Senior Housing Properties Trust Announces Second Quarter 2017 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 six months ended June 30, 2017 (see also Real Estate Investment Trust - Healthcare Facilities Companies).

"In the second quarter, we focused on investing in our existing portfolio and managing our balance sheet," said David Hegarty, President and Chief Operating Officer. "During the quarter ended June 30, 2017, we remained disciplined with our deployment of capital by investing approximately $25 million in our managed and triple net leased senior living communities. Since the quarter ended, we closed on the purchase of one medical office building for approximately $16.4 million and we entered a contract to purchase another MOB for approximately $16.7 million. During the quarter, we prepaid approximately $300 million of high interest debt and subsequent to the end of the quarter, we amended our $1 billion revolving credit facility, which reduced the interest rate and extended the maturity to 2022 as well as amended our $200 million unsecured term loan that matures in 2022 to reduce the interest rate." Results for the Quarter Ended June 30, 2017: Net income attributable to common shareholders was $16.0 million, or $0.07 per diluted share, for the quarter ended June 30, 2017, compared to $39.2 million, or $0.17 per diluted share, for the quarter ended June 30, 2016. This decrease in net income attributable to common shareholders is primarily the result of an increase in general and administrative expenses as a result of $10.8 million of estimated business management incentive fees due to SNH's outperformance of the SNL U.S. REIT Healthcare index for the applicable measurement period and a loss on early extinguishment of debt of $7.4 million recognized for the quarter ended June 30, 2017. Normalized funds from operations, or Normalized FFO, were $103.6 million and $111.7 million, respectively, or $0.44 and $0.47 per diluted share, respectively, for the quarters ended June 30, 2017 and June 30, 2016.

Cash basis net operating income, or Cash Basis NOI, was $157.3 million for the quarter ended June 30, 2017, compared to $157.6 million for the quarter ended June 30, 2016, which represents a decrease of 0.2%. This decrease is primarily the result of increased property operating expenses at SNH's comparable properties, partially offset by NOI from acquisitions since April 1, 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 June 30, 2017 and 2016 appear later in this press release. Reconciliations of net income determined in accordance with GAAP to net operating income, or NOI, and Cash Basis NOI for the quarters ended June 30, 2017 and 2016 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 June 30, 2017 and 2016 appear later in this press release. Results for the Six Months Ended June 30, 2017: Net income attributable to common shareholders was $48.2 million, or $0.20 per diluted share, for the six months ended June 30, 2017, compared to $70.5 million, or $0.30 per diluted share, for the six months ended June 30, 2016. This decrease in net income attributable to common shareholders is primarily the result of increases in general and administrative expenses and interest expense and a loss on early extinguishment of debt recognized for the six months ended June 30, 2017, partially offset by income from acquisitions since January 1, 2016 and lower asset impairment charges. Normalized FFO were $212.0 million and $222.0 million, respectively, or $0.89 and $0.94 per diluted share, respectively, for the six months ended June 30, 2017 and June 30, 2016.

Cash Basis NOI was $315.8 million for the six months ended June 30, 2017, compared to $312.0 million for the six months ended June 30, 2016, which represents an increase of 1.2%. This increase is primarily the result of NOI from acquisitions since January 1, 2016.

Reconciliations of net income attributable to common shareholders determined in accordance with GAAP to FFO and Normalized FFO for the six months ended June 30, 2017 and 2016 appear later in this press release. Reconciliations of net income determined in accordance with GAAP to NOI and Cash Basis NOI for the six months ended June 30, 2017 and 2016 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 six months ended June 30, 2017 and 2016 appear later in this press release. Portfolio Operating Results: For the quarter ended June 30, 2017, 41.5% of SNH's NOI came from 236 triple net leased senior living communities with 26,220 living units. Occupancy at triple net leased senior living communities and same property triple net leased senior living communities decreased to 84.6% for the most recently available 12 month period, compared to 85.4% for the comparable period last year(1). Same property Cash Basis NOI and same property NOI from triple net leased senior living communities increased by $1.1 million and $0.7 million, respectively, for the quarter ended June 30, 2017 compared to the quarter ended June 30, 2016.

For the quarter ended June 30, 2017, 41.4% of SNH's NOI came from 120 properties leased to medical providers, medical related businesses, clinics and biotech laboratory tenants, or MOBs, with 11.6 million leasable square feet. As of June 30, 2017, 96.5% of SNH's MOB square feet were leased compared to 95.9% as of June 30, 2016. Same property occupancy at SNH's MOBs was unchanged at 96.3% as of each of June 30, 2017 and June 30, 2016. SNH's MOB same property Cash Basis NOI and same property NOI decreased by $0.1 million and $1.2 million, respectively, for the quarter ended June 30, 2017 compared to the quarter ended June 30, 2016.

For the quarter ended June 30, 2017, 14.3% of SNH's NOI came from 68 managed senior living communities with 8,806 living units. Occupancy at managed senior living communities was 85.7% for the quarter ended June 30, 2017, compared to 87.1% for the quarter ended June 30, 2016. Same property occupancy at managed senior living communities owned and managed by the same operator continuously since April 1, 2016 was 86.0% for the quarter ended June 30, 2017, compared to 86.9% for the quarter ended June 30, 2016. Same property average monthly rates increased by 1.3% to $4,328 for the quarter ended June 30, 2017 compared to the quarter ended June 30, 2016. Same property Cash Basis NOI and same property NOI from managed senior living communities each decreased by $2.0 million for the quarter ended June 30, 2017 compared to the quarter ended June 30, 2016.

For the quarter ended June 30, 2017, consolidated same property Cash Basis NOI decreased to $151.7 million compared to $152.7 million for the quarter ended June 30, 2016, and consolidated same property NOI decreased to $156.4 million compared to $158.8 million for the quarter ended June 30, 2016. Financing Activities: In August 2017, SNH amended the agreement governing its $1.0 billion revolving credit facility. As a result of the amendment, the interest rate payable on borrowings under the facility was reduced from LIBOR plus a premium of 130 basis points per annum (as of June 30, 2017) to LIBOR plus a premium of 120 basis points per annum, and the facility fee was reduced from 30 basis points per annum (as of June 30, 2017) to 25 basis points per annum on the total amount of lending commitments under the facility. The interest rate premium and facility fee are each subject to adjustment based upon changes to SNH's credit ratings. Also as a result of the amendment, the stated maturity date of the facility was extended from January 15, 2018 to January 15, 2022, and subject to the payment of an extension fee and meeting other conditions, SNH has the right to extend the maturity date of the facility for an additional year. The amended facility also includes a feature pursuant to which, in certain circumstances, maximum borrowings under the facility may be increased to up to $2.0 billion.

Also in August 2017, SNH amended the agreement governing its $200.0 million unsecured term loan. As a result of the amendment, the interest rate payable on borrowings under the term loan was reduced from LIBOR plus a premium of 180 basis points per annum (as of June 30, 2017) to LIBOR plus a premium of 135 basis points per annum.

During the quarter ended June 30, 2017, SNH prepaid approximately $297.2 million of secured debt encumbering 19 properties with a weighted average annual interest rate of 6.7%, plus an aggregate premium of approximately $5.4 million and accrued interest. SNH funded these prepayments with cash on hand and borrowings under its revolving credit facility. Investment Activities: In July 2017, SNH acquired one MOB (one building) located in Maryland with approximately 59,000 square feet for approximately $16.4 million, excluding closing costs.

Also in July 2017, SNH entered an agreement to acquire one MOB (one building) located in Minnesota with approximately 150,000 square feet for approximately $16.7 million, excluding costs. This acquisition is expected to close later in 2017.

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

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