Senior Housing Properties Trust Announces Third Quarter 2019 Results

Third Quarter Net Loss Attributable to Common Shareholders of $0.12 Per Share

Third Quarter Normalized FFO Attributable to Common Shareholders of $0.29 Per Share

NEWTON, Mass.--()--Senior Housing Properties Trust (Nasdaq: SNH) today announced its financial results for the quarter and nine months ended September 30, 2019.

During the third quarter, we made further progress in completing the transformative restructuring of our business arrangement with our largest tenant, Five Star Senior Living, and we remain on target to close the transaction on January 1, 2020,” stated Jennifer Francis, President and Chief Operating Officer of Senior Housing Properties Trust. “Additionally, in conjunction with this restructuring, our third quarter results were within our expectations given our disposition activity and the reduced rent from Five Star. Furthermore, we are encouraged by both the pricing and active interest in the assets we are marketing for disposition, with approximately $564 million of assets sold or under agreement to sell and an additional $180 million of assets in first and second round offers stages, and we remain on pace to have approximately $900 million of assets sold or under agreement to sell by year end 2019.”

Results for the Quarter Ended September 30, 2019:

Net loss attributable to common shareholders was $29.4 million, or $0.12 per share, for the quarter ended September 30, 2019 compared to net income attributable to common shareholders of $45.8 million, or $0.19 per share, for the quarter ended September 30, 2018. The net loss attributable to common shareholders for the quarter ended September 30, 2019 includes:

  • a decrease in gains and losses on equity securities, net, of $35.1 million for the quarter ended September 30, 2019 compared to the quarter ended September 30, 2018, primarily as a result of SNH's sale of The RMR Group Inc. (Nasdaq: RMR), or RMR Inc., class A common stock on July 1, 2019;
  • $33.1 million of impairment charges during the quarter ended September 30, 2019 compared to $4.5 million of impairment charges during the quarter ended September 30, 2018;
  • a decrease in rental income of $25.6 million during the quarter ended September 30, 2019 compared to the quarter ended September 30, 2018, primarily as a result of the reduction in rent paid to SNH by Five Star Senior Living Inc. (Nasdaq: FVE), or Five Star, during the three months ended September 30, 2019 pursuant to the transaction agreement SNH entered into with Five Star in April 2019, or the Transaction Agreement, as well as dispositions since July 1, 2018; and
  • a decrease in general and administrative expenses during the quarter ended September 30, 2019 compared to the quarter ended September 30, 2018, primarily as a result of no business management incentive fees accrued for the quarter ended September 30, 2019 compared to $18.8 million of business management incentive fees accrued for the quarter ended September 30, 2018.

Normalized funds from operations attributable to common shareholders, or Normalized FFO attributable to common shareholders, were $70.1 million and $100.2 million, or $0.29 and $0.42 per share, for the quarters ended September 30, 2019 and 2018, respectively.

Reconciliations of net income (loss) attributable to common shareholders determined in accordance with U.S. generally accepted accounting principles, or GAAP, to funds from operations attributable to common shareholders, or FFO attributable to common shareholders, and Normalized FFO attributable to common shareholders for the quarters ended September 30, 2019 and 2018 appear later in this press release.

Results for the Nine Months Ended September 30, 2019:

Net loss attributable to common shareholders was $36.5 million, or $0.15 per share, for the nine months ended September 30, 2019 compared to net income attributable to common shareholders of $405.4 million, or $1.71 per share, for the nine months ended September 30, 2018. The net loss attributable to common shareholders for the nine months ended September 30, 2019 includes:

  • $21.9 million of gains on sale of properties, net, during the nine months ended September 30, 2019 compared to $261.9 million of gains on sale of properties, net, during the nine months ended September 30, 2018;
  • $41.5 million of losses on equity securities, net, for the nine months ended September 30, 2019 compared to $85.6 million of gains on equity securities, net, for the nine months ended September 30, 2018, primarily as a result of SNH's sale of RMR Inc. class A common stock on July 1, 2019;
  • $41.5 million of impairment charges during the nine months ended September 30, 2019 compared to $5.1 million of impairment charges during the nine months ended September 30, 2018;
  • a decrease in rental income of $62.6 million during the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018, primarily as a result of the reduction in rent paid to SNH by Five Star during the nine months ended September 30, 2019 pursuant to the Transaction Agreement, as well as dispositions since January 1, 2018;
  • $11.2 million of acquisition and certain other transaction related costs incurred during the nine months ended September 30, 2019 related to the Transaction Agreement; and
  • a decrease in general and administrative expenses during the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018, primarily as a result of no business management incentive fees accrued for the nine months ended September 30, 2019 compared to $50.7 million of business management incentive fees accrued for the nine months ended September 30, 2018.

Normalized FFO attributable to common shareholders were $239.4 million and $312.2 million, or $1.01 and $1.31 per share, for the nine months ended September 30, 2019 and 2018, respectively.

Reconciliations of net income (loss) attributable to common shareholders determined in accordance with GAAP to FFO attributable to common shareholders and Normalized FFO attributable to common shareholders for the nine months ended September 30, 2019 and 2018 appear later in this press release.

