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Section 1: 8-K (8-K)

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): February 22, 2019

 

 

New Senior Investment Group Inc.

(Exact Name of Registrant as Specified in Charter)

 

 

 

Delaware   001-36499   80-0912734

(State or other jurisdiction

of incorporation)

  (Commission File Number)  

(I.R.S. Employer

Identification Number)

55 West 46th Street, Suite 2204

New York, New York 10036

  10105
(Address of principal executive offices)   (Zip code)

646-822-3700

(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 February 22, 2019, New Senior Investment Group Inc. (the “Company”) issued a press release announcing the Company’s results for its fiscal quarter and full year ended December 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 February 22, 2019

 

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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: February 22, 2019    

By:

  /s/ David Smith
   

David Smith

   

Chief Financial Officer

 

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Section 2: EX-99.1 (EX-99.1)

EX-99.1

Exhibit 99.1

 

LOGO

Contact:

David Smith

(646) 969-2070

NEW SENIOR ANNOUNCES FOURTH QUARTER AND FULL YEAR 2018 RESULTS

Begins New Chapter as Internally-Managed Company

NEW YORK — February 22, 2019 — New Senior Investment Group Inc. (“New Senior” or the “Company”) (NYSE: SNR) announced today its results for the quarter and full year ended December 31, 2018.

FOURTH QUARTER 2018 FINANCIAL HIGHLIGHTS

 

   

Declared cash dividend of $0.13 per common share

 

   

Net loss of $86.6 million, or $(1.05) per diluted share

 

   

Total net operating income (“NOI”) of $43.4 million

 

   

Adjusted same store cash NOI increased 0.3% versus Q4’17

 

   

Normalized Funds from Operations (“Normalized FFO”) of $12.3 million, or $0.15 per diluted share

 

   

AFFO of $13.8 million, or $0.17 per diluted share

 

   

Normalized Funds Available for Distribution (“Normalized FAD”) of $11.5 million, or $0.14 per diluted share

FOURTH QUARTER 2018 AND RECENT BUSINESS HIGHLIGHTS

 

   

Completed internalization of management on January 1 and formally concluded review of strategic alternatives

 

   

Completed nearly $850 million of debt refinancing activity, comprised of:

 

   

In October, refinanced a $720 million secured loan with a term of seven years and a rate of L + 232bps, a savings of nearly 170bps from the prior loan

 

   

In December, refinanced $125 million of secured loans through the closing of the Company’s first revolving credit facility

 

   

Executing on plans to address underperforming AL/MC properties

 

   

Currently have 9 properties that will be transitioned to new operators by the end of the first quarter

 

   

Currently marketing several properties for sale

 

   

Ongoing evaluation of assets aimed at optimizing portfolio mix and driving better operating performance

“We are pleased to have accomplished several strategic initiatives in 2018 and are excited to have begun 2019 as an internalized management team,” said Susan Givens, Chief Executive Officer. “We are now focused on several strategic priorities, including optimizing our portfolio through asset sales and transitions, managing operator concentration and further strengthening our balance sheet. In addition, for the first time, we are providing guidance on our expectations of financial results for 2019 as part of our effort to provide increased transparency to the investor community.”

 

1


FOURTH QUARTER 2018 RESULTS

Dollars in thousands, except per share data

 

     For the Quarter Ended December 31, 2018     For the Quarter Ended December 31, 2017  
     Amount     Per Basic
Share
    Per Diluted
Share
    Amount      Per Basic
Share
     Per Diluted
Share
 

GAAP

              

Net (loss) income

   $ (86,626   $ (1.05   $ (1.05   $ 33,521      $ 0.41      $ 0.41  

Non-GAAP(A)

              

NOI

   $ 43,358       N/A       N/A     $ 53,732        N/A        N/A  

FFO

     (55,570   $ (0.68   $ (0.67     15,659      $ 0.19      $ 0.19  

Normalized FFO

     12,318     $ 0.15     $ 0.15       22,896      $ 0.28      $ 0.28  

AFFO

     13,792     $ 0.17     $ 0.17       20,070      $ 0.24      $ 0.24  

Normalized FAD (B)

     11,520     $ 0.14     $ 0.14       18,527      $ 0.23      $ 0.22  

 

(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.

