NEWTON, Mass.--(BUSINESS WIRE)--Senior Housing Properties Trust (Nasdaq:SNH) today announced its financial results for the quarter and year ended December 31, 2018.
Results for the Quarter Ended December 31, 2018:
Net loss attributable to common shareholders was $118.5 million, or $0.50 per share, for the quarter ended December 31, 2018 compared to net income attributable to common shareholders of $65.0 million, or $0.27 per diluted share, for the quarter ended December 31, 2017. The net loss attributable to common shareholders was primarily the result of: (1) unrealized losses on equity securities of $106.4 million, or $0.45 per share, which are included in earnings in accordance with new U.S. generally accepted accounting principles, or GAAP, standards effective January 1, 2018; (2) impairment charges of $61.3 million, or $0.26 per share, recognized during the quarter ended December 31, 2018; (3) dispositions since October 1, 2017; and (4) an increase in interest expense as a result of higher interest rates on SNH's debt. Net loss attributable to common shareholders was partially offset by: (1) a decrease in general and administrative expenses due to the reversal of $10.1 million, or $0.04 per share, of previously accrued business management incentive fee expense during the quarter ended December 31, 2018 and (2) acquisitions since October 1, 2017.
Normalized funds from operations attributable to common shareholders, or Normalized FFO attributable to common shareholders, were $65.1 million and $59.2 million, or $0.27 and $0.25 per diluted share, for the quarters ended December 31, 2018 and 2017, respectively.
Reconciliations of net income (loss) attributable to common shareholders determined in accordance with 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 December 31, 2018 and 2017 appear later in this press release.
Results for the Year Ended December 31, 2018:
Net income attributable to common shareholders was $286.9 million, or $1.21 per diluted share, for the year ended December 31, 2018 compared to $147.6 million, or $0.62 per diluted share, for the year ended December 31, 2017. This increase in net income attributable to common shareholders was primarily the result of: (1) $261.9 million, or $1.10 per diluted share, of net gains on the sale of properties recognized during 2018; (2) a decrease in general and administrative expenses as a result of the $40.6 million, or $0.17 per diluted share, of business management incentive fee expense recognized for the year ended December 31, 2018 as a result of SNH's total shareholder return, as defined, exceeding the returns for the SNL U.S. REIT Healthcare index by 9.6% over the applicable measurement period compared to the $55.7 million of business management incentive fee expense recognized for the year ended December 31, 2017; and (3) acquisitions since January 1, 2017. This increase in net income attributable to common shareholders was partially offset by: (1) impairment charges of $66.3 million, or $0.28 per diluted share, recognized during the year ended December 31, 2018; (2) unrealized losses on equity securities of $20.7 million, or $0.09 per diluted share, which are included in earnings in accordance with new GAAP standards effective January 1, 2018; (3) dispositions since January 1, 2017; and (4) an increase in interest expense as a result of higher interest rates applicable to SNH's debt.
Normalized FFO attributable to common shareholders were $377.3 million and $375.2 million, or $1.59 and $1.58 per diluted share, for the years ended December 31, 2018 and 2017, 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 year ended December 31, 2018 and 2017 appear later in this press release.
Portfolio Operating Results:
For the quarter ended December 31, 2018, consolidated cash basis net operating income, or Cash Basis NOI, at properties owned continuously since October 1, 2017, or same property, decreased 1.2% compared to the quarter ended December 31, 2017.
For the quarter ended December 31, 2018, 41.9% of net operating income, or NOI, came from 129 properties leased to medical providers, medical related businesses, clinics and biotech laboratory tenants, or MOBs, with 12.6 million leasable square feet. As of December 31, 2018, 94.5% of MOB square feet were leased compared to 95.0% as of December 31, 2017. Same property occupancy was 94.2% as of December 31, 2018 compared to 95.0% as of December 31, 2017. Same property Cash Basis NOI from MOBs increased 1.0% for the quarter ended December 31, 2018 compared to the quarter ended December 31, 2017.
For the quarter ended December 31, 2018, 42.2% of NOI came from 228 triple net leased senior living communities with 24,030 living units. The weighted average rent coverage for triple net leased senior living communities decreased to 1.08x for the 12 month period ended September 30, 2018 compared to 1.22x for the 12 month period ended September 30, 2017(1)(2). Same property Cash Basis NOI from triple net leased senior living communities was flat for the quarter ended December 31, 2018 compared to the quarter ended December 31, 2017.
