Second Quarter Net Income Attributable to
Common Shareholders of $0.52 Per Share
Second Quarter Normalized FFO Attributable
to Common Shareholders of $0.44 Per Share
Senior Housing Properties Trust (Nasdaq: SNH) today announced
its financial results for the quarter ended June 30, 2018.
Jennifer Francis, President and Chief Operating Officer, made
the following statement regarding the second quarter ended June 30,
2018 results:
“Generally, our overall portfolio, which consists of a
diversified mix of high quality healthcare properties, continued to
perform well during the quarter, with consolidated same property
Cash Basis NOI increasing 0.9%. Each of our different healthcare
property segments experienced solid same property Cash Basis NOI
growth during the quarter, except for our managed senior living
segment, which saw a decline primarily because of higher operating
expenses.”
“We also continue to experience headwinds in our senior living
properties from the recent overbuilding in the industry, which has
led to occupancy pressure and increasing operating expenses. To
help address this issue, we are focused on recycling capital from
dispositions into life science and medical office properties.
During the quarter, life science properties and medical office
properties represented approximately 23% and 21%, respectively, of
our consolidated NOI, and we hope to grow both these healthcare
property portfolios in the future.”
Results for the Quarter Ended June 30, 2018:
Net income attributable to common shareholders was $123.6
million, or $0.52 per diluted share, for the quarter ended
June 30, 2018 compared to $16.0 million, or $0.07 per diluted
share, for the quarter ended June 30, 2017. This increase in
net income attributable to common shareholders is primarily the
result of: (1) $80.8 million of net gains on the sale of properties
recognized for the quarter ended June 30, 2018, (2) unrealized
gains and losses on equity securities, net, of $23.3 million which,
effective January 1, 2018, is included in earnings in accordance
with an update to U.S. generally accepted accounting principles, or
GAAP, (3) acquisitions since April 1, 2017, and (4) a decrease
in asset impairment charges as compared to the prior year. This
increase in net income attributable to common shareholders was
partially offset by an increase in general and administrative
expenses due to the $17.6 million of business management incentive
fee expense recognized for the quarter ended June 30, 2018 as
a result of SNH's total shareholder return, as defined, exceeding
the returns for the SNL U.S. REIT Healthcare index by 38.3% over
the applicable measurement period compared to the $10.8 million of
business management incentive fee expense recognized for the
quarter ended June 30, 2017, as well as an increase in
interest expense. Normalized funds from operations attributable to
common shareholders, or Normalized FFO attributable to common
shareholders, were $104.8 million and $103.6 million, respectively,
or $0.44 and $0.44 per diluted share, respectively, for the
quarters ended June 30, 2018 and 2017.
Reconciliations of net income 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 June 30, 2018 and 2017
appear later in this press release.
Results for the Six Months Ended June 30, 2018:
Net income attributable to common shareholders was $359.6
million, or $1.51 per diluted share, for
the six months ended June 30, 2018 compared
to $48.2 million, or $0.20 per diluted share, for
the six months ended June 30, 2017. This
increase in net income attributable to common shareholders is
primarily the result of: (1) $261.9 million of net gains on the
sale of properties recognized for the six months ended
June 30, 2018, (2) unrealized gains and losses on equity
securities, net, of $50.5 million which, effective January 1, 2018,
is included in earnings in accordance with an update to GAAP, (3)
acquisitions since January 1, 2017, and (4) a decrease in
asset impairment charges as compared to the prior year. This
increase in net income attributable to common shareholders was
partially offset by an increase in general and administrative
expenses due to the $32.0 million of business management incentive
fee expense recognized for the six months ended
June 30, 2018 as a result of SNH's total shareholder return,
as defined, exceeding the returns for the SNL U.S. REIT Healthcare
index by 38.3% over the applicable measurement period compared to
the $14.0 million of business management incentive fee expense
recognized for the six months ended June 30, 2017.
Normalized FFO attributable to common shareholders were $212.0
million and $212.0 million, or $0.89 and $0.89 per diluted share,
respectively, for the six months ended June 30, 2018 and
2017.
Reconciliations of net income attributable to common
shareholders determined in accordance with GAAP to FFO attributable
to common shareholders and Normalized FFO attributable to common
shareholders for the six months ended June 30,
2018 and 2017 appear later in this press
release.
