Announces Strategic Transaction to Sell Assisted Living/Memory Care Portfolio & Raises Midpoint of 2019 AFFO Guidance Range
NEW YORK–(BUSINESS WIRE)–New Senior Investment Group Inc. (“New Senior” or the “Company”) (NYSE: SNR) announced today its results for the quarter ended September 30, 2019.
THIRD QUARTER 2019 FINANCIAL HIGHLIGHTS
- Declared cash dividend of $0.13 per common share
- Net income attributable to common stockholders of $28.2 million, or $0.34 per diluted share
- Total net operating income (“NOI”) of $40.4 million
- Adjusted same store cash NOI decreased 0.7% versus third quarter of 2018; pro forma for the Assisted Living / Memory Care (“AL/MC”) portfolio sale, adjusted same store cash NOI increased 0.7% versus third quarter of 2018
- Normalized Funds from Operations of $12.0 million, or $0.14 per diluted share
- AFFO of $14.0 million, or $0.17 per diluted share
- Normalized Funds Available for Distribution of $11.0 million, or $0.13 per diluted share
THIRD QUARTER 2019 & RECENT BUSINESS HIGHLIGHTS
- Entered into definitive purchase and sale agreement to sell the entire AL/MC portfolio of 28 properties for a gross sale price of $385 million (the “Transaction”)
- Raised midpoint of full year 2019 AFFO guidance range
“At the beginning of the year when we internalized the management of the company, we outlined several strategic priorities and I am extremely pleased with the progress that has been made to date to position us for long-term growth. The announcement of the Transaction today represents another key step and gives us significant momentum moving forward,” said Susan Givens, Chief Executive Officer. “Consistent with our strategic priorities, the sale of the AL/MC portfolio allows us to enhance the overall quality of our portfolio, strengthen our balance sheet and focus on growing our core business. Further, New Senior delivered solid earnings results in the third quarter of 2019 consistent with guidance expectations, and our Independent Living portfolio grew adjusted same store cash NOI 0.7% year over year in the third quarter, its sixth straight consecutive quarter of growth.”
STRATEGIC SALE OF AL/MC PORTFOLIO
As announced today, the Company has entered into a definitive purchase and sale agreement to sell its entire AL/MC portfolio of 28 properties for a gross sale price of $385 million. The Company expects the Transaction to close in the first quarter of 2020, subject to customary closing conditions. The gross sale price represents a 5.9% cap rate on third quarter 2019 trailing 12-month cash NOI or $136,000 per unit. The Company expects to realize a gain on sale of approximately $27 million prior to selling costs.
The Company intends to use the net proceeds from the Transaction to repay debt. As a result of the debt repayment and other refinancing activity related to the Transaction, the Company expects to extend its weighted average debt maturity and strengthen its capital position to invest in its core business.
THIRD QUARTER 2019 RESULTS
| Dollars in thousands, except per share data | |||||||||||
| For the Quarter Ended September 30, 2019 | For the Quarter Ended September 30, 2018 | ||||||||||
| Amount | Per Basic Share |
Per Diluted Share |
Amount | Per Basic Share |
Per Diluted Share |
||||||
| GAAP | |||||||||||
| Net income (loss) attributable to common stockholders |
$28,244 |
$0.34 |
$0.34 |
$(20,299) |
$(0.25) |
$(0.25) |
|||||
| Non-GAAP(A) | |||||||||||
| NOI |
$40,401 |
N/A |
N/A |
$40,694 |
N/A |
N/A |
|||||
| FFO |
49,285 |
$0.59 |
$0.59 |
2,074 |
$0.03 |
$0.03 |
|||||
| Normalized FFO |
11,989 |
$0.15 |
$0.14 |
4,728 |
$0.06 |
$0.06 |
|||||
| AFFO |
14,017 |
$0.17 |
$0.17 |
9,800 |
$0.12 |
$0.12 |
|||||
| Normalized FAD (B) |
10,965 |
$0.13 |
$0.13 |
7,680 |
$0.09 |
$0.09 |
|||||
(A) See tables at end of press release for reconciliations of non-GAAP measures to net income (loss), the most comparable GAAP measure.
