) at Aug. 31, 2019 | 4,899,139 |
CONDENSED CONSOLIDATED STATEM_5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 8 Months Ended | 9 Months Ended |
Aug. 31, 2019 | Sep. 30, 2018 | |
Operating activities: | ||
Net cash flows provided by (used in) operating activities – continuing operations | $ 679,646 | $ (336,905) |
Net cash flows provided by operating activities – discontinued operations | 188,175 | 541,630 |
Net cash flows provided by operating activities | 867,821 | 204,725 |
Investing activities: | ||
Acquisition of properties | (24,740,622) | |
Capital expenditures | (112,713) | (49,179) |
Net cash flows used in investing activities – continuing operations | (112,713) | (24,789,801) |
Capital expenditures | (23,151) | |
Proceeds from sale of real estate | 15,044,231 | |
Net cash flows provided by (used in) investing activities – discontinued operations | 15,044,231 | (23,151) |
Net cash flows provided by (used in) investing activities | 14,931,518 | (24,812,952) |
Financing activities: | ||
Subscriptions received for common stock through primary offering | 19,009,962 | |
Payment of underwriting compensation | (984,483) | |
Payment of cash distributions, net of distribution reinvestments during 2018 | (705,473) | (597,676) |
Redemptions of common stock | (185,460) | |
Repayment of mortgage loans | (18,350,000) | |
Proceeds from mortgage loans | 5,000,000 | |
Payment of loan costs | (91,649) | |
Net cash flows (used in) provided by financing activities | (19,055,473) | 22,150,694 |
Net decrease in cash and restricted cash | (3,256,134) | (2,457,533) |
Cash and restricted cash at beginning of period, including held for sale | 8,237,547 | 12,421,919 |
Cash and restricted cash at end of period, including held for sale | $ 4,981,413 | 9,964,386 |
Amounts incurred but not paid (including amounts due to related parties): | ||
Acquisition fees and expenses related to asset acquisition | 91,097 | |
Loan costs | 27,807 | |
Selling commissions and Dealer Manager fees | 41,651 | |
Annual distribution and stockholder servicing fee | 1,395,460 | |
Assumption of liabilities on acquisition of property | $ 115,779 |
Organization
Organization | 9 Months Ended |
Sep. 30, 2019 | |
Organization Consolidation And Presentation Of Financial Statements [Abstract] | |
Organization | 1. Organization CNL Healthcare Properties II, Inc. (“Company”) is a Maryland corporation that incorporated on July 10, 2015 and elected to be taxed as a real estate investment trust (“REIT”) for United States (“U.S.”) federal income tax purposes beginning with the year ended December 31, 2017. The Company is sponsored by CNL Financial Group, LLC (“Sponsor” or “CNL”) and 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 and dispositions, asset management and other operational matters. 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 meant that CNL Securities Corp. (“Dealer Manager”), an affiliate of the Sponsor, used its best efforts but was not required to sell any specific amount of shares. The Company also offered up to $250 million, in any combination, of Class A, Class T and Class I shares pursuant to its distribution reinvestment plan (“Reinvestment Plan” and, together with the Primary Offering, the “Offering”). The Company has contributed the net proceeds from its Offering to CHP II Partners, LP (“Operating Partnership”) in exchange for partnership interests. The Company owns 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 owns 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. On August 31, 2018, the Company’s board of directors approved the termination of its Offering and the suspension of its Reinvestment Plan, effective October 1, 2018. The Company also suspended its share redemption plan (“Redemption Plan”) and discontinued its stock dividends concurrently. In October 2018, the Company deregistered the unsold shares of its common stock under its previous registration statement on Form S-11. Through the close of its Offering, the Company had received aggregate proceeds of approximately $51.2 million (4.9 million shares), including approximately $1.2 million (0.1 million shares) of proceeds pursuant to the Reinvestment Plan. In 2018, the Company announced it had formed a special committee consisting solely of its independent directors (“Special Committee”) to consider possible strategic alternatives available to the Company, including, without limitation, (i) an orderly disposition of the Company’s assets or one or more of the Company’s asset classes and the distribution of the net sale proceeds thereof to the stockholders of the Company and (ii) a potential business combination or other transaction In March 2019, the Company entered into an asset purchase agreement (“Sale Agreement”) with HCP Medical Office Buildings, LLC related to the sale of Mid America Surgery for a gross sales price of $15.4 million (“MOB Sale”), subject to certain pro-rations and other adjustments as described in the Sale Agreement. In May 2019, the Company completed the MOB Sale. In March 2019, in connection with the exploration of strategic alternatives, the Company’s board of directors suspended regular cash distributions to stockholders effective April 1, 2019. In addition, in March 2019, the Company’s advisory agreement was amended and restated to eliminate acquisition fees and dispositions fees as well as to reduce the asset management fees (“AUM Fees”) to 0.40% per annum of average invested assets. The Company’s board of directors and its Advisor also agreed to terminate the Expense Support Agreement effective April 1, 2019; refer to Note 11. “Related Party Arrangements” for additional information. Moreover, effective April 1, 2019, the Advisor waived its rights to any AUM Fees going forward, with such waiver to remain in effect through the Company’s dissolution and liquidation. 1. Organization (continued) As of September 30, 2019, the Company owned two seniors housing communities that are leased to single member limited liability companies wholly-owned by TRS Holdings, a subsidiary of the Company. TRS Holdings has engaged 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. In September 2019, the Company's stockholders approved a plan of dissolution ("Plan of Dissolution") as further described in Note 2. “Plan of Dissolution.” As a result of the adoption of the Plan of Dissolution, all of the Company's real estate properties are considered held for sale and the |
Plan of Dissolution
Plan of Dissolution | 9 Months Ended |
Sep. 30, 2019 | |
Organization Consolidation And Presentation Of Financial Statements [Abstract] | |
Plan of Dissolution | 2. Plan of Dissolution As described in Note 1. “Organization,” the Plan of Dissolution approved by stockholders in September 2019 authorizes the Company to undertake the sale of all its assets, distribute the net proceeds after payment of all of the Company's liabilities to stockholders as liquidating distributions, wind-up the Company’s operations and dissolve the Company in accordance with Maryland law. The Company is permitted to provide for the payment of any unascertained or contingent liabilities and may do so by purchasing insurance, establishing a reserve fund or in other ways deemed necessary. The Plan of Dissolution enables the Company to sell any and all of its assets without further approval of the stockholders and provides that liquidating distributions be made to the stockholders as determined by the board. Pursuant to applicable REIT rules, in order to be able to deduct liquidating distributions as dividends, the Company must distribute all of the net proceeds from the sale of its assets to stockholders by September 2021, which represents 24 months following the stockholders’ approval of the Plan of Dissolution. However, if the Company cannot sell its assets and pay its debts within 24 months, or if the board of directors and the Special Committee determine that it is otherwise advisable to do so, the Company may transfer and assign its remaining assets to a liquidating trust. Upon such transfer and assignment, stockholders will receive interests in the liquidating trust. The liquidating trust will pay or provide for all of the Company’s liabilities and distribute any remaining net proceeds from the sale of its assets to the holders of interests in the liquidating trust. The dissolution process and the amount and timing of liquidating distributions to stockholders involves risks and uncertainties. Accordingly, it is not possible to predict the timing or aggregate amount which will ultimately be distributed to stockholders and no assurance can be given that the distributions will equal or exceed the estimate of net assets presented in the accompanying condensed consolidated statement of net assets. The Company expects to continue to qualify as a REIT throughout the liquidation until such time as any remaining assets, if any, are transferred into a liquidating trust. The board of directors shall use commercially reasonable efforts to continue to cause the Company to maintain its REIT status, provided however, the board of directors may elect to terminate the Company's status as a REIT if it determines that such termination would be in the best interest of the stockholders. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2019 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | 3 . Summary of Significant Accounting Policies Basis of Presentation - As a result of the approval of the Plan of Dissolution by its stockholders in September 2019, the Company’s financial position and results of operations for the nine months ended September 30, 2019 will be presented using two different presentations. The Company adopted the Liquidation Basis of Accounting as of September 1, 2019 and for the periods subsequent to September 1, 2019. As a result, a new statement of financial position (Statement of Net Assets) is presented, which represents the estimated amount of cash that the Company expects to collect on disposal of its assets as it carries out its Plan of Dissolution. In addition, a new statement of operations (Statement of Changes in Net Assets) reflects any changes in net assets from the original estimated values as of September 1, 2019 through the most recent period presented. 3. Summary of Significant Accounting Policies (continued) All financial results and disclosures up through August 31, 2019, prior to adopting the Liquidation Basis of Accounting, are presented based on a going concern basis (“Going Concern Basis”), which contemplated the realization of assets and liabilities in the normal course of business. As a result, the balance sheet as of December 31, 2018, and the statements of operations and the statements of cash flows for the eight months ended August 31, 2019 and the comparative nine months ended September 30, 2018 used the Going Concern Basis consistent with the presentation in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. The accompanying unaudited 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. Basis of Presentation Liquidation Basis (Post-Plan of Dissolution) – As a result of the approval of the Plan of Dissolution by its stockholders in September 2019, the Company adopted the Liquidation Basis of Accounting as of September 1, 2019 and for the periods subsequent to September 1, 2019 in accordance with generally accepted accounting principles of the United States (“GAAP”). Accordingly, as of September 1, 2019, the Company’s assets were adjusted to their estimated net realizable value, or liquidation value, which represents the estimated amount of cash that the Company will collect on disposal of its assets as it carries out the Plan of Dissolution. The liquidation value of the Company's operating properties is presented on an undiscounted basis. Estimated costs to dispose of its assets have been presented separately from the related assets. Liabilities are carried at their contractual amounts due or estimated settlement amounts. The Company accrues costs and income that it expects to incur and earn through the end of liquidation to the extent it has a reasonable basis for estimation. These amounts are classified as a liability for estimated costs in excess of estimated receipts during liquidation in the accompanying condensed consolidated statement of net assets. Actual costs and income may differ from amounts reflected in the financial statements because of inherent uncertainty in estimating future events. These differences may be material. See Note 4. "Liability for Estimated Costs in Excess of Estimated Receipts During Liquidation" for further discussion. Actual costs incurred but unpaid as of September 30, 2019 are included in accounts payable and accrued liabilities, due to related parties and other liabilities in the accompanying condensed consolidated statement of net assets. Net assets in liquidation represents the estimated liquidation value available to stockholders upon liquidation. Due to the uncertainty in the timing of the anticipated sale date(s) and the estimated cash flows, actual operating results and sale proceeds may differ materially from the amounts estimated. Basis of Presentation - - The accompanying unaudited condensed consolidated financial statements through August 31, 2019 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 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 operating results for the interim period presented. Operating results for the periods ended August 31, 2019 and September 30, 2018 were prepared on the going concern basis of accounting, which contemplates the realization of assets and liabilities in the normal course of business. Amounts as of December 31, 2018 included in the unaudited condensed consolidated financial statements have been derived from the 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, 2018. 