Portfolio Operating Results:
For the quarter ended June 30, 2018, consolidated cash
basis net operating income, or Cash Basis NOI, at properties owned
continuously since April 1, 2017, or same property, increased 0.9%
compared to the quarter ended June 30, 2017.
For the quarter ended June 30, 2018, 43.5% 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 June 30, 2018, 95.7% of MOB square feet were
leased compared to 96.5% as of June 30, 2017. Same property
occupancy was 95.6% as of June 30, 2018 compared to 96.5% as
of June 30, 2017. Same property Cash Basis NOI from MOBs
increased 1.8% for the quarter ended June 30, 2018 compared to
the quarter ended June 30, 2017.
For the quarter ended June 30, 2018, 39.6% of NOI came from
229 triple net leased senior living communities with 24,318 living
units. The weighted average rent coverage for triple net leased
senior living communities decreased to 1.18x for the 12 month
period ended March 31, 2018 compared to 1.24x for the 12 month
period ended March 31, 2017(1)(2). Same property Cash Basis NOI
from triple net leased senior living communities increased 1.9% for
the quarter ended June 30, 2018 compared to the quarter ended
June 30, 2017.
For the quarter ended June 30, 2018, 14.2% of NOI came from
75 managed senior living communities with 9,510 living units.
Occupancy at managed senior living communities was 86.1% for the
quarter ended June 30, 2018 compared to 85.7% for the quarter
ended June 30, 2017. Same property occupancy at managed senior
living communities was 85.8% for the quarter ended June 30,
2018 compared to 85.7% for the quarter ended June 30, 2017.
Same property average monthly rates at managed senior living
communities were $4,282 for the quarter ended June 30, 2018
compared to $4,298 for the quarter ended June 30, 2017. Same
property Cash Basis NOI from managed senior living communities
decreased 4.6% for the quarter ended June 30, 2018 compared to
the quarter ended June 30, 2017. The primary reason for the
decrease in same property Cash Basis NOI was an increase in
expenses.
SNH's 10 wellness centers remained 100% leased as of
June 30, 2018 and June 30, 2017, and provided SNH with
Cash Basis NOI of $4.4 million in each of the three months ended
June 30, 2018 and 2017.
Reconciliations of net income determined in accordance with GAAP
to consolidated NOI, Cash Basis NOI and same property NOI and Cash
Basis NOI by operating segment for the quarters ended June 30,
2018 and 2017 appear later in this press release.
Investment Activities:
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
principal and excluding closing costs. In June 2018, SNH acquired
the remaining two of these communities for an aggregate purchase
price of approximately $23.3 million, including the assumption of
approximately $16.6 million of mortgage debt principal 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.
During the quarter ended June 30, 2018, SNH invested
approximately $10.1 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 May 2018, SNH sold one senior living community that was
leased to Sunrise Senior Living, LLC for a sales price of
approximately $96.0 million, excluding closing costs, resulting in
a gain of approximately $78.9 million.
In June 2018, SNH sold one skilled nursing facility that was
leased to Five Star and one senior living community that was leased
to a private operator, where the tenant exercised its purchase
option, for a combined sales price of approximately $21.9 million,
excluding closing costs, resulting in a net gain of approximately
$1.9 million.
Financing Activities:
In July 2018, SNH prepaid approximately $90.6 million of secured
debts encumbering 12 senior living communities with a weighted
average annual interest rate of 5.0% and maturity dates in October
2018.
In July 2018, SNH gave notice of its intention to prepay
approximately $6.4 million of secured debt encumbering one senior
living community with an annual interest rate of 4.7% and a
maturity date in January 2019. SNH expects to make this prepayment
in September 2018.
Conference Call:
At 10:00 a.m. Eastern Time on Tuesday, August 7, 2018,
President and Chief Operating Officer, Jennifer Francis, and Chief
Financial Officer and Treasurer, Richard Siedel, will host a
conference call to discuss SNH's second quarter 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 Tuesday,
August 14, 2018. To access the replay, dial (412) 317-0088. The
replay pass code is 10121844.
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 second quarter
conference call are strictly prohibited without the prior written
consent of SNH.
Supplemental Data:
A copy of SNH’s Second 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.