(B) Normalized Funds Available for Distribution (“Normalized FAD”), which does not reflect debt principal payments and certain other expenses, does not represent cash available for distribution to stockholders.
THIRD QUARTER 2019 GAAP RESULTS
New Senior recorded GAAP net income attributable to common stockholders of $28.2 million, or $0.34 per diluted share, for the third quarter of 2019, compared to a GAAP net loss of $(20.3) million, or $(0.25) per diluted share, for the third quarter of 2018. The year over year increase in net income attributable to common stockholders was primarily driven by the receipt of $38 million of litigation proceeds related to the settlement of a derivative lawsuit.
THIRD QUARTER 2019 PORTFOLIO PERFORMANCE
| Excluding AL/MC Portfolio | |||||||||||
| Adjusted Same Store Cash NOI | as of September 30, 2019 | ||||||||||
| Properties | 3Q 2018 | 3Q 2019 | YoY | Properties | YoY | ||||||
| Managed Properties |
121 |
$ 39,511 |
$ 39,181 |
(0.8%) |
102 |
0.7% |
|||||
| NNN Property |
1 |
1,411 |
1,450 |
2.8% |
1 |
2.8% |
|||||
| Total Portfolio |
122 |
$ 40,922 |
$ 40,631 |
(0.7%) |
103 |
0.7% |
|||||
| Excluding AL/MC Portfolio | |||||||||||
| Adjusted Same Store Cash NOI – Managed | as of September 30, 2019 | ||||||||||
| Properties | 3Q 2018 | 3Q 2019 | YoY | Properties | YoY | ||||||
| IL Properties |
102 |
$ 34,001 |
$ 34,222 |
0.7% |
102 |
0.7% |
|||||
| AL/MC Properties |
19 |
5,510 |
4,958 |
(10.0%) |
– |
– |
|||||
| Total Managed Portfolio |
121 |
$ 39,511 |
$ 39,181 |
(0.8%) |
102 |
0.7% |
|||||
| Adjusted Same Store Cash NOI – Managed | |||||||||||
| Properties | 3Q 2018 | 3Q 2019 | YoY | ||||||||
| Properties Transitioned in 1Q19 |
9 |
$ 763 |
$ 30 |
(96.0%) |
|||||||
2019 STRATEGIC PRIORITIES UPDATE
As previously announced in February, the Company has identified several strategic priorities for 2019, including: 1) optimizing the portfolio, 2) managing operator concentration, 3) strengthening the balance sheet and 4) increasing the transparency of financial results. The Company continues to make significant progress across all of these areas:
-
Optimize Portfolio: A key priority for the Company has been to address the underperformance of the AL/MC portfolio. To date, the Company has pursued various strategies focused on improving performance, including asset sales and transitions to new operators. Despite these efforts, the AL/MC portfolio has continued to experience sustained challenges. After evaluating several alternatives, the Company concluded that a sale of the entire AL/MC portfolio would enable it to focus on growing and investing in its core business.
- Following the completion of the Transaction, New Senior’s portfolio will consist of 103 properties, including 102 Independent Living (“IL”) properties and 1 continuing care retirement community (“CCRC”), which represented 88% of third quarter 2019 NOI. The IL portfolio primarily serves the fast-growing middle market senior population, has delivered stable and consistent operating results, and is well positioned to benefit from medium and long term demographic trends.
- Manage Operator Concentration: Holiday Retirement (“Holiday”) is the Company’s largest operating partner and currently manages assets that accounted for approximately 82% of its third quarter 2019 NOI. Upon completion of the sale of the AL/MC portfolio, Holiday will manage assets that account for 94% of the Company’s NOI. While the Company views Holiday as a strong operator, particularly in the IL market, the Company recognizes the benefits of having a diversified portfolio of operators. To that end, the Company has spent considerable time growing and developing its relationships with operators in the industry. The Company will continue to actively evaluate all of its operator relationships as it seeks to position the Company for growth.