For the quarter ended December 31, 2018, 13.1% of NOI came from 76 managed senior living communities with 9,766 living units. Occupancy at managed senior living communities was 85.8% for the quarter ended December 31, 2018 compared to 85.9% for the quarter ended December 31, 2017. Same property occupancy at managed senior living communities was 86.2% for the quarter ended December 31, 2018 compared to 85.9% for the quarter ended December 31, 2017. Same property average monthly rates at managed senior living communities were $4,223 for the quarter ended December 31, 2018 compared to $4,256 for the quarter ended December 31, 2017. Same property Cash Basis NOI from managed senior living communities decreased 11.8% for the quarter ended December 31, 2018 compared to the quarter ended December 31, 2017.
SNH's 10 wellness centers were 100% leased as of each of December 31, 2018 and December 31, 2017, and generated Cash Basis NOI of $4.5 million and $4.4 million for the three months ended December 31, 2018 and 2017, respectively.
Reconciliations of net income (loss) determined in accordance with GAAP to consolidated NOI, Cash Basis NOI, same property NOI and Cash Basis NOI by operating segment for the quarters ended December 31, 2018 and 2017 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 are provided by tenants and SNH has not independently
verified this information.
(2) 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.
Investment Activities:
During the quarter ended December 31, 2018, SNH invested approximately $3.7 million in improvements at its senior living communities that has generated or will generate additional rent under the terms of the applicable leases. In addition, SNH regularly makes additional investments at its MOBs and its managed senior living communities that it expects may maintain or enhance the competitive positions of those properties and may increase its operating revenue from those properties.
Disposition Activities:
In December 2018, SNH agreed to sell two MOBs located in Massachusetts for an aggregate sales price of approximately$2.1 million, excluding closing costs. SNH expects the closings of these sales to occur during the second quarter of 2019.
In February 2019, SNH sold one MOB located in Florida for a sales price of $2.9 million, excluding closing costs.
Also in February 2019, SNH agreed to sell one MOB located in Colorado for a sales price of approximately $2.6 million, excluding closing costs. SNH expects the closing of this sale to occur during the second quarter of 2019.
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 fourth quarter and full year 2018 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 Friday, March 8, 2019. To access the replay, dial (412) 317-0088. The replay pass code is 10123763.
A live audio webcast of the conference call will also be available in a listen-only mode on SNH’s website, which is located at 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 fourth quarter conference call are strictly prohibited without the prior written consent of SNH.
Supplemental Data:
A copy of SNH’s Fourth Quarter 2018 Supplemental Operating and Financial Data is available for download at SNH’s website, which is located at 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 operating subsidiary of The RMR Group Inc. (Nasdaq: RMR), or RMR Inc., an alternative asset management company that is headquartered in Newton, MA.
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 and Cash Basis NOI and a reconciliation of those amounts to amounts determined in accordance with GAAP.
WARNING CONCERNING FORWARD LOOKING STATEMENTS
THIS PRESS RELEASE CONTAINS STATEMENTS THAT CONSTITUTE FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND OTHER SECURITIES LAWS. ALSO, 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 AS A RESULT OF VARIOUS FACTORS. FOR EXAMPLE:
- THIS PRESS RELEASE INCLUDES A STATEMENT THAT SNH EXPECTS THE ADDITIONAL INVESTMENTS IT REGULARLY MAKES AT ITS MOBS AND MANAGED SENIOR LIVING COMMUNITIES MAY MAINTAIN OR ENHANCE THE COMPETITIVE POSITIONS OF THOSE PROPERTIES AND MAY INCREASE ITS OPERATING REVENUE FROM THOSE PROPERTIES. HOWEVER, SNH CANNOT BE SURE THAT THE FUTURE COMPETITIVE POSITIONS OF, OR SNH'S OPERATING REVENUE FROM, THOSE PROPERTIES WILL INCREASE AS A RESULT OF THESE INVESTMENTS OR OTHERWISE. IN FACT, THE COMPETITIVE POSITIONS OF, AND SNH’S OPERATING REVENUE FROM, THOSE PROPERTIES MAY DECLINE.