_____________________________________________________________________________________________________________________________
(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:
- MS. FRANCIS’S STATEMENTS IN THIS PRESS
RELEASE REGARDING SNH’S OVERALL PORTFOLIO PERFORMANCE AND INCREASED
CONSOLIDATED SAME PROPERTY CASH BASIS NOI MAY IMPLY THAT SIMILAR OR
BETTER RESULTS WILL BE ACHIEVED IN THE FUTURE. HOWEVER, SNH CANNOT
BE SURE THAT IT WILL REALIZE SIMILAR OR BETTER RESULTS IN THE
FUTURE.
- THIS PRESS RELEASE INCLUDES A STATEMENT
THAT SNH HOPES TO GROW ITS LIFE SCIENCE AND MEDICAL OFFICE
PROPERTIES PORTFOLIOS IN THE FUTURE. HOWEVER, SNH CANNOT BE SURE
THAT FOCUSING ON THESE PORTFOLIOS WILL BE EFFECTIVE IN OVERCOMING
THE CURRENT TRENDS IN ITS SENIOR LIVING PROPERTIES PORTFOLIO OR
THAT SNH WILL IN FACT GROW ITS LIFE SCIENCE AND MEDICAL OFFICE
BUILDING PORTFOLIOS OR THE NOI REALIZED BY SNH FROM EITHER SUCH
PORTFOLIO.
- 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 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 AS A
RESULT OF THESE INVESTMENTS OR OTHERWISE. IN FACT, THE COMPETITIVE
POSITION OF, AND SNH’S REVENUES FROM, THOSE PROPERTIES MAY
DECLINE.
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
TRUSTCONDENSED CONSOLIDATED STATEMENTS OF
INCOME(amounts in thousands, except per share
data)(unaudited)
Three Months Ended June 30, Six Months Ended June
30, 2018 2017 2018
2017 Revenues: Rental income $ 174,585 $ 166,647 $ 348,313 $
333,090 Residents fees and services 102,663 98,366
204,750 196,484 Total revenues 277,248 265,013
553,063 529,574 Expenses: Property operating expenses
110,092 102,795 218,235 203,851 Depreciation and amortization
72,300 69,669 142,639 142,844 General and administrative (1) 29,078
22,922 54,196 38,005 Acquisition and certain other transaction
related costs 77 — 97 292 Impairment of assets 548 5,082
548 5,082 Total expenses 212,095
200,468 415,715 390,074 Operating
income 65,153 64,545 137,348 139,500 Dividend income 659 659
1,318 1,319 Unrealized gains and losses on equity securities, net
(2) 23,265 — 50,506 — Interest and other income 60 76 114 195
Interest expense (44,813 ) (40,800 ) (88,365 ) (84,289 ) Loss on
early extinguishment of debt — (7,353 ) (130 ) (7,353 )
Income from continuing operations before income tax expense and
equity in earnings of an investee 44,324 17,127 100,791 49,372
Income tax expense (105 ) (99 ) (365 ) (191 ) Equity in earnings of
an investee 7 374 51 502 Income before
gain on sale of properties 44,226 17,402 100,477 49,683 Gain on
sale of properties 80,762 — 261,916 —
Net income 124,988 17,402 362,393 49,683
Net income attributable to noncontrolling
interest
(1,401 ) (1,360 ) (2,784 ) (1,486 ) Net income attributable to
common shareholders $ 123,587 $ 16,042 $ 359,609
$ 48,197 Weighted average common shares
outstanding (basic) 237,487 237,399 237,483
237,395 Weighted average common shares outstanding (diluted)
237,529 237,445 237,506 237,433
Per common share
data (basic and diluted):
Net income attributable to common shareholders $ 0.52 $ 0.07
$ 1.51 $ 0.20 (1) General and
administrative expenses include estimated business management
incentive fee expense of $17,610 and $10,760 for the three months
ended June 30, 2018 and 2017, respectively, and $31,957 and $14,026
for the six months ended June 30, 2018 and 2017, respectively.
(2) Unrealized gains and losses on equity securities, net,
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 June 30, 2018 in accordance with new GAAP
standards effective January 1, 2018.