FULL YEAR 2018 RESULTS

Dollars in thousands, except per share data

 

     For the Year Ended December 31, 2018     For the Year Ended December 31, 2017  
     Amount     Per Basic
Share
    Per Diluted
Share
    Amount      Per Basic
Share
     Per Diluted
Share
 

GAAP

              

Net (loss) income

   $ (159,355   $ (1.94   $ (1.94   $ 12,208      $ 0.15      $ 0.15  

Non-GAAP(A)

              

NOI

   $ 176,513       N/A       N/A     $ 219,085        N/A        N/A  

FFO

     (54,680   $ (0.67   $ (0.66     80,387      $ 0.98      $ 0.97  

Normalized FFO

     47,298     $ 0.58     $ 0.57       94,340      $ 1.15      $ 1.14  

AFFO

     55,387     $ 0.67     $ 0.67       85,160      $ 1.04      $ 1.03  

Normalized FAD (B)

     48,151     $ 0.59     $ 0.58       78,254      $ 0.95      $ 0.95  

FOURTH QUARTER 2018 GAAP RESULTS

New Senior recorded GAAP net loss of $86.6 million, or $(1.05) per diluted share, for the fourth quarter of 2018, compared to GAAP net gain of $33.5 million, or $0.41 per diluted share, for the fourth quarter of 2017. The year over year decrease was primarily driven by the one-time termination fee in connection with the internalization, and lower net operating income as a result of asset sales.

 

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FOURTH QUARTER AND FULL YEAR 2018 PORTFOLIO PERFORMANCE

 

          Adjusted Same Store Cash NOI  
     Properties    4Q 2017      4Q 2018      YoY  

Managed Properties

   130    $ 42,110      $ 42,186        0.2

NNN Properties

   1      1,372        1,411        2.8

Total Portfolio

   131    $ 43,482      $ 43,597        0.3
          Adjusted Same Store Cash NOI(A)  
     Properties    2017      2018      YoY  

Managed Properties

   130    $  167,616      $ 163,119        (2.7 %) 

NNN Properties

   1      5,431        5,592        3.0

Total Portfolio

   131    $ 173,047      $  168,711        (2.5 %) 
          Adjusted Same Store Cash NOI - Managed  
     Properties    4Q 2017      4Q 2018      YoY  

IL Properties

   102    $ 35,066      $ 35,752        2.0

AL/MC Properties

   28      7,044        6,434        (8.7 %) 

Total Managed Portfolio

   130    $ 42,110      $ 42,186        0.2
          Adjusted Same Store Cash NOI -  Managed(A)  
     Properties    2017      2018      YoY  

IL Properties

   102    $ 137,363      $ 137,103        (0.2 %) 

AL/MC Properties

   28      30,253        26,016        (14.0 %) 

Total Managed Portfolio

   130    $ 167,616      $ 163,119        (2.7 %) 

 

(A)

Full year information based on 4Q18 same store pool.

BALANCE SHEET

As previously announced, the Company completed nearly $850 million of debt refinancing during the fourth quarter, resulting in estimated interest expense savings of approximately $14 million annually and increased flexibility to more efficiently manage our balance sheet going forward. This refinancing activity included the following:

 

  1.

$720 Million Bridge Loan Refinancing

 

  a.

In October, the Company completed the refinancing of a $720 million secured 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.

 

  2.

$125 Million Revolving Credit Facility

 

  a.

In December, the Company entered into its first revolving credit facility. The credit facility has a total capacity of $125 million, which may be increased to $300 million subject to customary terms and conditions, and matures in December 2021 with a one-year extension option. Borrowings under the credit facility bear interest at LIBOR plus 250 basis points. Proceeds from the credit facility along with cash on hand were used to pay off approximately $125 million of existing debt that was scheduled to mature in 2019 and 2020. The credit facility was arranged by KeyBanc Capital Markets, Inc. KeyBank National Association is serving as the Administrative Agent.

As a result of these activities, the Company has improved its weighted average debt maturity from 3.0 years as of September 30, 2018 to 5.3 years as of December 31, 2018.

 

3


2019 STRATEGIC PRIORITIES

As part of an extensive review of strategic alternatives announced in February of last year, the Company completed several initiatives, which have meaningfully enhanced the Company’s operating flexibility, capital structure and corporate governance structure. These initiatives are summarized below:

 

   

May 2018 – The Company terminated triple net leases on 51 independent living properties and negotiated a flexible operating agreement.