Portfolio Operating Results:

For the quarter ended September 30, 2019, cash basis net operating income, or Cash Basis NOI, at properties owned, in service and managed by the same operator continuously since July 1, 2018, or same property, decreased 14.9% compared to the quarter ended September 30, 2018, primarily as a result of the reduction in rent paid to SNH by Five Star during the quarter ended September 30, 2019 pursuant to the Transaction Agreement.

For the quarter ended September 30, 2019, 50.3% of net operating income, or NOI, came from 140 buildings leased to medical providers, clinics, medical related businesses and biotech laboratory tenants, or MOBs, with 12.2 million leasable square feet. Same property MOB occupancy was 94.6% as of September 30, 2019 compared to 95.9% as of September 30, 2018. Same property Cash Basis NOI from MOBs decreased 0.3% for the quarter ended September 30, 2019 compared to the quarter ended September 30, 2018.

For the quarter ended September 30, 2019, 33.1% of NOI came from 209 triple net leased senior living communities with 22,242 living units. The weighted average rent coverage for triple net leased senior living communities increased to 1.51x for the 12 month period ended June 30, 2019 compared to 1.14x for the 12 month period ended June 30, 2018(1). Same property Cash Basis NOI from triple net leased senior living communities decreased 30.4% for the quarter ended September 30, 2019 compared to the quarter ended September 30, 2018. The increase in rent coverage for the 12 month period ended June 30, 2019 and decrease in same property Cash Basis NOI during the quarter ended September 30, 2019 were primarily a result of the reduction in rent paid to SNH by Five Star pursuant to the Transaction Agreement.

For the quarter ended September 30, 2019, 12.9% of NOI came from 77 managed senior living communities with 10,168 living units. Occupancy at managed senior living communities was 84.7% for the quarter ended September 30, 2019 compared to 86.7% for the quarter ended September 30, 2018. Same property occupancy at managed senior living communities was 85.3% for the quarter ended September 30, 2019 compared to 86.7% for the quarter ended September 30, 2018. Same property average monthly rates at managed senior living communities were $4,153 for the quarter ended September 30, 2019 compared to $4,163 for the quarter ended September 30, 2018. Same property Cash Basis NOI from managed senior living communities decreased 17.5% for the quarter ended September 30, 2019 compared to the quarter ended September 30, 2018, primarily due to increased operating expenses.

SNH's 10 wellness centers were 100% leased as of each of September 30, 2019 and 2018, and generated Cash Basis NOI of $4.7 million and $4.5 million for the three months ended September 30, 2019 and 2018, respectively.

Reconciliations of net income (loss) determined in accordance with GAAP to NOI and Cash Basis NOI, and a reconciliation of NOI to same property NOI and calculation of same property Cash Basis NOI by operating segment for the quarters ended September 30, 2019 and 2018 appear later in this press release.

(1) SNH reports rent coverage one quarter in arrears because operating results from tenants are usually provided to SNH three months after the end of a fiscal quarter. Operating data from triple net leased senior living communities is provided by tenants and excludes data for periods prior to SNH's ownership of certain properties, as well as properties sold or classified as held for sale during the periods presented. SNH has not independently verified this information. Five Star rent coverage for the 12 months ended June 30, 2019 is calculated based on the $132.0 million of annualized rental income payable to SNH by Five Star pursuant to the Transaction Agreement. The aggregate amount of monthly minimum rent payable to SNH by Five Star is subject to adjustment in accordance with the Transaction Agreement.

Disposition Activities:

As previously announced, on July 1, 2019, SNH completed the sale of its 2,637,408 shares of RMR Inc. class A common stock in an underwritten public offering at a price to the public of $40.00 per common share. SNH received $98.9 million in net proceeds from this sale, after underwriting fees and before other offering expenses, that it used to repay amounts outstanding under its revolving credit facility.

During the quarter ended September 30, 2019, SNH sold five properties from its MOB segment located in Massachusetts for an aggregate sales price of approximately $9.9 million, excluding closing costs. In October 2019, SNH sold one property from its MOB segment located in New Jersey for a sales price of approximately $47.5 million, excluding closing costs.

During the quarter ended September 30, 2019, SNH sold 15 skilled nursing facilities, or SNFs, located in Kansas, Iowa and Nebraska for an aggregate sales price of approximately $8.0 million, excluding closing costs. In October 2019, SNH sold two SNFs and a senior living community located in South Dakota for an aggregate sales price of approximately $10.5 million, excluding closing costs.

Conference Call:

At 10:00 a.m. Eastern Time this morning, President and Chief Operating Officer, Jennifer Francis, and Chief Financial Officer and Treasurer, Richard Siedel, will host a conference call to discuss SNH's third quarter 2019 financial results. The conference call telephone number is (877) 329-4297. Participants calling from outside the United States and Canada should dial (412) 317-5435. No pass code is necessary to access the call from either number. Participants should dial in about 15 minutes prior to the scheduled start of the call. A replay of the conference call will be available through 11:59 p.m. on Thursday, November 14, 2019. To access the replay, dial (412) 317-0088. The replay pass code is 10134939.

A live audio webcast of the conference call will also be available in a listen-only mode on SNH’s website, www.snhreit.com. Participants wanting to access the webcast should visit SNH’s website about five minutes before the call. The archived webcast will be available for replay on SNH’s website following the call for about one week. The transcription, recording and retransmission in any way of SNH’s third quarter conference call are strictly prohibited without the prior written consent of SNH.