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. 3. Summary of Significant Accounting Policies (continued) Assets Held for Sale, net and Discontinued Operations — The Company determines to classify a property as held for sale once management has the authority to approve and commits to a plan to sell the property, the property is available for immediate sale, there is an active program to locate a buyer, the sale of the property is probable and the transfer of the property is expected to occur within one year. Upon the determination to classify a property as held for sale, the Company ceases recording further depreciation and amortization relating to the associated assets and those assets are measured at the lower of its carrying amount or fair value less disposition costs and are presented separately in the consolidated balance sheets for all periods presented. In addition, the Company classifies assets held for sale as discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on the Company’s operations and financial results. For any disposal(s) qualifying as discontinued operations, the Company allocates interest expense and loan cost amortization that directly relates to any mortgage loan(s) collateralized by properties classified as discontinued operations. Reclassifications – Certain amounts in the prior year’s condensed consolidated balance sheet, statement of operations and statement of cash flows have been reclassified to conform to the current year’s presentation, primarily related to the classification of the Company’s MOB property as held for sale and discontinued operations, with no effect on the other previously reported consolidated financial statements. Adopted Accounting Pronouncements — In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“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 also requires qualitative and quantitative disclosures designed to give financial statement users additional information on the amount, timing, and uncertainty of cash flows arising from leases. In July 2018, the FASB issued ASU 2018-11, “Leases (Topic 842): Targeted Improvements,” which includes a practical expedient for lessors that allows 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. The Company elected the practical expedient and applied the guidance to all of the leases that qualified under the established criteria. In December 2018, the FASB issued ASU 2018-20, “Leases (Topic 842): Narrow-Scope Improvements for Lessors,” which addressed challenges encountered in determining certain lessor costs paid by the lessee directly to third parties by allowing lessors to exclude these costs from its variable lease payments. This amendment did not have a material impact on the Company’s financial statements and related disclosures as it conformed Accounting Standard Codification (“ASC”) 842 to the Company’s historical accounting under ASC 840. In March 2019, the FASB issued ASU 2019-01, “Leases (Topic 842): Codification Improvements,” which clarified the transition guidance related to interim disclosure requirements in the year of adoption. All of the ASC 842 ASUs are effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2018. The Company adopted these ASUs on January 1, 2019 using a modified retrospective approach, the adoption of these ASUs did not have a material impact on the Company’s consolidated results of operations or cash flows. However, the adoption of these ASUs did impact the Company’s consolidated financial position for arrangements such as ground or other leases in which the Company is the lessee. More specifically, the adoption of ASC 842 resulted in the Company recording operating lease assets and liabilities on January 1, 2019. The following table provides additional details by financial statement line item of the adjusted presentation in the Company’s consolidated financial position: As Presented Effect of As Adjusted December 31, ASC 842 January 1, 2018 Adoption 2019 Other assets $ 382,637 $ 32,500 $ 415,137 Total assets $ 67,289,375 $ 32,500 $ 67,321,875 Other liabilities $ (128,957) $ (32,500) $ (161,457) Total liabilities $ (25,624,140) $ (32,500) $ (25,656,640) 3. Summary of Significant Accounting Policies (continued) In June 2018, the FASB issued ASU 2018-07, “Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting,” which expands the scope to include share-based payment transactions for acquiring goods and services from nonemployees. The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payments. The amendments also clarify that this ASU does not apply to share-based payments used to provide financing to the issuer or awards granted in conjunction with selling of goods or services to customers as a part of a contract accounted for under Revenue from Contracts with Customers (Topic 606). The ASU is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2018. The Company adopted this ASU prospectively on January 1, 2019; the adoption of which did not have a material impact on the Company’s consolidated results of operations or cash flows. |
Assets Held for Sale, net and Discontinued Operations | Assets Held for Sale, net and Discontinued Operations — The Company determines to classify a property as held for sale once management has the authority to approve and commits to a plan to sell the property, the property is available for immediate sale, there is an active program to locate a buyer, the sale of the property is probable and the transfer of the property is expected to occur within one year. Upon the determination to classify a property as held for sale, the Company ceases recording further depreciation and amortization relating to the associated assets and those assets are measured at the lower of its carrying amount or fair value less disposition costs and are presented separately in the consolidated balance sheets for all periods presented. In addition, the Company classifies assets held for sale as discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on the Company’s operations and financial results. For any disposal(s) qualifying as discontinued operations, the Company allocates interest expense and loan cost amortization that directly relates to any mortgage loan(s) collateralized by properties classified as discontinued operations. |
Liability for Estimated Costs i
Liability for Estimated Costs in Excess of Estimated Receipts During Liquidation | 9 Months Ended |
Sep. 30, 2019 | |
Organization Consolidation And Presentation Of Financial Statements [Abstract] | |
Liability for Estimated Costs in Excess of Estimated Receipts During Liquidation | 4. The Liquidation Basis of Accounting requires the Company to estimate net cash flows from operations and to accrue all costs associated with implementing and completing the Plan of Dissolution. The Company currently estimates that it will have costs in excess of estimated receipts during the liquidation. These amounts can vary significantly due to, among other things, the timing and estimates for occupancy, the timing of any property sale(s), direct costs incurred to complete the sale(s), the timing and amounts associated with discharging known and contingent liabilities and the costs associated with the winding up of operations. These costs are estimated and are anticipated to be paid out over the liquidation period. Upon transition to the Liquidation Basis of Accounting as of September 1, 2019, the Company accrued the following estimated receipts and costs expected to be incurred during liquidation: Resident fees and services $ 4,549,487 Property operating expenses (3,125,538) Property management fees (245,763 ) General and administrative (713,957 ) Interest expense (131,554 ) Liquidation transaction costs (2,605,872 ) Liability for estimated costs in excess of estimated receipts during liquidation $ (2,273,197 ) The change in the liability for estimated costs in excess of estimated receipts during liquidation as of September 30, 2019 is as follows: September 1, 2019 Cash Payments (Receipts) Remeasurement of Assets and Liabilities September 30, 2019 Assets: Net inflows from real estate investments $ 1,178,186 $ (207,906) $ — $ 970,280 Liabilities: Corporate expenditures (713,957) 87,636 — (626,321) Interest expense on mortgage loans (131,554) 23,929 — (107,625) Liquidation transaction costs (2,605,872) — — (2,605,872) (3,451,383) 111,565 — (3,339,818) Total liability for estimated costs in excess of estimated receipts during liquidation $ (2,273,197) $ (96,341) $ — $ (2,369,538) |
Net Assets in Liquidation
Net Assets in Liquidation | 9 Months Ended |
Sep. 30, 2019 | |
Net Assets In Liquidation [Abstract] | |
Net Assets in Liquidation | 5. The following is a reconciliation of stockholders’ equity under the Going Concern Basis to net assets in liquidation under the Liquidation Basis of Accounting as of September 1, 2019: Stockholders’ equity as of August 31, 2019 $ 40,876,936 Increase due to estimated net realizable value of investments in real estate 5,215,743 Decrease due to adjustment of assets and liabilities to net realizable value (22,657) Liability for estimated costs in excess of estimated receipts during liquidation (2,273,197) Adjustment to reflect the change to the liquidation basis of accounting 2,919,889 Estimated value of net assets in liquidation as of September 1, 2019 $ 43,796,825 Net assets in liquidation decreased by approximately $118,000 during the period from September 1, 2019 through September 30, 2019. The primary reason for the decrease in net assets was due to net outflows for corporate expenditures exceeding net inflows from real estate investments. Net assets in liquidation include projections of costs and expenses to be incurred during the period required to complete the Plan of Dissolution. There is inherent uncertainty with these projections, and the projections could change materially based on the timing of any property sale(s), the performance of the underlying properties and any changes in the underlying assumptions of the projected cash flows. |
Revenue
Revenue | 9 Months Ended |
Sep. 30, 2019 | |
Revenue From Contract With Customer [Abstract] | |
