New Senior Investment Group Inc. (“New Senior” or the “Company”)
(NYSE: SNR) announced today its results for the quarter ended
September 30, 2018.
THIRD QUARTER 2018 FINANCIAL
HIGHLIGHTS
- Declared cash dividend of $0.13 per
common share
- Net loss of $20.3 million, or $(0.25)
per diluted share
- Total net operating income (“NOI”) of
$40.7 million
- Adjusted same store cash NOI decreased
2.0% versus Q3’17
- Normalized Funds from Operations
(“Normalized FFO”) of $4.7 million, or $0.06 per diluted share
- AFFO of $9.8 million, or $0.12 per
diluted share
- Normalized Funds Available for
Distribution (“Normalized FAD”) of $7.7 million, or $0.09 per
diluted share
STRATEGIC REVIEW UPDATE
- Work on internalization continuing to
progress
- Refinanced a $720 million secured loan
priced at L + 232 basis points with a term of seven years in
October 2018
- Re-set dividend to $0.13 per share in
August 2018
- Transitioned 51 IL assets from leased
to managed in May 2018
THIRD QUARTER 2018
RESULTS
Dollars in thousands, except per share data
For the Quarter Ended September 30, 2018
For the Quarter Ended September 30, 2017 Amount
Per Basic Share
Per Diluted Share
Amount
Per Basic Share
Per Diluted Share
GAAP
Net (loss) income $(20,299) $(0.25) $(0.25) $(14,539) $(0.18)
$(0.18)
Non-GAAP(A)
NOI $40,694 N/A N/A $54,346 N/A N/A FFO 2,074 $0.03 $0.03 20,587
$0.25 $0.25 Normalized FFO 4,728 $0.06 $0.06 22,746 $0.28 $0.27
AFFO 9,800 $0.12 $0.12 20,561 $0.25 $0.25 Normalized FAD (B) 7,680
$0.09 $0.09 18,796 $0.23 $0.23 (A) See end of press release
for reconciliation of non-GAAP measures to net loss. (B) Normalized
FAD, which does not reflect debt principal payments and certain
other expenses, does not represent cash available for distribution
to shareholders.
THIRD QUARTER 2018 GAAP
RESULTS
New Senior recorded GAAP net loss of $20.3 million, or $(0.25)
per diluted share, for the third quarter of 2018, compared to GAAP
net loss of $14.5 million, or $(0.18) per diluted share, for the
third quarter of 2017. The year over year decrease was primarily
driven by lower net operating income as a result of asset
sales.
THIRD QUARTER 2018 PORTFOLIO
PERFORMANCE
Total NOI decreased 25.1% to $40.7 million compared to $54.3
million for the third quarter of 2017, primarily driven by
approximately $292 million in asset sales in the fourth quarter of
2017 and 51 assets transitioned from leased to managed in the
second quarter of 2018.
Adjusted same store cash NOI decreased 2.0% year over year. This
figure represents the Company’s entire portfolio of 133 assets,
including the 51 IL assets that were converted from leased to
managed in the second quarter of 2018.
REFINANCING
In October, the Company completed the refinancing of a $720
million secured loan (the “Loan”) with Freddie Mac arranged through
KeyBank Real Estate Capital. The Loan has a term of seven years and
bears interest at LIBOR plus 232 basis points, an improvement of
approximately 170 basis points, or $12 million annually, versus the
prior financing. Additionally, the refinancing improved the
Company’s weighted average debt maturity from three years to over
five years.
STRATEGIC REVIEW UPDATE
As previously announced on February 23, 2018, the Board of
Directors, together with the Company’s management team and legal
and financial advisors, has been exploring a full range of
strategic alternatives to maximize shareholder value. The Board
formed a special committee (the “Special Committee”), composed
entirely of independent and disinterested directors, to address
certain aspects of the strategic review.
In connection with the strategic review, the Company retained
J.P. Morgan Securities LLC as its financial advisor and Skadden,
Arps, Slate, Meagher & Flom LLP as its legal advisor. In
addition, the Special Committee retained Morgan Stanley & Co.
LLC as its independent financial advisor and Wachtell, Lipton,
Rosen & Katz as its independent legal advisor.
