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Senior Housing Properties Trust Announces Third Quarter 2018 Results

November 6, 2018

NEWTON, Mass.--(BUSINESS WIRE)--Nov 6, 2018--Senior Housing Properties Trust (Nasdaq: SNH) today announced its financial results for the quarter and nine months ended September 30, 2018.

“Our consolidated portfolio of diverse healthcare properties once again produced stable results this quarter, with a 0.3% increase in consolidated same property Cash Basis NOI during the quarter,” stated Jennifer Francis, President and Chief Operating Officer. “Our medical office and life science portfolios produced the strongest results, with same property Cash Basis NOI growing 2.4% during the quarter. Within our managed senior living portfolio, same property occupancy also increased 50 basis points to 86.3% during the quarter. Although we did not acquire any additional medical office or life science properties during the third quarter, we still have ample borrowing capacity to pursue our strategy of growing this segment of our portfolio.”

Results for the Quarter Ended September 30, 2018:

Net income attributable to common shareholders was $45.8 million, or $0.19 per diluted share, for the quarter ended September 30, 2018 compared to $34.4 million, or $0.14 per diluted share, for the quarter ended September 30, 2017. This increase in net income attributable to common shareholders is primarily the result of: (1) unrealized gains and losses on equity securities, net, of $35.1 million, or $0.15 per diluted share, which is included in earnings in accordance with new U.S. generally accepted accounting principles, or GAAP, standards effective January 1, 2018 and (2) acquisitions since July 1, 2017. This increase in net income attributable to common shareholders was partially offset by: (1) an increase in general and administrative expenses due to the $18.8 million, or $0.08 per diluted share, of business management incentive fee expense recognized for the quarter ended September 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 45.9% over the applicable measurement period compared to the $8.0 million of business management incentive fee expense recognized for the quarter ended September 30, 2017, (2) the disposition of six triple net leased senior living communities since July 1, 2017, (3) an increase in interest expense as a result of higher interest rates, and (4) impairment charges recognized for the quarter ended September 30, 2018.

Normalized funds from operations attributable to common shareholders, or Normalized FFO attributable to common shareholders, were $100.2 million and $104.0 million, or $0.42 and $0.44 per diluted share, for the quarters ended September 30, 2018 and 2017, respectively.

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 September 30, 2018 and 2017 appear later in this press release.

Results for the Nine Months Ended September 30, 2018:

Net income attributable to common shareholders was $405.4 million, or $1.71 per diluted share, for the nine months ended September 30, 2018 compared to $82.6 million, or $0.35 per diluted share, for the nine months ended September 30, 2017. This increase in net income attributable to common shareholders is primarily the result of: (1) $261.9 million, or $1.10 per diluted share, of net gains on the sale of properties recognized for the nine months ended September 30, 2018, (2) unrealized gains and losses on equity securities, net, of $85.6 million, or $0.21 per diluted share, which is included in earnings in accordance with new GAAP standards effective January 1, 2018, and (3) acquisitions since January 1, 2017. This increase in net income attributable to common shareholders was partially offset by: (1) an increase in general and administrative expenses due to the $50.7 million, or $0.21 per diluted share, of business management incentive fee expense recognized for the nine months ended September 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 45.9% over the applicable measurement period compared to the $22.0 million of business management incentive fee expense recognized for the nine months ended September 30, 2017, (2) the disposition of six triple net leased senior living communities since January 1, 2017, and (3) an increase in interest expense as a result of higher interest rates.

Normalized FFO attributable to common shareholders were $312.2 million and $315.9 million, or $1.31 and $1.33 per diluted share, for the nine months ended September 30, 2018 and 2017, respectively.

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 nine months ended September 30, 2018 and 2017 appear later in this press release.

Portfolio Operating Results:

For the quarter ended September 30, 2018, consolidated cash basis net operating income, or Cash Basis NOI, at properties owned continuously since July 1, 2017, or same property, increased 0.3% compared to the quarter ended September 30, 2017.