- SNH HAS AGREED TO SELL THREE MOBS FOR AN AGGREGATE SALES PRICE OF APPROXIMATELY $4.7 MILLION, EXCLUDING CLOSING COSTS. THESE SALES ARE SUBJECT TO CONDITIONS. THESE CONDITIONS MAY NOT BE MET AND THESE SALES MAY NOT OCCUR, MAY BE DELAYED BEYOND THE SECOND QUARTER OF 2019 OR THEIR TERMS MAY CHANGE.
THE INFORMATION CONTAINED IN SNH’S FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION, OR SEC, INCLUDING UNDER “RISK FACTORS” IN SNH’S PERIODIC REPORTS, OR INCORPORATED THEREIN, IDENTIFIES OTHER 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.
SENIOR HOUSING PROPERTIES TRUST
CONSOLIDATED STATEMENTS
OF INCOME (LOSS)
(amounts in thousands, except per share
data)
(unaudited)
| Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||
| Rental income | $ | 178,680 | $ | 179,585 | $ | 700,641 | $ | 681,022 | ||||||||||||||||
| Residents fees and services | 106,542 | 98,958 | 416,523 | 393,707 | ||||||||||||||||||||
| Total revenues | 285,222 | 278,543 | 1,117,164 | 1,074,729 | ||||||||||||||||||||
| Expenses: | ||||||||||||||||||||||||
| Property operating expenses | 117,440 | 104,842 | 451,581 | 413,492 | ||||||||||||||||||||
| Depreciation and amortization | 71,935 | 67,398 | 286,235 | 276,861 | ||||||||||||||||||||
| General and administrative (1) | 657 | 45,813 | 85,885 | 103,694 | ||||||||||||||||||||
| Acquisition and certain other transaction related costs | 56 | 255 | 194 | 403 | ||||||||||||||||||||
| Impairment of assets | 61,273 | — | 66,346 | 5,082 | ||||||||||||||||||||
| Total expenses | 251,361 | 218,308 | 890,241 | 799,532 | ||||||||||||||||||||
| Gain on sale of properties | — | 46,055 | 261,916 | 46,055 | ||||||||||||||||||||
| Dividend income | 923 | 659 | 2,901 | 2,637 | ||||||||||||||||||||
| Unrealized losses on equity securities(2) | (106,367 | ) | — | (20,724 | ) | — | ||||||||||||||||||
| Interest and other income | 305 | 83 | 667 | 406 | ||||||||||||||||||||
| Interest expense | (45,506 | ) | (40,625 | ) | (179,287 | ) | (165,019 | ) | ||||||||||||||||
| Loss on early extinguishment of debt | — | — | (22 | ) | (7,627 | ) | ||||||||||||||||||
| (Loss) income from continuing operations before income tax expense and equity in (losses) earnings of an investee | (116,784 | ) | 66,407 | 292,374 | 151,649 | |||||||||||||||||||
| Income tax expense | (32 | ) | (154 | ) | (476 | ) | (454 | ) | ||||||||||||||||
| Equity in (losses) earnings of an investee | (366 | ) | 75 | 516 | 608 | |||||||||||||||||||
| Net (loss) income | (117,182 | ) | 66,328 | 292,414 | 151,803 | |||||||||||||||||||
| Net income attributable to noncontrolling interest | (1,361 | ) | (1,328 | ) | (5,542 | ) | (4,193 | ) | ||||||||||||||||
| Net (loss) income attributable to common shareholders | $ | (118,543 | ) | $ | 65,000 | $ | 286,872 | $ | 147,610 | |||||||||||||||
| Weighted average common shares outstanding (basic) | 237,568 | 237,467 | 237,511 | 237,420 | ||||||||||||||||||||
| Weighted average common shares outstanding (diluted) | 237,573 | 237,475 | 237,546 | 237,452 | ||||||||||||||||||||
| Per common share data (basic and diluted): | ||||||||||||||||||||||||
| Net (loss) income attributable to common shareholders | $ | (0.50 | ) | $ | 0.27 | $ | 1.21 | $ | 0.62 | |||||||||||||||
(1) General and administrative expenses include the reversal of $10,066
of previously accrued business management incentive fee expense and
$33,693 of business management incentive fee expense for the three
months ended December 31, 2018 and 2017, respectively, and business
management incentive fee expense of $40,642 and $55,740 for the years
ended December 31, 2018 and 2017, respectively.
