ElderTrust Announces Agreements With Genesis and Multicare; Genesis and Multicare to File Motions Seeking Approval of the Agreements from the U.S. Bankruptcy Court.Business Editors KENNETT Kennet or Kennett may refer to: Places
ElderTrust (NYSE NYSE See: New York Stock Exchange :ETT ETT Empresa de Trabajo Temporal (Spain) ETT European Transactions on Telecommunications ETT Exercise Treadmill Test ETT Embedded Training Team ETT Exercise Tolerance Test (cardiology) ), an equity healthcare REIT REIT See: Real Estate Investment Trust REIT See real estate investment trust (REIT). , today announced that it has reached agreements, subject to approval of the U.S. Bankruptcy Court bankruptcy court n. the specialized Federal court in which bankruptcy matters under the Federal Bankruptcy Act are conducted. There are several bankruptcy courts in each state, and each one's territory covers several counties. , with Genesis Health Ventures, Inc. (OTC OTC See: Over-the-counter. OTC See over-the-counter market (OTC). :GHVIQ.OB) and The Multicare Companies, Inc. regarding the lease and loan transactions between the entities. Genesis and Multicare have advised the Company that they intend to file the motions with the U.S. Bankruptcy Court seeking the Court's approval to enter into the proposed transactions. Depending on the Court's schedule, the motions will likely be heard by the Bankruptcy Court in January January: see month. 2001. During the period between the filing of the motions and the Court hearing, the creditors for Genesis and Multicare may object to all or any portion of the agreements. Under the more significant terms of the agreement with Genesis: 1) Twenty-one twenty-one: see blackjack. of the existing twenty-three lease agreements between Genesis subsidiaries and ElderTrust would continue to be effective in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with their terms except as provided below; -- Two leases would be modified to reduce combined rents for the properties by $745,000 per year, -- One lease would be modified to create an early termination right commencing on December 31, 2002, and -- One lease would be modified to permit ElderTrust to terminate the lease during 2001 without penalty if the current tenant is unable to achieve occupancy targets specified by loan documents secured by property. 2) Two leases would be terminated ter·mi·nate v. ter·mi·nat·ed, ter·mi·nat·ing, ter·mi·nates v.tr. 1. To bring to an end or halt: when the two properties subject to the leases are sold to Genesis for $1.25 million, such amount to be paid via an increase in the notes receivable described in 4) below; 3) An $8.5 million loan currently guaranteed by ElderTrust and owed to Genesis by ET Sub-Meridian, an unconsolidated subsidiary of ElderTrust, would be acquired by ElderTrust in a manner to effect an $8.5 million reduction in amounts owed to ElderTrust by Genesis; 4) The maturity date for three loans by ElderTrust to Genesis and affiliated af·fil·i·ate v. af·fil·i·at·ed, af·fil·i·at·ing, af·fil·i·ates v.tr. 1. To adopt or accept as a member, subordinate associate, or branch: entities with unpaid principal balances totaling approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $7.5 million at June June: see month. 30, 2000 (after taking into account the aforementioned a·fore·men·tioned adj. Mentioned previously. n. The one or ones mentioned previously. aforementioned Adjective mentioned before Adj. 1. $1.25 million increase and $8.5 million reduction) would be extended to June 30, 2002 at the rates in effect prior to the Genesis bankruptcy bankruptcy, in law, settlement of the liabilities of a person or organization wholly or partially unable to meet financial obligations. The purposes are to distribute, through a court-appointed receiver, the bankrupt's assets equitably among creditors and, in most filing; and 5) The maturity date and interest rate for one loan with a principal balance of approximately $4.8 million made by ElderTrust to an entity in which Genesis owns a 49% limited partner interest would be extended to May 31, 2002 at a 10% interest rate. Under the terms of the agreement with Multicare, ElderTrust would acquire three properties secured by three loans with outstanding principal amounts totaling approximately $19.5 million, and having a net book value of $10.0 million, at September September: see month. 30, 2000, in exchange for the outstanding indebtedness INDEBTEDNESS. The state, of being in debt, without regard to the ability or inability of the party to pay the same. See 1 Story, Eq. 343; 2 Hill. Ab. 421. 