 

   

August 2018 – The Company re-set the dividend to a level the Board believes is appropriate for the internalized Company and more closely align with peer payout ratios.

 

   

October 2018 – The Company refinanced a $720 million bridge loan, resulting in annual interest expense savings of approximately $12 million, or $0.15 per share.

 

   

January 2019 – The Company completed the internalization of its management function, resulting in a dedicated management team, the appointment of Robert Savage as the new Chairman of the Board, and the relocation of corporate headquarters.

With the completion of these initiatives, the Board has unanimously determined to conclude the formal review of strategic alternatives, while remaining committed to identifying opportunities to maximize shareholder value and enhance corporate governance. In the near term, the Company has identified several strategic priorities for 2019, including:

 

  1.

Optimize Portfolio: As one of the largest owners of private pay senior housing assets in the United States, the Company has a unique real estate portfolio that is well positioned to benefit from medium and longer term trends in the senior housing sector. The Company intends to further improve the overall quality, performance and diversification of its portfolio through a combination of intensive asset management, operator transitions and dispositions of underperforming assets. Following the completion of the strategic initiatives described above, the Company has a high degree of flexibility to transition and sell assets, given that (i) the majority of the portfolio is owned on a managed basis and (ii) the Company’s agreements with operators can generally be terminated without penalty.

 

  2.

Managing Operator Concentration: The Company currently has 6 operating partners. Holiday Retirement is its largest operating partner and currently manages assets that account for approximately 80% of its total NOI. Blue Harbor is the Company’s second largest operator and currently manages assets that account for 12% of its NOI. While the Company views both Holiday and Blue Harbor as strong operators in the senior housing industry, it recognizes the benefits of having a diversified portfolio of operators. To that end, New Senior recently engaged two new operating partners, and continues to actively evaluate all of its operator relationships as it seeks to improve performance and position the Company for growth.

 

  3.

Strengthen Balance Sheet: The Company is committed to improving its balance sheet with the goal of reducing leverage over time and increasing flexibility. In the near term, the Company will seek to reduce leverage through asset sales and improved operating performance.

 

  4.

Increasing Transparency of Financial Results: With the internalization complete, management is providing guidance for 2019 financial results and expects to continue to provide guidance on a periodic basis, as is customary among the Company’s peers. The Company is committed to demonstrating the earnings power and underlying value of its assets with straightforward and thorough reporting. The Company believes these initiatives will attract a broader institutional shareholder base over time.

 

4


2019 GUIDANCE

New Senior expects 2019 FFO, AFFO, and net income attributable to common shareholders, and same store cash NOI growth, to range as follows:

 

     Full Year 2019 Guidance  
     Per Share  
     Low           High  

Net Loss Attributable to Common Shareholders

   ($ 0.48    -    ($ 0.42

FFO

   $ 0.50      -    $ 0.56  

Normalized FFO

   $ 0.52      -    $ 0.58  

AFFO

   $ 0.61      -    $ 0.67  

Key Guidance Assumptions

Same store managed cash NOI: (3.0%) to 0.0% versus 2018

Debt: LIBOR assumed at 12/31/18 spot rate of 2.50% (each 25bps change in LIBOR equates to $0.04 per share)

G&A: $19 – 20 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.

FOURTH QUARTER DIVIDEND

On February 19, 2019, the Company’s Board of Directors declared a cash dividend of $0.13 per share for the quarter ended December 31, 2018. The dividend is payable on March 22, 2019 to shareholders of record on March 8, 2019.

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 February 22, 2019 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 Fourth Quarter and Full Year 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 March 22, 2019 by dialing (855) 859-2056 (from within the U.S.) or (404) 537-3406 (from outside the U.S.); please reference access code “4279565.”

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 December 31, 2018, New Senior is one of the largest owners of senior housing properties, with 133 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,

 

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plans to manage operator concentration and plans to strengthen the balance sheet and potentially reduce leverage) 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.