The strategic review has been a multi-step process, resulting in
the following previously announced initiatives: (1) the termination
of triple net leases and entry into new management agreements for
51 IL assets in May 2018, (2) a re-set of the Company’s dividend in
August 2018, (3) the $720 million refinancing described above and
(4) an agreement in principle to internalize the Company’s
management function in August 2018. The Special Committee continues
to work with Fortress towards definitive documentation for the
internalization, and the Company continues to prepare to be
operationally ready for the internalization by January 1, 2019. The
agreement in principle with respect to the internalization is
non-binding, and there can be no assurance as to when or whether
the internalization will occur or its terms.
THIRD QUARTER DIVIDEND
On October 29, 2018, the Company’s Board of Directors declared a
cash dividend of $0.13 per share for the quarter ended September
30, 2018. The dividend is payable on December 21, 2018 to
shareholders of record on December 7, 2018.
ADDITIONAL INFORMATION
For additional information that management believes to be 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, 2018 at
9:00 A.M. Eastern Time. The conference call may be accessed by
dialing (877) 694-6694 (from within the U.S.) or (970) 315-0985
(from outside of the U.S.) ten minutes prior to the scheduled start
of the call; please reference “New Senior Third Quarter 2018
Earnings Call.” 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, 2018 by dialing
(855) 859-2056 (from within the U.S.) or (404) 537-3406 (from
outside the U.S.); please reference access code “5197165.”
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, 2018, New Senior is one of the largest
owners of senior housing properties, with 133 properties across 37
states. New Senior is managed by an affiliate of Fortress
Investment Group LLC, a global investment management firm. 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 exploration of
strategic alternatives and the plan to internalize the Company’s
management, including, in each case, with respect to the terms,
timing, potential benefits, potential costs and completion thereof,
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 review of strategic
alternatives and announcement thereof and the Company’s ability to
successfully manage the transition to self-management. 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,
2018 (Unaudited) December 31, 2017 Assets
Real estate investments: Land $ 182,238 $ 182,238 Buildings,
improvements and other 2,352,135 2,329,524 Accumulated depreciation
(341,250 ) (275,794 ) Net real estate property
2,193,123 2,235,968 Acquired lease and other
intangible assets 8,638 264,438 Accumulated amortization
(2,788 ) (249,198 ) Net real estate intangibles 5,850
15,240 Net real estate investments 2,198,973
2,251,208 Cash and cash equivalents 157,365 137,327
Straight-line rent receivables 3,321 82,445 Receivables and other
assets, net 41,352 37,047
Total
Assets $ 2,401,011 $
2,508,027 Liabilities and Equity
Liabilities Mortgage notes payable, net $ 1,951,884 $
1,907,928 Due to affiliates 15,339 9,550 Accrued expenses and other
liabilities 54,029 84,664
Total
Liabilities $ 2,021,252 $
2,002,142 Commitments and contingencies
Equity Preferred stock $0.01 par value, 100,000,000 shares
authorized and none issued or outstanding as of both September 30,
2018 and December 31, 2017 $ - $ - Common stock $0.01 par value,
2,000,000,000 shares authorized, 82,148,869 shares issued and
outstanding as of both September 30, 2018 and December 31, 2017,
respectively 821 821 Additional paid-in capital 898,135 898,132
Accumulated deficit (519,197 ) (393,068 )
Total
Equity $ 379,759 $ 505,885
Total Liabilities and Equity $
2,401,011 $ 2,508,027
Consolidated Statements of Operations (unaudited)
(dollars in thousands, except share data)
Three Months Ended September 30,
Nine Months Ended September 30, 2018
2017 2018 2017 Revenues Resident
fees and services $ 116,178 $ 84,708 $ 288,005 $ 257,473 Rental
revenue 1,582 28,247 37,825
84,741 Total revenues 117,760 112,955 325,830
342,214
Expenses Property operating expense 77,066
58,609 192,675 176,861 Depreciation and amortization 22,373 35,126
73,619 108,587 Interest expense 29,268 23,898 76,946 70,469
Acquisition, transaction and integration expense 1,559 675 13,130
1,469 Management fees and incentive compensation to affiliate 3,688
3,824 11,127 14,402 General and administrative expense 3,219 3,958
10,111 11,695 Loss on extinguishment of debt - - 58,544 672 Other
expense 782 1,484 2,194
1,645 Total expenses $ 137,955 $ 127,574 $ 438,346 $
385,800 Gain on sale of real estate - - - 22,546 Gain on lease
termination - - 40,090
-
Loss before income taxes (20,195 )
(14,619 ) (72,426 ) (21,040 ) Income tax expense (benefit)
104 (80 ) 303 273
Net
loss $ (20,299 ) $ (14,539 ) $ (72,729 ) $ (21,313 )
Net loss per share of common stock(A) Basic $ (0.25 )
$ (0.18 ) $ (0.89 ) $ (0.26 ) Diluted $ (0.25 ) $ (0.18 ) $ (0.89 )
$ (0.26 )
Weighted average number of shares of common
stock outstanding Basic 82,148,869
82,148,869 82,148,869 82,144,090
Diluted(B) 82,148,869 82,148,869
82,148,869 82,144,090
Dividends
declared per share of common stock $ 0.13 $ 0.26
$ 0.65 $ 0.78 (A)
Basic earnings per share (“EPS”) is
calculated by dividing net income (loss) by the weighted average
number of shares of common stock outstanding. Diluted EPS is
computed by dividing net income 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)
All outstanding options were excluded from
the diluted share calculation as their effect would have been
anti-dilutive.
