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Section 1: 8-K (FORM 8-K)

Form 8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of report (Date of earliest event reported): May 10, 2018

 

 

New Senior Investment Group Inc.

(Exact Name of Registrant as Specified in Charter)

 

 

 

Delaware

(State or other jurisdiction

of incorporation)

 

001-36499

(Commission File Number)

 

80-0912734

(I.R.S. Employer

Identification Number)

1345 Avenue of the Americas, 45th Floor

New York, New York

(Address of principal executive offices)

 

10105

(Zip code)

212-479-3140

(Registrant’s telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

    

Accelerated filer

 

Non-accelerated filer

 

    

(Do not check if a smaller reporting company)

      

Smaller reporting company

 

      

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ☐

 

 

 


Item 2.02 Results of Operation and Financial Condition.

On May 10, 2018, New Senior Investment Group Inc. (the “Company”) issued a press release announcing the Company’s results for its fiscal quarter ended March 31, 2018. A copy of the Company’s press release is attached to this Current Report on Form 8-K (the “Current Report”) as Exhibit 99.1 and is incorporated herein solely for purposes of this Item 2.02 disclosure.

This Current Report, including the exhibit attached hereto, is being furnished and shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be incorporated by reference into any of the Company’s filings under the Securities Act of 1933, as amended, or the Exchange Act, unless expressly set forth as being incorporated by reference into such filing.

 

Item 9.01 Financial Statements and Exhibits.

(d)    Exhibits

 

Exhibit

Number

 

Description

99.1   Press release dated May 10, 2018

 

2


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

   

NEW SENIOR INVESTMENT GROUP INC.

Date: May 10, 2018     By:   /s/ Bhairav Patel
     

 

      Bhairav Patel
     

Interim Chief Financial Officer,

Chief Accounting Officer and Treasurer

 

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(Back To Top)

Section 2: EX-99.1 (EX-99.1)

EX-99.1

Exhibit 99.1

 

     LOGO

Contact:                    

David Smith

(212) 515-7783

NEW SENIOR ANNOUNCES FIRST QUARTER 2018 RESULTS

Repositions Leased Portfolio and Continues Review of Strategic Alternatives

 

 

NEW YORK — May 10, 2018 — New Senior Investment Group Inc. (“New Senior” or the “Company”) (NYSE: SNR) announced today its results for the quarter ended March 31, 2018.

1Q 2018 FINANCIAL HIGHLIGHTS

 

    Net loss of $13.3 million, or $(0.16) per basic and diluted share

 

    Total net operating income (“NOI”) of $47.1 million

 

    Normalized Funds from Operations (“Normalized FFO”) of $17.6 million, or $0.21 per basic and diluted share

 

    AFFO of $16.8 million, or $0.20 per basic and diluted share

 

    Normalized Funds Available for Distribution (“Normalized FAD”) of $15.1 million, or $0.18 per basic and diluted share

1Q 2018 AND RECENT BUSINESS HIGHLIGHTS

 

    Total same store cash NOI decreased 1.0% vs. 1Q’17

 

    Managed same store cash NOI decreased 4.8% vs. 1Q’17

 

    Triple net same store cash NOI increased 3.5% vs. 1Q’17

 

    On May 9, entered into an agreement to terminate the Company’s triple net leases with Holiday

 

    Intend to announce first quarter dividend by June 1, 2018

 

    Review of strategic alternatives is ongoing

FIRST QUARTER 2018 RESULTS

 

Dollars in thousands, except per share data                                      
     For the Quarter Ended March 31, 2018      For the Quarter Ended March 31, 2017  
     Amount     Per Basic
Share
    Per Diluted
Share
     Amount     Per Basic
Share
    Per Diluted
Share
 

GAAP

             

Net loss

   $ (13,349   $ (0.16   $ (0.16    $ (9,895   $ (0.12   $ (0.12

Non-GAAP(A)

             

NOI

   $ 47,119       N/A       N/A      $ 55,389       N/A       N/A  

FFO

     13,376     $ 0.16     $ 0.16        23,424     $ 0.29     $ 0.28  

Normalized FFO

     17,644     $ 0.21     $ 0.21        24,282     $ 0.30     $ 0.29  

AFFO

     16,803     $ 0.20     $ 0.20        22,338     $ 0.27     $ 0.27  

Normalized FAD (B)

     15,113     $ 0.18     $ 0.18        20,644     $ 0.25     $ 0.25  

 

(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.