 

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Consolidated Balance Sheets

(dollars in thousands, except share data)

 

     December 31,  
     2018     2017  

Assets

    

Real estate investments:

    

Land

   $ 177,956     $ 182,238  

Buildings, improvements and other

     2,335,813       2,329,524  

Accumulated depreciation

     (358,368     (275,794
  

 

 

   

 

 

 

Net real estate property

     2,155,401       2,235,968  
  

 

 

   

 

 

 

Acquired lease and other intangible assets

     8,638       264,438  

Accumulated amortization

     (2,877     (249,198
  

 

 

   

 

 

 

Net real estate intangibles

     5,761       15,240  
  

 

 

   

 

 

 

Net real estate investments

     2,161,162       2,251,208  

Cash and cash equivalents

     72,422       137,327  

Straight-line rent receivables

     3,494       82,445  

Receivables and other assets, net

     49,180       37,047  
  

 

 

   

 

 

 

Total Assets

   $ 2,286,258     $ 2,508,027  
  

 

 

   

 

 

 

Liabilities and Equity

    

Liabilities

    

Debt, net

   $ 1,884,882     $ 1,907,928  

Due to affiliates

     26,245       9,550  

Accrued expenses and other liabilities

     52,679       84,664  
  

 

 

   

 

 

 

Total Liabilities

   $ 1,963,806     $ 2,002,142  
  

 

 

   

 

 

 

Commitments and contingencies

    
  

 

 

   

 

 

 

Redeemable Preferred Stock

   $ 40,000     $ —    
  

 

 

   

 

 

 

Equity

    

Preferred Stock $0.01 par value, 100,000,000 shares authorized and none issued or outstanding as of both December 31, 2018 and 2017

   $ —       $ —    

Common stock $0.01 par value, 2,000,000,000 shares authorized, 82,148,869 and 82,127,247 shares issued and outstanding as of December 31, 2018 and 2017, respectively

     821       821  

Additional paid-in capital

     898,135       898,132  

Accumulated deficit

     (616,504     (393,068
  

 

 

   

 

 

 

Total Equity

   $ 282,452     $ 505,885  
  

 

 

   

 

 

 

Total Liabilities and Equity

   $ 2,286,258     $ 2,508,027  
  

 

 

   

 

 

 

 

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Consolidated Statements of Operations

(dollars in thousands, except share data)

 

     Three Months Ended December 31,      Year Ended December 31,  
     2018     2017      2018     2017  
     (unaudited)               

Revenues

         

Resident fees and services

   $ 116,886     $ 79,266      $ 404,891     $ 336,739  

Rental revenue

     1,582       27,650        39,407       112,391  
  

 

 

   

 

 

    

 

 

   

 

 

 

Total revenues

     118,468       106,916        444,298       449,130  

Expenses

         

Property operating expense

     75,110       53,184        267,785       230,045  

Depreciation and amortization

     22,331       31,355        95,950       139,942  

Interest expense

     24,230       23,128        101,176       93,597  

Acquisition, transaction and integration expense

     2,789       984        15,919       2,453  

Termination fee to affiliate

     50,000       —          50,000       —    

Management fees and incentive compensation to affiliate

     3,687       3,823        14,814       18,225  

General and administrative expense

     3,276       3,612        13,387       15,307  

Loss on extinguishment of debt

     7,675       3,230        66,219       3,902  

Impairment of real estate held for sale

     8,725       —          8,725       —    

Other expense

     1,780       57        3,974       1,702  
  

 

 

   

 

 

    

 

 

   

 

 

 

Total expenses

     199,603       119,373        637,949       505,173  

Gain on sale of real estate

     —         49,217        —         71,763  

Gain on lease termination

     —         —          40,090       —    
  

 

 

   

 

 

    

 

 

   

 

 

 

(Loss) Income before income taxes

     (81,135     36,760        (153,561     15,720  

Income tax expense

     5,491       3,239        5,794       3,512  
  

 

 

   

 

 

    

 

 

   

 

 

 

Net (loss) income

   $ (86,626   $ 33,521      $ (159,355   $ 12,208  
  

 

 

   

 

 

    

 

 

   

 

 

 

Net (loss) income per share of common stock

         

Basic

   $ (1.05   $ 0.41      $ (1.94   $ 0.15  
  

 

 

   

 

 

    

 

 

   

 

 

 

Diluted

   $ (1.05   $ 0.41      $ (1.94   $ 0.15  
  

 

 

   

 

 

    

 

 

   

 

 

 

Weighted average number of shares of common stock outstanding

         

Basic

     82,148,869       82,148,869        82,148,869       82,145,295  
  

 

 

   

 

 

    

 

 

   

 

 

 

Diluted

     82,148,869       82,632,232        82,148,869       82,741,322  
  

 

 

   

 

 

    

 

 

   

 

 

 

Dividends declared per share of common stock

   $ 0.13     $ 0.26      $ 0.78     $ 1.04  
  

 

 

   

 

 

    

 

 

   

 

 

 

 

(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.

