8-K: Strategic Student & Senior Housing Trust Sets Net Asset Value at $6.34 Per Share

Strategic Student & Senior Housing Trust has established an estimated net asset value of $6.34 per share across all share classes as of September 30, 2023.

Summary

• Strategic Student & Senior Housing Trust's board of directors has approved an estimated net asset value (NAV) of $6.34 per share for all share classes.
• This valuation is based on the company's assets minus liabilities as of September 30, 2023.
• The NAV was calculated using a valuation report from Kroll Real Estate Advisory Group, an independent third-party firm.
• Kroll valued the company's student housing and four senior housing properties at a total of $262.9 million.
• The company's total assets were valued at $273.9 million, and total liabilities were $190.8 million, resulting in a net asset value of $83.1 million.
• The valuation process followed guidelines from the Institute for Portfolio Alternatives (IPA).
• The board considered a range of values from $5.38 to $7.43 per share, with a midpoint of $6.34, before adopting the $6.34 figure.
• The company's previous estimated NAV per share as of September 30, 2022, was $6.24.

Sentiment

Score: 7

Explanation: The document is generally positive, showing an increase in property value and a slight increase in NAV per share. However, it also includes standard disclaimers and risks associated with real estate valuations, which temper the overall sentiment.

Positives

• The appraised value of the properties increased by 10.7% over the aggregate purchase price.
• The valuation was conducted by an independent third-party firm, Kroll, ensuring objectivity.
• The valuation process followed established industry guidelines (IPA and USPAP).
• The company's net asset value increased from $81.7 million in 2022 to $83.1 million in 2023.
• The board of directors unanimously approved the estimated NAV per share.

Negatives

• The estimated NAV is not audited and does not represent the fair value of assets less liabilities according to GAAP.
• The estimated NAV does not represent a liquidation value or the amount at which shares would trade on a national securities exchange.
• The estimated asset values may not represent current market value or book value.
• The estimated value of the properties does not necessarily represent the value the company would receive if the assets were marketed for sale.
• The NAV does not reflect a real estate portfolio premium or discount compared to the sum of the individual property values.
• The NAV does not take into account estimated disposition costs and fees for real estate properties.

Risks

• Future valuations could be affected by COVID-19 or weakened economic conditions.
• The estimated NAV is based on assumptions that may not be accurate or complete.
• Different parties with different assumptions could derive a different estimated NAV per share.
• Markets for real estate and real estate-related investments can fluctuate, and values are expected to change in the future.
• There is no assurance that a stockholder would be able to resell their shares at this estimated NAV.
• There is no assurance that a stockholder would ultimately realize distributions per share equal to the estimated NAV upon liquidation.
• There is no assurance that the shares would trade at the estimated NAV on a national securities exchange.
• There is no assurance that an independent third-party appraiser would agree with the estimated NAV.
• There is no assurance that the methodology used to estimate the NAV will be in compliance with any future FINRA rules or ERISA reporting requirements.

Future Outlook

The company anticipates publishing a new estimated share value on an annual basis. Future valuations of the properties could be affected by current economic risk factors and real estate and capital markets.

Management Comments

• The Committee concluded that the range in estimated value per share of $5.38 to $7.43, with an approximate mid-range value of $6.34, was reasonable.
• The Board unanimously agreed upon the Estimated Per Share NAV of $6.34 recommended by the Committee, which determination is ultimately and solely the responsibility of the Board.
• Our goal in calculating the Estimated Per Share NAV is to arrive at a value that is reasonable and supportable using what the Committee and the Board each deems to be appropriate valuation methodologies and assumptions.

Industry Context

This announcement is typical for non-listed REITs that are required to provide periodic valuations to assist broker-dealers and fiduciaries. The valuation process and methodology are consistent with industry standards and guidelines.

Comparison to Industry Standards

• The company's valuation process adheres to the IPA Guidelines, which are widely used in the non-listed REIT industry.
• The use of an independent third-party appraiser, Kroll, is a common practice to ensure objectivity in valuations.
• The discounted cash flow method used by Kroll is a standard approach for valuing income-producing real estate assets.
• The company's approach to valuing debt at its principal balance is a common practice, although the fair value was estimated to be $7.1 million lower.
• The company's valuation is similar to other non-listed REITs that provide annual or semi-annual NAV updates to investors.

Stakeholder Impact

• Shareholders will receive an updated estimated NAV per share, which is important for their investment decisions.
• Broker-dealers will use the estimated NAV to comply with FINRA rules regarding customer account statements.
• Fiduciaries will use the estimated NAV to comply with ERISA reporting requirements.

Next Steps

• The company anticipates publishing a new estimated share value on an annual basis.

Key Dates

Keywords

Net Asset Value, NAV, Real Estate Valuation, Student Housing, Senior Housing, Kroll, Appraisal, IPA Guidelines, Discounted Cash Flow, Property Valuation