Supplemental Data:

A copy of SNH’s Third Quarter 2019 Supplemental Operating and Financial Data is available for download at SNH’s website, www.snhreit.com. SNH’s website is not incorporated as part of this press release.

SNH is a real estate investment trust, or REIT, that owns medical office and life science properties, senior living communities and wellness centers throughout the United States. SNH is managed by the majority owned operating subsidiary of RMR Inc., an alternative asset management company that is headquartered in Newton, MA.

Non-GAAP Financial Measures:

SNH presents certain "non-GAAP financial measures" within the meaning of applicable rules of the Securities and Exchange Commission, or SEC, including FFO attributable to common shareholders, Normalized FFO attributable to common shareholders, NOI, Cash Basis NOI, same property NOI and same property Cash Basis NOI, for the three and nine months ended September 30, 2019 and 2018. These measures do not represent cash generated by operating activities in accordance with GAAP and should not be considered alternatives to net income (loss) or net income (loss) attributable to common shareholders as indicators of SNH's operating performance or as measures of SNH's liquidity. These measures should be considered in conjunction with net income (loss) and net income (loss) attributable to common shareholders as presented in SNH's condensed consolidated statements of income (loss). SNH considers these non-GAAP measures to be appropriate supplemental measures of operating performance for a REIT, along with net income (loss) and net income (loss) attributable to common shareholders. SNH believes these measures provide useful information to investors because by excluding the effects of certain historical amounts, such as depreciation and amortization, they may facilitate a comparison of SNH's operating performance between periods and with other REITs and, in the case of NOI, Cash Basis NOI, same property NOI and same property Cash Basis NOI, reflecting only those income and expense items that are generated and incurred at the property level may help both investors and management to understand the operations at SNH's properties.

Please see the pages attached hereto for a more detailed statement of SNH’s operating results and financial condition, and for an explanation of SNH’s calculation of FFO attributable to common shareholders, Normalized FFO attributable to common shareholders, NOI, Cash Basis NOI, same property NOI and same property Cash Basis NOI and a reconciliation of those amounts to amounts determined in accordance with GAAP.

 

SENIOR HOUSING PROPERTIES TRUST
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(amounts in thousands, except per share data)
(unaudited)

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

2019

 

2018

 

2019

 

2018

Revenues:

 

 

 

 

 

 

 

 

Rental income

 

$

148,011

 

 

$

173,648

 

 

$

459,349

 

 

$

521,961

 

Residents fees and services

 

107,816

 

 

105,321

 

 

324,767

 

 

309,981

 

Total revenues

 

255,827

 

 

278,969

 

 

784,116

 

 

831,942

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

Property operating expenses

 

125,083

 

 

115,987

 

 

362,498

 

 

334,141

 

Depreciation and amortization

 

73,368

 

 

71,661

 

 

219,522

 

 

214,300

 

General and administrative (1)

 

9,604

 

 

31,032

 

 

28,287

 

 

85,228

 

Acquisition and certain other transaction related costs

 

2,492

 

 

51

 

 

11,209

 

 

138

 

Impairment of assets

 

33,099

 

 

4,525

 

 

41,518

 

 

5,073

 

Total expenses

 

243,646

 

 

223,256

 

 

663,034

 

 

638,880

 

 

 

 

 

 

 

 

 

 

Gain on sale of properties

 

4,183

 

 

 

 

21,893

 

 

261,916

 

Dividend income

 

 

 

660

 

 

1,846

 

 

1,978

 

Gains and losses on equity securities, net

 

40

 

 

35,137

 

 

(41,476

)

 

85,643

 

Interest and other income

 

238

 

 

248

 

 

590

 

 

362

 

Interest expense (including net amortization of debt premiums, discounts and issuance costs of $1,421, $1,626, $4,592 and $4,579, respectively)

 

(44,817

)

 

(45,416

)

 

(136,840

)

 

(133,781

)

Gain (loss) on early extinguishment of debt

 

 

 

108

 

 

(17

)

 

(22

)

(Loss) income from continuing operations before income tax benefit (expense) and equity in earnings of an investee

 

(28,175

)

 

46,450

 

 

(32,922

)

 

409,158

 

Income tax benefit (expense)

 

146

 

 

(79

)

 

47

 

 

(444

)

Equity in earnings of an investee

 

83

 

 

831

 

 

617

 

 

882

 

Net (loss) income

 

(27,946

)

 

47,202

 

 

(32,258

)

 

409,596

 

Net income attributable to noncontrolling interest

 

(1,444

)

 

(1,397

)

 

(4,279

)

 

(4,181

)

Net (loss) income attributable to common shareholders

 

$

(29,390

)

 

$

45,805

 

 

$

(36,537

)

 

$

405,415

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding (basic)

 

237,608

 

 

237,511

 

 

237,585

 

 

237,492

 

Weighted average common shares outstanding (diluted)

 

237,608

 

 

237,562

 

 

237,585

 

 

237,526

 

 

 

 

 

 

 

 

 

 

Per common share amounts (basic and diluted):

 

 

 

 

 

 

 

 

Net (loss) income attributable to common shareholders

 

$

(0.12

)

 

$

0.19

 

 

$

(0.15

)

 

$

1.71

 

(1) General and administrative expenses include estimated business management incentive fee expense of $18,751 and $50,708 for the three and nine months ended September 30, 2018, respectively.

