Built on Experience
The market for seniors housing and healthcare real estate may benefit from several large-scale trends that will play out in the United States over the coming decades. With an established track record in these markets, CNL Financial Group (CNL) is an experienced sponsor that has longstanding relationships with leading industry operators.1 Launched in 2016, CNL Healthcare Properties II is a non-traded REIT that builds on CNL's expertise to help investors who are seeking income and long-term growth capitalize on this continuing opportunity.2
|Maximum Offering Size||$2 billion shares of Class A, Class T or Class I common stock|
|Offering Price Per Share3||Class A: $10.99; Class T: $10.56; Class I: $10.06|
|Asset Focus||Seniors housing, medical office, acute care, post-acute care and other income-producing real estate assets|
|Geographic Focus||United States, with the opportunity for limited international acquisitions|
|Return Objective4||Income and growth|
|Annualized Distribution Rate5||Class A: 6.35% (5.24% cash; 1.11% stock)
Class T: 5.61% (4.45% cash; 1.16% stock)
Class I: 6.44% (5.22% cash; 1.22% stock)
|Distribution Payment Schedule5||Declared monthly and paid quarterly|
|Distribution Reinvestment Price||Equal to the most current Net Asset Value (NNAV) per share for each class|
|Redemption Price6||Limited redemptions available at the NAV per share|
|Exit Strategy||While there are no assurances regarding the timing of a liquidity event, the board of directors will consider liquidity event options no later than 2023|
|Financial Suitability Standards||$250,000 net worth or $70,000 net worth and $70,000 annual gross income (excluding home, furnishings and personal automobiles). Some states may have additional standards. These states include, but are not limited to, AL, CA, IA, ID, KS, KY, MA, MO, ND, NE, NJ, NM, OR, PA and VT.|
Read the prospectus, including the Risk Factors section for full details.
1 CNL Healthcare Properties II has a limited operating history. The prior performance of real estate programs sponsored by CNL may not be indicative of the future results of CNL Healthcare Properties II. During select periods, some REIT programs sponsored by CNL had a backlog of redemption requests that were unfulfilled and experienced net operating losses. In addition, two REITs have taken impairment charges on certain properties. During and after the global financial crisis in 2008, some REITs experienced declining performance which impacted the REITs' valuation.
2 CNL Healthcare Properties II intends to qualify and elect REIT tax status beginning with the first year in which it commences material operations, the taxable year ending Dec. 31, 2017, although there is no assurance the REIT tax status will occur within the stated time frame. If the company fails to meet the REIT qualification standards now or in the future, the company will be subject to increased taxes, which will decrease investors' returns.
3 As of March 15, 2018, offering prices are based on the estimated NAV per share for each class plus applicable upfront selling commissions and dealer manager fees of 8.5 percent for Class A shares and 4.75 percent for Class T shares. Class I shares are sold without an upfront fee. The public offering price (POP) and estimated NAV do not represent market values, rather they are based upon appraisals and estimates that may be incorrect and unrealized by the portfolio or investors.
4 There is no assurance this objective will be met.
5 As of March 15, 2018. There is no guarantee of future distributions or that distributions will be paid at all. Due to the high levels of investment costs and fees incurred during the REIT's initial phase, distributions will not be fully covered by cash flows from operating activities and will be paid from expense waivers, borrowings and offering proceeds. For the three months ended March 31, 2018, approximately 39 percent of cash distributions were covered by operating cash flow and 61 percent were funded by offering proceeds. For the years ended Dec. 31, 2017 and 2016, approximately 30 and 0 percent of distributions were covered by operating cash flow and 70 and 100 percent were funded by offering proceeds, respectively. Distributions paid from sources other than operating cash flow, now and in the future, are not sustainable, can reduce investors’ overall return and may be dilutive to future shareholders. Please see the REIT’s financial filings on sec.gov to get a detailed view of the performance metrics.
6 In no event will more than 5 percent of the weighted average of all share classes of the outstanding shares be redeemed in any 12-month period. Redemption price is determined by the share redemption plan in the prospectus at the time of redemption. The REIT may modify, suspend or terminate the redemption plan at any time.