(2) Unrealized
losses on equity securities represent the adjustment required to adjust
the carrying value of SNH's investments in RMR Inc. and Five Star Senior
Living Inc. (Nasdaq: FVE), or Five Star, common stock to their fair
value as of the end of the period in accordance with new GAAP standards
effective January 1, 2018.
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 December 31, | Year Ended December 31, | |||||||||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||||||||||
| Net (loss) income attributable to common shareholders | $ | (118,543 | ) | $ | 65,000 | $ | 286,872 | $ | 147,610 | |||||||||||||||
| Depreciation and amortization expense | 71,935 | 67,398 | 286,235 | 276,861 | ||||||||||||||||||||
| FFO attributable to noncontrolling interest | (5,300 | ) | (5,304 | ) | (21,200 | ) | (16,370 | ) | ||||||||||||||||
| Gain on sale of properties | — | (46,055 | ) | (261,916 | ) | (46,055 | ) | |||||||||||||||||
| Impairment of assets | 61,273 | — | 66,346 | 5,082 | ||||||||||||||||||||
| FFO attributable to common shareholders | 9,365 | 81,039 | 356,337 | 367,128 | ||||||||||||||||||||
| Estimated business management incentive fees (2) | (50,708 | ) | (22,048 | ) | — | — | ||||||||||||||||||
| Acquisition and certain other transaction related costs | 56 | 255 | 194 | 403 | ||||||||||||||||||||
| Loss on early extinguishment of debt | — | — | 22 | 7,627 | ||||||||||||||||||||
| Unrealized losses on equity securities(3) | 106,367 | — | 20,724 | — | ||||||||||||||||||||
| Normalized FFO attributable to common shareholders | $ | 65,080 | $ | 59,246 | $ | 377,277 | $ | 375,158 | ||||||||||||||||
| Weighted average common shares outstanding (basic) | 237,568 | 237,467 | 237,511 | 237,420 | ||||||||||||||||||||
| Weighted average common shares outstanding (diluted) | 237,573 | 237,475 | 237,546 | 237,452 | ||||||||||||||||||||
| Per common share data (basic and diluted): | ||||||||||||||||||||||||
| Net (loss) income attributable to common shareholders | $ | (0.50 | ) | $ | 0.27 | $ | 1.21 | $ | 0.62 | |||||||||||||||
| FFO attributable to common shareholders | $ | 0.04 | $ | 0.34 | $ | 1.50 | $ | 1.55 | ||||||||||||||||
| Normalized FFO attributable to common shareholders | $ | 0.27 | $ | 0.25 | $ | 1.59 | $ | 1.58 | ||||||||||||||||
| Distributions declared | $ | 0.39 | $ | 0.39 | $ | 1.56 | $ | 1.56 | ||||||||||||||||
(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, or Nareit,
which is net income (loss) attributable to common shareholders,
calculated in accordance with GAAP, excluding any gain or loss on sale
of real estate and loss on impairment of real estate assets, if any,
plus real estate depreciation and amortization and the difference
between net income (loss) attributable to common shareholders and FFO
attributable to noncontrolling interest, as well as certain other
adjustments currently not applicable to SNH. SNH’s calculation of
Normalized FFO attributable to common shareholders differs from Nareit’s
definition of FFO because SNH 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, and SNH
excludes acquisition and certain other transaction related costs
expensed under GAAP such as legal and professional fees associated with
SNH's acquisition and disposition activities, gains or losses on early
extinguishment of debt, if any, unrealized gains or losses on equity
securities, net, if any, and Normalized FFO, net of FFO, from
noncontrolling interest, if any. SNH considers FFO attributable to
common shareholders and Normalized FFO attributable to common
shareholders 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 that FFO
attributable to common shareholders and Normalized FFO attributable to
common shareholders provide useful information to investors, because by
excluding the effects of certain historical amounts, such as
depreciation and amortization expense, FFO attributable to common
shareholders and Normalized FFO attributable to common shareholders may
facilitate a comparison of SNH's operating performance between periods
and with other REITs. 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. FFO attributable to common
shareholders and Normalized FFO attributable to common shareholders 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 consolidated statements of income. Other real estate companies and
REITs may calculate FFO and Normalized FFO differently than SNH does.