 

8


Consolidated Statements of Cash Flows

(dollars in thousands, except share data)

 

     Three Months Ended December 31,     Year Ended December 31,  
     2018     2017     2018     2017  
     (unaudited)              

Cash Flows From Operating Activities

        

Net (loss) income

   $ (86,626   $ 33,521     $ (159,355)     $ 12,208  

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

        

Depreciation of tangible assets and amortization of intangible assets

     22,332       31,380       95,986       140,078  

Amortization of deferred financing costs

     1,116       2,093       10,512       9,090  

Amortization of deferred revenue, net

     522       (604     2,868       (385

Amortization of premium on mortgage notes payable

     —         (56     —         (512

Non-cash straight-line rent

     (173     (4,338     (5,365     (17,865

Gain on sale of real estate

     —         (49,217     —         (71,763

Non-cash adjustment on lease termination(A)

     —         —         29,910       —    

Loss on extinguishment of debt

     7,675       3,230       66,219       3,902  

Non-cash termination fee to affiliate

     40,000       —         40,000       —    

Impairment of real estate held for sale

     8,725       —         8,725       —    

Provision for bad debt

     671       509       2,301       2,228  

Remeasurement of deferred tax asset

     —         2,966       —         2,966  

Non-cash valuation allowance on deferred tax asset, net

     5,354       —         5,354       —    

Other non-cash expense

     2,012       (53     4,320       1,243  

Changes in:

        

Receivables and other assets, net

     (79     (652     (5,125     (1,724

Due to affiliates

     10,906       (6,018     16,695       (2,073

Accrued expenses and other liabilities

     (2,884     (24,252     8,032       (16,948
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) operating activities

   $ 9,551     $ (11,491   $ 121,077     $ 60,445  
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash Flows From Investing Activities

        

Proceeds from the sale of real estate, net

   $ —       $ 292,270     $ —       $ 339,624  

Capital expenditures, net of insurance proceeds

     (5,557     (5,253     (19,162     (19,729
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash (used in) provided by investing activities

   $ (5,557   $ 287,017     $ (19,162   $ 319,895  
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash Flows From Financing Activities

        

Principal payments of mortgage notes payable and capital lease obligations

   $ (3,365   $ (7,642   $ (19,428   $ (26,946

Proceeds from mortgage notes payable

     720,000       —         1,440,000       —    

Repayments of mortgage notes payable

     (845,399     (176,762     (1,509,187     (204,730

Payment of exit fee on extinguishment of debt

     (1,236     (2,953     (53,122     (3,264

Proceeds from borrowings on revolving credit facility

     125,000       —         125,000       —    

Repayments of borrowings on revolving credit facility

     (56,000     —         (56,000     —    

Payment of common stock dividend

     (10,681     (21,359     (64,081     (85,432

Payment of deferred financing costs

     (13,417     579       (27,080     —    

Purchase of interest rate caps

     (2,505     —         (2,846     —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash (used in) provided by financing activities

   $ (87,603   $ (208,137   $ (166,744   $ (320,372
  

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in cash, cash equivalents and restricted cash

     (83,609     67,389       (64,829     59,968  

Cash, cash equivalents and restricted cash, beginning of period

     176,265       90,096       157,485       97,517  
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash, cash equivalents and restricted cash, end of period

   $ 92,656     $ 157,485     $ 92,656     $ 157,485  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(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.

 

9


Reconciliation of NOI to Net Loss

(dollars in thousands)

 

     2018     2017  

Total revenues

   $ 444,298     $ 449,130  

Property operating expense

     (267,785     (230,045
  

 

 

   

 

 

 

NOI

     176,513       219,085  

Depreciation and amortization

     (95,950     (139,942

Interest expense

     (101,176     (93,597

Acquisition, transaction and integration expense

     (15,919     (2,453

Termination fee to affiliate

     (50,000     —    

Management fees and incentive compensation to affiliate

     (14,814     (18,225

General and administrative expense

     (13,387     (15,307

Loss on extinguishment of debt

     (66,219     (3,902

Impairment of real estate held for sale

     (8,725     —    

Other expense

     (3,974     (1,702

Gain on sale of real estate

     —         71,763  

Gain on lease termination

     40,090       —    

Income tax expense

     (5,794     (3,512
  

 