- Strengthen Balance Sheet: The Company is committed to improving its balance sheet with the goal of reducing leverage over time and increasing flexibility. Consistent with the Company’s strategic priorities, the Company intends to use the net proceeds from the Transaction and other related refinancing activities to reduce debt by approximately $350 million. In conjunction with the Transaction, New Senior expects to refinance its largest near-term debt maturity. As a result, the Company will significantly improve its debt maturity profile and will have no material debt maturities scheduled until 2025. Furthermore, the Transaction will improve the Company’s cash flow and provide more flexibility for growth. The Company is continuing to evaluate its capital structure for additional opportunities to extend debt maturities and lower debt costs.
- Increase Transparency of Financial Results: Management provided guidance for 2019 and expects to continue to provide guidance on an ongoing basis. The Company is committed to continuing to provide increased transparency through its financial disclosures.
2019 AFFO GUIDANCE MIDPOINT RAISED
- New Senior is narrowing the range and increasing the midpoint of its AFFO guidance by changing the range from $0.62 to $0.67 per share to a range of $0.64 to $0.67 per share, in addition to updating its outlook for net loss attributable to common stockholders, Funds from Operations (“FFO”) and Normalized FFO. Additional details can be found below.
| Full Year 2019 Guidance | |||
| Per Share | |||
| Low | High | ||
| Net Loss Attributable to Common Stockholders |
$(0.03) |
– |
$0.00 |
| FFO |
$0.96 |
– |
$0.99 |
| Normalized FFO |
$0.56 |
– |
$0.59 |
| AFFO |
$0.64 |
– |
$0.67 |
-
Key Guidance Assumptions
- Same store managed cash NOI: (3.0%) to 0.0% versus 2018
- Debt: LIBOR assumed at 2.50% (each 25bps change in LIBOR equates to $0.03 per share annually)
- Cash G&A: $18 million
- Shares: 84 million diluted shares outstanding
- The Company’s guidance is based on a number of other assumptions that are subject to change and many of which are outside the control of the Company. If actual results vary from these assumptions, the Company’s expectations may change. There can be no assurance that the Company will achieve these results. A reconciliation of the Company’s guidance to the Company’s projected GAAP measures is included in this press release.
THIRD QUARTER DIVIDEND
On October 29, 2019, the Company’s Board declared a cash dividend of $0.13 per share for the quarter ended September 30, 2019. The dividend is payable on December 20, 2019 to shareholders of record on December 6, 2019.
ADDITIONAL INFORMATION
For additional information that management believes is useful for investors, please refer to the presentation posted in the Investor Relations section of the Company’s website, www.newseniorinv.com.
EARNINGS CONFERENCE CALL
Management will host a conference call on November 1, 2019 at 9:00 A.M. Eastern Time. The conference call may be accessed by dialing (888) 317-6003 (from within the U.S.) or (412) 317-6061 (from outside of the U.S.) ten minutes prior to the scheduled start of the call; please use entry number “4902462” A simultaneous webcast of the conference call will be available to the public on a listen-only basis at www.newseniorinv.com. Please allow extra time prior to the call to visit the website and download any necessary software required to listen to the internet broadcast.
A telephonic replay of the conference call will also be available approximately two hours following the call’s completion through 11:59 P.M. Eastern Time on November 30, 2019 by dialing (877) 344-7529 (from within the U.S.) or (412) 317-0088 (from outside the U.S.); please use access code “10135384.”