Consolidated Statements of Cash Flows
(unaudited) (dollars in thousands)
Nine Months Ended September 30, 2018
2017 Cash Flows From Operating Activities Net loss $
(72,729 ) $ (21,313 ) Adjustments to reconcile net loss to net cash
provided by operating activities: Depreciation of tangible assets
and amortization of intangible assets 73,654 108,698 Amortization
of deferred financing costs 9,396 6,997 Amortization of deferred
revenue, net 2,346 219 Amortization of premium on mortgage notes
payable - (456 ) Non-cash straight-line rent (5,192 ) (13,527 )
Gain on sale of real estate - (22,546 ) Non-cash adjustment on
lease termination(A) 29,910 - Loss on extinguishment of debt 58,544
672 Provision for uncollectible receivables 1,630 1,719 Other
non-cash expense 2,308 1,296 Changes in: Receivables and other
assets, net (5,046 ) (1,072 ) Due to affiliates 5,789 3,945 Accrued
expenses and other liabilities 10,916 7,304
Net cash provided by operating activities $
111,526 $ 71,936 Cash
Flows From Investing Activities Proceeds from the sale of real
estate, net $ - $ 47,354 Capital expenditures, net of insurance
proceeds (13,605 ) (14,476 )
Net cash (used in)
provided by investing activities $ (13,605
) $ 32,878 Cash Flows From
Financing Activities Principal payments of mortgage notes
payable and capital lease obligations $ (16,063 ) $ (19,304 )
Proceeds from mortgage notes payable 720,000 - Repayments of
mortgage notes payable (663,788 ) (27,968 ) Payment of exit fee on
extinguishment of debt (51,886 ) (311 ) Payment of deferred
financing costs (13,663 ) (579 ) Purchase of interest rate caps
(341 ) - Payment of common stock dividend (53,400 )
(64,073 )
Net cash used in financing activities $
(79,141 ) $ (112,235 ) Net
increase (decrease) in cash, cash equivalents and restricted cash
18,780 (7,421 ) Cash, cash equivalents and restricted cash,
beginning of period 157,485 97,517
Cash, cash equivalents and restricted cash, end of period
$ 176,265 $ 90,096
Supplemental Disclosure of Cash Flow Information Cash paid
during the period for interest expense $ 67,323 $ 63,860 Cash paid
during the period for income taxes 326 274
Supplemental
Disclosure of Non-Cash Investing and Financing Activities
Issuance of common stock $ - $ 214 Capital lease obligations $ 273
$ - Furniture, fixtures, equipment and other improvements(B) $
9,975 $ - (A) Primarily includes the non-cash write-offs of
straight-line rent receivables and net above-market rent lease
intangible assets, offset by the fair value of furniture, fixtures,
equipment and other improvements received by us as a result of the
lease termination with affiliates of Holiday Retirement. (B) Fair
value of furniture, fixtures, equipment and other improvements
received by us as a result of the lease termination with affiliates
of Holiday Retirement.