 

   

 

 

 

Net (Loss) Income

   $ (159,355   $ 12,208  
  

 

 

   

 

 

 

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
December 31, 2018
    For the Year Ended
December 31, 2018
 

Net loss

   $ (86,626   $ (159,355

Adjustments:

    

Depreciation and amortization

     22,331       95,950  

Impairment of real estate held for sale

     8,725       8,725  
  

 

 

   

 

 

 

FFO

   $ (55,570   $ (54,680

FFO per diluted share

   $ (0.67   $ (0.66
  

 

 

   

 

 

 

Acquisition, transaction and integration expense

     2,789       15,919  

Termination fee to affiliate

     50,000       50,000  

Loss on extinguishment of debt

     7,675       66,219  

Non-cash valuation allowance on deferred tax asset, net

     5,354       5,354  

Gain on lease termination

     —         (40,090

Other expense(1)

     2,070       4,576  
  

 

 

   

 

 

 

Normalized FFO

   $ 12,318     $ 47,298  

Normalized FFO per diluted share

   $ 0.15     $ 0.57  
  

 

 

   

 

 

 

Straight-line rent

     (173     (5,365

Amortization of deferred financing costs

     1,123       10,519  

Amortization of deferred community fees and other(2)

     524       2,935  
  

 

 

   

 

 

 

AFFO

   $ 13,792     $ 55,387  

AFFO per diluted share

   $ 0.17     $ 0.67  
  

 

 

   

 

 

 

Routine capital expenditures

     (2,272     (7,236
  

 

 

   

 

 

 

Normalized FAD

   $ 11,520     $ 48,151  

Normalized FAD per diluted share

   $ 0.14     $ 0.58  
  

 

 

   

 

 

 

Weighted average diluted shares outstanding

     82,439       82,649  

 

(1)

Primarily includes changes in the fair value of financial instruments and casualty related charges.

(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.

 

10


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

(dollars in thousands)

 

     4Q 2017     4Q 2018  
     Triple Net Lease
Properties
    Managed Properties            Triple Net Lease
Properties
    Managed Properties         
    IL      AL/MC      Total     IL     AL/MC      Total  

Adjusted Same Store Cash NOI(1)

   $ 1,372     $ 35,066      $ 7,044      $ 43,482     $ 1,411     $ 35,752     $ 6,434      $ 43,597  

Non-Same Store Cash NOI

     3,414       —          648        4,062       —         —         111        111  

Triple net lease to managed adjustments(2)

     —         5,088        —          5,088       —         —         —          —    

Straight-line rent

     574       —          —          574       173       —         —          173  

Amortization of deferred community fees and other(3)

     (3     102        427        526       (2     (574     53        (523
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Segment / Total NOI

   $ 5,357     $ 40,256      $ 8,119      $ 53,732     $ 1,582     $ 35,178     $ 6,598      $ 43,358  
  

 

 

   

 

 

    

 

 

      

 

 

   

 

 

   

 

 

    

Depreciation and amortization

             (31,355            (22,331

Interest expense

             (23,128            (24,230

Acquisition, transaction & integration expense

             (984            (2,789

Termination fee to affiliate

             —                (50,000

Management fees and incentive compensation to affiliate

             (3,823            (3,687

General and administrative expense

             (3,612            (3,276

Loss on extinguishment of debt

             (3,230            (7,675

Impairment of real estate held for sale

             —                (8,725

Other expense

             (57            (1,780

Gain on sale of assets

             49,217              —    

Income tax expense

             (3,239            (5,491
          

 

 

          

 

 

 

Net Income (Loss)

           $ 33,521            $ (86,626
          

 

 

          

 

 

 

 

(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.

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

(dollars in thousands)

 

     3Q 2018     4Q 2018  
     Triple Net Lease
Properties
    Managed Properties           Triple Net Lease
Properties
    Managed Properties         
    IL     AL/MC     Total     IL     AL/MC      Total  

Adjusted Same Store Cash NOI(1)

   $ 1,411     $ 34,001     $ 6,273     $ 41,685     $ 1,411     $ 35,752     $ 6,434      $ 43,597  

Non-Same Store Cash NOI

     —         —         (125     (125     —         —         111      $ 111  

Triple net lease to managed adjustments(2)

     —         106       —         106       —         —         —          —    

Straight-line rent

     175       —         —         175       173       —         —          173  

Amortization of deferred community fees and other(3)