2. . These properties would then be leased back to Multicare under long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. operating lease Operating Lease A lease contract that allows the use of an asset, but does not convey rights similar to ownership of the asset. Notes: An operating lease is not capitalized it is accounted for as a rental expense. agreements. ElderTrust has no other transactions with this entity. Using the quarter ended September 30, 2000 as a basis for measuring the impact of these agreements; as that quarter reflected little, if any, impact of non-recurring transactions; the above described transactions would effect annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. Funds From Operations Funds From Operations (FFO) Used by real estate and other investment trusts to define the cash flow from trust operations; earnings with depreciation and amortization added back. (FFO FFO See: Funds from operations ) reported for that quarter as follows: (a) The rent modifications to the two leases will reduce rental income Noun 1. rental income - income received from rental properties income - the financial gain (earned or unearned) accruing over a given period of time by $745,000; (b) The sale of the two buildings in exchange for a $1.25 million note will decrease FFO by approximately $80,000; (c) The acquisition of the $8.5 million note will increase interest income by approximately $850,000; (d)(1) The three revised loans to Genesis will increase interest income by approximately $580,000; and (e)(1) The three leases with Multicare will generate approximately $800,000 in rental income. (1) These items increase income over that reported for the quarter as the Company ceased accruing interest income on loans once Genesis and Multicare filed for bankruptcy protection. Attached are unaudited pro forma financial statements Pro forma financial statements A firm's financial statements as adjusted to reflect a projected or planned transaction. "What-if" analysis. for the periods ended December December: see month. 31, 1999 and September 30, 2000 giving pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma effect to the proposed agreements with Genesis and Multicare. The pro forma financial information is not necessarily indicative indicative: see mood. of what ElderTrust's actual results would have been for the periods presented nor does the pro forma financial information represent the results of future periods. The Company also announced that the above agreements were reached following discussions with the lender LENDER, contracts. He from whom a thing is borrowed. 2. The contract of loan confers rights, and imposes duties on the lender. 1. The lender has the right to revoke the loan at his mere pleasure; 9 Cowen, R. 687; 8 Johns. Rep. 432; 1 T. R. 480; 2 Campb. Rep. on its Bank Credit Facility. The Company is currently in discussions with this lender and other lenders regarding the covenant covenant (kŭv`ənənt), agreement entered into voluntarily by two or more parties to do or refrain from doing certain acts. In the Bible and in theology the covenant is the agreement or engagement of God with man as revealed in the defaults under the Company's Bank Credit Facility and bond guarantees. "We believe that these agreements represent a fair resolution to a difficult situation and are very pleased to be able to make this announcement today," said D. Lee McCreary McCreary can refer to a number of things: People
Because the agreements are subject to Bankruptcy Court and lender approval and because the creditors for Genesis and Multicare may object to all or any portion of the agreements, there can be no assurance that the transaction contemplated by the agreements will be completed as proposed. ElderTrust is a real estate investment trust that invests in real estate properties used in the healthcare services industry, principally along the East Coast of the United States The "Eastern Seaboard," or "Atlantic Seaboard" are terms referring to the easternmost coastal states in the United States. They touch the Atlantic Ocean and stretch up to Canada. . Since commencing operations in January 1998, and without giving effect to the above described agreements, the Company has acquired direct and indirect interests in 31 buildings and has loans outstanding of $31 million, net of allowance, in construction and term financing on eight additional healthcare facilities. Certain matters discussed within this press release may be deemed to be forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Although ElderTrust believes the expectations reflected in such forward-looking statements are reasonable assumptions, it can give no assurance that its expectations will be attained at·tain v. at·tained, at·tain·ing, at·tains v.tr. 1. To gain as an objective; achieve: attain a diploma by hard work. 2. . Factors that could cause actual results to differ materially from ElderTrust's expectations include the extent to which Genesis and Multicare continue to make lease and loan payments to the Company, approval of the agreements reached between ElderTrust and Genesis and Multicare and completion of the transactions contemplated thereby, real estate conditions, the Company's ability to refinance Refinance 1. When a business or person revises their payment schedule for repaying debt. 2. Replacing an older loan with a new loan offering better terms. Notes: When a business refinances they typically extend the maturity date. its existing bank credit facility when it matures in June 2001 or to further extend the maturity date thereof, changes in the economic conditions and other risks detailed from time to time in the Company's SEC reports and filings. The Company assumes no obligation to update or supplement forward-looking statements that become untrue un·true adj. un·tru·er, un·tru·est 1. Contrary to fact; false. 2. Deviating from a standard; not straight, even, level, or exact. 3. Disloyal; unfaithful. because of subsequent events.
