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ElderTrust
A Healthcare Real Estate 101 East State Street
Investment Trust Suite 100
Kennett Square, PA 19348
T 888.234.REIT
T 610.925.4200
F 610.925.4351
Contact: D. Lee McCreary, Jr.
President and Chief Executive Officer
(610) 925-4200
www.eldertrust.com
ElderTrust Announces Agreements With
Genesis and Multicare
Genesis and Multicare to File Motions Seeking Approval
of the Agreements from the U.S. Bankruptcy Court
Kennett Square, PA (November 22, 2000) - ElderTrust (NYSE:ETT), an equity
healthcare REIT, today announced that it has reached agreements, subject to
approval of the U.S. Bankruptcy Court, with Genesis Health Ventures, Inc.
(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 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 of the existing twenty-three lease agreements between Genesis
subsidiaries and ElderTrust would continue to be effective in accordance
with their terms except as provided below;
o Two leases would be modified to reduce combined rents for the properties
by $745,000 per year,
o One lease would be modified to create an early termination right
commencing on December 31, 2002, and
o 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 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;
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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
entities with unpaid principal balances totaling approximately $7.5 million
at June 30, 2000 (after taking into account the aforementioned $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 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 30, 2000, in exchange for the outstanding indebtedness. These
properties would then be leased back to Multicare under long-term operating
lease 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 Funds From Operations (FFO) reported for that quarter as follows:
(a) The rent modifications to the two leases will reduce rental income 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 for the periods ended
December 31, 1999 and September 30, 2000 giving pro forma effect to the proposed
agreements with Genesis and Multicare. The pro forma financial information is
not necessarily indicative 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.
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The Company also announced that the above agreements were reached following
discussions with the lender on its Bank Credit Facility. The Company is
currently in discussions with this lender and other lenders regarding the
covenant 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, Jr., ElderTrust's President and Chief Executive Officer. Mr.
McCreary added, "To become effective, these agreements must be approved by the
U.S. Bankruptcy Court and various lenders, an approval we hope to gain in
January 2001. Closing of the transactions would be anticipated to occur in
January 2001 following Court approval of the agreements."
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. 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 within the meaning of the Private Securities
Litigation Reform Act 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. 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 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 because of subsequent events.
(Financial Statements Follow)
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ELDERTRUST
PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
(Unaudited)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
ADJUSTMENTS ELDERTRUST,
FOR THE ADJUSTED FOR THE
ELDERTRUST GENESIS/MULTICARE GENESIS/MULTICARE
(HISTORICAL) RESTRUCTURING RESTRUCTURING
-------------- ------------ --------------
Revenues:
<S> <C> <C> <C>
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 $(1.52) $(1.49)
============== ============ ==============
</TABLE>
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ELDERTRUST
NOTES TO PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31,1999
<TABLE>
<CAPTION>
(1) Record $745 agreed upon rent reduction and $792 minimum rent on 3
properties leased back to Multicare (Berkshire, Lehigh and Sanatoga).
<S> <C>
(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 $8.65 million reduction in 3 Genesis loans (Mifflin, Oaks and Coquina) 823
Other 21
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$ 2,933
============
</TABLE>
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.
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ELDERTRUST
PRO FORMA FUNDS FROM OPERATIONS
YEAR ENDED DECEMBER 31, 1999
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
ADJUSTMENTS ELDERTRUST,
FOR THE ADJUSTED FOR THE
ELDERTRUST GENESIS/MULTICARE GENESIS/MULTICARE
(HISTORICAL) RESTRUCTURING RESTRUCTURING
------------ ------------------ ------------------
<S> <C> <C> <C>
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)
</TABLE>
(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.
<TABLE>
<CAPTION>
<S> <C>
* 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
</TABLE>
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ELDERTRUST
PRO FORMA STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2000
(Unaudited)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
ADJUSTMENTS ELDERTRUST,
FOR THE ADJUSTED FOR THE
ELDERTRUST GENESIS/MULTICARE GENESIS/MULTICARE
(HISTORICAL) RESTRUCTURING RESTRUCTURING
------------ ----------------- ------------------
Revenues:
<S> <C> <C> <C>
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
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Total revenues 19,496 (478) 19,018
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Expenses:
Property operating expenses 852 852
Interest expense, including amortization of deferred
finance costs 10,448 10,448
Depreciation 4,399 (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
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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)
=========== ========= =======
</TABLE>
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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).
<TABLE>
<CAPTION>
<S> <C>
(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
========
</TABLE>
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.
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ELDERTRUST
PRO FORMA FUNDS FROM OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2000
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
ADJUSTMENTS ELDERTRUST,
FOR THE ADJUSTED FOR THE
ELDERTRUST GENESIS/MULTICARE GENESIS/MULTICARE
(HISTORICAL) RESTRUCTURING RESTRUCTURING
------------ ----------------- ------------------
Funds from Operations:
<S> <C> <C> <C> <C>
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.
* 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
============
</TABLE>