 

SENIOR HOUSING PROPERTIES TRUST
FUNDS FROM OPERATIONS AND NORMALIZED FUNDS FROM OPERATIONS ATTRIBUTABLE TO COMMON SHAREHOLDERS
(amounts in thousands, except per share data)
(unaudited)

 

 

Calculation of FFO and Normalized FFO Attributable to Common Shareholders(1):

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

2019

 

2018

 

2019

 

2018

Net (loss) income attributable to common shareholders

 

$

(29,390

)

 

$

45,805

 

 

$

(36,537

)

 

$

405,415

 

Depreciation and amortization

 

73,368

 

 

71,661

 

 

219,522

 

 

214,300

 

FFO attributable to noncontrolling interest

 

(5,277

)

 

(5,300

)

 

(15,871

)

 

(15,900

)

Gain on sale of properties

 

(4,183

)

 

 

 

(21,893

)

 

(261,916

)

Impairment of assets

 

33,099

 

 

4,525

 

 

41,518

 

 

5,073

 

Gains and losses on equity securities, net

 

(40

)

 

(35,137

)

 

41,476

 

 

(85,643

)

FFO attributable to common shareholders

 

67,577

 

 

81,554

 

 

228,215

 

 

261,329

 

 

 

 

 

 

 

 

 

 

Estimated business management incentive fees (2)

 

 

 

18,751

 

 

 

 

50,708

 

Acquisition and certain other transaction related costs

 

2,492

 

 

51

 

 

11,209

 

 

138

 

(Gain) loss on early extinguishment of debt

 

 

 

(108

)

 

17

 

 

22

 

Normalized FFO attributable to common shareholders

 

$

70,069

 

 

$

100,248

 

 

$

239,441

 

 

$

312,197

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding (basic)

 

237,608

 

 

237,511

 

 

237,585

 

 

237,492

 

Weighted average common shares outstanding (diluted)

 

237,608

 

 

237,562

 

 

237,585

 

 

237,526

 

 

 

 

 

 

 

 

 

 

Per common share data (basic and diluted):

 

 

 

 

 

 

 

 

Net (loss) income attributable to common shareholders

 

$

(0.12

)

 

$

0.19

 

 

$

(0.15

)

 

$

1.71

 

FFO attributable to common shareholders

 

$

0.28

 

 

$

0.34

 

 

$

0.96

 

 

$

1.10

 

Normalized FFO attributable to common shareholders

 

$

0.29

 

 

$

0.42

 

 

$

1.01

 

 

$

1.31

 

Distributions declared

 

$

0.15

 

 

$

0.39

 

 

$

0.69

 

 

$

1.17

 

(1) SNH calculates FFO attributable to common shareholders and Normalized FFO attributable to common shareholders as shown above. FFO attributable to common shareholders is calculated on the basis defined by the National Association of Real Estate Investment Trusts, which is net income (loss) attributable to common shareholders, calculated in accordance with GAAP, excluding any gain or loss on sale of properties, loss on impairment of real estate assets and gains or losses on equity securities, net, if any, plus real estate depreciation and amortization and minus FFO attributable to noncontrolling interest, as well as certain other adjustments currently not applicable to SNH. In calculating Normalized FFO attributable to common shareholders, SNH adjusts for the items shown above and includes business management incentive fees, if any, only in the fourth quarter versus the quarter when they are recognized as expense in accordance with GAAP due to their quarterly volatility not necessarily being indicative of SNH’s core operating performance and the uncertainty as to whether any such business management incentive fees will be payable when all contingencies for determining such fees are known at the end of the calendar year. FFO attributable to common shareholders and Normalized FFO attributable to common shareholders are among the factors considered by SNH’s Board of Trustees when determining the amount of distributions to its shareholders. Other factors include, but are not limited to, requirements to maintain SNH’s qualification for taxation as a REIT, limitations in SNH’s revolving credit facility and term loan agreements and SNH’s public debt covenants, the availability to SNH of debt and equity capital, SNH’s expectation of its future capital requirements and operating performance, and SNH’s expected needs for and availability of cash to pay its obligations. Other real estate companies and REITs may calculate FFO attributable to common shareholders and Normalized FFO attributable to common shareholders differently than SNH does.

(2) Incentive fees under SNH’s business management agreement with The RMR Group LLC are payable after the end of each calendar year, are calculated based on common share total return, as defined, compared to returns for the SNL U.S. REIT Healthcare Index over the applicable measurement period and are included in general and administrative expense in SNH’s condensed consolidated statements of income (loss). In calculating net income (loss) attributable to common shareholders in accordance with GAAP, SNH recognizes estimated business management incentive fee expense, if any, in the first, second and third quarters. Although SNH recognizes this expense, if any, in the first, second and third quarters for purposes of calculating net income (loss) attributable to common shareholders, SNH does not include these amounts in the calculation of Normalized FFO attributable to common shareholders until the fourth quarter, when the amount of the business management incentive fee expense for the calendar year, if any, is determined.