ABOUT NEW SENIOR
New Senior Investment Group Inc. (NYSE: SNR) is a publicly-traded real estate investment trust with a diversified portfolio of senior housing properties located across the United States. As of September 30, 2019, New Senior is one of the largest owners of senior housing properties, with 131 properties across 37 states. More information about New Senior can be found at www.newseniorinv.com.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain information in this press release may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including without limitation statements regarding the Company’s 2019 strategic priorities (including, without limitation, plans relating to optimizing the Company’s portfolio through operator transitions and asset sales, plans to manage operator concentration and plans to strengthen the balance sheet and potentially reduce leverage), the Company’s expectations with respect to the execution, timing and impact of the sale of the AL/MC portfolio and expectations with respect to the potential range of 2019 financial results, and the declaration or amount of any future dividend. These statements are not historical facts. They represent management’s current expectations regarding future events and are subject to a number of risks and uncertainties, many of which are beyond our control, that could cause actual results to differ materially from those described in the forward-looking statements. These risks and uncertainties include, but are not limited to, risks and uncertainties relating to the Company’s ability to successfully manage the transition to self-management, the asset management by third parties and market conditions affecting demand and supply for senior housing. Accordingly, you should not place undue reliance on any forward-looking statements contained herein. For a discussion of these and other risks and important factors that could affect such forward-looking statements, see the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s most recent annual and quarterly reports filed with the Securities and Exchange Commission, which are available on the Company’s website (www.newseniorinv.com). New risks and uncertainties emerge from time to time, and it is not possible for New Senior to predict or assess the impact of every factor that may cause its actual results to differ materially from those contained in any forward-looking statements. Forward-looking statements contained herein speak only as of the date of this press release, and New Senior expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in New Senior’s expectations with regard thereto or change in events, conditions or circumstances on which any statement is based.
| Consolidated Balance Sheets | |||
| (dollars in thousands, except share data) | |||
| September 30, 2019 | December 31, 2018 | ||
| (unaudited) | |||
| Assets | |||
| Real estate investments: | |||
| Land |
$ 177,956 |
$ 177,956 |
|
| Buildings, improvements and other |
2,360,548 |
2,335,813 |
|
| Accumulated depreciation |
(420,682) |
(358,368) |
|
| Net real estate property |
2,117,822 |
2,155,401 |
|
| Acquired lease and other intangible assets |
8,638 |
8,638 |
|
| Accumulated amortization |
(3,144) |
(2,877) |
|
| Net real estate intangibles |
5,494 |
5,761 |
|
| Net real estate investments |
2,123,316 |
2,161,162 |
|
| Cash and cash equivalents |
35,399 |
72,422 |
|
| Receivables and other assets, net |
45,156 |
52,674 |
|
| Total Assets |
$ 2,203,871 |
$ 2,286,258 |
|
| Liabilities, Redeemable Preferred Stock and Equity | |||
| Liabilities | |||
| Debt, net |
$ 1,836,062 |
$ 1,884,882 |
|
| Due to affiliates |
– |
26,245 |
|
| Accrued expenses and other liabilities |
76,298 |
52,679 |
|
| Total Liabilities |
$ 1,912,360 |
$ 1,963,806 |
|