(2)
Incentive fees under SNH’s business management agreement are payable
after the end of each calendar year, are calculated based on common
share total return, as defined, and are included in general and
administrative expense in SNH’s consolidated statements of income. 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.
Normalized FFO attributable to common shareholders includes business
management incentive fee expense of $40,642 and $55,740 for the three
months and years ended December 31, 2018 and 2017, respectively.
(3)
Unrealized losses on equity securities represent the adjustment required
to adjust the carrying value of SNH's investments in RMR Inc. and Five
Star common stock to their fair value as of the end of the period in
accordance with new GAAP standards effective January 1, 2018.
SENIOR HOUSING PROPERTIES TRUST
CALCULATION AND
RECONCILIATION OF NET OPERATING INCOME (NOI) AND CASH BASIS NOI
(amounts
in thousands)
(unaudited)
| Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||||||||||
| Calculation of NOI and Cash Basis NOI(1): | ||||||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||
| Rental income | $ | 178,680 | $ | 179,585 | $ | 700,641 | $ | 681,022 | ||||||||||||||||
| Residents fees and services | 106,542 | 98,958 | 416,523 | 393,707 | ||||||||||||||||||||
| Total revenues | 285,222 | 278,543 | 1,117,164 | 1,074,729 | ||||||||||||||||||||
| Property operating expenses | (117,440 | ) | (104,842 | ) | (451,581 | ) | (413,492 | ) | ||||||||||||||||
| Property net operating income (NOI): | 167,782 | 173,701 | 665,583 | 661,237 | ||||||||||||||||||||
| Non-cash straight line rent adjustments | (1,720 | ) | (3,473 | ) | (10,227 | ) | (13,958 | ) | ||||||||||||||||
| Lease value amortization | (1,497 | ) | (1,386 | ) | (5,787 | ) | (5,349 | ) | ||||||||||||||||
| Non-cash amortization included in property operating expenses(2) | (200 | ) | (200 | ) | (797 | ) | (798 | ) | ||||||||||||||||
| Cash Basis NOI | $ | 164,365 | $ | 168,642 | $ | 648,772 | $ | 641,132 | ||||||||||||||||
| Reconciliation of Net (Loss) Income to Cash Basis NOI: | ||||||||||||||||||||||||
| Net (loss) income | $ | (117,182 | ) | $ | 66,328 | $ | 292,414 | $ | 151,803 | |||||||||||||||
| Equity in losses (earnings) of an investee | 366 | (75 | ) | (516 | ) | (608 | ) | |||||||||||||||||
| Income tax expense | 32 | 154 | 476 | 454 | ||||||||||||||||||||
| Loss on early extinguishment of debt | — | — | 22 | 7,627 | ||||||||||||||||||||
| Interest expense | 45,506 | 40,625 | 179,287 | 165,019 | ||||||||||||||||||||
| Interest and other income | (305 | ) | (83 | ) | (667 | ) | (406 | ) | ||||||||||||||||
| Unrealized losses on equity securities | 106,367 | — | 20,724 | — | ||||||||||||||||||||
| Dividend income | (923 | ) | (659 | ) | (2,901 | ) | (2,637 | ) | ||||||||||||||||
| Gain on sale of properties | — | (46,055 | ) | (261,916 | ) | (46,055 | ) | |||||||||||||||||
| Impairment of assets | 61,273 | — | 66,346 | 5,082 | ||||||||||||||||||||
| Acquisition and certain other transaction related costs | 56 | 255 | 194 | 403 | ||||||||||||||||||||
| General and administrative expense | 657 | 45,813 | 85,885 | 103,694 | ||||||||||||||||||||
| Depreciation and amortization expense | 71,935 | 67,398 | 286,235 | 276,861 | ||||||||||||||||||||
| Property NOI | 167,782 | 173,701 | 665,583 | 661,237 | ||||||||||||||||||||
| Non-cash amortization included in property operating expenses(2) | (200 | ) | (200 | ) | (797 | ) | (798 | ) | ||||||||||||||||
| Lease value amortization | (1,497 | ) | (1,386 | ) | (5,787 | ) | (5,349 | ) | ||||||||||||||||
| Non-cash straight line rent adjustments | (1,720 | ) | (3,473 | ) | (10,227 | ) | (13,958 | ) | ||||||||||||||||
| Cash Basis NOI | $ | 164,365 | $ | 168,642 | $ | 648,772 | $ | 641,132 | ||||||||||||||||
(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 considers NOI, Cash
Basis NOI, same property NOI and same property Cash Basis NOI to be
appropriate supplemental measures to net income (loss) and net income