(Financial Statements Follow)
ELDERTRUST
PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
(Unaudited)
(in thousands, except per share amounts)
PRO FORMA PRO FORMA
ADJUSTMENTS ELDERTRUST,
FOR THE ADJUSTED FOR THE
ELDERTRUST GENESIS/MULTICARE GENESIS/MULTICARE
(HISTORICAL) RESTRUCTURING RESTRUCTURING
------------ ----------------- -----------------
Revenues:
Rental revenues $18,552 $47 (1) $18,599
Interest, net of
amortization of
deferred loan
origination
costs 5,653 (2,933) (2) 2,720
Interest from
unconsolidated
equity
investees 3,809 723 (3) 4,532
Other income 127 127
-------- -------- --------
Total revenues 28,141 (2,163) 25,978
-------- -------- --------
Expenses:
Property operating
expenses 1,124 1,124
Interest expense,
including
amortization of
deferred
finance costs 13,136 13,136
Depreciation 5,788 315 (4) 6,103
General and
administrative 2,612 2,612
Bad debt expense -- 9,568 (5) 9,568
Separation agreement
expenses 2,800 2,800
-------- -------- --------
Total expenses 25,460 9,883 35,343
-------- -------- --------
Net income (loss)
before
equity in losses
of unconsolidated
entities, minority
interest and
extraordinary item 2,681 (12,046) (9,365)
Equity in losses of
unconsolidated
entities, net (2,482) (2,482)
Minority interest (19) 1,150 (6) 1,131
-------- -------- --------
Net income (loss)
before extraordinary
item $180 (10,896) $(10,716)
Basic and diluted
weighted average number
of common
shares outstanding 7,198 7,198 7,198
-------- -------- --------
Net income (loss) per
share before
extraordinary item -
basic and diluted $0.03 $(1.49) $(1.52)
======== ======== ========
ELDERTRUST
NOTES TO PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31,1999
(1) Record $745 agreed upon rent reduction and $792 minimum rent
on 3 properties leased back to Multicare (Berkshire, Lehigh and
Sanatoga).
(2) Record reduction in interest income related to the following:
Interest income on 3 Multicare
loans (Berkshire, Lehigh and
Sanatoga) $ 2,089
Interest income on $8.65 million
reduction in 3 Genesis loans
(Mifflin, Oaks and Coquina) 823
Other 21
--------
$ 2,933
========
Note: 3 Multicare loans exchanged for secured real estate
properties. 3 Genesis loans were reduced by $8.5 million related to
the transfer from Genesis to ElderTrust of ET Sub-Meridian note
payable (see (3)).
(3) Record interest income on $8.5 million note payable from ET
Sub-Meridian tranferred from Genesis to ElderTrust.
(4) Record depreciation expense using a useful life of 28.5 years
on 3 properties acquired from Multicare in exchange for the related
loans receivable.
(5) Record bad debt expense on 3 properties acquired from
Multicare in exchange for the related loans receivable based on excess
of book value over estimated fair value.
(6) Record effect of pro forma adjustments on minority interest.
ELDERTRUST
PRO FORMA FUNDS FROM OPERATIONS
YEAR ENDED DECEMBER 31, 1999
(Unaudited)
(in thousands)
PRO FORMA PRO FORMA
ADJUSTMENTS ELDERTRUST,
FOR THE ADJUSTED FOR THE
ELDERTRUST GENESIS/MULTICARE GENESIS/MULTICARE
(HISTORICAL) RESTRUCTURING RESTRUCTURING
------------ ----------------- -----------------
Funds from Operations:
Net income (loss)
before extraordinary
item* $ 180 $ (10,896) (1) $(10,716)
Minority interest 19 (1,150) (1) (1,131)
-------- -------- --------
Net income (loss)
before minority
interest 199 (12,046) (11,847)
Adjustments to derive
funds from
operations:
Add:
Real estate
depreciation
and
amortization:
Consolidated
entities 5,963 315 (2) 6,278
Unconsolidated
entities 4,492 4,492
-------- -------- --------
Funds from Operations
before allocation
to minority
interest 10,654 (11,731) (1,077)
Less:
Funds from
Operations
allocable to
minority
interest (715) 787 (3) 72
-------- -------- --------
Funds from Operations
attributable to
the common
shareholders $ 9,939 $(10,944) $ (1,005)
======== ======== ========
(1) See pro forma income statement.
(2)Record depreciation expense using a useful life of 28.5 years
on 3 properties acquired from Multicare in exchange for the related
loans receivable.
(3) Record effect of pro forma adjustments on Funds from
Operations allocable to minority interest.