| Commitments and contingencies | |||
| Redeemable preferred stock, $0.01 par value with $100 liquidation preference, 400,000 shares authorized, issued and outstanding as of September 30, 2019 and December 31, 2018, respectively |
$ 40,506 |
$ 40,000 |
|
| Equity | |||
| Preferred stock, $0.01 par value, 99,600,000 shares (excluding 400,000 shares of redeemable preferred stock) authorized, none issued or outstanding as of September 30, 2019 and December 31, 2018 |
$ – |
$ – |
|
| Common stock, $0.01 par value, 2,000,000,000 shares authorized, 82,964,438 and 82,148,869 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively |
830 |
821 |
|
| Additional paid-in capital |
900,432 |
898,135 |
|
| Accumulated deficit |
(642,990) |
(616,504) |
|
| Accumulated other comprehensive loss |
(7,267) |
– |
|
| Total Equity |
$ 251,005 |
$ 282,452 |
|
| Total Liabilities, Redeemable Preferred Stock and Equity |
$ 2,203,871 |
$ 2,286,258 |
|
| Consolidated Statements of Operations | |||||||
| (dollars in thousands, except share data) | |||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||
|
2019 |
2018 |
2019 |
2018 |
||||
| (unaudited) | (unaudited) | ||||||
| Revenues | |||||||
| Resident fees and services |
$ 114,003 |
$ 116,178 |
$ 344,477 |
$ 288,005 |
|||
| Rental revenue |
1,583 |
1,582 |
4,748 |
37,825 |
|||
| Total revenues |
115,586 |
117,760 |
349,225 |
325,830 |
|||
| Expenses | |||||||
| Property operating expense |
75,185 |
77,066 |
227,489 |
192,675 |
|||
| Depreciation and amortization |
21,041 |
22,373 |
62,583 |
73,619 |
|||
| Interest expense |
22,662 |
29,268 |
69,864 |
76,946 |
|||
| General and administrative expense |
5,417 |
3,219 |
15,773 |
10,111 |
|||
| Acquisition, transaction and integration expense |
616 |
1,559 |
1,677 |
13,130 |
|||
| Management fees and incentive compensation to affiliate |
– |
3,688 |
– |
11,127 |
|||
| Loss on extinguishment of debt |
– |
– |
335 |
58,544 |
|||
| Other expense (income) |
(2) |
782 |
1,350 |
2,194 |
|||
| Total expenses |
124,919 |
137,955 |
379,071 |
438,346 |
|||
| Loss on sale of real estate |
– |
– |
(122) |
– |
|||
| Gain on lease termination |
– |
– |
– |
40,090 |
|||
| Litigation proceeds, net |
38,226 |
– |
38,226 |
– |
|||
| Income (Loss) before income taxes |
28,893 |
(20,195) |
8,258 |
(72,426) |
|||
| Income tax expense |
44 |
104 |
188 |
303 |
|||
| Net income (loss) |
$ 28,849 |
$ (20,299) |
$ 8,070 |
$ (72,729) |
|||
| Deemed dividend on redeemable preferred stock |
$ (605) |
$ – |
$ (1,802) |
$ – |
|||
| Net income (loss) attributable to common stockholders |
$ 28,244 |
$ (20,299) |
$ 6,268 |
$ (72,729) |
|||
| Net income (loss) per share of common stock | |||||||
| Basic(A) |
$ 0.34 |
$ (0.25) |
$ 0.08 |
$ (0.89) |
|||
| Diluted |
$ 0.34 |
$ (0.25) |
$ 0.07 |
$ (0.89) |
|||
| Weighted average number of shares of common stock outstanding | |||||||
| Basic |
82,209,844 |
82,148,869 |
82,207,610 |
82,148,869 |
|||
| Diluted(B) |
83,964,231 |
82,148,869 |
83,588,648 |
82,148,869 |
|||
| Dividends declared per share of common stock |
$ 0.13 |
$ 0.13 |
$ 0.39 |
$ 0.65 |
|||
(A) Basic earnings per share (“EPS”) is calculated by dividing net income (loss) attributable to common stockholders by the weighted average number of shares of common stock outstanding. The outstanding shares used to calculate the weighted average basic shares excludes 754,594 restricted stock awards, net of forfeitures, as of September 30, 2019, as those shares were issued but were not vested and therefore, not considered outstanding for purposes of computing basic loss per share as of September 30, 2019. Diluted EPS is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of shares of common stock outstanding plus the additional dilutive effect, if any, of common stock equivalents during each period.