Revenue | 6. Revenue Prior to adopting the Liquidation Basis of Accounting, the following table presents disaggregated revenue related to resident fees and services for the eight months ended August 31, 2019 and nine months ended September 30, 2018: Eight Months Ended August 31, 2019 and Nine Months Ended September 30, 2018 Type of Investment Number of Units Revenues Percentage of Revenues Resident fees and services: 2019 2018 2019 2018 2019 2018 Assisted living 129 129 $ 4,006,041 $ 2,706,757 68.6 % 72.2 % Memory care 52 52 1,758,522 998,661 30.1 % 26.6 % Other revenues ― ― 76,518 43,266 1.3 % 1.2 % 181 181 $ 5,841,081 $ 3,748,684 100.0 % 100.0 % |
Real Estate Assets, net
Real Estate Assets, net | 9 Months Ended |
Sep. 30, 2019 | |
Real Estate [Abstract] | |
Real Estate Assets, net | 7. Real Estate Assets, net As a result of adopting Liquidation Basis of Accounting in September 2019, real estate assets were adjusted to their estimated net realizable value, or liquidation value, which represents the estimated amount of cash that the Company expects to collect on the disposal of its assets as it carries out its Plan of Dissolution. Prior to adopting Liquidation Basis of Accounting, the gross carrying amount and accumulated depreciation of the Company’s real estate assets as of December 31, 2018, excluding assets held for sale, are as follows: Land and land improvements $ 4,075,733 Building and building improvements 38,700,052 Furniture, fixtures and equipment 1,872,959 Less: accumulated depreciation (1,679,564) Real estate investment properties, net $ 42,969,180 Depreciation expense on the Company’s real estate investment properties, net was approximately $1.1 million and $0.7 million for the eight months ended August 31, 2019 and nine months ended September 30, 2018, respectively, and approximately $0.3 million for each of the two months ended August 31, 2019 and the quarter ended September 30, 2018, respectively. |
Intangibles, net
Intangibles, net | 9 Months Ended |
Sep. 30, 2019 | |
Goodwill And Intangible Assets Disclosure [Abstract] | |
Intangibles, net | 8. Intangibles, net Prior to adopting Liquidation Basis of Accounting, the gross carrying amount and accumulated amortization of the Company’s intangible assets as of December 31, 2018, excluding assets held for sale, are as follows: December 31, 2018 In-place resident agreement intangibles $ 2,569,419 Less: accumulated amortization (1,071,610) Intangible assets, net $ 1,497,809 For the two months and eight months ended August 31, 2019, amortization on the Company’s intangibles was approximately $0.2 million and $0.7 million, respectively, all of which was included in depreciation and amortization. For the quarter and nine months ended September 30, 2018, amortization on the Company’s intangibles was approximately $0.2 million and $0.4 million, respectively, all of which was included in depreciation and amortization. |
Assets and Associated Liabiliti
Assets and Associated Liabilities Held for Sale and Discontinued Operations | 9 Months Ended |
Sep. 30, 2019 | |
Real Estate Liabilities Associated With Assets Held For Development And Sale [Abstract] | |
Assets and Associated Liabilities Held for Sale and Discontinued Operations | 9 . Assets and Associated Liabilities Held for Sale and Discontinued Operations Prior to adopting the Liquidation Basis of Accounting, the Company committed to a plan to sell its MOB, Mid America Surgery, and classified the property as held for sale. The Company believed the sale of Mid America Surgery would cause a strategic shift in the Company’s operations and, therefore, classified the corresponding revenues and expenses for its MOB property as discontinued operations. In March 2019, the Company entered into a Sale Agreement with HCP Medical Office Buildings, LLC related to the MOB Sale. In May 2019, the Company completed the MOB Sale and recognized a gain on the sale of approximately $1.6 million for financial reporting purposes. As of December 31, 2018, the amounts classified as assets held for sale and the liabilities associated with those assets held for sale consisted of the following: December 31, 2018 Real estate investment properties, net $ 10,603,833 Intangibles, net 3,485,818 Other assets 112,551 Assets held for sale, net $ 14,202,202 Mortgage loan, net $ 5,532,346 Accounts payable and accrued liabilities 391,735 Other liabilities 323,106 Liabilities associated with assets held for sale $ 6,247,187 9. Assets and Associated Liabilities Held for Sale and Discontinued Operations (continued) The following table is a summary of the Company’s income from discontinued operations for the two months and eight months ended August 31, 2019 and the quarter and nine months ended September 30, 2018: Two Months Ended Quarter Ended Eight Months Ended Nine Months Ended August 31, September 30, August 31, September 30, 2019 2018 2019 2018 Revenues: Rental income and related revenues $ — $ 422,967 $ 486,294 $ 1,253,209 Operating expenses: Property operating expenses — 196,932 165,782 547,152 General and administrative expenses — (110) 791 1,275 Property management fees — 11,538 13,869 32,931 Depreciation and amortization — 131,636 43,793 393,565 Total operating expenses — 339,996 224,235 974,923 Gain on sale of real estate — — 1,566,321 — Operating income — 82,971 1,828,380 278,286 Other expense: Interest expense and loan cost amortization — (69,190) (161,512) (201,711) Total other expense — (69,190) (161,512) (201,711) Income before income taxes 1,666,868 76,575 Income tax expense — — — — Income from discontinued operations $ — $ 13,781 $ 1,666,868 $ 76,575 As of September 30, 2019, all of the Company’s real estate assets are considered held for sale due to the adoption of Liquidation Basis of Accounting effective September 1, 2019, as discussed above in Note 3. “Summary of Significant Accounting Policies.” |
Indebtedness
Indebtedness | 9 Months Ended |
Sep. 30, 2019 | |
Debt Disclosure [Abstract] | |
Indebtedness | 10 . Indebtedness In May 2019, in connection with the MOB Sale, the Company strategically paid down approximately $12.8 million of debt secured by its Summer Vista Assisted Living (“Summer Vista”) property. In connection therewith, the Company wrote-off approximately $0.1 million in unamortized loan costs as a loss on the early extinguishment of debt, which is included in interest expense and loan cost amortization in the accompanying condensed consolidated statements of operations for the eight months ended August 31, 2019. The following table provides details of the Company’s indebtedness as of September 30, 2019 and December 31, 2018: September 30, December 31, 2019 2018 Mortgage loans, net: Mortgage loans (1) $ 6,150,000 $ 18,900,000 Loan costs, net — (2) (234,987) Total mortgage loans, net $ 6,150,000 $ 18,665,013 FOOTNOTES: (1) As of September 30, 2019, the Company’s mortgage loans are collateralized by its Summer Vista and Riverview properties. (2) As described in Note 3. "Summary of Significant Accounting Policies," the Company adopted the Liquidation Basis of Accounting which requires the Company to record indebtedness at its contractual amounts. 10 . Indebtedness (continued) The fair market value of the Company’s mortgage loans was approximately $6.1 million and $18.9 million as of September 30, 2019 and December 31, 2018, respectively, which is based on then-current rates and spreads the Company would expect to obtain for similar borrowings. Since this methodology includes inputs that are less observable by the public and are not necessarily reflected in active markets, the measurement of the estimated fair values is categorized as Level 3 on the three-level valuation hierarchy. The following is a schedule of future principal payments and maturity for the Company’s mortgage loans for the remainder of 2019, each of the next four years and thereafter, in the aggregate, as of September 30, 2019: 2019 $ — 2020 31,849 2021 85,947 2022 1,192,460 2023 4,839,744 Thereafter — $ 6,150,000 |
Related Party Arrangements
Related Party Arrangements | 9 Months Ended |
Sep. 30, 2019 | |
Related Party Transactions [Abstract] | |
Related Party Arrangements | 11. 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 connection with services provided to the Company, affiliates are entitled to the following fees: Dealer Manager — Through the termination of the Offering in October 2018, the Dealer Manager received 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 could be reallowed to participating broker dealers. In addition, for Class T shares sold in the Primary Offering, the Dealer Manager could choose the respective amounts of the commission and dealer manager fee, provided that the selling commission did not exceed 3.0% of the gross proceeds from the completed sale of such Class T shares. The Company paid 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 then-current gross offering price per Class T or Class I share. The Company recorded the annual distribution and stockholder servicing fees as a reduction to capital in excess of par value and measured 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 was relieved over time, as the fees were paid to the Dealer Manager. In connection with the close of the Offering effective October 1, 2018, certain underwriting compensation limits were met and, effective October 31, 2018, each Class T and Class I share automatically converted into a Class A share pursuant to the terms of the Company’s charter. The Class T and Class I shares converted into Class A shares on a one-for-one basis because the then-current estimated net asset value (“NAV”) per share of $10.06 was the same for all share classes. Effective October 31, 2018, Class T and Class I shares were no longer subject to class specific expenses upon conversion into Class A shares. The Company’s obligation to pay the remaining distribution and stockholder servicing fees liability of approximately $1.4 million to the Dealer Manager ceased effective October 31, 2018 upon the conversion of the Class T and Class I shares into Class A Shares. 1 1 . Related Party Arrangements (continued) CNL Capital Markets, LLC — The Company will pay CNL Capital Markets, LLC, an affiliate of CNL, an annual fee payable monthly based on the average number of total investor accounts that are 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 — Pursuant to the Company’s advisory agreement, dated as of March 2, 2016, the Company paid the Advisor AUM Fees in an amount equal to 0.80% per annum of average invested assets. In March 2019, the Company’s advisory agreement was amended and restated to eliminate acquisition fees and dispositions fees as well as to reduce the AUM Fees to 0.40% per annum of average invested assets. The reduced AUM Fees were further subject and subordinate to an agreed upon hurdle relating to the total operating expenses (as described in the amended and restated advisory agreement) of the Company, though to the extent any portion of the AUM Fees are not paid as a result of total operating expenses exceeding the prescribed limits, it may be recovered by the Advisor if certain Company performance thresholds are subsequently met. The Company’s board of directors approved renewing the amended and restated advisory agreement through March 2020. Effective as of April 1, 2019, the Advisor waived its rights to any AUM Fees going forward, with such waiver to remain in effect through the Company’s dissolution and liquidation. 