Senior Housing Properties Trust (Nasdaq: SNH) today announced
its financial results for the quarter and year ended
December 31, 2017.
“Operating results were stable in 2017, with consolidated annual
Cash Basis NOI growth of 1% year over year showcasing our strategic
portfolio composition of high quality healthcare real estate,” said
David Hegarty, President and Chief Operating Officer. “2017 was
highlighted by our ability to raise cost effective capital and to
invest the proceeds on a disciplined and accretive basis, and we
continued to successfully execute on this strategy during the first
quarter with our $500 million senior notes offering in February
2018. At year end, we announced that we agreed to sell four
senior living communities for $368 million and we expect to report
a gain of approximately $308 million on this sale. During the 2017
fourth quarter, we acquired four medical office buildings and two
senior living communities for aggregate consideration of $120
million at attractive cap rates and subsequent to year end, we
acquired three medical office buildings and two senior living
communities for $133 million.”
Results for the Quarter Ended December 31, 2017:
Net income attributable to common shareholders was $65.0
million, or $0.27 per diluted share, for the quarter ended
December 31, 2017, compared to $42.9 million, or $0.18 per
diluted share, for the quarter ended December 31, 2016. This
increase in net income attributable to common shareholders is
primarily the result of a $46.1 million gain on sale of properties
recognized for the quarter ended December 31, 2017, as well as
acquisitions since October 1, 2016, partially offset by an increase
in general and administrative expenses as a result of $33.7 million
of business management incentive fee expense recognized for the
quarter ended December 31, 2017 as a result of SNH's total
shareholder return, as defined, exceeding the returns for the SNL
U.S. REIT Healthcare index over the applicable three year
measurement period ended December 31, 2017. Normalized funds
from operations, or Normalized FFO, were $59.2 million and $118.6
million, respectively, or $0.25 and $0.50 per diluted share,
respectively, for the quarters ended December 31, 2017 and
December 31, 2016.
Reconciliations of net income attributable to common
shareholders determined in accordance with U.S. generally accepted
accounting principles, or GAAP, to funds from operations, or FFO,
and Normalized FFO for the quarters ended December 31, 2017
and 2016 appear later in this press release.
Results for the Year Ended December 31, 2017:
Net income attributable to common shareholders was $147.6
million, or $0.62 per diluted share, for the year ended
December 31, 2017, compared to $141.3 million, or $0.60 per
diluted share, for the year ended December 31, 2016. This
increase in net income attributable to common shareholders is
primarily the result of a $46.1 million gain on sale of properties
recognized for the year ended December 31, 2017, acquisitions since
January 1, 2016 and decreases in depreciation and amortization
expense, acquisition and certain other transaction related costs
and asset impairment charges, partially offset by increases in
general and administrative expenses as a result of $55.7 million of
business management incentive fee expense recognized for the year
ended December 31, 2017 as a result of SNH's total shareholder
return, as defined, exceeding the returns for the SNL U.S. REIT
Healthcare index over the applicable three year measurement period
ended December 31, 2017. Normalized FFO were $375.3 million
and $446.4 million, respectively, or $1.58 and $1.88 per diluted
share, respectively, for the years ended December 31, 2017 and
December 31, 2016.
Reconciliations of net income attributable to common
shareholders determined in accordance with GAAP to FFO and
Normalized FFO for the years ended December 31, 2017 and 2016
appear later in this press release.
Portfolio Operating Results:
For the quarter ended December 31, 2017, 45.1% of net
operating income, or NOI, came from 235 triple net leased senior
living communities with 25,790 living units. As a result of
increased capital investments, which increase rents and may disrupt
community operations during expansions and renovations, along with
other factors, the weighted average rent coverage for triple net
leased senior living communities decreased to 1.21x for the 12
month period ended September 30, 2017 compared to 1.28x for the 12
month period ended September 30, 2016(1)(2). Cash basis net
operating income, or Cash Basis NOI, from triple net leased senior
living communities owned continuously since October 1, 2016, or
same property, increased 0.9% for the quarter ended
December 31, 2017 compared to the quarter ended
December 31, 2016.