(loss) attributable to common shareholders because they may help both
investors and management to understand the operations of SNH’s
properties. SNH uses NOI, Cash Basis NOI, same property NOI and same
property Cash Basis NOI to evaluate individual and company wide property
level performance, and SNH believes that NOI, Cash Basis NOI, same
property NOI and same property Cash Basis NOI provide useful information
to investors regarding its results of operations because these measures
reflect only those income and expense items that are generated and
incurred at the property level and may facilitate comparisons of its
operating performance between periods and with other REITs. NOI, Cash
Basis NOI, same property NOI and same property Cash Basis NOI 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
consolidated statements of income. 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 December 31, 2018 | For the Three Months Ended December 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Calculation of NOI and Cash Basis NOI: | MOBs |
Triple Net |
Managed |
Non- |
Total | MOBs |
Triple Net |
Managed |
Non- |
Total | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Rental income / residents fees and services | $ | 103,316 | $ | 70,886 | $ | 106,542 | $ | 4,478 | $ | 285,222 | $ | 96,714 | $ | 78,301 | $ | 98,958 | $ | 4,570 | $ | 278,543 | ||||||||||||||||||||||||||||||||||||||||
| Property operating expenses | (32,959 | ) | — | (84,481 | ) | — | (117,440 | ) | (28,950 | ) | — | (75,892 | ) | — | (104,842 | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Property net operating income (NOI) | $ | 70,357 | $ | 70,886 | $ | 22,061 | $ | 4,478 | $ | 167,782 | $ | 67,764 | $ | 78,301 | $ | 23,066 | $ | 4,570 | $ | 173,701 | ||||||||||||||||||||||||||||||||||||||||
| NOI change | 3.8 | % | (9.5 | )% | (4.4 | )% | (2.0 | )% | (3.4 | )% | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Property NOI | $ | 70,357 | $ | 70,886 | $ | 22,061 | $ | 4,478 | $ | 167,782 | $ | 67,764 | $ | 78,301 | $ | 23,066 | $ | 4,570 | $ | 173,701 | ||||||||||||||||||||||||||||||||||||||||
| Less: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-cash straight line rent adjustments | 1,703 | 130 | — | (113 | ) | 1,720 | 2,577 | 759 | — | 137 | 3,473 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Lease value amortization | 1,442 | — | — | 55 | 1,497 | 1,331 | — | — | 55 | 1,386 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-cash amortization included in property operating expenses (3) | 200 | — | — | — | 200 | 200 | — | — | — | 200 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash Basis NOI | $ | 67,012 | $ | 70,756 | $ | 22,061 | $ | 4,536 | $ | 164,365 | $ | 63,656 | $ | 77,542 | $ | 23,066 | $ | 4,378 | $ | 168,642 | ||||||||||||||||||||||||||||||||||||||||
| Cash Basis NOI change | 5.3 | % | (8.8 | )% | (4.4 | )% | 3.6 | % | (2.5 | )% | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Reconciliation of NOI to Same Property NOI: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property NOI | $ | 70,357 | $ | 70,886 | $ | 22,061 | $ | 4,478 | $ | 167,782 | $ | 67,764 | $ | 78,301 | $ | 23,066 | $ | 4,570 | $ | 173,701 | ||||||||||||||||||||||||||||||||||||||||
| Less: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| NOI not included in same property | 4,390 | 264 | 1,734 | — | 6,388 | 1,482 | 7,166 | 29 | — | 8,677 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Same property NOI (4) | $ | 65,967 | $ | 70,622 | $ | 20,327 | $ | 4,478 | $ | 161,394 | $ | 66,282 | $ | 71,135 | $ | 23,037 | $ | 4,570 | $ | 165,024 | ||||||||||||||||||||||||||||||||||||||||
| Same property NOI change | (0.5 | )% | (0.7 | )% | (11.8 | )% | (2.0 | )% | (2.2 | )% | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Reconciliation of Same Property NOI to Same Property Cash Basis NOI: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Same property NOI (4) | $ | 65,967 | $ | 70,622 | $ | 20,327 | $ | 4,478 | $ | 161,394 | $ | 66,282 | $ | 71,135 | $ | 23,037 | $ | 4,570 | $ | 165,024 | ||||||||||||||||||||||||||||||||||||||||