 

1


FIRST QUARTER 2018 GAAP RESULTS

New Senior recorded GAAP net loss of $13.3 million, or $(0.16) per basic and diluted share, for the first quarter of 2018, compared to GAAP net loss of $9.9 million, or $(0.12) per basic and diluted share, for the first quarter of 2017. The year over year decrease was primarily driven by no gain on sale of assets recognized during the first quarter of 2018 compared to a $4.2 million gain on sale of assets recognized during the first quarter of 2017.

FIRST QUARTER 2018 PORTFOLIO PERFORMANCE

Total NOI decreased 14.9% to $47.1 million compared to $55.4 million for 1Q 2017. Total same store cash NOI decreased 1.0% vs. 1Q 2017.

For the managed portfolio, same store average occupancy decreased 160 basis points to 85.4% compared to 87.0% for 1Q 2017, and same store RevPOR increased 1.6% to $3,113 compared to $3,063 for 1Q 2017. Year-over-year, same store cash NOI decreased 4.8% to $22.9 million compared to $24.1 million for 1Q 2017.

For the triple net portfolio, same store cash NOI increased 3.5% to $20.6 million compared to $19.9 million for 1Q 2017. Same store triple net average occupancy decreased 210 basis points to 87.4% compared to 89.5% for 1Q 2017. Same store EBITDARM coverage as of March 31, 2018 was 1.15x, down from 1.20x as of March 31, 2017. Triple net average occupancy and EBITDARM coverage are presented one quarter in arrears on a trailing twelve month basis.

UPDATE ON REVIEW OF STRATEGIC ALTERNATIVES

As previously announced on February 23, 2018, the Company’s Board of Directors, together with its management team and legal and financial advisors, is exploring a full range of strategic alternatives to maximize shareholder value. The strategic review is ongoing.

As part of the strategic review process, on May 9, 2018, the Company entered into an agreement (the “Termination Agreement”) to terminate its triple net leases with affiliates of Holiday Retirement (collectively, “Holiday”). In exchange, the Company will receive $116 million of total consideration, including a $70 million termination payment and $46 million of retained security deposits. The effectiveness of the lease termination is subject to the Company completing a refinancing of the existing debt on the portfolio, which had an outstanding face amount of approximately $666 million as of March 31, 2018 and a current coupon of 4.15%, on or before May 21, 2018. The Company expects to refinance the existing debt with a one-year $720 million secured loan bearing interest at LIBOR plus 4.0% for the first six months and increasing by 50 basis points after the sixth monthly payment date and by an additional 50 basis points after the ninth monthly payment date. If the Company is successful in refinancing the existing debt, the Company is expected to incur approximately $65 million of prepayment fees and expenses. The refinancing is expected to close in May, but it has not been completed and there can be no assurances that it will be completed on the expected terms or at all.

In addition, the parties have agreed to enter into property management agreements (collectively, the “Management Agreements”), concurrently with the termination of the leases, pursuant to which the Company will pay a management fee equal to (x) a monthly base fee in the amount of 5% of Effective Gross Income (as defined in the Management Agreements) in the first year and 4.5% of Effective Gross Income for the remainder of the term, and (y) provided the portfolio achieves certain performance thresholds, an annual incentive fee in an amount not to exceed 2% of the portfolio’s Effective Gross Income. The Management Agreements are freely terminable without penalty after the first year of the term.

The Termination Agreement and the Management Agreements were negotiated and unanimously approved by a special committee (the “Special Committee”) of the Company’s Board of Directors. The Special Committee was composed entirely of independent and disinterested members of the Board of Directors, and the Special Committee was advised by independent legal and financial advisors. Holiday is majority owned by private equity funds managed by the Company’s manager.

FIRST QUARTER DIVIDEND

The Board continues to evaluate our dividend policy in light of the ongoing strategic review, our results of operations, liquidity needs and other factors. We expect the Board to make a final determination on the amount of the first quarter dividend by June 1, 2018 and, consistent with past practice, to maintain the payment date as June 22. While the amount of such dividend has not yet been determined, it may be less than dividends declared in prior quarters, and such difference could be material.

 

2


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 May 10, 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 First 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 June 10, 2018 by dialing (855) 859-2056 (from within the U.S.) or (404) 537-3406 (from outside the U.S.); please reference access code “1498898.”

ABOUT NEW SENIOR

New Senior Investment Group (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 March 31, 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, the anticipated termination of the leases with Holiday, as well as the related refinancing and entry into new management agreements, the repositioning of the lease portfolio, 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. 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.