Reconciliation of NOI to
Net Loss (dollars in thousands) For the
Quarter Ended September 30, 2018 Total revenues $
117,760 Property operating expense (77,066 )
NOI
40,694 Depreciation and amortization (22,373 )
Interest expense (29,268 ) Acquisition, transaction and integration
expense (1,559 ) Management fees and incentive compensation to
affiliate (3,688 ) General and administrative expense (3,219 )
Other expense
(782 ) Income tax expense (104 )
Net Loss $
(20,299 ) Reconciliation of Net Loss
to FFO, Normalized FFO, AFFO and Normalized FAD (dollars and
shares in thousands, except per share data)
For the Quarter Ended September 30, 2018 Net
loss $ (20,299 ) Adjustments: Depreciation
and amortization 22,373
FFO
$ 2,074 FFO per diluted share
$ 0.03
Acquisition, transaction and integration
expense
1,559
Other expense(1)
1,095
Normalized FFO $
4,728 Normalized FFO per diluted share
$ 0.06 Straight-line rent (175 ) Amortization
of deferred financing costs 4,100
Amortization of deferred community fees
and other(2)
1,147
AFFO $ 9,800
AFFO per diluted share $ 0.12
Routine capital expenditures (2,120 )
Normalized FAD $ 7,680 Normalized FAD per
diluted share $ 0.09
Weighted average diluted shares
outstanding(3)
82,616
(1) Primarily includes a loss associated
with Hurricane Florence and reduction in fair value of
interest rate caps.
(2) Consists of (i) amortization of above
/ below market lease intangibles, (ii) amortization of premium on
mortgage notes payable and (iii) amortization of deferred community
fees and other, which includes the net change in deferred community
fees and other rent discounts or incentives.
(3) Includes dilutive effect of
options.
Reconciliation
of Year-over-Year Cash NOI (unaudited) (dollars in
thousands) 3Q
2017 3Q 2018
Adjusted Same
Store NNN
Properties
Non-Same Store
NNN Properties
Adjusted Same
Store Managed
Properties
Non-Same Store Managed Properties
Total
Adjusted Same
Store NNN
Properties
Non-Same Store
NNN Properties
Adjusted Same
Store Managed
Properties
Non-Same Store Managed Properties
Total
Cash NOI (1)
$1,372 $3,969 $41,055
$1,504
$47,900
$1,411 $0
$40,149
$0 $41,560
Triple net lease to managed
adjustments(2)
- -
5,962
-
5,962
- -
106
-
106
Straight-line rent 211
419
- -
630
175 - - - 175
Amortization of deferred community fees
and other(3)
(2 )
(14
)
(156
) 26 (146 ) (4 )
-
(1,143
)
-
(1,147 )
Segment / Total NOI $1,581
$4,374
$46,861
$1,530
$54,346 $1,582
$0
$39,112
$0
$40,694 Depreciation and amortization (35,126 )
(22,373 ) Interest expense (23,898 ) (29,268 ) Acquisition,
transaction & integration expense (675 ) (1,559 ) Management
fees and incentive compensation to affiliate (3,824 ) (3,688 )
General and administrative expense (3,958 ) (3,219 ) Other expense
(1,484 ) (782 ) Income tax benefit (expense) 80 (104 )
Net loss $(14,539 ) $(20,299 )
(1) For the period during which the
properties were owned on a triple net basis, cash NOI reflects the
unaudited operating results provided by the operator, as opposed to
the rent recorded by the Company, and excludes ancillary service
revenue attributable to a business that ceased operations over the
course of 2018.
(2) Primarily represents straight-line
rent for the period during which the properties were owned on a
triple net basis.
(3) Consists of amortization of deferred
community fees and other, which includes the net change in deferred
community fees and other rent discounts or incentives.
NON-GAAP FINANCIAL
MEASURES
The tables above set forth reconciliations of non-GAAP measures
to net income (loss), which is the most directly comparable GAAP
financial measure.
A non-GAAP financial measure is a measure of historical or
future financial performance, financial position or cash flows that
excludes or includes amounts that are not excluded from or included
in the most comparable GAAP measure. We consider certain non-GAAP
financial measures to be useful supplemental measures of our
operating performance. GAAP accounting for real estate assets
assumes that the value of real estate assets diminishes predictably
over time, even though real estate values historically have risen
or fallen with market conditions. As a result, many industry
investors look to non-GAAP financial measures for supplemental
information about real estate companies.
You should not consider non-GAAP measures as alternatives to
GAAP net (loss) income, which is an indicator of our financial
performance, or as alternatives to GAAP cash flow from operating
activities, which is a liquidity measure, nor are non-GAAP measures
necessarily indicative of our ability to satisfy our funding
requirements. In order to facilitate a clear understanding of our
consolidated historical operating results, you should examine our
non-GAAP measures in conjunction with GAAP net (loss) income as
presented in our Consolidated Financial Statements and other
financial data included elsewhere in this report. Moreover, the
comparability of non-GAAP financial measures across companies may
be limited as a result of differences in the manner in which real
estate companies calculate such measures, the capital structure of
such companies or other factors.