For the quarter ended December 31, 2017, 39.0% of NOI came
from 125 properties leased to medical providers, medical related
businesses, clinics and biotech laboratory tenants, or MOBs, with
12.1 million leasable square feet. As of December 31, 2017,
95.0% of MOB square feet were leased compared to 96.5% as of
December 31, 2016. Same property occupancy at MOBs was 94.9%
as of December 31, 2017 compared to 96.4% as of
December 31, 2016. Same property Cash Basis NOI from MOBs
decreased 1.6% for the quarter ended December 31, 2017
compared to the quarter ended December 31, 2016. As of
December 31, 2017, SNH's investments in life science
properties constituted approximately half of SNH's total $3.7
billion invested in MOBs.
For the quarter ended December 31, 2017, 13.3% of NOI came
from 70 managed senior living communities with 9,043 living units.
Occupancy at managed senior living communities was 85.9% for the
quarter ended December 31, 2017, compared to 85.2% for the
quarter ended December 31, 2016. Same property occupancy at
managed senior living communities was 87.4% for the quarter ended
December 31, 2017 compared to 86.5% for the quarter ended
December 31, 2016. Same property average monthly rates at
managed senior living communities increased by 0.9% to $4,262 for
the quarter ended December 31, 2017 compared to the quarter
ended December 31, 2016. Same property Cash Basis NOI from
managed senior living communities decreased 3.4% for the quarter
ended December 31, 2017 compared to the quarter ended
December 31, 2016.
SNH's 10 wellness centers remained 100% leased as of
December 31, 2017 and December 31, 2016 and provided SNH
with Cash Basis NOI of $4.4 million in each of the three months
ended December 31, 2017 and December 31, 2016.
Consolidated same property Cash Basis NOI decreased 0.7% for the
quarter ended December 31, 2017 compared to the quarter ended
December 31, 2016.
Reconciliations of net income determined in accordance with GAAP
to same property Cash Basis NOI by operating segment for the
quarters ended December 31, 2017 and 2016 appear later in this
press release.
Financing Activities:
In December 2017, SNH prepaid approximately $8.4 million of
secured debt encumbering one MOB with an annual interest rate of
6.73% and a maturity date in April 2018.
In January 2018, SNH prepaid approximately $4.3 million of
secured debt encumbering one senior living community with an annual
interest rate of 4.375% and a maturity date in September 2043.
In February 2018, SNH issued $500.0 million of 4.75% senior
unsecured notes due 2028. SNH used the net proceeds of this
offering to reduce the outstanding balance under its revolving
credit facility.
Investment Activities:
In October 2017, SNH acquired two MOBs (two buildings) located
in Minnesota and North Carolina with a total of approximately
255,000 square feet for an aggregate purchase price of
approximately $38.5 million, excluding closing costs.
In November 2017, SNH acquired one MOB (one building) located in
California with approximately 63,000 square feet for approximately
$26.5 million, excluding closing costs.
In November 2017, SNH agreed to acquire six senior living
communities from Five Star Senior Living Inc. (Nasdaq: FVE), or
Five Star, for an aggregate purchase price of approximately $104.0
million, including SNH’s assumption of approximately $33.7 million
of mortgage debt secured by certain of these senior living
communities and excluding closing costs. In December 2017, SNH
acquired two of these communities for an aggregate purchase price
of approximately $39.2 million, excluding closing costs. In January
2018, SNH acquired one of these communities for approximately $19.7
million, excluding closing costs. In February 2018, SNH acquired
one of these communities for approximately $22.2 million, including
the assumption of approximately $16.8 million of mortgage debt and
excluding closing costs. In connection with these acquisitions, SNH
entered management and pooling agreements with Five Star for Five
Star to manage these senior living communities for SNH, and SNH
expects to enter additional management and pooling agreements with
Five Star concurrent with the acquisition of the remaining two
communities. The closings of the acquisitions of the remaining two
communities for an aggregate purchase price of approximately $23.3
million, including SNH's assumption of approximately $16.8 million
of mortgage debt, are expected to occur as third party approvals
are received by the end of the first quarter of 2018.
In December 2017, SNH acquired one MOB (one building) located in
Virginia with approximately 136,000 square feet for approximately
$15.6 million, excluding closing costs.
In January 2018, SNH acquired three MOBs (three buildings)
located in Kansas, Missouri and California with a total of
approximately 400,000 square feet for an aggregate purchase price
of approximately $91.2 million, excluding closing costs.
In November 2017, SNH entered an agreement to acquire one MOB
(one building) located in Virginia with approximately 135,000
square feet for approximately $22.8 million, including the
assumption of approximately $11.2 million of mortgage debt and
excluding closing costs. This acquisition is expected to close by
the end of the first quarter of 2018.