 

SENIOR HOUSING PROPERTIES TRUST
CALCULATION AND RECONCILIATION OF NET OPERATING INCOME (NOI) AND CASH BASIS NOI
(amounts in thousands)
(unaudited)

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

2019

 

2018

 

2019

 

2018

Calculation of NOI and Cash Basis NOI(1):

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

Rental income

 

$

148,011

 

 

$

173,648

 

 

$

459,349

 

 

$

521,961

 

Residents fees and services

 

107,816

 

 

105,321

 

 

324,767

 

 

309,981

 

Total revenues

 

255,827

 

 

278,969

 

 

784,116

 

 

831,942

 

Property operating expenses

 

(125,083

)

 

(115,987

)

 

(362,498

)

 

(334,141

)

NOI

 

130,744

 

 

162,982

 

 

421,618

 

 

497,801

 

Non-cash straight line rent adjustments

 

(1,186

)

 

(2,484

)

 

(3,550

)

 

(8,507

)

Lease value amortization

 

(1,842

)

 

(1,493

)

 

(4,922

)

 

(4,290

)

Non-cash amortization included in property operating expenses(2)

 

(199

)

 

(199

)

 

(597

)

 

(597

)

Cash Basis NOI

 

$

127,517

 

 

$

158,806

 

 

$

412,549

 

 

$

484,407

 

 

 

 

 

 

 

 

 

 

Reconciliation of Net Income (Loss) to NOI and Cash Basis NOI:

 

 

 

 

 

 

Net (loss) income

 

$

(27,946

)

 

$

47,202

 

 

$

(32,258

)

 

$

409,596

 

 

 

 

 

 

 

 

 

 

Equity in earnings of an investee

 

(83

)

 

(831

)

 

(617

)

 

(882

)

Income tax (benefit) expense

 

(146

)

 

79

 

 

(47

)

 

444

 

(Gain) loss on early extinguishment of debt

 

 

 

(108

)

 

17

 

 

22

 

Interest expense

 

44,817

 

 

45,416

 

 

136,840

 

 

133,781

 

Interest and other income

 

(238

)

 

(248

)

 

(590

)

 

(362

)

Gains and losses on equity securities, net

 

(40

)

 

(35,137

)

 

41,476

 

 

(85,643

)

Dividend income

 

 

 

(660

)

 

(1,846

)

 

(1,978

)

Gain on sale of properties

 

(4,183

)

 

 

 

(21,893

)

 

(261,916

)

Impairment of assets

 

33,099

 

 

4,525

 

 

41,518

 

 

5,073

 

Acquisition and certain other transaction related costs

 

2,492

 

 

51

 

 

11,209

 

 

138

 

General and administrative

 

9,604

 

 

31,032

 

 

28,287

 

 

85,228

 

Depreciation and amortization

 

73,368

 

 

71,661

 

 

219,522

 

 

214,300

 

NOI

 

130,744

 

 

162,982

 

 

421,618

 

 

497,801

 

 

 

 

 

 

 

 

 

 

Non-cash amortization included in property operating expenses(2)

 

(199

)

 

(199

)

 

(597

)

 

(597

)

Lease value amortization

 

(1,842

)

 

(1,493

)

 

(4,922

)

 

(4,290

)

Non-cash straight line rent adjustments

 

(1,186

)

 

(2,484

)

 

(3,550

)

 

(8,507

)

Cash Basis NOI

 

$

127,517

 

 

$

158,806

 

 

$

412,549

 

 

$

484,407

 

(1) The calculations of NOI, Cash Basis NOI, same property NOI and same property Cash Basis NOI exclude certain components of net income (loss) in order to provide results that are more closely related to SNH’s property level results of operations. SNH calculates NOI and Cash Basis NOI as shown above. SNH defines NOI as income from its real estate less its property operating expenses. NOI excludes amortization of capitalized tenant improvement costs and leasing commissions that SNH records as depreciation and amortization. SNH defines Cash Basis NOI as NOI excluding non-cash straight line rent adjustments, lease value amortization, lease termination fee amortization, if any, and non-cash amortization included in property operating expenses. SNH calculates same property NOI and same property Cash Basis NOI in the same manner that it calculates the corresponding NOI and Cash Basis NOI amounts, except that it only includes same properties in calculating same property NOI and same property Cash Basis NOI. SNH uses NOI, Cash Basis NOI, same property NOI and same property Cash Basis NOI to evaluate individual and company wide property level performance. Other real estate companies and REITs may calculate NOI, Cash Basis NOI, same property NOI and same property Cash Basis NOI differently than SNH does.

(2) SNH recorded a liability for the amount by which the estimated fair value for accounting purposes exceeded the price SNH paid for its investment in RMR Inc. common stock in June 2015. A portion of this liability is being amortized on a straight line basis through December 31, 2035 as a reduction to property management fees expense, which is included in property operating expenses.