     (4     (1,117     (26     (1,147     (2     (574     53        (523
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Segment / Total NOI

   $ 1,582     $ 32,990     $ 6,122     $ 40,694     $ 1,582     $ 35,178     $ 6,598      $ 43,358  
  

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

    

Depreciation and amortization

           (22,373            (22,331

Interest expense

           (29,268            (24,230

Acquisition, transaction & integration expense

           (1,559            (2,789

Termination fee to affiliate

           —                (50,000

Management fees and incentive compensation to affiliate

           (3,688            (3,687

General and administrative expense

           (3,219            (3,276

Loss on extinguishment of debt

           —                (7,675

Impairment of real estate held for sale

           —                (8,725

Other expense

           (782            (1,780

Income tax expense

           (104            (5,491
        

 

 

          

 

 

 

Net Loss

         $ (20,299          $ (86,626
        

 

 

          

 

 

 

 

(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.

 

11


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

(dollars in thousands)

 

     2017     2018  
     Triple Net Lease
Properties
    Managed Properties            Triple Net Lease
Properties
    Managed Properties         
    IL     AL/MC      Total     IL     AL/MC      Total  

Adjusted Same Store Cash NOI(1)

   $ 5,431     $ 137,363     $ 30,253      $ 173,047     $ 5,592     $ 137,103     $ 26,016      $ 168,711  

Non-Same Store Cash NOI

     15,033       1,271       5,814        22,118       —         —         358        358  

Triple net lease to managed adjustments(2)

     —         21,219       —          21,219       —         9,318       —          9,318  

Straight-line rent

     2,808       —         —          2,808       743       —         —          743  

Amortization of deferred community fees and other(3)

     (55     (484     432        (107     (8     (2,628     18        (2,617
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Segment / Total NOI

   $ 23,217     $ 159,369     $ 36,499      $ 219,085     $ 6,327     $ 143,793     $ 26,392      $ 176,513  
  

 

 

   

 

 

   

 

 

      

 

 

   

 

 

   

 

 

    

Depreciation and amortization

            (139,942            (95,950

Interest expense

            (93,597            (101,176

Acquisition, transaction & integration expense

            (2,453            (15,919

FIG Termination fee

            —                (50,000

Management fees and incentive compensation to affiliate

            (18,225            (14,814

General and administrative expense

            (15,307            (13,387

Loss on extinguishment of debt

            (3,902            (66,219

Impairment of real estate held for sale

            —                (8,725

Gain on sale of assets

            71,763              —    

Gain on lease termination

            —                40,090  

Other expense

            (1,702            (3,974

Income tax benefit (expense)

            (3,512            (5,794
         

 

 

          

 

 

 

Net loss

          $ 12,208            $ (159,355
         

 

 

          

 

 

 

 

(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.

2019 Guidance Reconciliation

Reconciliation of Net Loss to FFO, Normalized FFO and AFFO

 

     Full Year 2019 Guidance  
     Per Share  
     Low             High  

Net Loss Attributable to Common Shareholders

   ($ 0.48      -      ($ 0.42

Depreciation & Amortization

   $ 0.97        -      $ 0.97  
  

 

 

       

 

 

 

FFO

   $ 0.50        -      $ 0.56  

Acquisition, Transaction & Integration Expense

   $ 0.02        -      $ 0.02  
  

 

 

       

 

 

 

Normalized FFO

   $ 0.52        -      $ 0.58  

Straight-Line Rent

   ($ 0.01      -      ($ 0.01

Amortization of Deferred Financing Costs

   $ 0.05        -      $ 0.05  

Amortization of Deferred Community Fees & Other

   $ 0.03        -      $ 0.03  

Amortization of Equity-Based Compensation

   $ 0.02        -      $ 0.02  
  

 

 

       

 

 

 

AFFO

   $ 0.61        -      $ 0.67  

 

12


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 three 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.

 

13


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) valuation allowance on deferred tax assets, net; (f) termination fee to affiliate; (g) gain on lease termination; and (h) other items that we believe are not indicative of operating performance, generally reported as “Other (income) expense” in the Consolidated Statements of Operations.

We also use AFFO and Normalized FAD as supplemental measures of our 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; (e) amortization of deferred community fees and other, which includes the net change in deferred community fees and other rent discounts or incentives; and (f) amortization of equity-based compensation expense.

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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