| Less: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-cash straight line rent adjustments | 1,390 | 103 | — | (113 | ) | 1,380 | 2,507 | 621 | — | 137 | 3,265 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Lease value amortization | 1,505 | — | — | 55 | 1,560 | 1,331 | — | — | 55 | 1,386 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-cash amortization included in property operating expenses (3) | 199 | — | — | — | 199 | 199 | — | — | — | 199 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Same property cash basis NOI (4) | $ | 62,873 | $ | 70,519 | $ | 20,327 | $ | 4,536 | $ | 158,255 | $ | 62,245 | $ | 70,514 | $ | 23,037 | $ | 4,378 | $ | 160,174 | ||||||||||||||||||||||||||||||||||||||||
| Same property cash basis NOI change | 1.0 | % | 0.0 | % | (11.8 | )% | 3.6 | % | (1.2 | )% | ||||||||||||||||||||||||||||||||||||||||||||||||||
(1) See above for the calculation of NOI and a reconciliation of net
income (loss) determined in accordance with GAAP to that amount. For a
definition of NOI, Cash Basis NOI, same property NOI and same property
Cash Basis NOI, a description of why management believes they are
appropriate supplemental measures and a description of how management
uses these measures, please see footnote 1 to the table included on page
7.
(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
continuously and properties owned and managed continuously by the same
operator since October 1, 2017 and includes SNH's MOB (two buildings)
that is owned in a joint venture arrangement and excludes properties
classified as held for sale, 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 Year Ended December 31, 2018 | For the Year Ended December 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Calculation of NOI and Cash Basis NOI: | MOBs |
Triple Net |
Managed |
Non- |
Total | MOBs |
Triple Net |
Managed |
Non- |
Total | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Rental income / residents fees and services | $ | 412,813 | $ | 269,512 | $ | 416,523 | $ | 18,316 | $ | 1,117,164 | $ | 382,127 | $ | 280,641 | $ | 393,707 | $ | 18,254 | $ | 1,074,729 | ||||||||||||||||||||||||||||||||||||||||
| Property operating expenses | (127,732 | ) | — | (323,849 | ) | — | (451,581 | ) | (112,930 | ) | — | (300,562 | ) | — | (413,492 | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Property net operating income (NOI) | $ | 285,081 | $ | 269,512 | $ | 92,674 | $ | 18,316 | $ | 665,583 | $ | 269,197 | $ | 280,641 | $ | 93,145 | $ | 18,254 | $ | 661,237 | ||||||||||||||||||||||||||||||||||||||||
| NOI change | 5.9 | % | (4.0 | )% | (0.5 | )% | 0.3 | % | 0.7 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Property NOI | $ | 285,081 | $ | 269,512 | $ | 92,674 | $ | 18,316 | $ | 665,583 | $ | 269,197 | $ | 280,641 | $ | 93,145 | $ | 18,254 | $ | 661,237 | ||||||||||||||||||||||||||||||||||||||||
| Less: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-cash straight line rent adjustments | 8,189 | 1,851 | — | 187 | 10,227 | 10,346 | 3,063 | — | 549 | 13,958 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Lease value amortization | 5,566 | — | — | 221 | 5,787 | 5,128 | — | — | 221 | 5,349 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-cash amortization included in property operating expenses (3) | 797 | — | — | — | 797 | 798 | — | — | — | 798 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash Basis NOI | $ | 270,529 | $ | 267,661 | $ | 92,674 | $ | 17,908 | $ | 648,772 | $ | 252,925 | $ | 277,578 | $ | 93,145 | $ | 17,484 | $ | 641,132 | ||||||||||||||||||||||||||||||||||||||||
| Cash Basis NOI change | 7.0 | % | (3.6 | )% | (0.5 | )% | 2.4 | % | 1.2 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Reconciliation of NOI to Same Property NOI: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property NOI | $ | 285,081 | $ | 269,512 | $ | 92,674 | $ | 18,316 | $ | 665,583 | $ | 269,197 | $ | 280,641 | $ | 93,145 | $ | 18,254 | $ | 661,237 | ||||||||||||||||||||||||||||||||||||||||