During the quarter ended December 31, 2017, SNH invested
approximately $10.7 million in improvements at its owned senior
living communities that has generated or will generate additional
rent under the terms of its existing senior living communities’
leases. 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 2017, SNH agreed to sell four senior living
communities with a total of 1,619 living units that were leased to
Sunrise Senior Living, LLC, or Sunrise, for an aggregate sales
price of $368.0 million, excluding closing costs. The sale of one
of these communities was completed in December 2017 for a sales
price of $55.0 million, excluding closing costs, resulting in a
gain of approximately $45.9 million. SNH expects the closings of
the sales of the remaining three senior living communities, for an
aggregate sales price of $313.0 million, to occur by the end of the
first quarter of 2018. These four communities produced rental
income to SNH during 2017 of approximately $14.8 million. SNH
expects to realize a total of approximately $308.0 million from the
sale of these four Sunrise leased communities.
At December 31, 2017, four senior living communities, including
the three communities leased to Sunrise that are discussed above
and one additional community leased to Five Star, were classified
as held for sale.
Conference Call:
On Tuesday, February 27, 2018, at 10:00 a.m. Eastern
Time, President and Chief Operating Officer, David Hegarty, Chief
Financial Officer and Treasurer, Richard Siedel, and Senior Vice
President of The RMR Group LLC, Jennifer Francis, will host a
conference call to discuss SNH's fourth quarter 2017 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. Eastern Time
on Tuesday, March 6, 2018. To hear the replay, dial (412) 317-0088.
The replay pass code is 10115724.
A live audio webcast of the conference call will also be
available in a listen only mode on the company’s website, which is
located at www.snhreit.com. Participants wanting to access the
webcast should visit the company’s website about five minutes
before the call. The archived webcast will be available for replay
on the company’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 2017 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, which owns
senior living communities, medical office and life science
properties 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 calculations of FFO, Normalized FFO,
NOI and Cash Basis NOI and reconciliations of net income
attributable to common shareholders and net income, respectively,
determined in accordance with GAAP to these amounts.
___________________________________________________________________________________________________________________________________(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.
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:
- MR. HEGARTY NOTES SNH’S STRATEGY TO
RAISE COST EFFECTIVE CAPITAL AND TO INVEST THE PROCEEDS ON A
DISCIPLINED AND ACCRETIVE BASIS AND REFERENCES RECENT EXAMPLES OF
SNH EXECUTING ON THIS STRATEGY. HOWEVER, SNH MAY FAIL TO SUSTAIN
THIS STRATEGY IN THE FUTURE AND IT MAY INCUR COSTS AND REALIZE
LOSSES AS A RESULT OF SUCH FAILURE.
- THIS PRESS RELEASE INCLUDES A STATEMENT
THAT SNH EXPECTS THE ADDITIONAL INVESTMENTS IT REGULARLY MAKES AT
ITS OWNED MOBS AND ITS OWNED AND MANAGED SENIOR LIVING COMMUNITIES
MAY MAINTAIN OR ENHANCE THE COMPETITIVE POSITION OF THOSE
PROPERTIES AND MAY INCREASE ITS OPERATING REVENUE FROM THOSE
PROPERTIES. HOWEVER, THERE CAN BE NO ASSURANCE THAT THE FUTURE
COMPETITIVE POSITION OF, OR THE OPERATING REVENUE FROM, THOSE
PROPERTIES WILL INCREASE OR REMAIN AT CURRENT LEVELS. IN FACT, THE
COMPETITIVE POSITION OF, AND SNH’S REVENUES FROM, THOSE PROPERTIES
MAY DECLINE.
- SNH HAS AGREED TO ACQUIRE TWO SENIOR
LIVING COMMUNITIES AND ONE MOB FOR APPROXIMATELY $46.1 MILLION,
INCLUDING SNH’S ASSUMPTION OF APPROXIMATELY $28.1 MILLION OF
MORTGAGE DEBT AND EXCLUDING CLOSING COSTS, AND SNH EXPECTS TO ENTER
MANAGEMENT AND POOLING AGREEMENTS WITH FIVE STAR FOR FIVE STAR TO
MANAGE THE TWO SENIOR LIVING COMMUNITIES SNH EXPECTS TO ACQUIRE.
