Tuesday, January 23, 2018

Mission Critical's Capital Distribution

Carter Validus Mission Critical REIT (CVMC) announced in an 8-K yesterday that it is distributing $560 million, or $3.00 per share to investors from its recent property sales.  This is the equivalent of a 30% return of capital.  The gross property sale proceeds totaled $1.296 billion, and included the data storage transactions I discussed here, along with two other sales, including one of the three troubled medical properties CVMC discussed in its December 29, 2017, valuation filing.  Subtracting debt repayments, transaction costs, joint venture payments, and $101 million the REIT is reserving gets  to the $560 million being returned to investors.

CVMC is lowering its distribution.  The new distribution is 6.7% based on the revised net asset value of $6.26 per share, which is the NAV the REIT disclosed on December 29, 2017, less the $3.00 per share return of capital distribution.  This new distribution rate is the equivalent of 6.0% on the original remaining capital of $7.00 per share, which is a reduction from the previous 7.0% per share distribution.

For an interesting exercise, take CVMC's September 30, 2017 total assets, subtract the property sales and remaining debt, and then compare this figure to the original capital the REIT has remaining, including the $101 million of capital that was not returned to investors.  Conclusion?  Well, I'll let you do the math, but if you get more than $1.2 billion leave a comment.


Anonymous said...

I guess your last paragraph implies their numbers don't add up.Most of us aren't analists, but you represent as such.Just spit it out please!

Rational Realist said...

I didn't mean to imply that CVMC's numbers don't add up. CVMC is returning $3.00 per share and has an estimated remaining NAV of $6.26. Together, the $3.00 and $6.26 are less than the REIT's original $10.00 per share offer price. My last paragraph is my agreement with CVMC that its capital distribution and remaining assets are less than an original $10.00 per share investment.