SENIOR HOUSING PROPERTIES
TRUSTFUNDS 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 June 30, Six Months Ended June
30, 2018 2017 2018
2017 Net income attributable to common shareholders $
123,587 $ 16,042 $ 359,609 $ 48,197 Depreciation and amortization
expense 72,300 69,669 142,639 142,844 Noncontrolling interest's
share of net FFO adjustments (5,300 ) (5,305 ) (10,600 ) (5,761 )
Gain on sale of properties (80,762 ) — (261,916 ) — Impairment of
assets 548 5,082 548 5,082 FFO
attributable to common shareholders 110,373 85,488 230,280 190,362
Estimated business management incentive fees (2) 17,610
10,760 31,957 14,026 Acquisition and certain other transaction
related costs 77 — 97 292 Loss on early extinguishment of debt —
7,353 130 7,353 Unrealized gains and losses on equity securities,
net (3) (23,265 ) — (50,506 ) — Normalized FFO
attributable to common shareholders $ 104,795 $ 103,601
$ 211,958 $ 212,033 Weighted average
common shares outstanding (basic) 237,487 237,399
237,483 237,395 Weighted average common shares
outstanding (diluted) 237,529 237,445 237,506
237,433
Per common share
data (basic and diluted):
Net income attributable to common shareholders $ 0.52 $ 0.07
$ 1.51 $ 0.20 FFO attributable to common
shareholders $ 0.46 $ 0.36 $ 0.97 $ 0.80
Normalized FFO attributable to common shareholders $ 0.44
$ 0.44 $ 0.89 $ 0.89 Distributions
declared $ 0.39 $ 0.39 $ 0.78 $ 0.78
(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
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
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 and losses on early extinguishment of
debt, if any, unrealized gains and losses on equity securities,
net, if any, and Normalized FFO from noncontrolling interest, net
of FFO, 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, net income attributable to
common shareholders and operating income. 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, 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 condensed 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 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. (3) Unrealized gains and losses on equity
securities, net, 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 June 30, 2018 in accordance
with new GAAP standards effective January 1, 2018.
SENIOR HOUSING PROPERTIES
TRUSTCALCULATION AND RECONCILIATION OF NET OPERATING INCOME
(NOI) AND CASH BASIS NOI(amounts in
thousands)(unaudited)
Three Months Ended June 30, Six Months
Ended June 30, 2018 2017 2018
2017
Calculation of
NOI and Cash Basis NOI(1):
Revenues: Rental income $ 174,585 $ 166,647 $ 348,313 $ 333,090
Residents fees and services 102,663 98,366 204,750
196,484 Total revenues 277,248 265,013 553,063
529,574 Property operating expenses (110,092 ) (102,795 ) (218,235
) (203,851 ) Property net operating income (NOI): 167,156 162,218
334,828 325,723 Non-cash straight line rent adjustments (3,030 )
(3,435 ) (6,023 ) (6,865 ) Lease value amortization (1,416 ) (1,320
) (2,797 ) (2,610 ) Non-cash amortization included in property
operating expenses(2) (199 ) (199 ) (398 ) (399 ) Cash Basis NOI $
162,511 $ 157,264 $ 325,610 $ 315,849
Reconciliation of
Net Income to Cash Basis NOI:
Net income $ 124,988 $ 17,402 $ 362,393 $ 49,683 Gain on sale of
properties (80,762 ) — (261,916 ) — Income before
gain on sale of properties 44,226 17,402 100,477 49,683
Equity in earnings of an investee (7 ) (374 ) (51 ) (502 ) Income
tax expense 105 99 365 191 Loss on early extinguishment of debt —
7,353 130 7,353 Interest expense 44,813 40,800 88,365 84,289
Interest and other income (60 ) (76 ) (114 ) (195 ) Unrealized
gains and losses on equity securities, net (23,265 ) — (50,506 ) —
Dividend income (659 ) (659 ) (1,318 ) (1,319 ) Operating income
65,153 64,545 137,348 139,500 Impairment of assets 548 5,082
548 5,082 Acquisition and certain other transaction related costs
77 — 97 292 General and administrative expense 29,078 22,922 54,196
38,005 Depreciation and amortization expense 72,300 69,669
142,639 142,844 Property NOI 167,156 162,218
334,828 325,723 Non-cash amortization included in property
operating expenses(2) (199 ) (199 ) (398 ) (399 ) Lease value
amortization (1,416 ) (1,320 ) (2,797 ) (2,610 ) Non-cash straight
line rent adjustments (3,030 ) (3,435 ) (6,023 ) (6,865 ) Cash
Basis NOI $ 162,511 $ 157,264 $ 325,610 $
315,849 (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 condensed 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 fees expense, which is
included in property operating expenses.