THESE ACQUISITIONS ARE SUBJECT TO CONDITIONS. THESE CONDITIONS MAY
NOT BE MET AND THESE ACQUISITIONS AND ANY RELATED MANAGEMENT AND
POOLING AGREEMENTS MAY NOT OCCUR, MAY BE DELAYED BEYOND THE FIRST
QUARTER OF 2018 OR THEIR TERMS MAY CHANGE.
- SNH HAS AGREED TO SELL THREE SENIOR
LIVING COMMUNITIES CURRENTLY LEASED TO SUNRISE FOR $313.0 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 FIRST QUARTER OF 2018 OR THEIR TERMS MAY
CHANGE, AND SNH MAY NOT REALIZE THE EXPECTED GAINS ON THESE
SALES.
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
(amounts in thousands, except per share
data)
(unaudited)
Three Months Ended Year Ended December
31, December 31, 2017
2016 2017 2016 Revenues:
Rental income $ 179,585 $ 175,277 $ 681,022 $ 666,200 Residents
fees and services 98,981 99,019 393,797
391,822 Total revenues 278,566 274,296 1,074,819 1,058,022
Expenses: Property operating expenses 104,865 101,021
413,430 399,790 Depreciation and amortization 67,398 72,893 276,861
287,831 General and administrative 45,813 11,619 103,702 46,559
Acquisition and certain other transaction related costs 255 642 547
2,085 Impairment of assets — 1,744 5,082
18,674 Total expenses 218,331 187,919 799,622
754,939 Operating income 60,235 86,377 275,197
303,083 Dividend income 659 659 2,637 2,108 Interest and
other income 83 99 406 430 Interest expense (40,625 ) (43,737 )
(165,019 ) (167,574 ) Loss on early extinguishment of debt —
(437 ) (7,627 ) (526 ) Income from continuing operations before
income tax expense and equity in earnings of an investee 20,352
42,961 105,594 137,521 Income tax expense (154 ) (106 ) (454 ) (424
) Equity in earnings of an investee 75 30 608
137 Income before gain on sale of properties 20,273 42,885
105,748 137,234 Gain on sale of properties 46,055 —
46,055 4,061 Net income 66,328 42,885 151,803 141,295
Net income attributable to noncontrolling interest (1,328 ) —
(4,193 ) — Net income attributable to common
shareholders $ 65,000 $ 42,885 $ 147,610 $
141,295 Weighted average common shares outstanding
(basic) 237,467 237,391 237,420 237,345
Weighted average common shares outstanding (diluted) 237,475
237,393 237,452 237,382
Per common share
data (basic and diluted):
Net income attributable to common shareholders $ 0.27 $ 0.18
$ 0.62 $ 0.60
SENIOR HOUSING PROPERTIES TRUST
CONSOLIDATED STATEMENTS OF FFO AND
NORMALIZED FFO
(amounts in thousands, except per share
data)
(unaudited)
Calculation of FFO and Normalized
FFO (1):
Three Months EndedDecember 31, Year
EndedDecember 31, 2017
2016 2017 2016 Net income
attributable to common shareholders $ 65,000 $ 42,885 $ 147,610 $
141,295 Depreciation and amortization expense 67,398 72,893 276,861
287,831 Noncontrolling interest's share of net FFO adjustments
(5,304 ) — (16,370 ) — Gain on sale of properties (46,055 ) —
(46,055 ) (4,061 ) Impairment of assets — 1,744 5,082
18,674 FFO 81,039 117,522 367,128 443,739
Estimated business management incentive fees (2) (22,048 ) — — —
Acquisition and certain other transaction related costs 255 642 547
2,085 Loss on early extinguishment of debt — 437
7,627 526 Normalized FFO $ 59,246 $ 118,601
$ 375,302 $ 446,350 Weighted average
common shares outstanding (basic) 237,467 237,391
237,420 237,345 Weighted average common shares
outstanding (diluted) 237,475 237,393 237,452
237,382
Per common share
data (basic and diluted):
Net income attributable to common shareholders $ 0.27 $ 0.18
$ 0.62 $ 0.60 FFO $ 0.34 $ 0.50
$ 1.55 $ 1.87 Normalized FFO $ 0.25 $ 0.50
$ 1.58 $ 1.88 Distributions declared $ 0.39
$ 0.39 $ 1.56 $ 1.56 (1)
SNH calculates FFO and Normalized FFO as shown above. FFO is
calculated on the basis defined by The National Association of Real
Estate Investment Trusts, or Nareit, which is net income
attributable to common shareholders, calculated in accordance with
GAAP, excluding any gain or loss on sale of properties and loss on
