DHC - Earnings call transcript Q2 2018 | Diversified Healthcare Trust

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Operator

Good morning, and welcome to the Senior Housing Properties Trust Second Quarter 2018 Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Brad Shepherd, Director of Investor Relations. ahead. go Please

Brad Shepherd

to second Welcome Properties call Trust’s Thank XXXX Senior results. the quarter covering you. Housing

of Joining today’s Financial Operating management, Officer; Today’s me release and includes followed the and President forward-looking on and call session. results Rick Today’s to transcription, August are call Tuesday, within Private call would by the These expectations are revision Securities a Securities prior based SNH of Litigation Siedel, written securities statements I with conference presentation today’s the today, retransmission SEC. conference publicly statements contains today’s in than statements Exchange recording, Reform of X, prohibited. any Act XXXX. the Chief forward-looking call through a like and Officer question-and-answer meaning to other filings Treasurer. and note of Francis, conference of the forward-looking and the beliefs consent as are and other by Jennifer Chief that of call XXXX revise to the SNH strictly upon undertakes present or made SNH’s Commission obligation laws. or no without

www.snhreit.com. SNH’s cash-based projected this available at FAD cash attributable or numbers, those components from on forward-looking our statements. supplemental non-GAAP results In on normalized materially and website shareholders may to income and common or operating data NOI. to calculate are AFFO, any found to financial package may operating including funds FFO in figures CAD normalized from Actual differ call addition, Reconciliations contain of income and net or operations net non-GAAP these

to that place now the Investors in upon forward-looking undue could are turn over factors cautioned Jennifer. I’d those cause information contained with to differences SEC. to call statements. our reliance any the not like filings Additional is concerning

Jennifer Francis

growing operating quarter delivered earnings with quality and Senior property cash million NOI an Brad, just $X.X adding combined level Properties from everyone. on NOI million. cash $X.X In Trust Housing morning, same us stable XXXX property growth this year-over-year call. you, by additional SNH’s joining results; you or good Thank X% for second quarter acquisitions under Thank

percentage headwinds our the increased the science into property remain recycling from to focused capital NOI competition and portfolio. senior science offset on in for property office life living dispositions from continue our acquisitions both In XX% second entire on segment hope continue grow we'll but a medical to approximately quarter and represented cash our our properties the life We have experience results. and the to help MOB industry of of to these impact our medical office we in as types challenges portfolio consolidated

XX MOB up increased occupancy segment total in was property compared quarter at to the was sequentially. basis year the XX.X% same points X.X% NOI which last the cash and of quarter end second Our

concentration stronger increased rent and medical see of by driven portfolio; growth NOI we growth was in as and a quarter of average of performance throughout our Digging medical leases; we foot roll property square renewals averaged our weighted increased entire new X.X%; term in these years. such XX,XXX a segment During where our Austin did off office executed a markets cash second leases renewal quarter we same science into performance office X.X% buildings traditional in properties MOB rent the and X.X% Phoenix. of and in portfolio’s leasing X.X our the of and few our the XXX,XXX the square of properties lease traditional life foot to noticeable have

This quarter. year; had the the economy. ended X.XX which times the continued quarter of quarter strong wage the the XXXX decrease compared living in second for cash net by given continued X.X% rent last lease portfolio this triple X.XX Our headwinds caused with senior XX to produce NOI increasing caused expected consistent store XX, from and portfolio growth same new to in down was by pressure reported was supply March coverage months prior times the in coverage

the last of coverage quarter. a flu impact also season discussed tough Our reflects reported

Our portfolio X.X% second to and year; remained points decreased same in basis NOI residents increased and on same the living flat. cash the managed senior compared a basis property property XX occupancy last quarter services quarter fees