 

SENIOR HOUSING PROPERTIES TRUST
Calculation and Reconciliation of NOI, Cash Basis NOI, Same Property NOI and Same Property Cash Basis NOI by Segment
(1)
(dollars in thousands)
(unaudited)

 

 

 

For the Three Months Ended September 30, 2019

 

For the Three Months Ended September 30, 2018

Calculation of NOI and Cash Basis NOI:

 

MOBs

 

Triple Net Leased Senior Living Communities

 

Managed Senior Living Communities

 

Non-Segment (2)

 

Total

 

MOBs

 

Triple Net Leased Senior Living Communities

 

Managed Senior Living Communities

 

Non-Segment (2)

 

Total

Rental income / residents fees and services

 

$

100,010

 

 

$

43,326

 

 

$

107,816

 

 

$

4,675

 

 

$

255,827

 

 

$

104,492

 

 

$

64,538

 

 

$

105,321

 

 

$

4,618

 

 

$

278,969

 

Property operating expenses

 

(34,184

)

 

 

 

(90,899

)

 

 

 

(125,083

)

 

(32,652

)

 

 

 

(83,335

)

 

 

 

(115,987

)

NOI

 

$

65,826

 

 

$

43,326

 

 

$

16,917

 

 

$

4,675

 

 

$

130,744

 

 

$

71,840

 

 

$

64,538

 

 

$

21,986

 

 

$

4,618

 

 

$

162,982

 

NOI change

 

(8.4

)%

 

(32.9

)%

 

(23.1

)%

 

1.2

%

 

(19.8

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NOI

 

$

65,826

 

 

$

43,326

 

 

$

16,917

 

 

$

4,675

 

 

$

130,744

 

 

$

71,840

 

 

$

64,538

 

 

$

21,986

 

 

$

4,618

 

 

$

162,982

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-cash straight line rent adjustments

 

1,043

 

 

255

 

 

 

 

(112

)

 

1,186

 

 

1,912

 

 

548

 

 

 

 

24

 

 

2,484

 

Lease value amortization

 

1,787

 

 

 

 

 

 

55

 

 

1,842

 

 

1,438

 

 

 

 

 

 

55

 

 

1,493

 

Non-cash amortization included in property operating expenses (3)

 

199

 

 

 

 

 

 

 

 

199

 

 

199

 

 

 

 

 

 

 

 

199

 

Cash Basis NOI

 

$

62,797

 

 

$

43,071

 

 

$

16,917

 

 

$

4,732

 

 

$

127,517

 

 

$

68,291

 

 

$

63,990

 

 

$

21,986

 

 

$

4,539

 

 

$

158,806

 

Cash Basis NOI change

 

(8.0

)%

 

(32.7

)%

 

(23.1

)%

 

4.3

%

 

(19.7

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of NOI to Same Property NOI:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NOI

 

$

65,826

 

 

$

43,326

 

 

$

16,917

 

 

$

4,675

 

 

$

130,744

 

 

$

71,840

 

 

$

64,538

 

 

$

21,986

 

 

$

4,618

 

 

$

162,982

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NOI not included in same property

 

1,185

 

 

963

 

 

(1,443

)

 

 

 

705

 

 

5,696

 

 

3,709

 

 

(265

)

 

 

 

9,140

 

Same property NOI (4)

 

$

64,641

 

 

$

42,363

 

 

$

18,360

 

 

$

4,675

 

 

$

130,039

 

 

$

66,144

 

 

$

60,829

 

 

$

22,251

 

 

$

4,618

 

 

$

153,842

 

Same property NOI change

 

(2.3

)%

 

(30.4

)%

 

(17.5

)%

 

1.2

%

 

(15.5

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of Same Property NOI to Same Property Cash Basis NOI:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Same property NOI (4)

 

$

64,641

 

 

$

42,363

 

 

$

18,360

 

 

$

4,675

 

 

$

130,039

 

 

$

66,144

 

 

$

60,829

 

 

$

22,251

 

 

$

4,618

 

 

$

153,842

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-cash straight line rent adjustments

 

1,029

 

 

258

 

 

 

 

(112

)

 

1,175

 

 

2,466

 

 

368

 

 

 

 

24

 

 

2,858

 

Lease value amortization

 

1,798

 

 

 

 

 

 

55

 

 

1,853

 

 

1,654

 

 

 

 

 

 

55

 

 

1,709

 

Non-cash amortization included in property operating expenses (3)

 

188

 

 

 

 

 

 

 

 

188

 

 

183

 

 

 

 

 

 

 

 

183

 

Same property cash basis NOI (4)

 

$

61,626

 

 

$

42,105

 

 

$

18,360

 

 

$

4,732

 

 

$

126,823

 

 

$

61,841

 

 

$

60,461

 

 

$

22,251

 

 

$

4,539

 

 

$

149,092

 

Same property cash basis NOI change

 

(0.3

)%

 

(30.4

)%

 

(17.5

)%

 

4.3

%

 

(14.9

)%

 

 

 

 

 

 

 

 

 

 

(1) See page 7 for the calculation of NOI and a reconciliation of net income (loss) determined in accordance with GAAP to that amount. See footnote 1 on page 7 of this press release for a definition of NOI, Cash Basis NOI, same property NOI and same property Cash Basis NOI, and page 4 for a description of why management believes they are appropriate supplemental measures and a description of how management uses these measures.

(2) Includes the operating results of certain properties that offer wellness, fitness and spa services to members.