impairment of real estate assets, if any, plus real estate
depreciation and amortization and the difference between net income
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 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
and losses on early extinguishment of debt, if any, and Normalized
FFO from noncontrolling interest, net of FFO attributable to
noncontrolling interest, if any. SNH considers FFO and Normalized
FFO to be appropriate supplemental measures of operating
performance for a REIT, along with net income, net income
attributable to common shareholders and operating income. SNH
believes that FFO and Normalized FFO provide useful information to
investors, because by excluding the effects of certain historical
amounts, such as depreciation and amortization expense, FFO and
Normalized FFO may facilitate a comparison of SNH's operating
performance between periods and with other REITs. FFO and
Normalized FFO 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 and Normalized
FFO do not represent cash generated by operating activities in
accordance with GAAP and should not be considered alternatives to
net income, net income attributable to common shareholders or
operating income as indicators of SNH’s operating performance or as
measures of SNH’s liquidity. These measures should be considered in
conjunction with net income, net income attributable to common
shareholders and operating income 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
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 attributable to
common shareholders, SNH does not include these amounts in the
calculation of Normalized FFO until the fourth quarter, when the
amount of the business management incentive fee expense for the
calendar year, if any, is determined. Excluding business management
incentive fee expense of $55,740 included in Normalized FFO for the
three months ended December 31, 2017, Normalized FFO per share for
this period would have been $0.48.
SENIOR HOUSING PROPERTIES TRUST
CALCULATION AND RECONCILIATION OF NET
OPERATING INCOME (NOI) AND CASH BASIS NOI
(amounts in thousands)
(unaudited)
Three Months EndedDecember
31,
Year Ended December31,
2017 2016 2017
2016
Calculation of
NOI and Cash Basis NOI(1):
Revenues: Rental income $ 179,585 $ 175,277 $ 681,022 $ 666,200
Residents fees and services 98,981 99,019 393,797
391,822 Total revenues 278,566 274,296 1,074,819
1,058,022 Property operating expenses (104,865 ) (101,021 )
(413,430 ) (399,790 ) Property net operating income (NOI): 173,701
173,275 661,389 658,232 Non-cash straight line rent adjustments
(3,473 ) (4,006 ) (13,958 ) (17,604 ) Lease value amortization
(1,386 ) (1,147 ) (5,349 ) (4,941 ) Non-cash amortization included
in property operating expenses(2) (200 ) (199 ) (798 ) (798 ) Cash
Basis NOI $ 168,642 $ 167,923 $ 641,284 $
634,889
Reconciliation of
Net Income to Cash Basis NOI:
Net income $ 66,328 $ 42,885 $ 151,803 $ 141,295 Gain on sale of
properties (46,055 ) — (46,055 ) (4,061 ) Income before gain
on sale of properties 20,273 42,885 105,748 137,234 Equity
in earnings of an investee (75 ) (30 ) (608 ) (137 ) Income tax
expense 154 106 454 424 Loss on early extinguishment of debt — 437
7,627 526 Interest expense 40,625 43,737 165,019 167,574 Interest
and other income (83 ) (99 ) (406 ) (430 ) Dividend income (659 )
(659 ) (2,637 ) (2,108 ) Operating income 60,235 86,377 275,197
303,083 Impairment of assets — 1,744 5,082 18,674
Acquisition and certain other transaction related costs 255 642 547
2,085 General and administrative expense 45,813 11,619 103,702
46,559 Depreciation and amortization expense 67,398 72,893
276,861 287,831 Property NOI 173,701 173,275
661,389 658,232 Non-cash amortization included in property
operating expenses(2) (200 ) (199 ) (798 ) (798 ) Lease value
amortization (1,386 ) (1,147 ) (5,349 ) (4,941 ) Non-cash straight