 

3


Consolidated Balance Sheets

(dollars in thousands, except share data)

 

     March 31, 2018
(Unaudited)
    December 31, 2017  

Assets

    

Real estate investments:

    

Land

   $ 182,238     $ 182,238  

Buildings, improvements and other

     2,333,016       2,329,524  

Accumulated depreciation

     (297,035     (275,794
  

 

 

   

 

 

 

Net real estate property

     2,218,219       2,235,968  
  

 

 

   

 

 

 

Acquired lease and other intangible assets

     69,139       264,438  

Accumulated amortization

     (59,406     (249,198
  

 

 

   

 

 

 

Net real estate intangibles

     9,733       15,240  
  

 

 

   

 

 

 

Net real estate investments

     2,227,952       2,251,208  

Cash and cash equivalents

     120,834       137,327  

Straight-line rent receivables

     85,771       82,445  

Receivables and other assets, net

     38,190       37,047  
  

 

 

   

 

 

 

Total Assets

   $ 2,472,747     $ 2,508,027  
  

 

 

   

 

 

 

Liabilities and Equity

    

Liabilities

    

Mortgage notes payable, net

   $ 1,902,901     $ 1,907,928  

Due to affiliates

     8,957       9,550  

Accrued expenses and other liabilities

     89,709       84,664  
  

 

 

   

 

 

 

Total Liabilities

   $ 2,001,567     $ 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 March 31, 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 March 31, 2018 and December 31, 2017

     821       821  

Additional paid-in capital

     898,135       898,132  

Accumulated deficit

     (427,776     (393,068
  

 

 

   

 

 

 

Total Equity

   $ 471,180     $ 505,885  
  

 

 

   

 

 

 

Total Liabilities and Equity

   $ 2,472,747     $ 2,508,027  
  

 

 

   

 

 

 

 

4


Consolidated Statements of Operations (unaudited)

(dollars in thousands, except share data)

 

     Three Months Ended March 31,  
     2018     2017  

Revenues

    

Resident fees and services

   $ 75,343     $ 86,726  

Rental revenue

     23,875       28,247  
  

 

 

   

 

 

 

Total revenues

     99,218       114,973  

Expenses

    

Property operating expense

     52,099       59,584  

Depreciation and amortization

     26,725       37,518  

Interest expense

     21,923       23,066  

Acquisition, transaction and integration expense

     2,888       348  

Management fees and incentive compensation to affiliate

     3,752       3,824  

General and administrative expense

     3,752       4,011  

Loss on extinguishment of debt

     —         375  

Other expense

     1,380       135  
  

 

 

   

 

 

 

Total expenses

     112,519       128,861  

Gain on sale of real estate

     —         4,199  
  

 

 

   

 

 

 

Loss before income taxes

     (13,301     (9,689

Income tax expense

     48       206  
  

 

 

   

 

 

 

Net loss

   $ (13,349   $ (9,895
  

 

 

   

 

 

 

Net loss per share of common stock

    

Basic and diluted(A)

   $ (0.16   $ (0.12
  

 

 

   

 

 

 

Weighted average number of shares of common stock outstanding

    

Basic and diluted(B)

     82,148,869       82,140,750  
  

 

 

   

 

 

 

Dividends declared per share of common stock

   $ 0.26     $ 0.26  
  

 

 

   

 

 

 

 

(A) Basic earnings per share (“EPS”) is calculated by dividing net income 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.    

 

5


Consolidated Statements of Cash Flows (unaudited)

(dollars in thousands)

 

     Three Months Ended March 31,  
     2018     2017  

Cash Flows From Operating Activities

    

Net loss

   $ (13,349   $ (9,895

Adjustments to reconcile net loss to net cash provided by operating activities:

    

Depreciation of tangible assets and amortization of intangible assets

     26,749       37,555  

Amortization of deferred financing costs

     2,132       2,465  

Amortization of deferred revenue, net

     331       190  

Amortization of premium on mortgage notes payable

     —         (144

Non-cash straight-line rent

     (3,326     (4,581

Gain on sale of real estate

     —         (4,199

Loss on extinguishment of debt

     —         375  

Provision for bad debt

     345       645  

Other non-cash expense

     1,322       87  

Changes in:

    

Receivables and other assets, net

     (796     (198

Due to affiliates

     (593     (549

Accrued expenses and other liabilities

     2,915       (297
  

 

 

   

 

 

 

Net cash provided by operating activities

   $ 15,730     $ 21,454  
  

 

 

   

 

 

 

Cash Flows From Investing Activities

    

Proceeds from the sale of real estate, net

   $ —       $ 14,956  

Capital expenditures, net of insurance proceeds

     (3,561     (4,386
  

 

 

   

 

 

 

Net cash (used in) provided by investing activities

   $ (3,561   $ 10,570  
  

 

 

   

 

 

 

Cash Flows From Financing Activities

    