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. For the Expense Year ended September 30, 2019, the Company’s total operating expenses were in excess of this limitation by approximately $35,000. As of September 30, 2019, the Company had received cumulative approvals from its independent directors for total operating expenses in excess of this limitation of approximately $0.9 million. The Company’s independent directors determined that the higher relationship of operating expenses to average invested assets for the Expense Year ended September 30, 2019, was justified given the cost of operating a public company and the MOB Sale undertaken in the second quarter of 2019 in connection with the exploration of strategic alternatives, which further reduced the Company’s already limited number of investments. For the nine months ended September 30, 2019, the Company paid cash distributions of approximately $38,000 to the Advisor related to the Class A common stock held by the Advisor. The Company Pursuant to an expense support arrangement, the Advisor agreed to accept payment in restricted stock in lieu of cash for services rendered, in the event that the Company did not achieve established distribution coverage targets (“Expense Support Agreement”). In exchange for services rendered and in consideration of the expense support provided under this arrangement, the Company issued, 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 NAV per share of the Class A common shares 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 advisory agreement), excluding for the purposes of calculating this threshold any shares of restricted stock owned by the Advisor. In March 2019, the Company’s board of directors and the Advisor agreed to terminate the Expense Support Agreement effective April 1, 2019. Any restricted stock shares granted to the Advisor under the Expense 11. Related Party Arrangements (continued) Support Agreement shall continue to be held by the Advisor, subject to the vesting and forfeiture provisions of the Expense Support Agreement which survive termination. The following fees for services rendered were settled in the form of restricted stock pursuant to the Expense Support Agreement for the quarter and nine months ended September 30, 2019 and 2018 and cumulatively through the termination date effective April 1, 2019: Quarter Ended Nine Months Ended Cumulative September 30, September 30, Fees 2019 2018 2019 2018 Settled Fees for services rendered: Asset management fees $ ― $ 87,488 $ 99,417 $ 229,088 $ 578,171 Advisor personnel expenses (1) ― 112,784 127,950 362,555 1,058,676 Total fees for services rendered $ ― $ 200,272 $ 227,367 $ 591,643 $ 1,636,847 Then-current NAV $ 9.92 $ 10.06 $ 9.92 $ 10.06 $ 9.92 Restricted stock shares (2) ― 19,908 22,920 58,811 164,210 Cash distributions on restricted stock (3) $ ― $ 8,113 $ 8,113 $ 16,226 $ 16,226 Stock dividends on restricted stock (4) ― 170 ― 340 340 FOOTNOTES : (1) Amounts consisted 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 to the Advisor pursuant to the Expense Support Agreement through its termination effective April 1, 2019. No fair value was assigned to the restricted stock shares as the shares do not vest until a liquidity event is consummated and certain market conditions are achieved. In addition, the restricted stock shares will be treated as unissued for financial reporting purposes until the vesting criteria are met. (3) The cash distributions were recognized as compensation expense as issued and included in general and administrative expense in the accompanying condensed consolidated statements of operations. (4) The par value of the stock dividends was recognized as compensation expense as issued and included in general and administrative expense in the accompanying condensed consolidated statements of operations. The fees payable through the termination of the Offering in October 2018 to the Dealer Manager for the quarter and nine months ended September 30, 2019 and 2018, and related amounts unpaid as of September 30, 2019 and December 31, 2018 were as follows: Quarter Ended Nine Months Ended Unpaid amounts as of (1) September 30, September 30, September 30, December 31, 2019 2018 2019 2018 2019 2018 Selling commissions (2) $ — $ 121,413 $ — $ 343,087 $ — $ — Dealer manager fees (2) — 153,073 — 429,356 — — Distribution and stockholder servicing fees (2) — 307,630 — 822,477 — — $ — $ 582,116 $ — $ 1,594,920 $ — $ — 1 1 . Related Party Arrangements (continued) The expenses incurred by and reimbursable to the Company’s related parties, including amounts included in income from discontinued operations, for the quarter and nine months ended September 30, 2019 and 2018, and related amounts unpaid as of September 30, 2019 and December 31, 2018 are as follows: Quarter Ended Nine Months Ended Unpaid amounts as of (1) September 30, September 30, September 30, December 31, 2019 2018 2019 2018 2019 2018 Reimbursable expenses: Operating expenses (3) $ 170,893 $ 227,393 $ 580,462 $ 754,188 $ 78,079 $ 85,902 Acquisition fees and expenses ― 8,680 ― 10,183 ― — 170,893 236,073 580,462 764,371 78,079 85,902 Asset management fees (4) 45,650 87,488 196,136 229,088 ― — Investment services fee (5) ― 545,625 ― 545,625 ― — $ 216,543 $ 869,186 $ 776,598 $ 1,539,084 $ 78,079 $ 85,902 FOOTNOTES: (1) Amounts are recorded as due to related parties in the accompanying condensed consolidated balance sheets. ( 2 ) (3) ( 4 ) (5) In connection with adopting the Liquidation Basis of Accounting, the Company accrues costs it expects to incur through the end of the liquidation. As of September 30, 2019, the Company has accrued Advisor personnel expenses of approximately $0.1 million and included in its liability for estimated costs in excess of estimated receipts. |
Equity
Equity | 9 Months Ended |
Sep. 30, 2019 | |
Equity [Abstract] | |
Equity | 1 2 . Equity Subscription Proceeds — In October 2018, in light of the Company’s decision to terminate its Offering, the Company suspended the Reinvestment Plan and the Redemption Plan. As such, there were no subscriptions proceeds received for either the quarter or nine months ended September 30, 2019. For the quarter and nine months ended September 30, 2018, the Company received subscription proceeds of approximately $7.2 million (0.7 million shares) and $19.8 million (2.0 million shares), respectively, through its Offering and Reinvestment Plan. Distributions — In October 2018, in light of the Company’s decision to terminate its Offering, the Company suspended the Reinvestment Plan and discontinued the issuance of stock dividends concurrently. In March 2019, in connection with the Company’s strategic alternatives discussed in Note 1. “Organization,” the Company’s board of directors suspended regular cash distributions to stockholders effective April 1, 2019. As such, there were no cash distributions declared subsequent to April 1, 2019. For the eight months ended August 31, 2019, the Company declared cash distributions of approximately $0.7 million, all of which were paid in cash to stockholders. None of the cash distributions were reinvested during 2019 due to the suspension of the Reinvestment Plan effective October 2018. For the quarter and nine months ended September 30, 2018, the Company declared cash distributions of approximately $0.6 million and $1.4 million, respectively, of which approximately $0.3 million and $0.8 million, respectively, was reinvested pursuant to the Reinvestment Plan. Redemptions — In October 2018, in light of the Company’s decision to terminate its Offering, the Company suspended the Reinvestment Plan and the Redemption Plan. As such, there were no requests for the redemption of common stock subsequent to the suspension in October 2018. During the quarter and nine months ended September 30, 2018, the Company received requests for the redemption of common stock of approximately $33,000 and $0.2 million, respectively, which were approved for redemption at an average price of $10.05 and $10.05, respectively. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2019 | |
Commitments And Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | 1 3 . 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. |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | 1 4 . Income Taxes Prior to adopting the Liquidation Basis of Accounting, the accompanying condensed consolidated financial statements include an interim tax provision for the two months and eight months ended August 31, 2019 and the quarter and nine months ended September 30, 2018. The components of income tax expense for each period are as follows: Two Months Ended Quarter Ended Eight Months Ended Nine Months Ended August 31, September 30, August 31, September 30, 2019 2018 2019 2018 Current: Federal $ ― $ 8,150 $ ― $ (26,350) State ― 3,040 ― (5,560) Total current expense ― 11,190 ― (31,910) Deferred: Federal ― (838) (25,300) (2,164) State ― (414) (5,233) (1,171) Total deferred expense ― (1,252) (30,533) (3,335) Income tax expense $ ― $ 9,938 $ (30,533) $ (35,245) 14. Income Taxes (continued) Deferred income taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets as of December 31, 2018 are as follows: December 31, 2018 Carryforwards of net operating loss $ ― Prepaid rent 30,533 Valuation allowance ― Deferred tax assets, net $ 30,533 The recording of a valuation allowance relates primarily to a change in judgment about the Company’s ability to realize deferred tax assets in future years, due to its current and foreseeable operations. A reconciliation of the income tax expense for the two months and eight months ended August 31, 2019 and the quarter and nine months ended September 30, 2018 computed at the statutory federal tax rate on income (loss) before income taxes is as follows: Two Months Ended August 31, Quarter Ended September 30, 2019 2018 Tax benefit computed at federal statutory rate $ 98,564 21.0 % $ 101,305 21.0 % Impact of REIT election (98,564) (21.0) % (93,991) (19.5) % State income tax expense ― ― % 2,624 0.5 % Impact of change in deferred tax asset 11,297 3.6 % ― ― % Impact of change in valuation allowance (11,297) (3.6) % ― ― % Income tax expense $ ― ― % $ 9,938 2.0 % Eight Months Ended August 31, Nine Months Ended September 30, 2019 2018 Tax benefit computed at federal statutory rate $ 361,024 21.0 % $ 260,494 21.0 % Impact of REIT election (355,791) (20.7) % (289,008) (23.3) % State income tax expense (5,233) (0.3) % (6,731) (0.5) % Impact of change in deferred tax asset 86,558 5.0 % ― ― % Impact of change in valuation allowance (117,091) (6.8) % ― ― % Income tax expense $ (30,533) (1.8) % $ (35,245) (2.8) % The Company analyzed its material tax positions and determined that it has not taken any uncertain tax positions. The tax years 2016 and forward remain subject to examination by taxing authorities throughout the United States. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2019 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation - As a result of the approval of the Plan of Dissolution by its stockholders in September 2019, the Company’s financial position and results of operations for the nine months ended September 30, 2019 will be presented using two different presentations. The Company adopted the Liquidation Basis of Accounting as of September 1, 2019 and for the periods subsequent to September 1, 2019. As a result, a new statement of financial position (Statement of Net Assets) is presented, which represents the estimated amount of cash that the Company expects to collect on disposal of its assets as it carries out its Plan of Dissolution. In addition, a new statement of operations (Statement of Changes in Net Assets) reflects any changes in net assets from the original estimated values as of September 1, 2019 through the most recent period presented. 