Senior Housing Properties Trust Announces Fourth Quarter and Year End 2016 Results

By a News Reporter-Staff News Editor at Biotech Week -- Senior Housing Properties Trust (Nasdaq:SNH) announced its financial results for the quarter and year ended December 31, 2016. "In 2016, we employed a disciplined approach to capital allocation throughout the year," said David Hegarty, President and Chief Operating Officer. "In the fourth quarter we acquired two assisted living communities and one medical office building for a total purchase price of approximately $37 million, bringing our gross acquisition volume for 2016 to approximately $226 million. 2016 acquisitions were done at a weighted average cap rate of 9.3%. Additionally, in the fourth quarter we prepaid approximately $48 million of secured debt with an average annual interest rate of 6.5%." Results for the Quarter Ended December 31, 2016: Net income was $42.9 million, or $0.18 per diluted share, for the quarter ended December 31, 2016, compared to $9.5 million, or $0.04 per diluted share, for the quarter ended December 31, 2015, which represents an increase of $0.14 per diluted share. This increase in net income is primarily attributable to a non-cash loss on the distribution of The RMR Group Inc. (Nasdaq: RMR) common stock to SNH's shareholders of $38.4 million, or $0.16 per diluted share, that SNH recognized in December 2015. This was partially offset by an increase in interest expense of approximately $5.7 million, or $0.02 per diluted share, for the three months ended December 31, 2016 compared to December 31, 2015 (see also Real Estate Investment Trust - Healthcare Facilities Companies).

Normalized funds from operations, or Normalized FFO, were $118.6 million, or $0.50 per diluted share, for the quarter ended December 31, 2016, compared to $120.6 million, or $0.51 per diluted share, for the quarter ended December 31, 2015, which represents a decrease of $0.01 per diluted share. This decrease in Normalized FFO is primarily attributable to increased interest expense of $0.02 per diluted share.

Cash basis net operating income, or Cash Basis NOI, was $167.9 million for the quarter ended December 31, 2016, compared to $161.0 million for the quarter ended December 31, 2015, which represents an increase of 4.3%. The increase in Cash Basis NOI includes $4.6 million from acquisitions and $2.3 million of increases at the same properties owned since October 1, 2015.

Reconciliations of net income 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, 2016 and 2015 appear later in this press release. Reconciliations of net operating income, or NOI, and Cash Basis NOI to net income determined in accordance with GAAP for the quarters ended December 31, 2016 and 2015 also appear later in this press release. In addition, calculations and reconciliations of NOI, Cash Basis NOI, same property NOI and same property Cash Basis NOI by SNH's operating segments for the quarters ended December 31, 2016 and 2015 appear later in this press release. Results for the Year Ended December 31, 2016: Net income was $141.3 million, or $0.60 per diluted share, for the year ended December 31, 2016, compared to $124.0 million, or $0.53 per diluted share, for the year ended December 31, 2015, which represents an increase of $0.07 per diluted share. This increase is primarily attributable to a non-cash loss on the distribution of RMR common stock to SNH's shareholders of $38.4 million, or $0.16 per diluted share, that SNH recognized in December 2015. The increase to net income was partially offset by an increase in interest expense of approximately $16.7 million, or $0.06 per diluted share, as well as an increase in impairment of assets of $18.5 million, or $0.08 per diluted share. Net income for the year ended December 31, 2016 also included a gain on sale of $4.1 million, or $0.02 per diluted share, related to SNH's sale of a skilled nursing facility in June 2016.

Normalized FFO were $446.4 million, or $1.88 per diluted share, for the year ended December 31, 2016, compared to $429.7 million, or $1.84 per diluted share, for the year ended December 31, 2015, which represents an increase of $0.04 per diluted share. This increase in Normalized FFO is primarily attributable to acquisitions, partially offset by increased interest expense of $0.06 per diluted share.

Cash Basis NOI was $634.9 million for the year ended December 31, 2016, compared to $598.1 million for the year ended December 31, 2015, which represents an increase of 6.2%. Contributions to the increase in Cash Basis NOI include $29.3 million from acquisitions and $7.5 million of increases at the same properties owned since January 1, 2015.

Reconciliations of net income determined in accordance with GAAP to FFO and Normalized FFO for the years ended December 31, 2016 and 2015 appear later in this press release. Reconciliations of NOI and Cash Basis NOI to net income determined in accordance with GAAP for the years ended December 31, 2016 and 2015 also appear later in this press release. In addition, calculations and reconciliations of NOI, Cash Basis NOI, same property NOI and same property Cash Basis NOI by SNH's operating segments for the years ended December 31, 2016 and 2015 appear later in this press release. Portfolio Operating Results: For the quarter ended December 31, 2016, same property Cash Basis NOI and same property NOI each increased 1.4% compared to the quarter ended December 31, 2015.

For the quarter ended December 31, 2016, 38.6% of SNH's NOI came from 119 properties leased to medical providers, medical related businesses, clinics and biotech laboratory tenants, or MOBs, with 11.4 million leasable square feet. SNH's MOB same property Cash Basis NOI increased 2.2% and same property NOI increased 2.7% for the quarter ended December 31, 2016 compared to the quarter ended December 31, 2015. As of December 31, 2016, 96.5% of SNH's MOB square feet were leased compared to 96.4% as of December 31, 2015. Same property occupancy at SNH's MOBs remained unchanged at 96.3% as of both December 31, 2016 and December 31, 2015.

For the quarter ended December 31, 2016, 44.7% of SNH's NOI came from 236 triple net leased senior living communities with 26,220 living units. Same property Cash Basis NOI and same property NOI from triple net leased senior living communities increased 2.3% and 1.8%, respectively, for the quarter ended December 31, 2016 compared to the quarter ended December 31, 2015. Occupancy at triple net leased senior living communities decreased to 85.1% for the most recently available 12 month period, compared to 85.6% for the comparable period last year(1). Same property occupancy at triple net leased senior living communities decreased to 85.1% for the most recently available 12 month period, compared to 85.6% for the comparable period last year(1).

For the quarter ended December 31, 2016, 14.1% of SNH's NOI came from 68 managed senior living communities with 8,788 living units. As a result of casualty losses and hurricane evacuation costs, same property Cash Basis NOI and same property NOI from managed senior living communities each decreased 3.1% for the quarter ended December 31, 2016 compared to the quarter ended December 31, 2015. Occupancy at managed senior living communities was 86.8% for the quarter ended December 31, 2016, compared to 87.7% for the quarter ended December 31, 2015. Same property occupancy at managed senior living communities owned and managed by the same operator continuously since October 1, 2015 was 87.1% for the quarter ended December 31, 2016, compared to 87.7% for the quarter ended December 31, 2015. Same property average monthly rates increased 1.6% to $4,245 for the quarter ended December 31, 2016 compared to the quarter ended December 31, 2015. Acquisition Activities: In October 2016, SNH acquired one MOB for approximately $18.5 million, excluding closing costs. This MOB contains approximately 96,000 square feet, is located in Ohio and has a remaining lease term of approximately 14.1 years.

In December 2016, SNH acquired two senior living communities for approximately $18.6 million, excluding closing costs. These senior living communities contain a combined 126 living units, are located in Illinois and are leased to Five Star Quality Care, Inc.

In January 2017, SNH acquired one MOB for approximately $15.5 million, excluding closing costs. This MOB contains approximately 117,000 square feet, is located in Kansas and has a remaining lease term of approximately 10.6 years.

Keywords for this news article include: Investing, Senior Housing Properties Trust, Real Estate Investment Trust - Healthcare Facilities Companies.

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