No offering is made to residents of New York, Maryland or any other state, except by a prospectus filed with the Department of Law of the state of New York, the Maryland Division of Securities or the respective state securities administrator. Neither the U.S. Securities and Exchange Commission, the attorney general of the state of New York, the Maryland Division of Securities nor any other state securities administrator has passed on or endorsed the merits of the REIT's offering or the adequacy or accuracy of this piece or the REIT's prospectus. Any representation to the contrary is unlawful.
This is not an offer to sell nor a solicitation of an offer to buy shares of the REIT. Only the prospectus makes such an offer. This piece must be read in conjunction with the prospectus in order to understand fully all the objectives, risks, charges and expenses associated with an investment and must not be relied upon to make a decision. The information herein does not supplement or revise any information in the REIT's public filings. To the extent information herein conflicts with the prospectus, the information in the prospectus shall govern. The prospectus is available on sec.gov and cnlhealthcarepropertiesii.com.
Forward-looking statements are based on current expectations and may be identified by words such as believes, expects, may, could and terms of similar substance and speak only as of the date made. Actual results could differ materially due to risks and uncertainties that are beyond the REIT’s ability to control or accurately predict. Investors should not place undue reliance on forward-looking statements.
Investing in a non-traded REIT is a higher risk, longer term investment than many listed securities and is not suitable for all investors. Shares may lose value, or investors could lose their entire investment.
The REIT was recently organized and has a limited operating history on which investors may evaluate operations and prospects for the future. The REIT is a blind pool offering that is in the initial stages of property acquisitions and has made limited investments.
This is a best-efforts offering and if the REIT raises substantially less than the maximum offering amount, it may not be able to invest in a large variety of portfolio assets, which will subject investors to greater risk.
Non-traded REITs are illiquid. There is no public trading market for the shares. The REIT does not expect to offer a liquidity event in the near future and investors should be prepared to hold shares for an indefinite period of time. If investors are able to sell their shares, it would likely be at a substantial discount.
There are significant limitations on the redemption of investors' shares under the REIT's redemption plan. The REIT can determine not to redeem any shares or to redeem only a portion of the shares for which redemption is requested. In no event will more than 5 percent of the weighted average of all share classes of the outstanding shares be redeemed in any 12-month period. The REIT may modify, suspend or terminate the redemption plan at any time. Holding periods may be waived for qualifying events.
The REIT is obligated to pay substantial fees to its advisor, managing dealer, property manager and their respective affiliates for their services in managing the day-to-day operations of the REIT based upon agreements that have not been negotiated at arm’s length, and some of which are payable based upon factors other than the quality of services. These fees could influence their advice and judgment in performing services. In addition, certain officers and directors of the advisor also serve as the REIT’s officers and directors, as well as officers and directors of competing programs, resulting in conflicts of interest.
There is no guarantee of future distributions or that distributions will be paid at all. Due to the high levels of investment costs and fees incurred during the REIT's initial phase, distributions will not be fully covered by cash flows from operating activities and will be paid from expense waivers, borrowings and offering proceeds. For the nine months ended Sept. 30, 2017, approximately 49 percent of cash distributions were covered by operating cash flow and 51 percent were funded by offering proceeds. For the year ended Dec. 31, 2016, distributions were not covered by operating cash flow and were 100 percent funded by offering proceeds. Distributions paid from sources other than operating cash flow, now and in the future, are not sustainable, can reduce investors' overall return and may be dilutive.
The per-share amount of distributions on Class A, Class T and Class I shares will differ because of the timing of certain class-specific expenses. Specifically, distributions on Class T shares and Class I shares will be lower than distributions on Class A shares because the REIT is required to pay ongoing distribution and servicing fees with respect to the Class T shares and Class I shares. These fees are not applicable to Class A shares.
If the REIT fails to maintain its qualification as a REIT for any taxable year, it will be subject to federal income tax and net earnings available for investment or distributions would be reduced.
The use of leverage to acquire assets may hinder the REIT’s ability to pay distributions and/or decrease the value of shareholders’ investments.
There are significant risks associated with the seniors housing and healthcare sectors, including market risks impacting demand, competition from other entities, litigation risks and the cost of being responsive to changing government regulations. The REIT's success in these sectors is dependent, in part, on the ability to evaluate local conditions, identify appropriate opportunities and find qualified tenants or, where properties are acquired through a taxable REIT subsidiary, engage and retain qualified independent managers.
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