3. Summary of Significant Accounting Policies (continued) All financial results and disclosures up through August 31, 2019, prior to adopting the Liquidation Basis of Accounting, are presented based on a going concern basis (“Going Concern Basis”), which contemplated the realization of assets and liabilities in the normal course of business. As a result, the balance sheet as of December 31, 2018, and the statements of operations and the statements of cash flows for the eight months ended August 31, 2019 and the comparative nine months ended September 30, 2018 used the Going Concern Basis consistent with the presentation in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. The accompanying unaudited 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. Basis of Presentation Liquidation Basis (Post-Plan of Dissolution) – As a result of the approval of the Plan of Dissolution by its stockholders in September 2019, the Company adopted the Liquidation Basis of Accounting as of September 1, 2019 and for the periods subsequent to September 1, 2019 in accordance with generally accepted accounting principles of the United States (“GAAP”). Accordingly, as of September 1, 2019, the Company’s assets were adjusted to their estimated net realizable value, or liquidation value, which represents the estimated amount of cash that the Company will collect on disposal of its assets as it carries out the Plan of Dissolution. The liquidation value of the Company's operating properties is presented on an undiscounted basis. Estimated costs to dispose of its assets have been presented separately from the related assets. Liabilities are carried at their contractual amounts due or estimated settlement amounts. The Company accrues costs and income that it expects to incur and earn through the end of liquidation to the extent it has a reasonable basis for estimation. These amounts are classified as a liability for estimated costs in excess of estimated receipts during liquidation in the accompanying condensed consolidated statement of net assets. Actual costs and income may differ from amounts reflected in the financial statements because of inherent uncertainty in estimating future events. These differences may be material. See Note 4. "Liability for Estimated Costs in Excess of Estimated Receipts During Liquidation" for further discussion. Actual costs incurred but unpaid as of September 30, 2019 are included in accounts payable and accrued liabilities, due to related parties and other liabilities in the accompanying condensed consolidated statement of net assets. Net assets in liquidation represents the estimated liquidation value available to stockholders upon liquidation. Due to the uncertainty in the timing of the anticipated sale date(s) and the estimated cash flows, actual operating results and sale proceeds may differ materially from the amounts estimated. Basis of Presentation - - The accompanying unaudited condensed consolidated financial statements through August 31, 2019 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 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 operating results for the interim period presented. Operating results for the periods ended August 31, 2019 and September 30, 2018 were prepared on the going concern basis of accounting, which contemplates the realization of assets and liabilities in the normal course of business. Amounts as of December 31, 2018 included in the unaudited condensed consolidated financial statements have been derived from the 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, 2018. |
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. |
Reclassifications | Reclassifications – Certain amounts in the prior year’s condensed consolidated balance sheet, statement of operations and statement of cash flows have been reclassified to conform to the current year’s presentation, primarily related to the classification of the Company’s MOB property as held for sale and discontinued operations, with no effect on the other previously reported consolidated financial statements. |
Adopted Accounting Pronouncements | Adopted Accounting Pronouncements — In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“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 also requires qualitative and quantitative disclosures designed to give financial statement users additional information on the amount, timing, and uncertainty of cash flows arising from leases. In July 2018, the FASB issued ASU 2018-11, “Leases (Topic 842): Targeted Improvements,” which includes a practical expedient for lessors that allows 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. The Company elected the practical expedient and applied the guidance to all of the leases that qualified under the established criteria. In December 2018, the FASB issued ASU 2018-20, “Leases (Topic 842): Narrow-Scope Improvements for Lessors,” which addressed challenges encountered in determining certain lessor costs paid by the lessee directly to third parties by allowing lessors to exclude these costs from its variable lease payments. This amendment did not have a material impact on the Company’s financial statements and related disclosures as it conformed Accounting Standard Codification (“ASC”) 842 to the Company’s historical accounting under ASC 840. In March 2019, the FASB issued ASU 2019-01, “Leases (Topic 842): Codification Improvements,” which clarified the transition guidance related to interim disclosure requirements in the year of adoption. All of the ASC 842 ASUs are effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2018. The Company adopted these ASUs on January 1, 2019 using a modified retrospective approach, the adoption of these ASUs did not have a material impact on the Company’s consolidated results of operations or cash flows. However, the adoption of these ASUs did impact the Company’s consolidated financial position for arrangements such as ground or other leases in which the Company is the lessee. More specifically, the adoption of ASC 842 resulted in the Company recording operating lease assets and liabilities on January 1, 2019. The following table provides additional details by financial statement line item of the adjusted presentation in the Company’s consolidated financial position: As Presented Effect of As Adjusted December 31, ASC 842 January 1, 2018 Adoption 2019 Other assets $ 382,637 $ 32,500 $ 415,137 Total assets $ 67,289,375 $ 32,500 $ 67,321,875 Other liabilities $ (128,957) $ (32,500) $ (161,457) Total liabilities $ (25,624,140) $ (32,500) $ (25,656,640) 3. Summary of Significant Accounting Policies (continued) In June 2018, the FASB issued ASU 2018-07, “Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting,” which expands the scope to include share-based payment transactions for acquiring goods and services from nonemployees. The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payments. The amendments also clarify that this ASU does not apply to share-based payments used to provide financing to the issuer or awards granted in conjunction with selling of goods or services to customers as a part of a contract accounted for under Revenue from Contracts with Customers (Topic 606). The ASU is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2018. The Company adopted this ASU prospectively on January 1, 2019; the adoption of which did not have a material impact on the Company’s consolidated results of operations or cash flows. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Accounting Policies [Abstract] | |
Summary of Additional Details by Financial Statement Line Item Adjusted | The following table provides additional details by financial statement line item of the adjusted presentation in the Company’s consolidated financial position: As Presented Effect of As Adjusted December 31, ASC 842 January 1, 2018 Adoption 2019 Other assets $ 382,637 $ 32,500 $ 415,137 Total assets $ 67,289,375 $ 32,500 $ 67,321,875 Other liabilities $ (128,957) $ (32,500) $ (161,457) Total liabilities $ (25,624,140) $ (32,500) $ (25,656,640) |
Liability for Estimated Costs_2
Liability for Estimated Costs in Excess of Estimated Receipts During Liquidation (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Organization Consolidation And Presentation Of Financial Statements [Abstract] | |
Summary of Estimated Receipts and Costs | Upon transition to the Liquidation Basis of Accounting as of September 1, 2019, the Company accrued the following estimated receipts and costs expected to be incurred during liquidation: Resident fees and services $ 4,549,487 Property operating expenses (3,125,538) Property management fees (245,763 ) General and administrative (713,957 ) Interest expense (131,554 ) Liquidation transaction costs (2,605,872 ) Liability for estimated costs in excess of estimated receipts during liquidation $ (2,273,197 ) |
Summary of Change in Liquidation Liability for Estimated Costs in Excess of Estimated Receipts | The change in the liability for estimated costs in excess of estimated receipts during liquidation as of September 30, 2019 is as follows: September 1, 2019 Cash Payments (Receipts) Remeasurement of Assets and Liabilities September 30, 2019 Assets: Net inflows from real estate investments $ 1,178,186 $ (207,906) $ — $ 970,280 Liabilities: Corporate expenditures (713,957) 87,636 — (626,321) Interest expense on mortgage loans (131,554) 23,929 — (107,625) Liquidation transaction costs (2,605,872) — — (2,605,872) (3,451,383) 111,565 — (3,339,818) Total liability for estimated costs in excess of estimated receipts during liquidation $ (2,273,197) $ (96,341) $ — $ (2,369,538) |
Net Assets in Liquidation (Tabl
Net Assets in Liquidation (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Net Assets In Liquidation [Abstract] | |
Reconciliation of Shareholder's Equity to Net Assets in Liquidation | The following is a reconciliation of stockholders’ equity under the Going Concern Basis to net assets in liquidation under the Liquidation Basis of Accounting as of September 1, 2019: Stockholders’ equity as of August 31, 2019 $ 40,876,936 Increase due to estimated net realizable value of investments in real estate 5,215,743 Decrease due to adjustment of assets and liabilities to net realizable value (22,657) Liability for estimated costs in excess of estimated receipts during liquidation (2,273,197) Adjustment to reflect the change to the liquidation basis of accounting 2,919,889 Estimated value of net assets in liquidation as of September 1, 2019 $ 43,796,825 |
Revenue (Tables)
Revenue (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Revenue From Contract With Customer [Abstract] | |
Schedule of Disaggregated Revenue for Resident Fees and Services | Prior to adopting the Liquidation Basis of Accounting, the following table presents disaggregated revenue related to resident fees and services for the eight months ended August 31, 2019 and nine months ended September 30, 2018: Eight Months Ended August 31, 2019 and Nine Months Ended September 30, 2018 Type of Investment Number of Units Revenues Percentage of Revenues Resident fees and services: 2019 2018 2019 2018 2019 2018 Assisted living 129 129 $ 4,006,041 $ 2,706,757 68.6 % 72.2 % Memory care 52 52 1,758,522 998,661 30.1 % 26.6 % Other revenues ― ― 76,518 43,266 1.3 % 1.2 % 181 181 $ 5,841,081 $ 3,748,684 100.0 % 100.0 % |
Real Estate Assets, net (Tables
Real Estate Assets, net (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Real Estate [Abstract] | |
Schedule of Real Estate Assets | Prior to adopting Liquidation Basis of Accounting, the gross carrying amount and accumulated depreciation of the Company’s real estate assets as of December 31, 2018, excluding assets held for sale, are as follows: Land and land improvements $ 4,075,733 Building and building improvements 38,700,052 Furniture, fixtures and equipment 1,872,959 Less: accumulated depreciation (1,679,564) Real estate investment properties, net $ 42,969,180 |
Intangibles, net (Tables)
Intangibles, net (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Goodwill And Intangible Assets Disclosure [Abstract] | |
Schedule of Gross Carrying Amount and Accumulated Amortization of Intangible Assets Excluding Assets Held for Sale | Prior to adopting Liquidation Basis of Accounting, the gross carrying amount and accumulated amortization of the Company’s intangible assets as of December 31, 2018, excluding assets held for sale, are as follows: December 31, 2018 In-place resident agreement intangibles $ 2,569,419 Less: accumulated amortization (1,071,610) Intangible assets, net $ 1,497,809 |
Assets and Associated Liabili_2
Assets and Associated Liabilities Held for Sale and Discontinued Operations (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Real Estate Liabilities Associated With Assets Held For Development And Sale [Abstract] | |
Schedule of Assets Classified as Held for Sale and Liabilities Associated with Those Assets Held for Sale | As of December 31, 2018, the amounts classified as assets held for sale and the liabilities associated with those assets held for sale consisted of the following: December 31, 2018 Real estate investment properties, net $ 10,603,833 Intangibles, net 3,485,818 Other assets 112,551 Assets held for sale, net $ 14,202,202 Mortgage loan, net $ 5,532,346 Accounts payable and accrued liabilities 391,735 Other liabilities 323,106 Liabilities associated with assets held for sale $ 6,247,187 |