(3) SNH recorded a liability for the amount by which the estimated fair value for accounting purposes exceeded the price SNH paid for its investment in RMR Inc. common stock in June 2015. A portion of this liability is being amortized on a straight line basis through December 31, 2035 as a reduction to property management fees expense, which is included in property operating expenses.

(4) Consists of properties owned, in service and managed by the same operator continuously since July 1, 2018, including SNH's MOB (two buildings) owned in a joint venture arrangement in which SNH owns a 55% equity interest; excludes properties classified as held for sale or in redevelopment, if any.

 

SENIOR HOUSING PROPERTIES TRUST
Calculation and Reconciliation of NOI, Cash Basis NOI, Same Property NOI and Same Property Cash Basis NOI by Segment
(1)
(dollars in thousands)
(unaudited)

 

 

 

For the Nine Months Ended September 30, 2019

 

For the Nine Months Ended September 30, 2018

Calculation of NOI and Cash Basis NOI:

 

MOBs

 

Triple Net Leased Senior Living Communities

 

Managed Senior Living Communities

 

Non-Segment (2)

 

Total

 

MOBs

 

Triple Net Leased Senior Living Communities

 

Managed Senior Living Communities

 

Non-Segment (2)

 

Total

Rental income / residents fees and services

 

$

307,616

 

 

$

137,683

 

 

$

324,767

 

 

$

14,050

 

 

$

784,116

 

 

$

309,497

 

 

$

198,626

 

 

$

309,981

 

 

$

13,838

 

 

$

831,942

 

Property operating expenses

 

(98,886

)

 

 

 

(263,612

)

 

 

 

(362,498

)

 

(94,773

)

 

 

 

(239,368

)

 

 

 

(334,141

)

NOI

 

$

208,730

 

 

$

137,683

 

 

$

61,155

 

 

$

14,050

 

 

$

421,618

 

 

$

214,724

 

 

$

198,626

 

 

$

70,613

 

 

$

13,838

 

 

$

497,801

 

NOI change

 

(2.8

)%

 

(30.7

)%

 

(13.4

)%

 

1.5

%

 

(15.3

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NOI

 

$

208,730

 

 

$

137,683

 

 

$

61,155

 

 

$

14,050

 

 

$

421,618

 

 

$

214,724

 

 

$

198,626

 

 

$

70,613

 

 

$

13,838

 

 

$

497,801

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-cash straight line rent adjustments

 

3,151

 

 

736

 

 

 

 

(337

)

 

3,550

 

 

6,486

 

 

1,722

 

 

 

 

299

 

 

8,507

 

Lease value amortization

 

4,756

 

 

 

 

 

 

166

 

 

4,922

 

 

4,124

 

 

 

 

 

 

166

 

 

4,290

 

Non-cash amortization included in property operating expenses (3)

 

597

 

 

 

 

 

 

 

 

597

 

 

597

 

 

 

 

 

 

 

 

597

 

Cash Basis NOI

 

$

200,226

 

 

$

136,947

 

 

$

61,155

 

 

$

14,221

 

 

$

412,549

 

 

$

203,517

 

 

$

196,904

 

 

$

70,613

 

 

$

13,373

 

 

$

484,407

 

Cash Basis NOI change

 

(1.6

)%

 

(30.4

)%

 

(13.4

)%

 

6.3

%

 

(14.8

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of NOI to Same Property NOI:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NOI

 

$

208,730

 

 

$

137,683

 

 

$

61,155

 

 

$

14,050

 

 

$

421,618

 

 

$

214,724

 

 

$

198,626

 

 

$

70,613

 

 

$

13,838

 

 

$

497,801

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NOI not included in same property

 

19,106

 

 

3,877

 

 

(998

)

 

 

 

21,985

 

 

24,220

 

 

16,408

 

 

2,150

 

 

 

 

42,778

 

Same property NOI (4)

 

$

189,624

 

 

$

133,806

 

 

$

62,153

 

 

$

14,050

 

 

$

399,633

 

 

$

190,504

 

 

$

182,218

 

 

$

68,463

 

 

$

13,838

 

 

$

455,023

 

Same property NOI change

 

(0.5

)%

 

(26.6

)%

 

(9.2

)%

 

1.5

%

 

(12.2

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of Same Property NOI to Same Property Cash Basis NOI:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Same property NOI (4)

 

$

189,624

 

 

$

133,806

 

 

$

62,153

 

 

$

14,050

 

 

$

399,633

 

 

$

190,504

 

 

$

182,218

 

 

$

68,463

 

 

$

13,838

 

 

$

455,023

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-cash straight line rent adjustments

 

3,772

 

 

745

 

 

 

 

(337

)

 

4,180

 

 

7,621

 

 

1,143

 

 

 

 

299

 

 

9,063

 

Lease value amortization

 

5,352

 

 

 

 

 

 

166

 

 

5,518

 

 

4,926

 

 

 

 

 

 

166

 

 

5,092

 

Non-cash amortization included in property operating expenses (3)

 

554

 

 

 

 

 

 

 

 

554

 

 

547

 

 

 

 

 

 

 

 

547

 

Same property cash basis NOI (4)

 

$

179,946

 

 

$

133,061

 

 

$

62,153

 

 

$

14,221

 

 

$

389,381

 

 

$

177,410

 

 

$

181,075

 

 

$

68,463

 

 

$

13,373

 

 

$

440,321

 

Same property cash basis NOI change

 

1.4

%

 

(26.5

)%

 

(9.2

)%

 

6.3

%

 

(11.6

)%

 

 

 

 

 

 

 

 

 

 

(1) See page 7 for the calculation of NOI and a reconciliation of net income (loss) determined in accordance with GAAP to that amount. See footnote 1 on page 7 of this press release for a definition of NOI, Cash Basis NOI, same property NOI and same property Cash Basis NOI, and page 4 for a description of why management believes they are appropriate supplemental measures and a description of how management uses these measures.