Principal payments of mortgage notes payable

   $ (7,159   $ (4,900

Repayments of mortgage notes payable

     —         (14,730

Payment of exit fee on extinguishment of debt

     —         (178

Payment of deferred financing costs

     (587     —    

Purchase of interest rate caps

     (280     —    

Payment of common stock dividend

     (21,359     (21,357
  

 

 

   

 

 

 

Net cash used in financing activities

   $ (29,385   $ (41,165
  

 

 

   

 

 

 

Net decrease in cash, cash equivalents and restricted cash

     (17,216     (9,141

Cash, cash equivalents and restricted cash, beginning of period

     157,485       97,517  
  

 

 

   

 

 

 

Cash, cash equivalents and restricted cash, end of period

   $ 140,269     $ 88,376  
  

 

 

   

 

 

 

Supplemental Disclosure of Cash Flow Information

    

Cash paid during the period for interest expense

   $ 19,633     $ 20,679  

Supplemental Disclosure of Non-Cash Investing and Financing Activities

    

Issuance of common stock

   $ —       $ 139  

 

6


Reconciliation of NOI to Net Loss

(dollars in thousands)

 

     For the Quarter Ended  
     March 31, 2018  

Total revenues

   $ 99,218  

Property operating expense

     (52,099
  

 

 

 

NOI

     47,119  

Depreciation and amortization

     (26,725

Interest expense

     (21,923

Acquisition, transaction and integration expense

     (2,888

Management fees and incentive compensation to affiliate

     (3,752

General and administrative expense

     (3,752

Other expense

     (1,380

Income tax expense

     (48
  

 

 

 

Net Loss

   $ (13,349
  

 

 

 

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  
     March 31, 2018  

Net loss

   $ (13,349

Adjustments:

  

Depreciation and amortization

     26,725  
  

 

 

 

FFO

   $ 13,376  

FFO per diluted share

   $ 0.16  
  

 

 

 

Acquisition, transaction and integration expense

     2,888  

Other expense

     1,380  
  

 

 

 

Normalized FFO

   $ 17,644  

Normalized FFO per diluted share

   $ 0.21  
  

 

 

 

Straight-line rent

     (3,326

Amortization of deferred financing costs

     2,132  

Amortization of deferred community fees and other(1)

     353  
  

 

 

 

AFFO

   $ 16,803  

AFFO per diluted share

   $ 0.20  
  

 

 

 

Routine capital expenditures

     (1,690
  

 

 

 

Normalized FAD

   $ 15,113  

Normalized FAD per diluted share

   $ 0.18  
  

 

 

 

Weighted average diluted shares outstanding(2)

     82,738  

 

(1) Includes amortization of above / below market lease intangibles, amortization of premium on mortgage notes payable and amortization of deferred community fees and other, which includes the net change in deferred community fees and other rent discounts or incentives.
(2) Includes dilutive effect of options.

 

7


Reconciliation of Year-over-Year Cash NOI (unaudited)

(dollars in thousands)

 

    1Q 2017     1Q 2018  
    Same Store
NNN
Properties
    Non-Same
Store NNN
Properties
    Same Store
Managed
Properties
    Non-Same
Store
Managed
Properties
    Total     Same Store
NNN
Properties
    Non-Same
Store NNN
Properties
    Same Store
Managed
Properties
    Non-Same
Store
Managed
Properties
    Total  

Cash NOI

  $ 19,882     $ 3,825     $ 24,079     $ 3,336     $ 51,122     $ 20,574       —       $ 22,927     $ 644     $ 44,145  

Straight-line rent

    4,019       562       —         —         4,581       3,326       —         —         —         3,326  

Amortization of deferred community fees and other(1)

    (26     (15     (318     45       (314     (25     —         (325     (2     (352
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Segment / Total NOI

  $ 23,875     $ 4,372     $ 23,761     $ 3,381     $ 55,389     $ 23,875       —       $ 22,602     $ 642     $ 47,119  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

   

 

 

   

Depreciation and amortization

            (37,518             (26,725

Interest expense

            (23,066             (21,923

Acquisition, transaction & integration expense

            (348             (2,888

Management fees and incentive compensation to affiliate

            (3,824             (3,752

General and administrative expense

            (4,011             (3,752

Loss on extinguishment of debt

            (375             —    

Other expense

            (135             (1,380

Gain on sale of real estate

            4,199               —    

Income tax expense

            (206             (48
         

 

 

           

 

 

 

Net loss

          ($ 9,895           ($ 13,349
         

 

 

           

 

 

 

 

(1) Includes 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.    

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.

 

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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 classified as held for sale during the comparable periods are excluded from the same store amounts.

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 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 costs and 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 property; (d) the remeasurement of deferred tax assets and (e) 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.

 

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