Schedule of Disposal Groups Including Discontinued Operations Income Statement | The following table is a summary of the Company’s income from discontinued operations for the two months and eight months ended August 31, 2019 and the quarter and nine months ended September 30, 2018: Two Months Ended Quarter Ended Eight Months Ended Nine Months Ended August 31, September 30, August 31, September 30, 2019 2018 2019 2018 Revenues: Rental income and related revenues $ — $ 422,967 $ 486,294 $ 1,253,209 Operating expenses: Property operating expenses — 196,932 165,782 547,152 General and administrative expenses — (110) 791 1,275 Property management fees — 11,538 13,869 32,931 Depreciation and amortization — 131,636 43,793 393,565 Total operating expenses — 339,996 224,235 974,923 Gain on sale of real estate — — 1,566,321 — Operating income — 82,971 1,828,380 278,286 Other expense: Interest expense and loan cost amortization — (69,190) (161,512) (201,711) Total other expense — (69,190) (161,512) (201,711) Income before income taxes 1,666,868 76,575 Income tax expense — — — — Income from discontinued operations $ — $ 13,781 $ 1,666,868 $ 76,575 |
Indebtedness (Tables)
Indebtedness (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Debt Disclosure [Abstract] | |
Schedule of Indebtedness | The following table provides details of the Company’s indebtedness as of September 30, 2019 and December 31, 2018: September 30, December 31, 2019 2018 Mortgage loans, net: Mortgage loans (1) $ 6,150,000 $ 18,900,000 Loan costs, net — (2) (234,987) Total mortgage loans, net $ 6,150,000 $ 18,665,013 FOOTNOTES: (1) As of September 30, 2019, the Company’s mortgage loans are collateralized by its Summer Vista and Riverview properties. (2) As described in Note 3. "Summary of Significant Accounting Policies," the Company adopted the Liquidation Basis of Accounting which requires the Company to record indebtedness at its contractual amounts. |
Schedule of Future Principal Payments and Maturity | The following is a schedule of future principal payments and maturity for the Company’s mortgage loans for the remainder of 2019, each of the next four years and thereafter, in the aggregate, as of September 30, 2019: 2019 $ — 2020 31,849 2021 85,947 2022 1,192,460 2023 4,839,744 Thereafter — $ 6,150,000 |
Related Party Arrangements (Tab
Related Party Arrangements (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Related Party Arrangement, Fees and Expenses Incurred By, Reimbursable, Settled and Paid | 1 1 . Related Party Arrangements (continued) The expenses incurred by and reimbursable to the Company’s related parties, including amounts included in income from discontinued operations, for the quarter and nine months ended September 30, 2019 and 2018, and related amounts unpaid as of September 30, 2019 and December 31, 2018 are as follows: Quarter Ended Nine Months Ended Unpaid amounts as of (1) September 30, September 30, September 30, December 31, 2019 2018 2019 2018 2019 2018 Reimbursable expenses: Operating expenses (3) $ 170,893 $ 227,393 $ 580,462 $ 754,188 $ 78,079 $ 85,902 Acquisition fees and expenses ― 8,680 ― 10,183 ― — 170,893 236,073 580,462 764,371 78,079 85,902 Asset management fees (4) 45,650 87,488 196,136 229,088 ― — Investment services fee (5) ― 545,625 ― 545,625 ― — $ 216,543 $ 869,186 $ 776,598 $ 1,539,084 $ 78,079 $ 85,902 FOOTNOTES: (1) Amounts are recorded as due to related parties in the accompanying condensed consolidated balance sheets. ( 2 ) (3) ( 4 ) (5) |
Dealer Manager | |
Related Party Arrangement, Fees and Expenses Incurred By, Reimbursable, Settled and Paid | The fees payable through the termination of the Offering in October 2018 to the Dealer Manager for the quarter and nine months ended September 30, 2019 and 2018, and related amounts unpaid as of September 30, 2019 and December 31, 2018 were as follows: Quarter Ended Nine Months Ended Unpaid amounts as of (1) September 30, September 30, September 30, December 31, 2019 2018 2019 2018 2019 2018 Selling commissions (2) $ — $ 121,413 $ — $ 343,087 $ — $ — Dealer manager fees (2) — 153,073 — 429,356 — — Distribution and stockholder servicing fees (2) — 307,630 — 822,477 — — $ — $ 582,116 $ — $ 1,594,920 $ — $ — |
Expense Support Agreement | |
Related Party Arrangement, Fees and Expenses Incurred By, Reimbursable, Settled and Paid | The following fees for services rendered were settled in the form of restricted stock pursuant to the Expense Support Agreement for the quarter and nine months ended September 30, 2019 and 2018 and cumulatively through the termination date effective April 1, 2019: Quarter Ended Nine Months Ended Cumulative September 30, September 30, Fees 2019 2018 2019 2018 Settled Fees for services rendered: Asset management fees $ ― $ 87,488 $ 99,417 $ 229,088 $ 578,171 Advisor personnel expenses (1) ― 112,784 127,950 362,555 1,058,676 Total fees for services rendered $ ― $ 200,272 $ 227,367 $ 591,643 $ 1,636,847 Then-current NAV $ 9.92 $ 10.06 $ 9.92 $ 10.06 $ 9.92 Restricted stock shares (2) ― 19,908 22,920 58,811 164,210 Cash distributions on restricted stock (3) $ ― $ 8,113 $ 8,113 $ 16,226 $ 16,226 Stock dividends on restricted stock (4) ― 170 ― 340 340 FOOTNOTES : (1) Amounts consisted 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 to the Advisor pursuant to the Expense Support Agreement through its termination effective April 1, 2019. No fair value was assigned to the restricted stock shares as the shares do not vest until a liquidity event is consummated and certain market conditions are achieved. In addition, the restricted stock shares will be treated as unissued for financial reporting purposes until the vesting criteria are met. (3) The cash distributions were recognized as compensation expense as issued and included in general and administrative expense in the accompanying condensed consolidated statements of operations. (4) The par value of the stock dividends was recognized as compensation expense as issued and included in general and administrative expense in the accompanying condensed consolidated statements of operations. |
Income Taxes (Tables)
Income Taxes (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Income Tax Disclosure [Abstract] | |
Components of Income Tax Expense | The components of income tax expense for each period are as follows: Two Months Ended Quarter Ended Eight Months Ended Nine Months Ended August 31, September 30, August 31, September 30, 2019 2018 2019 2018 Current: Federal $ ― $ 8,150 $ ― $ (26,350) State ― 3,040 ― (5,560) Total current expense ― 11,190 ― (31,910) Deferred: Federal ― (838) (25,300) (2,164) State ― (414) (5,233) (1,171) Total deferred expense ― (1,252) (30,533) (3,335) Income tax expense $ ― $ 9,938 $ (30,533) $ (35,245) |
Significant Components of Deferred Tax Assets | Significant components of the Company’s deferred tax assets as of December 31, 2018 are as follows: December 31, 2018 Carryforwards of net operating loss $ ― Prepaid rent 30,533 Valuation allowance ― Deferred tax assets, net $ 30,533 |
Reconciliation of Income Tax Expense | A reconciliation of the income tax expense for the two months and eight months ended August 31, 2019 and the quarter and nine months ended September 30, 2018 computed at the statutory federal tax rate on income (loss) before income taxes is as follows: Two Months Ended August 31, Quarter Ended September 30, 2019 2018 Tax benefit computed at federal statutory rate $ 98,564 21.0 % $ 101,305 21.0 % Impact of REIT election (98,564) (21.0) % (93,991) (19.5) % State income tax expense ― ― % 2,624 0.5 % Impact of change in deferred tax asset 11,297 3.6 % ― ― % Impact of change in valuation allowance (11,297) (3.6) % ― ― % Income tax expense $ ― ― % $ 9,938 2.0 % Eight Months Ended August 31, Nine Months Ended September 30, 2019 2018 Tax benefit computed at federal statutory rate $ 361,024 21.0 % $ 260,494 21.0 % Impact of REIT election (355,791) (20.7) % (289,008) (23.3) % State income tax expense (5,233) (0.3) % (6,731) (0.5) % Impact of change in deferred tax asset 86,558 5.0 % ― ― % Impact of change in valuation allowance (117,091) (6.8) % ― ― % Income tax expense $ (30,533) (1.8) % $ (35,245) (2.8) % |
Organization - Additional Infor
Organization - Additional Information (Details) | 1 Months Ended | 3 Months Ended | 9 Months Ended | ||||
Mar. 31, 2019USD ($) | Sep. 30, 2019Propertyshares | Sep. 30, 2018shares | Sep. 30, 2019USD ($)Propertyshares | Sep. 30, 2018USD ($)shares | Mar. 20, 2019 | Mar. 02, 2016USD ($) | |
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items] | |||||||
Aggregate offering proceeds | $ 19,009,962 | ||||||
Common stock, shares sold | shares | 0 | 700,000 | 0 | 700,000 | |||
Reduction in AUM fees percentage of average invested assets | 0.40% | 0.40% | |||||
Seniors Housing Communities | |||||||
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items] | |||||||
Number of properties owned | Property | 2 | 2 | |||||
Expense Support Agreement | |||||||
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items] | |||||||
Agreement effective termination date | Apr. 1, 2019 | ||||||
Medical Office Building, Mid America Surgery Institute | Discontinued Operations, Held-for-sale | Sale Agreement | HCP Medical Office Buildings, LLC | |||||||
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items] | |||||||
Gross sales price of properties | $ 15,400,000 | ||||||
Initial Public Offering | |||||||
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items] | |||||||
Common stock, value authorized | $ 1,750,000,000 | ||||||
Aggregate offering proceeds | $ 51,200,000 | ||||||
Common stock, shares sold | shares | 4,900,000 | ||||||
Reinvestment Plan | |||||||
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items] | |||||||
Common stock, value authorized | $ 250,000,000 | ||||||
Aggregate offering proceeds | $ 1,200,000 | ||||||
Common stock, shares sold | shares | 100,000 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies - Summary of Additional Details by Financial Statement Line Item Adjusted (Details) - USD ($) | Jan. 01, 2019 | Dec. 31, 2018 |
New Accounting Pronouncements Or Change In Accounting Principle [Line Items] | ||
Other assets | $ 382,637 | |
Total assets | 67,289,375 | |
Other liabilities | (128,957) | |
Total liabilities | $ (25,624,140) | |
ASC 842 | ||
New Accounting Pronouncements Or Change In Accounting Principle [Line Items] | ||
Other assets | $ 415,137 | |
Total assets | 67,321,875 | |
Other liabilities | (161,457) | |
Total liabilities | (25,656,640) | |
ASC 842 | Effect of ASC 842 Adoption | ||
New Accounting Pronouncements Or Change In Accounting Principle [Line Items] | ||
Other assets | 32,500 | |
Total assets | 32,500 | |
Other liabilities | (32,500) | |
Total liabilities | $ (32,500) |
Liability for Estimated Costs_3
Liability for Estimated Costs in Excess of Estimated Receipts During Liquidation - Summary of Estimated Receipts and Costs (Details) - USD ($) | Sep. 30, 2019 | Sep. 01, 2019 | Aug. 31, 2019 |
Organization Consolidation And Presentation Of Financial Statements [Abstract] | |||
Resident fees and services | $ 4,549,487 | ||
Property operating expenses | (3,125,538) | ||
Property management fees | (245,763) | ||
General and administrative | (713,957) | ||
Interest expense | (131,554) | ||
Liquidation transaction costs | (2,605,872) | ||
Liability for estimated costs in excess of estimated receipts during liquidation | $ (2,369,538) | $ (2,273,197) | $ (2,273,197) |
Liability for Estimated Costs_4
Liability for Estimated Costs in Excess of Estimated Receipts During Liquidation - Summary of Change in Liquidation Liability for Estimated Costs in Excess of Estimated Receipts (Details) | 1 Months Ended |
Sep. 30, 2019USD ($) | |
Summary Of Liquidation [Line Items] | |
Beginning Balance September 1,2019 | $ (2,273,197) |