line rent adjustments (3,473 ) (4,006 ) (13,958 ) (17,604 ) Cash
Basis NOI $ 168,642 $ 167,923 $ 641,284 $
634,889 (1) The calculations of NOI and
Cash Basis NOI exclude certain components of net income 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 considers NOI and Cash Basis NOI to be appropriate
supplemental measures to net income because they may help both
investors and management to understand the operations of SNH’s
properties. SNH uses NOI and Cash Basis NOI to evaluate individual
and company wide property level performance, and it believes that
NOI and 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 and
Cash Basis NOI do not represent cash generated by operating
activities in accordance with GAAP and should not be considered
alternatives to net income, net income attributable to common
shareholders or operating income as indicators of SNH’s operating
performance or as measures of SNH’s liquidity. These measures
should be considered in conjunction with net income, net income
attributable to common shareholders and operating income as
presented in SNH’s consolidated statements of income. Other real
estate companies and REITs may calculate NOI and 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 fee 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, 2017 For
the Three Months Ended December 31, 2016 Calculation of NOI
and Cash Basis NOI:
Triple NetLeased
SeniorLivingCommunities
ManagedSenior
LivingCommunities
MOBs
Non-Segment (2)
Total
Triple NetLeased
SeniorLivingCommunities
ManagedSenior
LivingCommunities
MOBs
Non-Segment (2)
Total Rental income / residents fees
and services $ 78,301 $ 98,981 $ 96,714 $ 4,570 $ 278,566 $ 77,428
$ 99,019 $ 93,270 $ 4,579 $ 274,296 Property operating expenses —
(75,915 ) (28,950 ) — (104,865 ) — (74,613 )
(26,408 ) — (101,021 ) Property net operating income (NOI) $
78,301 $ 23,066 $ 67,764 $ 4,570 $
173,701 $ 77,428 $ 24,406 $ 66,862 $
4,579 $ 173,275 NOI change 1.1 % (5.5 )% 1.3 % (0.2
)% 0.2 % Property NOI $ 78,301 $ 23,066 $ 67,764 $ 4,570 $
173,701 $ 77,428 $ 24,406 $ 66,862 $ 4,579 $ 173,275 Less: Non-cash
straight line rent adjustments 759 — 2,577 137 3,473 948 — 2,921
137 4,006 Lease value amortization — — 1,331 55 1,386 — — 1,092 55
1,147 Non-cash amortization included in property operating expenses
(3) — — 200 — 200 — —
199 — 199 Cash Basis NOI $ 77,542
$ 23,066 $ 63,656 $ 4,378 $ 168,642
$ 76,480 $ 24,406 $ 62,650 $ 4,387
$ 167,923 Cash Basis NOI change 1.4 % (5.5 )% 1.6 %
(0.2 )% 0.4 %
Reconciliation of NOI to Same Property
NOI: Property NOI $ 78,301 $ 23,066 $ 67,764 $ 4,570 $ 173,701
$ 77,428 $ 24,406 $ 66,862 $ 4,579 $ 173,275 Less: NOI not included
in same property 1,595 932 2,401 — 4,928 1,233 1,489 283 — 3,005
Same property NOI (4) $ 76,706 $ 22,134 $
65,363 $ 4,570 $ 168,773 $ 76,195 $
22,917 $ 66,579 $ 4,579 $ 170,270 Same
property NOI change 0.7 % (3.4 )% (1.8 )% (0.2 )% (0.9 )%
Reconciliation of Same Property NOI to Same Property Cash Basis
NOI: Same property NOI (4) $ 76,706 $ 22,134 $ 65,363 $ 4,570 $
168,773 $ 76,195 $ 22,917 $ 66,579 $ 4,579 $ 170,270 Less: Non-cash
straight line rent adjustments 759 — 2,400 137 3,296 948 — 2,873
137 3,958 Lease value amortization — — 1,333 55 1,388 — — 1,092 55
1,147 Non-cash amortization included in property operating expenses
(3) — — 200 — 200 — —
199 — 199 Same property cash basis NOI
(4) $ 75,947 $ 22,134 $ 61,430 $ 4,378
$ 163,889 $ 75,247 $ 22,917 $ 62,415 $
4,387 $ 164,966 Same property cash basis NOI change
0.9 % (3.4 )% (1.6 )% (0.2 )% (0.7 )% (1) See
above for the calculation of NOI and a reconciliation of net income
determined in accordance with GAAP to that amount. For a definition
of NOI and 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 8. (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 fee 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, 2016 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, 2017 For the Year