(2) Includes the operating results of certain properties that offer wellness, fitness and spa services to members.

(3) SNH recorded a liability for the amount by which the estimated fair value for accounting purposes exceeded the price SNH paid for its investment in RMR Inc. common stock in June 2015. A portion of this liability is being amortized on a straight line basis through December 31, 2035 as a reduction to property management fees expense, which is included in property operating expenses.

(4) Consists of properties owned, in service and managed by the same operator continuously since January 1, 2018, including SNH's MOB (two buildings) owned in a joint venture arrangement in which SNH owns a 55% equity interest; excludes properties classified as held for sale or in redevelopment, if any.

 

SENIOR HOUSING PROPERTIES TRUST
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands)
(unaudited)

 

 

 

September 30, 2019

 

December 31, 2018

ASSETS

 

 

 

 

Real estate properties

 

$

7,844,812

 

 

$

7,876,300

 

Accumulated depreciation

 

(1,655,141

)

 

(1,534,392

)

Total real estate properties, net

 

6,189,671

 

 

6,341,908

 

 

 

 

 

 

Assets of properties held for sale

 

104,446

 

 

1,928

 

Cash and cash equivalents

 

49,462

 

 

54,976

 

Restricted cash

 

13,987

 

 

15,095

 

Acquired real estate leases and other intangible assets, net

 

359,909

 

 

419,244

 

Other assets, net

 

199,515

 

 

327,275

 

Total assets

 

$

6,916,990

 

 

$

7,160,426

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

Unsecured revolving credit facility

 

$

589,000

 

 

$

139,000

 

Unsecured term loans, net

 

548,906

 

 

548,286

 

Senior unsecured notes, net

 

1,819,802

 

 

2,216,945

 

Secured debt and capital leases, net

 

698,695

 

 

744,186

 

Accrued interest

 

30,308

 

 

26,182

 

Assumed real estate lease obligations, net

 

79,134

 

 

86,304

 

Other liabilities

 

182,923

 

 

219,653

 

Total liabilities

 

3,948,768

 

 

3,980,556

 

 

 

 

 

 

Total equity

 

2,968,222

 

 

3,179,870

 

Total liabilities and equity

 

$

6,916,990

 

 

$

7,160,426

 

Warning Concerning Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Whenever SNH uses words such as “believe”, “expect”, “anticipate”, “intend”, “plan”, “estimate”, "will", “may” and negatives or derivatives of these or similar expressions, SNH is making forward-looking statements. These forward-looking statements are based upon SNH’s present intent, beliefs or expectations, but forward-looking statements are not guaranteed to occur and may not occur. Actual results may differ materially from those contained in or implied by SNH’s forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors, some of which are beyond SNH’s control. For example,

  • Ms. Francis’s statements that SNH has made further progress in completing and remains on target to close the transformative restructuring of its business arrangement with Five Star on January 1, 2020 may imply that the restructuring transaction will be completed effective January 1, 2020. SNH's restructuring transaction with Five Star is subject to conditions, including, among others, the receipt of certain regulatory approvals. SNH cannot be sure that any or all of such conditions will be satisfied. Accordingly, this restructuring transaction may not be completed effective January 1, 2020 or at all, and the terms of such transaction may change.
  • Ms. Francis’s statements that SNH has approximately $564 million of assets sold or under agreement to sell, that SNH has received offers for $180 million of additional assets and that SNH remains on pace to have approximately $900 million of assets sold or under agreement to sell by year end 2019 may imply that SNH will sell the properties under agreement or for which it has received offers by year end 2019 and receive proceeds from those sales equal to or greater than the expected amounts. However, SNH may not complete the sales of any or all of the properties it currently plans to sell. Also, SNH may sell some or all of these properties at amounts that are less than currently expected and/or less than the carrying values of such properties and SNH may incur losses on any such sales as a result.

The information contained in SNH’s filings with the SEC, including under “Risk Factors” in SNH’s periodic reports, or incorporated therein, identifies important factors that could cause SNH’s actual results to differ materially from those stated in or implied by SNH’s forward-looking statements. SNH’s filings with the SEC are available on the SEC’s website at www.sec.gov. You should not place undue reliance upon forward-looking statements. Except as required by law, SNH does not intend to update or change any forward-looking statements as a result of new information, future events or otherwise.

A Maryland Real Estate Investment Trust with transferable shares of beneficial interest listed on the Nasdaq.
No shareholder, Trustee or officer is personally liable for any act or obligation of the Trust.

Contacts

Michael Kodesch, Director, Investor Relations
(617) 796-8234
www.snhreit.com

Contacts

Michael Kodesch, Director, Investor Relations
(617) 796-8234
www.snhreit.com