Cash Payments (Receipts) | (96,341) |
Ending Balance September 30,2019 | (2,369,538) |
Corporate Expenditures | |
Summary Of Liquidation [Line Items] | |
Beginning Balance September 1,2019 | (713,957) |
Cash Payments (Receipts) | 87,636 |
Ending Balance September 30,2019 | (626,321) |
Interest Expense on Mortgage Loans | |
Summary Of Liquidation [Line Items] | |
Beginning Balance September 1,2019 | (131,554) |
Cash Payments (Receipts) | 23,929 |
Ending Balance September 30,2019 | (107,625) |
Liquidation Transaction Costs | |
Summary Of Liquidation [Line Items] | |
Beginning Balance September 1,2019 | (2,605,872) |
Ending Balance September 30,2019 | (2,605,872) |
Liquidation Liability Components | |
Summary Of Liquidation [Line Items] | |
Beginning Balance September 1,2019 | (3,451,383) |
Cash Payments (Receipts) | 111,565 |
Ending Balance September 30,2019 | (3,339,818) |
Net Inflows From Real Estate Investments | |
Summary Of Liquidation [Line Items] | |
Beginning Balance September 1,2019 | 1,178,186 |
Cash Payments (Receipts) | (207,906) |
Ending Balance September 30,2019 | $ 970,280 |
Net Assets in Liquidation - Rec
Net Assets in Liquidation - Reconciliation of Shareholder's Equity to Net Assets Liquidation (Details) - Liquidation Basis - USD ($) | Sep. 30, 2019 | Sep. 01, 2019 | Aug. 31, 2019 |
Liquidation Basis Of Accounting [Line Items] | |||
Stockholders’ equity as of August 31, 2019 | $ 40,876,936 | ||
Increase due to estimated net realizable value of investments in real estate | $ 5,215,743 | ||
Decrease due to adjustment of assets and liabilities to net realizable value | (22,657) | ||
Liability for estimated costs in excess of estimated receipts during liquidation | (2,273,197) | ||
Adjustment to reflect the change to the liquidation basis of accounting | 2,919,889 | ||
Estimated value of net assets in liquidation as of September 1, 2019 | $ 43,678,364 | $ 43,796,825 | $ 43,796,825 |
Net Assets in Liquidation - Add
Net Assets in Liquidation - Additional Information (Detail) | 1 Months Ended |
Sep. 30, 2019USD ($) | |
Net Assets In Liquidation [Abstract] | |
Net assets in liquidation decreased | $ (118,000) |
Revenue - Schedule of Disaggreg
Revenue - Schedule of Disaggregated Revenue for Resident Fees and Services (Details) | 2 Months Ended | 3 Months Ended | 8 Months Ended | 9 Months Ended |
Aug. 31, 2019USD ($) | Sep. 30, 2018USD ($) | Aug. 31, 2019USD ($)ResidentialUnit | Sep. 30, 2018USD ($)ResidentialUnit | |
Disaggregation Of Revenue [Line Items] | ||||
Resident fees and services: Number of Units | ResidentialUnit | 181 | 181 | ||
Resident fees and services: Revenues | $ 1,490,631 | $ 1,483,924 | $ 5,841,081 | $ 3,748,684 |
Resident fees and services: Percentage of Revenues | 100.00% | 100.00% | ||
Assisted Living | ||||
Disaggregation Of Revenue [Line Items] | ||||
Resident fees and services: Number of Units | ResidentialUnit | 129 | 129 | ||
Resident fees and services: Revenues | $ 4,006,041 | $ 2,706,757 | ||
Resident fees and services: Percentage of Revenues | 68.60% | 72.20% | ||
Memory Care | ||||
Disaggregation Of Revenue [Line Items] | ||||
Resident fees and services: Number of Units | ResidentialUnit | 52 | 52 | ||
Resident fees and services: Revenues | $ 1,758,522 | $ 998,661 | ||
Resident fees and services: Percentage of Revenues | 30.10% | 26.60% | ||
Other Revenues | ||||
Disaggregation Of Revenue [Line Items] | ||||
Resident fees and services: Revenues | $ 76,518 | $ 43,266 | ||
Resident fees and services: Percentage of Revenues | 1.30% | 1.20% |
Real Estate Assets, net - Sched
Real Estate Assets, net - Schedule of Real Estate Assets (Details) | Dec. 31, 2018USD ($) |
Real Estate [Abstract] | |
Land and land improvements | $ 4,075,733 |
Building and building improvements | 38,700,052 |
Furniture, fixtures and equipment | 1,872,959 |
Less: accumulated depreciation | (1,679,564) |
Real estate investment properties, net | $ 42,969,180 |
Real Estate Assets, net - Addit
Real Estate Assets, net - Additional Information (Details) - USD ($) $ in Millions | 2 Months Ended | 3 Months Ended | 8 Months Ended | 9 Months Ended |
Aug. 31, 2019 | Sep. 30, 2018 | Aug. 31, 2019 | Sep. 30, 2018 | |
Real Estate Investment Properties | ||||
Real Estate Properties [Line Items] | ||||
Depreciation expense | $ 0.3 | $ 0.3 | $ 1.1 | $ 0.7 |
Intangibles, net - Schedule of
Intangibles, net - Schedule of Gross Carrying Amount and Accumulated Amortization of Intangible Assets Excluding Assets Held for Sale (Details) | Dec. 31, 2018USD ($) |
Goodwill And Intangible Assets Disclosure [Abstract] | |
In-place resident agreement intangibles | $ 2,569,419 |
Less: accumulated amortization | (1,071,610) |
Intangible assets, net | $ 1,497,809 |
Intangibles, net - Additional I
Intangibles, net - Additional Information (Details) - USD ($) $ in Millions | 2 Months Ended | 3 Months Ended | 8 Months Ended | 9 Months Ended |
Aug. 31, 2019 | Sep. 30, 2018 | Aug. 31, 2019 | Sep. 30, 2018 | |
Depreciation And Amortization | ||||
Finite Lived Intangible Assets And Liabilities [Line Items] | ||||
Amortization expense on intangible assets | $ 0.2 | $ 0.2 | $ 0.7 | $ 0.4 |
Assets and Associated Liabili_3
Assets and Associated Liabilities Held for Sale and Discontinued Operations - Additional Information (Details) - USD ($) | 1 Months Ended | 8 Months Ended |
May 31, 2019 | Aug. 31, 2019 | |
Long Lived Assets Held For Sale [Line Items] | ||
Proceeds from sale of real estate | $ 15,044,231 | |
Medical Office Building, Mid America Surgery Institute | Discontinued Operations, Held-for-sale | ||
Long Lived Assets Held For Sale [Line Items] | ||
Proceeds from sale of real estate | $ 1,600,000 |
Assets and Associated Liabili_4
Assets and Associated Liabilities Held for Sale and Discontinued Operations - Schedule of Assets Classified as Held for Sale and Liabilities Associated with Those Assets Held for Sale (Details) | Dec. 31, 2018USD ($) |
Long Lived Assets Held For Sale [Line Items] | |
Assets held for sale, net | $ 14,202,202 |
Liabilities associated with assets held for sale | 6,247,187 |
Medical Office Building, Mid America Surgery Institute | Discontinued Operations, Held-for-sale | |
Long Lived Assets Held For Sale [Line Items] | |
Real estate investment properties, net | 10,603,833 |
Intangibles, net | 3,485,818 |
Other assets | 112,551 |
Assets held for sale, net | 14,202,202 |
Mortgage loan, net | 5,532,346 |
Accounts payable and accrued liabilities | 391,735 |
Other liabilities | 323,106 |
Liabilities associated with assets held for sale | $ 6,247,187 |
Assets and Associated Liabili_5
Assets and Associated Liabilities Held for Sale And Discontinued Operations - Schedule of Disposal Groups Including Discontinued Operations Income Statement (Details) - USD ($) | 3 Months Ended | 8 Months Ended | 9 Months Ended |
Sep. 30, 2018 | Aug. 31, 2019 | Sep. 30, 2018 | |
Other expense: | |||
Income from discontinued operations | $ 13,781 | $ 1,666,868 | $ 76,575 |
Medical Office Building, Mid America Surgery Institute | Discontinued Operations, Held-for-sale | |||
Revenues: | |||
Rental income and related revenues | 422,967 | 486,294 | 1,253,209 |
Operating expenses: | |||
Property operating expenses | 196,932 | 165,782 | 547,152 |
General and administrative expenses | (110) | 791 | 1,275 |
Property management fees | 11,538 | 13,869 | 32,931 |
Depreciation and amortization | 131,636 | 43,793 | 393,565 |
Total operating expenses | 339,996 | 224,235 | 974,923 |
Gain on sale of real estate | 1,566,321 | ||
Operating income | 82,971 | 1,828,380 | 278,286 |
Other expense: | |||
Interest expense and loan cost amortization | (69,190) | (161,512) | (201,711) |
Total other expense | (69,190) | (161,512) | (201,711) |
Income before income taxes | 1,666,868 | 76,575 | |
Income from discontinued operations | $ 13,781 | $ 1,666,868 | $ 76,575 |
Indebtedness - Additional Infor
Indebtedness - Additional Information (Details) - USD ($) $ in Millions | 1 Months Ended | ||
May 31, 2019 | Sep. 30, 2019 | Dec. 31, 2018 | |
Level 3 | |||
Debt Instrument [Line Items] | |||
Mortgage loans, fair market value | $ 6.1 | $ 18.9 | |
Medical Office Building, Mid America Surgery Institute | Summer Vista Assisted Living | Mortgage Loan | |||
Debt Instrument [Line Items] | |||
Repayments debt | $ 12.8 | ||
Loss on extinguishment of debt | $ 0.1 |
Indebtedness - Schedule of Inde
Indebtedness - Schedule of Indebtedness (Details) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 | |
Mortgage loans, net: | |||
Mortgage loans | [1] | $ 6,150,000 | $ 18,900,000 |
Loan costs, net | (234,987) | ||
Total mortgage loans, net | $ 6,150,000 | $ 18,665,013 | |
[1] | As of September 30, 2019, the Company’s mortgage loans are collateralized by its Summer Vista and Riverview properties. |
Indebtedness - Schedule of Futu
Indebtedness - Schedule of Future Principal Payments and Maturity (Details) | Sep. 30, 2019USD ($) |
Debt Disclosure [Abstract] | |
2020 | $ 31,849 |
2021 | 85,947 |
2022 | 1,192,460 |
2023 | 4,839,744 |
Mortgage loans | $ 6,150,000 |
Related Party Arrangements - Ad
Related Party Arrangements - Additional Information (Details) | 1 Months Ended | 3 Months Ended | 6 Months Ended | 8 Months Ended | 9 Months Ended | ||||
Mar. 31, 2019 | Oct. 31, 2018 | Sep. 30, 2019USD ($)$ / shares | Sep. 30, 2018USD ($)$ / sharesshares | Sep. 30, 2019USD ($)shares | Aug. 31, 2019USD ($) | Sep. 30, 2019USD ($)Quarter$ / shares | Sep. 30, 2018USD ($)$ / sharesshares | Mar. 20, 2019 | |
Related Party Transaction [Line Items] | |||||||||
Conversion of stock, description | The Class T and Class I shares converted into Class A shares on a one-for-one basis because the then-current estimated net asset value (“NAV”) per share of $10.06 was the same for all share classes. | ||||||||
Then-current estimated NAV per share | $ / shares | $ 10.06 | ||||||||
Distribution and stockholder servicing fees liability | $ 1,400,000 | $ 1,400,000 | $ 1,400,000 | ||||||
Percentage of AUM fee equal to advisor AUM fees, paid | 0.80% | ||||||||
Reduction in AUM fees percentage of average invested assets | 0.40% | 0.40% | |||||||
Operating expenses reimbursement percentage of average invested assets | 2.00% | ||||||||
Operating expenses reimbursement percentage of net income | 25.00% | ||||||||
No. of consecutive fiscal quarters of net income calculation for operating expenses reimbursement | Quarter | 4 | ||||||||
Operating expenses in excess of limitation | $ 35,000 | ||||||||
Operating expenses in excess of limitation approved | 900,000 | ||||||||
Cash distributions paid | $ 705,473 | $ 597,676 | |||||||
Accrued advisor personal expenses | $ 100,000 | 100,000 | $ 100,000 | ||||||
Expense Support Agreement | |||||||||
Related Party Transaction [Line Items] | |||||||||
Then-current estimated NAV per share | $ / shares | $ 9.92 | $ 10.06 | $ 9.92 | $ 10.06 | |||||
Agreement effective termination date | Apr. 1, 2019 | ||||||||
Advisor | |||||||||
Related Party Transaction [Line Items] | |||||||||
Cash distributions paid | $ 38,000 | $ 0 | $ 114,000 | ||||||
Regular cash distributions suspended date | Apr. 1, 2019 | ||||||||
Stock dividends issued (in shares) | shares | 0 | ||||||||
Class A Common Stock | |||||||||
Related Party Transaction [Line Items] | |||||||||
Stock dividends issued (in shares) | shares | 2,819 | 8,021 | |||||||
Class A Common Stock | Advisor | |||||||||
Related Party Transaction [Line Items] | |||||||||
Cash distributions paid | $ 38,000 | ||||||||
Stock dividends issued (in shares) | shares | 1,000 | 2,000 | |||||||
Class T Common Stock | |||||||||
Related Party Transaction [Line Items] | |||||||||
Distribution and stockholder servicing fee | 1.00% | ||||||||
Stock dividends issued (in shares) | shares | 9,622 | 24,541 | |||||||
Class I Common Stock | |||||||||
Related Party Transaction [Line Items] | |||||||||
Distribution and stockholder servicing fee | 0.50% | ||||||||
Stock dividends issued (in shares) | shares | 1,229 | 2,696 | |||||||
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% |
Related Party Arrangements - Su
Related Party Arrangements - Summary of Fees for Services Rendered Settled in Restricted Stock (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Apr. 01, 2019 | ||