Ended December 31, 2016 Calculation of NOI and Cash Basis
NOI:
Triple NetLeased
SeniorLivingCommunities
ManagedSenior
LivingCommunities
MOB
Non-Segment (2)
Total
Triple NetLeased
SeniorLivingCommunities
ManagedSenior
LivingCommunities
MOBs
Non-Segment (2) Total
Rental income / residents fees and services $ 280,641 $ 393,797 $
382,127 $ 18,254 $ 1,074,819 $ 275,697 $ 391,822 $ 372,233 $ 18,270
$ 1,058,022 Property operating expenses — (300,500 )
(112,930 ) — (413,430 ) (833 ) (293,195 ) (105,762 ) —
(399,790 ) Property net operating income (NOI) $ 280,641
$ 93,297 $ 269,197 $ 18,254 $ 661,389
$ 274,864 $ 98,627 $ 266,471 $ 18,270
$ 658,232 NOI change 2.1 % (5.4 )% 1.0 % (0.1 )% 0.5
% Property NOI $ 280,641 $ 93,297 $ 269,197 $ 18,254 $
661,389 $ 274,864 $ 98,627 $ 266,471 $ 18,270 $ 658,232 Less:
Non-cash straight line rent adjustments 3,063 — 10,346 549 13,958
4,133 — 12,922 549 17,604 Lease value amortization — — 5,128 221
5,349 — — 4,720 221 4,941 Non-cash amortization included in
property operating expenses (3) — — 798 —
798 — — 798 — 798
Cash Basis NOI $ 277,578 $ 93,297 $ 252,925 $
17,484 $ 641,284 $ 270,731 $ 98,627 $
248,031 $ 17,500 $ 634,889 Cash Basis NOI
change 2.5 % (5.4 )% 2.0 % (0.1 )% 1.0 %
Reconciliation
of NOI to Same Property NOI: Property NOI $ 280,641 $ 93,297 $
269,197 $ 18,254 $ 661,389 $ 274,864 $ 98,627 $ 266,471 $ 18,270 $
658,232 Less: NOI not included in same property 12,739 4,376 13,907
— 31,022 9,643 5,405 8,215 — 23,263
Same property NOI (4) $
267,902 $ 88,921 $ 255,290 $ 18,254 $
630,367 $ 265,221 $ 93,222 $ 258,256 $
18,270 $ 634,969 Same property NOI change 1.0 % (4.6
)% (1.1 )% (0.1 )% (0.7 )%
Reconciliation of Same
Property NOI to Same Property Cash Basis NOI: Same property NOI
(4) $ 267,902 $ 88,921 $ 255,290 $ 18,254 $ 630,367 $ 265,221 $
93,222 $ 258,256 $ 18,270 $ 634,969 Less: Non-cash straight line
rent adjustments 3,063 — 8,966 549 12,578 4,172 — 12,241 549 16,962
Lease value amortization — — 4,984 221 5,205 — — 4,421 221 4,642
Non-cash amortization included in property operating expenses (3) —
— 798 — 798 — —
791 — 791 Same property cash basis NOI (4) $
264,839 $ 88,921 $ 240,542 $ 17,484 $
611,786 $ 261,049 $ 93,222 $ 240,803 $
17,500 $ 612,574 Same property cash basis NOI change
1.5 % (4.6 )% (0.1 )% (0.1 )% (0.1 )% (1) See
above for the calculation of NOI and a reconciliation of net income
determined in accordance with GAAP to that amount. For a definition
of NOI and 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 8. (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 fee 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, 2016 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 31,2017
December 31,2016
ASSETS
Real estate properties $ 7,824,763 $ 7,617,547 Accumulated
depreciation (1,454,477 ) (1,270,716 ) 6,370,286 6,346,831
Cash and cash equivalents 31,238 31,749 Restricted cash 16,083
3,829 Acquired real estate leases and other intangible assets, net
472,265 514,446 Other assets, net 404,147 330,899
Total assets $ 7,294,019 $ 7,227,754
LIABILITIES AND
EQUITY
Unsecured revolving credit facility $ 596,000 $ 327,000 Unsecured
term loans, net 547,460 547,058 Senior unsecured notes, net
1,725,662 1,722,758 Secured debt and capital leases, net 805,404
1,117,649 Accrued interest 17,987 18,471 Assumed real estate lease
obligations, net 96,018 106,038 Other liabilities 228,300
189,375 Total liabilities 4,016,831 4,028,349 Total
equity 3,277,188 3,199,405 Total liabilities and
equity $ 7,294,019 $ 7,227,754
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.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20180227005607/en/
Senior Housing Properties TrustBrad Shepherd,
617-796-8234Director, Investor Relations
Senior Housing Properties (NASDAQ:SNH)
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