For the quarter ended September 30, 2018, 44.1% 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 September 30, 2018, 95.6% of MOB square feet were leased compared to 95.8% as of September 30, 2017. Same property occupancy was 95.3% as of September 30, 2018 compared to 95.8% as of September 30, 2017. Same property Cash Basis NOI from MOBs increased 2.4% for the quarter ended September 30, 2018 compared to the quarter ended September 30, 2017.

For the quarter ended September 30, 2018, 39.6% of NOI came from 229 triple net leased senior living communities with 24,298 living units. The weighted average rent coverage for triple net leased senior living communities decreased to 1.13x for the 12 month period ended June 30, 2018 compared to 1.22x for the 12 month period ended June 30, 2017 (1)(2). Same property Cash Basis NOI from triple net leased senior living communities increased 1.8% for the quarter ended September 30, 2018 compared to the quarter ended September 30, 2017.

For the quarter ended September 30, 2018, 13.5% of NOI came from 75 managed senior living communities with 9,515 living units. Occupancy at managed senior living communities was 86.7% for the quarter ended September 30, 2018 compared to 85.8% for the quarter ended September 30, 2017. Same property occupancy at managed senior living communities was 86.3% for the quarter ended September 30, 2018 compared to 85.8% for the quarter ended September 30, 2017. Same property average monthly rates at managed senior living communities were $4,225 for the quarter ended September 30, 2018 compared to $4,243 for the quarter ended September 30, 2017. Same property Cash Basis NOI from managed senior living communities decreased 10.5% for the quarter ended September 30, 2018 compared to the quarter ended September 30, 2017. The primary reason for the decrease in same property Cash Basis NOI was an increase in property operating expenses.

SNH’s 10 wellness centers remained 100% leased as of September 30, 2018 and September 30, 2017, and provided SNH with Cash Basis NOI of $4.5 million and $4.4 million for the three months ended September 30, 2018 and 2017, respectively.

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 September 30, 2018 and 2017 appear later in this press release.

Investment Activities:

During the quarter ended September 30, 2018, SNH invested approximately $7.4 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.

Financing Activities:

In July 2018, SNH prepaid approximately $90.6 million of secured debts encumbering 12 senior living communities that had a weighted average annual interest rate of 5.0% and maturity dates in October 2018.

In September 2018, SNH prepaid approximately $6.3 million of secured debt encumbering one senior living community that had an annual interest rate of 4.7% and a maturity date in January 2019.

Conference Call:

At 10:00 a.m. Eastern Time on Tuesday, November 6, 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 third 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, November 13, 2018. 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 third quarter conference call are strictly prohibited without the prior written consent of SNH.

Supplemental Data:

A copy of SNH’s Third 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.

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(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 CONSOLIDATED 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. MS. FRANCIS’S STATEMENTS IN THIS PRESS RELEASE THAT SNH’S MEDICAL OFFICE AND LIFE SCIENCE PORTFOLIO INCREASED SAME PROPERTY CASH BASIS NOI AND SNH’S MANAGED SENIOR LIVING PORTFOLIO INCREASED SAME PROPERTY OCCUPANCY 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 HAS AMPLE BORROWING CAPACITY TO PURSUE THE STRATEGY OF GROWING THE MEDICAL OFFICE AND LIFE SCIENCE PROPERTIES SEGMENT OF ITS PORTFOLIO. SNH CANNOT BE SURE THAT IT WILL IN FACT GROW THE MEDICAL OFFICE AND LIFE SCIENCE PROPERTIES SEGMENT OF ITS PORTFOLIO OR THE NOI REALIZED BY SNH FROM THAT SEGMENT OF ITS 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 OPERATING REVENUE 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.

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/20181106005230/en/

CONTACT: Senior Housing Properties Trust

Brad Shepherd, 617-796-8234

Senior Director, Investor Relations

KEYWORD: UNITED STATES NORTH AMERICA MASSACHUSETTS

INDUSTRY KEYWORD: PROFESSIONAL SERVICES REIT FINANCE CONSTRUCTION & PROPERTY COMMERCIAL BUILDING & REAL ESTATE

SOURCE: Senior Housing Properties Trust

Copyright Business Wire 2018.

PUB: 11/06/2018 07:00 AM/DISC: 11/06/2018 07:01 AM

http://www.businesswire.com/news/home/20181106005230/en

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