Fees for services rendered: | ||||||
Asset management fees | [1] | $ 45,650 | $ 87,488 | $ 196,136 | $ 229,088 | |
Then-current NAV | $ 10.06 | |||||
Expense Support Agreement | ||||||
Fees for services rendered: | ||||||
Asset management fees | 87,488 | $ 99,417 | 229,088 | |||
Advisor personnel expenses | [2] | 112,784 | 127,950 | 362,555 | ||
Total fees for services rendered | $ 200,272 | $ 227,367 | $ 591,643 | |||
Asset management fees | $ 578,171 | |||||
Advisor personnel expenses | [2] | 1,058,676 | ||||
Total fees for services rendered | $ 1,636,847 | |||||
Then-current NAV | $ 9.92 | $ 10.06 | $ 9.92 | $ 10.06 | ||
Then-current NAV | $ 9.92 | |||||
Expense Support Agreement | Restricted Stock | ||||||
Fees for services rendered: | ||||||
Restricted stock shares | [3] | 19,908 | 22,920 | 58,811 | ||
Cash distributions on restricted stock | [4] | $ 8,113 | $ 8,113 | $ 16,226 | ||
Stock dividends issued (in shares) | [5] | 170 | 340 | |||
Restricted stock shares | [3] | 164,210 | ||||
Cash distributions on restricted stock | [4] | $ 16,226 | ||||
Stock dividends on restricted stock | [5] | 340 | ||||
[1] | In March 2019, the Company’s board of directors and its Advisor agreed to terminate the Expense Support Agreement effective April 1, 2019; as such, no further expense support was provided effective April 1, 2019. For the nine months ended September 30, 2019, approximately $0.1 million of asset management fees were settled in accordance with the terms of the Expense Support Agreement through its termination and, as such, asset management fees were reduced by approximately $0.1 million for the nine months ended September 30, 2019. For the quarter and nine months ended September 30, 2018, approximately $0.1 million and $0.2 million, respectively, of asset management fees 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 $0.2 million, respectively, for the quarter and nine months ended September 30, 2018. In addition, for the quarter and nine months ended September 30, 2019, the Advisor earned and waived approximately $46,000 and $0.1 million, respectively, of asset management fees, which will not be reimbursed by the Company in future periods, and as such asset management fees were reduced by approximately $46,000 and $0.1 million, respectively, for the quarter and nine months ended September 30, 2019. | |||||
[2] | Amounts consisted of personnel and related overhead costs of the Advisor or its affiliates (which, in general, are those expenses relating to the Company’s administration on an on-going basis) that are reimbursable by the Company. | |||||
[3] | Represents restricted stock shares issued to the Advisor pursuant to the Expense Support Agreement through its termination effective April 1, 2019. No fair value was assigned to the restricted stock shares as the shares do not vest until a liquidity event is consummated and certain market conditions are achieved. In addition, the restricted stock shares will be treated as unissued for financial reporting purposes until the vesting criteria are met. | |||||
[4] | The cash distributions were recognized as compensation expense as issued and included in general and administrative expense in the accompanying condensed consolidated statements of operations. | |||||
[5] | The par value of the stock dividends was recognized as compensation expense as issued and included in general and administrative expense in the accompanying condensed consolidated statements of operations. |
Related Party Arrangements - _2
Related Party Arrangements - Summary of Fees for Services Rendered Settled in Restricted Stock (Parenthetical) (Details) | 9 Months Ended |
Sep. 30, 2019USD ($) | |
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 | 9 Months Ended | ||||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | ||
Related Party Transaction [Line Items] | ||||||
Distribution and stockholder servicing fees | $ 1,395,460 | |||||
Acquisition fees and expenses | 818 | |||||
Total reimbursable expenses | $ 170,893 | $ 236,073 | $ 580,462 | 764,371 | ||
Asset management fees | [1] | 45,650 | 87,488 | 196,136 | 229,088 | |
Investment services fee | [2] | 545,625 | 545,625 | |||
Total reimbursable expenses, net | 216,543 | 869,186 | 776,598 | 1,539,084 | ||
Operating expenses, Unpaid amount | [3] | 78,079 | 78,079 | $ 85,902 | ||
Total reimbursable expenses due | 78,079 | 78,079 | 85,902 | |||
Related parties, Unpaid amount | 78,079 | 78,079 | $ 85,902 | |||
Reimbursable Expense | ||||||
Related Party Transaction [Line Items] | ||||||
Operating expenses | [3] | $ 170,893 | 227,393 | $ 580,462 | 754,188 | |
Acquisition fees and expenses | 8,680 | 10,183 | ||||
Dealer Manager | ||||||
Related Party Transaction [Line Items] | ||||||
Selling commissions | [4] | 121,413 | 343,087 | |||
Dealer manager fees | [4] | 153,073 | 429,356 | |||
Distribution and stockholder servicing fees | [4] | 307,630 | 822,477 | |||
Total offering expenses | $ 582,116 | $ 1,594,920 | ||||
[1] | In March 2019, the Company’s board of directors and its Advisor agreed to terminate the Expense Support Agreement effective April 1, 2019; as such, no further expense support was provided effective April 1, 2019. For the nine months ended September 30, 2019, approximately $0.1 million of asset management fees were settled in accordance with the terms of the Expense Support Agreement through its termination and, as such, asset management fees were reduced by approximately $0.1 million for the nine months ended September 30, 2019. For the quarter and nine months ended September 30, 2018, approximately $0.1 million and $0.2 million, respectively, of asset management fees 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 $0.2 million, respectively, for the quarter and nine months ended September 30, 2018. In addition, for the quarter and nine months ended September 30, 2019, the Advisor earned and waived approximately $46,000 and $0.1 million, respectively, of asset management fees, which will not be reimbursed by the Company in future periods, and as such asset management fees were reduced by approximately $46,000 and $0.1 million, respectively, for the quarter and nine months ended September 30, 2019. | |||||
[2] | For the quarter and nine months ended September 30, 2018, the Company incurred approximately $0.5 million in investment services fees, all of which were capitalized and included in real estate investment properties, net in the accompanying condensed consolidated balance sheets. No such fees were incurred for the quarter and nine months ended September 30, 2019. | |||||
[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. In March 2019, the Company’s board of directors and its Advisor agreed to terminate the Expense Support Agreement effective April 1, 2019. As such, there were was no expense support provided by the Advisor for the quarter ended September 30, 2019. For the nine months ended September 30, 2019, approximately $0.1 million of personnel expenses of affiliates of the Advisor were settled in accordance with the terms of the Expense Support Agreement and as such general and administrative expenses were reduced by approximately $0.1 million for the nine months ended September 30, 2019. For the quarter and nine months ended September 30, 2018, approximately $0.1 million and $0.4 million, respectively, of personnel expenses of affiliates of the Advisor were settled in accordance with the terms of the Expense Support Agreement and as such general and administrative expenses were reduced by approximately $0.1 million and $0.4 million, respectively, for the quarter and nine months ended September 30, 2018. | |||||
[4] | Amounts are recorded as stock issuance and offering costs in the accompanying condensed consolidated statements of stockholders’ equity. |
Related Party Arrangements - _3
Related Party Arrangements - Fees and Expenses Incurred and Reimbursable to Affiliates and Related Parties (Parenthetical) (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | ||
Related Party Transaction [Line Items] | |||||
Investment services fees | [1] | $ 545,625 | $ 545,625 | ||
Investment Services Fees | |||||
Related Party Transaction [Line Items] | |||||
Investment services fees | $ 0 | 500,000 | $ 0 | 500,000 | |
Expense Support Agreement | |||||
Related Party Transaction [Line Items] | |||||
Advisor personnel expenses | 0 | 100,000 | 100,000 | 400,000 | |
Reduction in general and administrative expenses | 100,000 | 100,000 | 400,000 | ||
Asset management fees | 46,000 | 100,000 | 100,000 | 200,000 | |
Reduction in asset management fees | $ 46,000 | $ 100,000 | 100,000 | $ 200,000 | |
Reduction in asset management fees left | $ 100,000 | ||||
[1] | For the quarter and nine months ended September 30, 2018, the Company incurred approximately $0.5 million in investment services fees, all of which were capitalized and included in real estate investment properties, net in the accompanying condensed consolidated balance sheets. No such fees were incurred for the quarter and nine months ended September 30, 2019. |
Equity - Additional Information
Equity - Additional Information (Details) - USD ($) | 1 Months Ended | 3 Months Ended | 6 Months Ended | 8 Months Ended | 9 Months Ended | ||
Oct. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Aug. 31, 2019 | Sep. 30, 2019 | Sep. 30, 2018 | |
Schedule Of Capitalization Equity [Line Items] | |||||||
Subscription proceeds pursuant to the Reinvestment Plan | $ 0 | $ 19,800,000 | $ 0 | $ 19,800,000 | |||
Subscription proceeds pursuant to the Reinvestment Plan, shares | 0 | 2,000,000 | 0 | 2,000,000 | |||
Proceeds from public offering | $ 0 | $ 7,200,000 | $ 0 | $ 7,200,000 | |||
Common stock, shares sold | 0 | 700,000 | 0 | 700,000 | |||
Cash distributions declared | $ 554,780 | $ 0 | $ 705,473 | $ 1,440,153 | |||
Cash distributions paid | $ 705,473 | 597,676 | |||||
Redemptions of common stock | $ 0 | $ 33,000 | $ 185,460 | ||||
Redemption of common stock, per share | $ 10.05 | $ 10.05 | |||||
Reinvestment Plan | |||||||
Schedule Of Capitalization Equity [Line Items] | |||||||
Common stock, shares sold | 100,000 | ||||||
Cash distributions declared | $ 300,000 | $ 0 | $ 800,000 |
Income Taxes - Components of In
Income Taxes - Components of Income Tax Expense (Details) - USD ($) | 3 Months Ended | 8 Months Ended | 9 Months Ended |
Sep. 30, 2018 | Aug. 31, 2019 | Sep. 30, 2018 | |
Current: | |||
Federal | $ 8,150 | $ (26,350) | |
State | 3,040 | (5,560) | |
Total current expense | 11,190 | (31,910) | |
Deferred: | |||
Federal | (838) | $ (25,300) | (2,164) |
State | (414) | (5,233) | (1,171) |
Total deferred expense | (1,252) | (30,533) | (3,335) |
Income tax expense | $ 9,938 | $ (30,533) | $ (35,245) |
Income Taxes - Significant Comp
Income Taxes - Significant Components of Deferred Tax Assets (Details) | Dec. 31, 2018USD ($) |
Income Tax Disclosure [Abstract] | |
Prepaid rent | $ 30,533 |
Deferred tax assets, net | $ 30,533 |
Income Taxes - Reconciliation o
Income Taxes - Reconciliation of Income Tax Expense (Details) - USD ($) | 2 Months Ended | 3 Months Ended | 8 Months Ended | 9 Months Ended |
Aug. 31, 2019 | Sep. 30, 2018 | Aug. 31, 2019 | Sep. 30, 2018 | |
Income Tax Disclosure [Abstract] | ||||
Tax benefit computed at federal statutory rate | $ 98,564 | $ 101,305 | $ 361,024 | $ 260,494 |
Impact of REIT election | (98,564) | (93,991) | (355,791) | (289,008) |
State income tax expense | 2,624 | (5,233) | (6,731) | |
Impact of change in deferred tax asset | 11,297 | 86,558 | ||
Impact of change in valuation allowance | $ (11,297) | (117,091) | ||
Income tax expense | $ 9,938 | $ (30,533) | $ (35,245) | |
Tax benefit computed at federal statutory rate | 21.00% | 21.00% | 21.00% | 21.00% |
Impact of REIT election | (21.00%) | (19.50%) | (20.70%) | (23.30%) |
State income tax expense | 0.50% | (0.30%) | (0.50%) | |
Impact of change in deferred tax asset | 3.60% | 5.00% | ||
Impact of change in valuation allowance | (3.60%) | (6.80%) | ||
Income tax expense | 2.00% | (1.80%) | (2.80%) |