(B) Dilutive share equivalents and options were excluded given our loss position, so basic and diluted EPS were the same for each reporting period.
| Consolidated Statements of Cash Flows | |||||||
| (dollars in thousands) | |||||||
| Nine Months Ended September 30, | |||||||
|
2019 |
2018 |
||||||
| (unaudited) | |||||||
| Cash Flows From Operating Activities | |||||||
| Net income (loss) |
$ |
8,070 |
|
$ |
(72,729 |
) |
|
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | |||||||
| Depreciation of tangible assets and amortization of intangible assets |
|
62,583 |
|
|
73,654 |
|
|
| Amortization of deferred financing costs |
|
3,228 |
|
|
9,396 |
|
|
| Amortization of deferred revenue, net |
|
1,588 |
|
|
2,346 |
|
|
| Non-cash straight line rental revenue |
|
(455 |
) |
|
(5,192 |
) |
|
| Non-cash adjustment on lease termination |
|
– |
|
|
29,910 |
|
|
| Loss on extinguishment of debt |
|
335 |
|
|
58,544 |
|
|
| Provision for bad debt |
|
– |
|
|
1,630 |
|
|
| Amortization of equity-based compensation |
|
2,031 |
|
|
– |
|
|
| Loss on sale of real estate |
|
122 |
|
|
– |
|
|
| Other non-cash expense |
|
1,041 |
|
|
2,308 |
|
|
| Changes in: | |||||||
| Receivables and other assets, net |
|
(2,274 |
) |
|
(5,046 |
) |
|
| Due to affiliates |
|
(25,995 |
) |
|
5,789 |
|
|
| Accrued expenses and other liabilities |
|
12,080 |
|
|
10,916 |
|
|
| Net cash provided by operating activities |
$ |
62,354 |
|
$ |
111,526 |
|
|
| Cash Flows From Investing Activities | |||||||
| Proceeds from sale of real estate |
|
13,086 |
|
|
– |
|
|
| Capital expenditures |
|
(21,436 |
) |
|
(13,091 |
) |
|
| Insurance proceeds, net |
|
752 |
|
|
(514 |
) |
|
| Net cash used in investing activities |
$ |
(7,598 |
) |
$ |
(13,605 |
) |
|
| Cash Flows From Financing Activities | |||||||
| Principal payments of mortgage notes payable and capital lease obligations |
$ |
(7,675 |
) |
$ |
(16,063 |
) |
|
| Proceeds from mortgage notes payable |
|
– |
|
|
720,000 |
|
|
| Proceeds from borrowing on revolving credit facility |
|
4,250 |
|
|
– |
|
|
| Repayments of borrowings on revolving credit facility |
|
(34,500 |
) |
|
– |
|
|
| Repayments of mortgage notes payable |
|
(13,674 |
) |
|
(663,788 |
) |
|
| Payment of exit fee on extinguishment of debt |
|
(206 |
) |
|
(51,886 |
) |
|
| Payment of deferred financing costs |
|
(1,055 |
) |
|
(13,663 |
) |
|
| Purchase of interest rate caps |
|
(35 |
) |
|
(341 |
) |
|
| Payment of common stock dividend |
|
(32,062 |
) |
|
(53,400 |
) |
|
| Payment of redeemable preferred stock dividend |
|
(1,296 |
) |
|
– |
|
|
| Net cash used in financing activities |
$ |
(86,253 |
) |
$ |
(79,141 |
) |
|
| Net increase (decrease) in cash, cash equivalents and restricted cash |
|
(31,497 |
) |
|
18,780 |
|
|
| Cash, cash equivalents and restricted cash, beginning of period |
|
92,656 |
|
|
157,485 |
|
|
| Cash, cash equivalents and restricted cash, end of period |
$ |
61,159 |
|
$ |
176,265 |
|
|
| Supplemental Disclosure of Cash Flow Information | |||||||
| Cash paid during the period for interest expense |
$ |
67,151 |
|
$ |
67,323 |
|
|
| Cash paid during the period for income taxes |
|
349 |
|
|
326 |
|
|
| Supplemental Disclosure of Non-Cash Investing and Financing Activities | |||||||
| Issuance of common stock |
$ |
275 |
|
$ |
– |
|
|
| Capital lease obligations |
|
468 |
|
|
273 |
|
|
| Furniture, fixtures, equipment and other improvements |
|
– |
|
|
10,065 |
|
|
Contacts
Jane Ryu
(646) 822-3700