| Less: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| NOI not included in same property | 20,291 | 7,995 | 5,801 | — | 34,087 | 3,816 | 21,713 | (110 | ) | — | 25,419 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Same property NOI (4) | $ | 264,790 | $ | 261,517 | $ | 86,873 | $ | 18,316 | $ | 631,496 | $ | 265,381 | $ | 258,928 | $ | 93,255 | $ | 18,254 | $ | 635,818 | ||||||||||||||||||||||||||||||||||||||||
| Same property NOI change | (0.2 | )% | 1.0 | % | (6.8 | )% | 0.3 | % | (0.7 | )% | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Reconciliation of Same Property NOI to Same Property Cash Basis NOI: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Same property NOI (4) | $ | 264,790 | $ | 261,517 | $ | 86,873 | $ | 18,316 | $ | 631,496 | $ | 265,381 | $ | 258,928 | $ | 93,255 | $ | 18,254 | $ | 635,818 | ||||||||||||||||||||||||||||||||||||||||
| Less: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-cash straight line rent adjustments | 6,921 | 1,561 | — | 187 | 8,669 | 10,153 | 2,516 | — | 549 | 13,218 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Lease value amortization | 5,806 | — | — | 221 | 6,027 | 5,141 | — | — | 221 | 5,362 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-cash amortization included in property operating expenses (3) | 796 | — | — | — | 796 | 796 | — | — | — | 796 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Same property cash basis NOI (4) | $ | 251,267 | $ | 259,956 | $ | 86,873 | $ | 17,908 | $ | 616,004 | $ | 249,291 | $ | 256,412 | $ | 93,255 | $ | 17,484 | $ | 616,442 | ||||||||||||||||||||||||||||||||||||||||
| Same property cash basis NOI change | 0.8 | % | 1.4 | % | (6.8 | )% | 2.4 | % | (0.1 | )% | ||||||||||||||||||||||||||||||||||||||||||||||||||
(1) See above for the calculation of NOI and a reconciliation of net
income (loss) determined in accordance with GAAP to that amount. For a
definition of NOI, Cash Basis NOI, same property NOI and same property
Cash Basis NOI, a description of why management believes they are
appropriate supplemental measures and a description of how management
uses these measures, please see footnote 1 to the table included on page
7.
(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
continuously and properties owned and managed continuously by the same
operator since January 1, 2017 and includes SNH's MOB (two buildings)
that is owned in a joint venture arrangement and excludes properties
classified as held for sale, if any.
SENIOR HOUSING PROPERTIES TRUST
CONDENSED CONSOLIDATED
BALANCE SHEETS
(amounts in thousands)
(unaudited)
| December 31, 2018 | December 31, 2017 | |||||||||||
|
ASSETS |
||||||||||||
| Real estate properties | $ | 7,876,300 | $ | 7,824,763 | ||||||||
| Accumulated depreciation | (1,534,392 | ) | (1,454,477 | ) | ||||||||
| 6,341,908 | 6,370,286 | |||||||||||
| Cash and cash equivalents | 54,976 | 31,238 | ||||||||||
| Restricted cash | 15,095 | 16,083 | ||||||||||
| Acquired real estate leases and other intangible assets, net | 419,244 | 472,265 | ||||||||||
| Other assets, net | 329,203 | 404,147 | ||||||||||
| Total assets | $ | 7,160,426 | $ | 7,294,019 | ||||||||
|
LIABILITIES AND EQUITY |
||||||||||||
| Unsecured revolving credit facility | $ | 139,000 | $ | 596,000 | ||||||||
| Unsecured term loans, net | 548,286 | 547,460 | ||||||||||
| Senior unsecured notes, net | 2,216,945 | 1,725,662 | ||||||||||
| Secured debt and capital leases, net | 744,186 | 805,404 | ||||||||||
| Accrued interest | 26,182 | 17,987 | ||||||||||
| Assumed real estate lease obligations, net | 86,304 | 96,018 | ||||||||||
| Other liabilities | 219,653 | 228,300 | ||||||||||
| Total liabilities | 3,980,556 | 4,016,831 | ||||||||||
| Total equity | 3,179,870 | 3,277,188 | ||||||||||
| Total liabilities and equity | $ | 7,160,426 | $ | 7,294,019 | ||||||||
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.