SENIOR HOUSING PROPERTIES
TRUSTCalculation 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 June 30, 2018
For the Three Months Ended June 30, 2017 Calculation of
NOI and Cash Basis NOI: MOBs
Triple NetLeasedSenior
LivingCommunities
ManagedSenior
LivingCommunities
Non-Segment (2)
Total MOBs
Triple NetLeasedSenior
LivingCommunities
ManagedSenior
LivingCommunities
Non-Segment (2)
Total Rental income / residents fees and services $
103,854 $ 66,113 $ 102,663 $ 4,618 $ 277,248 $ 94,651 $ 67,426 $
98,366 $ 4,570 $ 265,013 Property operating expenses (31,183 ) —
(78,909 ) — (110,092 ) (27,646 ) — (75,149 ) —
(102,795 ) Property net operating income (NOI) $ 72,671
$ 66,113 $ 23,754 $ 4,618 $ 167,156
$ 67,005 $ 67,426 $ 23,217 $ 4,570
$ 162,218 NOI change 8.5 % (1.9 )% 2.3 % 1.1 % 3.0 %
Property NOI $ 72,671 $ 66,113 $ 23,754 $ 4,618 $ 167,156 $
67,005 $ 67,426 $ 23,217 $ 4,570 $ 162,218 Less: Non-cash straight
line rent adjustments 2,338 555 — 137 3,030 2,520 778 — 137 3,435
Lease value amortization 1,361 — — 55 1,416 1,265 — — 55 1,320
Non-cash amortization included in property operating expenses (3)
199 — — — 199 199 —
— — 199 Cash Basis NOI $ 68,773
$ 65,558 $ 23,754 $ 4,426 $ 162,511 $
63,021 $ 66,648 $ 23,217 $ 4,378 $
157,264 Cash Basis NOI change 9.1 % (1.6 )% 2.3 % 1.1 % 3.3
%
Reconciliation of NOI to Same Property NOI:
Property NOI $ 72,671 $ 66,113 $ 23,754 $ 4,618 $ 167,156 $ 67,005
$ 67,426 $ 23,217 $ 4,570 $ 162,218 Less: NOI not included in same
property 4,824 1,744 1,514 — 8,082 (2 ) 4,071 (97 ) — 3,972
Same
property NOI (4) $ 67,847 $ 64,369 $ 22,240 $
4,618 $ 159,074 $ 67,007 $ 63,355 $
23,314 $ 4,570 $ 158,246 Same property NOI
change 1.3 % 1.6 % (4.6 )% 1.1 % 0.5 %
Reconciliation of
Same Property NOI to Same Property Cash Basis NOI: Same
property NOI (4) $ 67,847 $ 64,369 $ 22,240 $ 4,618 $ 159,074 $
67,007 $ 63,355 $ 23,314 $ 4,570 $ 158,246 Less: Non-cash straight
line rent adjustments 2,040 572 — 137 2,749 2,522 738 — 137 3,397
Lease value amortization 1,424 — — 55 1,479 1,264 — — 55 1,319
Non-cash amortization included in property operating expenses (3)
199 — — — 199 199 —
— — 199 Same property cash basis NOI
(4) $ 64,184 $ 63,797 $ 22,240 $ 4,426
$ 154,647 $ 63,022 $ 62,617 $ 23,314 $
4,378 $ 153,331 Same property cash basis NOI change
1.8 % 1.9 % (4.6 )% 1.1 % 0.9 % (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 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 April 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
TRUSTCalculation 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 Six Months Ended June 30, 2018 For
the Six Months Ended June 30, 2017 Calculation of NOI and
Cash Basis NOI: MOBs
Triple
NetLeasedSeniorLivingCommunities
ManagedSenior
LivingCommunities
Non-Segment (2)
Total MOBs
Triple
NetLeasedSeniorLivingCommunities
ManagedSenior
LivingCommunities
Non-Segment (2)
Total Rental income / residents fees and services $
205,005 $ 134,088 $ 204,750 $ 9,220 $ 553,063 $ 189,297 $ 134,678 $
196,484 $ 9,115 $ 529,574 Property operating expenses (62,121 ) —