((1))Includes the following non-recurring charges:
Bad debt expense on 3 Multicare
loans (Berkshire, Lehigh and Sanatoga)
based on excess of book value
over estimated fair value. $ 9,568
Separation agreement expenses
in connection with resignation
of a former officer of
the Company. 2,800
--------
$12,368
========
ELDERTRUST
PRO FORMA STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2000
(Unaudited)
(in thousands, except per share amounts)
PRO FORMA PRO FORMA
ADJUSTMENTS ELDERTRUST,
FOR THE ADJUSTED FOR THE
ELDERTRUST GENESIS/MULTICARE GENESIS/MULTICARE
(HISTORICAL) RESTRUCTURING RESTRUCTURING
------------ ----------------- -----------------
Revenues:
Rental revenues $ 14,058 35 (1) $14,093
Interest, net of
amortization of
deferred loan
origination costs 2,801 $ (1,055) (2) 1,746
Interest from
unconsolidated
equity
investees 2,482 542 (3) 3,024
Other income 155 155
-------- -------- --------
Total revenues 19,496 (478) 19,018
-------- -------- --------
Expenses:
Property operating
expenses 852 852
Interest expense,
including
amortization of
deferred
finance costs 10,448 10,448
Depreciation 4,399 236 (4) 4,635
General and
administrative 2,661 2,661
Bad debt expense 20,282 (8,538) (5) 11,744
Separation agreement
expenses -- --
-------- -------- --------
Total expenses 38,642 (8,302) 30,340
-------- -------- --------
Net income (loss)
before
equity in losses
of unconsolidated
entities and
minority
interest (19,146) 7,824 (11,322)
Equity in losses of
unconsolidated
entities, net (9,570) (9,570)
Minority interest 1,926 (525) (6) 1,401
-------- -------- --------
Net income ( loss) (26,790) 7,299 (19,491)
Basic and diluted
weighted average
number of common
shares outstanding 7,119 7,119 7,119
-------- -------- --------
Net income (loss)
per share - basic
and diluted $ (3.76) $ 1.02 $ (2.74)
======== ======== ========
ELDERTRUST
NOTES TO PRO FORMA STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2000
(1) Record $559 agreed upon rent reduction and $594 minimum rent
on 3 properties leased back to Multicare (Berkshire, Lehigh and
Sanatoga).
(2) Record reduction in interest income for the period related to
the following:
Interest income on 3 Multicare
loans (Berkshire, Lehigh and Sanatoga) $ 867
Interest income on $8.65 million
reduction in 3 Genesis loans
(Mifflin, Oaks and Coquina) 150
Other 38
-------
$ 1,055
=======
Note: 3 Multicare loans exchanged for secured real estate
properties. 3 Genesis loans were reduced by $8.5 million related to
the transfer from Genesis to ElderTrust of ET Sub-Meridian note
payable (see (3))
(3) Record interest income on $8.5 million note payable from ET
Sub-Meridian tranferred from Genesis to ElderTrust.
Interest was calculated based on an annual interest rate of 8.5%.
(4) Record depreciation expense using a useful life of 28.5 years
on 3 properties acquired from Multicare in exchange for the related
loans receivable.
(5) Reverse bad debt expense on 3 Genesis loans (Mifflin, Oaks and
Coquina) which was recorded for the quarter ended June 30, 2000 based
on the excess book value over estimated fair value. Based on the term
of the restructuring agreement, these loans will be reduced by $8.65
million via transfer from Genesis to ElderTrust of a $8.5 million note
payable from ET Sub-Meridian (see(3)) and other land transaction of
$150,000. The remaining book value, after the $8.65 million reduction,
approximates estimated fair value, thus no allowance for credit losses
is required at September 30, 2000.
(6) Record effect of pro forma adjustments on minority interest.
ELDERTRUST
PRO FORMA FUNDS FROM OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2000
(Unaudited)
(in thousands)
PRO FORMA PRO FORMA
ADJUSTMENTS ELDERTRUST,
FOR THE ADJUSTED FOR THE
ELDERTRUST GENESIS/MULTICARE GENESIS/MULTICARE
(HISTORICAL) RESTRUCTURING RESTRUCTURING
------------ ----------------- -----------------
Funds from Operations:
Net income (loss) $(26,790) $7,299 (1) $ (19,491)
Minority interest (1,926) 525 (1) (1,401)
-------- -------- --------
Net income (loss)
before minority
interest (28,716) 7,824 (20,892)
Adjustments to derive
funds from
operations:
Add:
Real estate
depreciation
and amortization:
Consolidated
entities 4,522 236 (2) 4,758
Unconsolidated
entities 3,366 3,366
-------- -------- --------
Funds from Operations
before allocation to
minority
interest (20,828) 8,060 (12,768)
Less:
Funds
from Operations
allocable to
minority
interest 1,396 (540) (3) 856
-------- -------- --------
Funds from
Operations
attributable to
the common
shareholders $(19,432) $ 7,520 $(11,912)
======== ======== ========
(1) See pro forma income statement.
(2) Record depreciation expense on 3 Multicare properties
converted from loans to real estate properties using a useful life of
28.5 years.
(3) Record effect of pro forma adjustments on Funds from
Operations allocable to minority interest.
((1))Includes the following non-recurring charges:
Bad debt expense on 3
Multicare loans
(Berkshire, Lehigh and Sanatoga)
based on excess of book value
over estimated fair value. $9,568
Bad debt expense on note
receivable from a former
officer of the Company. 990
Bad debt expense on notes
receivable from ET Capital
related to AGE Institute of
Florida second mortgage transaction. 1,186
Equity in net loss of ET Capital
related to bad debt expense
recorded by ET Capital on note
receivable from AGE Institute
of Florida. 7,410
Write-off of costs incurred in
connection with property due
diligence for investment
transactions that were
not completed. 682
--------
$ 19,836
========
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