Below is a description of the non-GAAP financial measures
presented herein.
NOI and Cash NOI
The Company evaluates the performance of each of its two
business segments based on NOI. The Company defines NOI as total
revenues less property-level operating expenses, which include
property management fees and travel cost reimbursements. The sum of
the NOI for each segment is total NOI, which the Company uses to
evaluate the aggregate performance of its segments.The Company
defines Cash NOI as NOI excluding the effects of straight-line
rent, amortization of above / below market lease intangibles and
amortization of deferred community fees and other, which includes
the net change in deferred community fees and other rent discounts
or incentives. We believe that NOI and Cash NOI serve as useful
supplemental measures to net income because they allow investors,
analysts and management to measure unlevered property-level
operating results and to compare our operating results between
periods and to the operating results of other real estate companies
on a consistent basis.
Same store NOI and same store cash NOI include only properties
owned for the entirety of comparable periods. Properties acquired,
sold, transitioned to other operators or between segments,
classified as held for sale during the comparable periods are
excluded from the same store amounts. Accordingly, same store
results exclude the performance of the 51 assets that were
transitioned from the triple net lease segment to the managed
segment as a result of the lease termination in May 2018.
Adjusted same store cash NOI adjusts same store cash NOI to
include properties transitioned from the Company’s triple net lease
segment to the managed segment during the comparative periods. For
the period during which the properties were owned on a triple net
basis, cash NOI reflects the unaudited operating results provided
by the operator, as opposed to the rent recorded by the Company,
and excludes ancillary service revenue attributable to a business
that ceased operations over the course of 2018.
FFO and Other Non-GAAP Measures
We use Funds From Operations ("FFO") and Normalized FFO as
supplemental measures of our operating performance. We use the
National Association of Real Estate Investment Trusts ("NAREIT")
definition of FFO. NAREIT defines FFO as GAAP net income (loss)
excluding gains (losses) from sales of depreciable real estate
assets and impairment charges of depreciable real estate, plus real
estate depreciation and amortization, and after adjustments for
unconsolidated entities and joint ventures to reflect FFO on the
same basis. FFO does not account for debt principal payments and is
not intended as a measure of a REIT’s ability to satisfy such
payments or any other cash requirements.
Normalized FFO, as defined below, measures the financial
performance of our portfolio of assets excluding items that,
although incidental to, are not reflective of the day-to-day
operating performance of our portfolio of assets. We believe that
Normalized FFO is useful because it facilitates the evaluation of
our portfolio’s operating performance (i) between periods on a
consistent basis and (ii) to the operating performance of other
real estate companies. However, comparability may be limited
because our calculation of Normalized FFO may differ significantly
from that of other companies, or because of features of our
business that are not present in other companies.
We define Normalized FFO as FFO excluding the following income
and expense items, as applicable: (a) acquisition, transaction and
integration related expenses; (b) the write off of unamortized
discounts, premiums, deferred financing costs, or additional costs,
make whole payments and penalties or premiums incurred as the
result of early repayment of debt (collectively “Gain (Loss) on
extinguishment of debt”); (c) incentive compensation recognized as
a result of sales of real estate; (d) the remeasurement of deferred
tax assets; (e) gain on lease termination; and (f) other items that
we believe are not indicative of operating performance, generally
reported as “Other (income) expense” in the Consolidated Statements
of Operations.
Management also uses AFFO and Normalized FAD as supplemental
measures of the Company’s operating performance.
We define AFFO as Normalized FFO excluding the impact of the
following: (a) straight-line rents; (b) amortization of above /
below market lease intangibles; (c) amortization of deferred
financing costs; (d) amortization of premium on mortgage notes
payable and (e) amortization of deferred community fees and other,
which includes the net change in deferred community fees and other
rent discounts or incentives. We believe AFFO is useful because it
facilitates the evaluation of (i) the current economic return on
our portfolio of assets between periods on a consistent basis and
(ii) our portfolio versus those of other real estate companies that
report AFFO. However, comparability may be limited because our
calculation of AFFO may differ significantly from that of other
companies, or because of features of our business that are not
present in other companies.
We define Normalized FAD as AFFO less routine capital
expenditures, which we view as a cost associated with the current
economic return. Normalized FAD, which does not reflect debt
principal payments and certain other expenses, does not represent
cash available for distribution to shareholders.
View source
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For New Senior Investment Group Inc.David Smith(212)
515-7783
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