(156,114 ) — (218,235 ) (54,823 ) — (149,028 )
— (203,851 ) Property net operating income (NOI) $ 142,884
$ 134,088 $ 48,636 $ 9,220 $ 334,828
$ 134,474 $ 134,678 $ 47,456 $ 9,115
$ 325,723 NOI change 6.3 % (0.4 )% 2.5 % 1.2 % 2.8 %
Property NOI $ 142,884 $ 134,088 $ 48,636 $ 9,220 $ 334,828
$ 134,474 $ 134,678 $ 47,456 $ 9,115 $ 325,723 Less: Non-cash
straight line rent adjustments 4,574 1,174 — 275 6,023 5,035 1,554
— 276 6,865 Lease value amortization 2,687 — — 110 2,797 2,500 — —
110 2,610 Non-cash amortization included in property operating
expenses (3) 398 — — — 398 399
— — — 399 Cash Basis NOI $
135,225 $ 132,914 $ 48,636 $ 8,835 $
325,610 $ 126,540 $ 133,124 $ 47,456 $
8,729 $ 315,849 Cash Basis NOI change 6.9 % (0.2 )%
2.5 % 1.2 % 3.1 %
Reconciliation of NOI to Same Property
NOI: Property NOI $ 142,884 $ 134,088 $ 48,636 $ 9,220 $
334,828 $ 134,474 $ 134,678 $ 47,456 $ 9,115 $ 325,723 Less: NOI
not included in same property 9,759 5,370 2,539 — 17,668 519 8,152
(92 ) — 8,579
Same property NOI (4) $ 133,125 $
128,718 $ 46,097 $ 9,220 $ 317,160 $
133,955 $ 126,526 $ 47,548 $ 9,115 $
317,144 Same property NOI change (0.6 )% 1.7 % (3.1 )% 1.2 %
0.0 %
Reconciliation of Same Property NOI to Same
Property Cash Basis NOI: Same property NOI (4) $ 133,125 $
128,718 $ 46,097 $ 9,220 $ 317,160 $ 133,955 $ 126,526 $ 47,548 $
9,115 $ 317,144 Less: Non-cash straight line rent adjustments 3,951
1,143 — 275 5,369 4,975 1,475 — 276 6,726 Lease value amortization
2,798 — — 110 2,908 2,505 — — 110 2,615 Non-cash amortization
included in property operating expenses (3) 399 — —
— 399 399 — — —
399 Same property cash basis NOI (4) $ 125,977 $
127,575 $ 46,097 $ 8,835 $ 308,484 $
126,076 $ 125,051 $ 47,548 $ 8,729 $
307,404 Same property cash basis NOI change (0.1 )% 2.0 %
(3.1 )% 1.2 % 0.4 % (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 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
TRUSTCONDENSED CONSOLIDATED BALANCE SHEETS(amounts in
thousands)(unaudited)
June 30, 2018 December 31, 2017
ASSETS
Real estate properties $ 7,987,732 $ 7,824,763 Accumulated
depreciation (1,555,754 ) (1,454,477 ) 6,431,978 6,370,286
Cash and cash equivalents 30,657 31,238 Restricted cash 108,704
16,083 Acquired real estate leases and other intangible assets, net
472,272 472,265 Other assets, net 392,025 404,147
Total assets $ 7,435,636 $ 7,294,019
LIABILITIES AND
EQUITY
Unsecured revolving credit facility $ 64,000 $ 596,000 Unsecured
term loans, net 547,873 547,460 Senior unsecured notes, net
2,214,856 1,725,662 Secured debt and capital leases, net 843,623
805,404 Accrued interest 26,015 17,987 Assumed real estate lease
obligations, net 91,080 96,018 Other liabilities 204,616
228,300 Total liabilities 3,992,063 4,016,831 Total
equity 3,443,573 3,277,188 Total liabilities and
equity $ 7,435,636 $ 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180807005208/en/
Senior Housing Properties TrustBrad Shepherd,
617-796-8234Director, Investor Relations
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