CCRCs managed detail which nursing assisted and same property on increased Looking senior X.X%. associated X.X% revenues year-over-year. deeper units along skilled from flat benefits IL in turnover within revenues. portfolio nearly independent of entire unit with X% to the are into the higher the these the to be offset increases to living portfolio Conversely Property revenues expenses increased ins in causing increased move basis; our revenue the majority revenues decreased living across enough healthcare related increases revenues costs, driving living our the the was that new increased AL and with wages and operating spread

at of residences Yonker’s capital senior growth managed living quarters. consecutive to invested premier NOI of several properties the of XX performance we’ve where We’re notably past months. XX New in close York Most achieved largest cash over pleased XX% improved the CCRCs our by in one the the to

transaction sold Rick purchase agreement our to investment million price for of the living $XX.X acquire senior this first quarter communities second the our an from private we for with communities purchase sold acquiring call them; Five quarter. provide gross senior sold debt. Sunrise was as for of deal communities these gain of we a turn leased individual part results $XX.X Five May properties was four living the of to I’d $XX.X remaining with living in community leased into sales XXXX discussion million who to that as for in announced facility including the property the of Turning over to a previously of million. Senior the the skilled we of $X.X entered million the last in in Living nursing Star; a that sold the like In activity June reported the the assumption quarter living Star exercised second the two completed November we during resulted million purchase was to to January; a two transactions; further second their assisted operator $XX.X was in senior now in option, the financial

Rick Siedel

I are available at million of touch Thank to proceeds fund covered. restricted morning our with Senior SNH's with as you benefit million the of for drawing revolving second everyone. are beyond on some fourth Starting just our kind going million million restricted in Jennifer from of sheet quarter hand. ended end. of and These to cash we $XX.X purposes. of being part billion sale $XX.X quarter our a the capacity the cash and for the Jennifer the majority are cash Sunrise Living am million held good $XXX.X on of the $X second credit on We represent but like quarter $XX financial leaving that highlights outstanding what and $XXX acquisitions unsecured restricted of facility us accounting had considered proceeds community. with exchange balance

capital portion last ramp was and throughout the $XX the debt and remainder remaining senior that adjusting of to adjusted that our EBITDA in we MOBs million and down managed includes expected capital debt was believe times our XXXX. ample for expenditures, $X.X million and at to debt cash have gross assets EBITDA million we could reported second the development living on to and The communities. we our projects. was and year continue to gross which senior expenditures revolver we adjusted which of times cash senior leasing and costs Our the X.X X.X our living The and related we recurring invested is living portfolio. of and renovations was MOBs XX.X%. Between X.X improvements, redevelopment XX.X%; restricted on to I well building was sale in and $XX.X managed the liquidity Sunrise and mentioned debt to very our quarter capacity million of majority are growth. on was tenant positioned to and the considered development improvements capital borrowing spent quarter In for assets spent communities managed up expansions spend in

This the these the some pleased market. in development the construction tight largely we’re expectation on with and despite with made of that were associated quarter’s line expenditures challenges projects with progress

quarter living $XXX,XXX, a approximately In addition provides opportunity. projects a we our still the net senior on investment. X% Subsequent for within lease by share increased triple return quarter of have which annual to with end tenants we SNH $XX.X portfolio over a million we declared X.X% funded $X.XX investment our and dividend from a our per due think compelling XXXX rent of yield second

incentive or of total SNH’s a the $XXX.X administrative of the REIT expenses period on is by quarter, XX.X%; capitalization the $XXX.X of our million management that and from The which to over to the common want for quarter the or of a from capped as remarks; borrowings outperformed to the weighted million of common of compared average line incentive the second Jennifer rate senior return partially with in normalized compared estimated notes mortgages XXXX. million net fee annualized depending attributable of were second quarter end offset of X.X% decrease lines fee XXXX color million quarter, U.S. SNH X.XX% of mid last normalized second XXXX. estimated didn’t prepared rates the on incentive rather of this a year. and to the questions. SNL included the $XX.X unsecured than That second FFO was at fee This issued The of with in of with to return the shareholders attributable historical of equates in increase market second by market weighted more floating-rate General the fee Healthcare our cost our the incentive is expenses the for shareholders please end the or RMR accrued to lower compared I up management business quarter total to quarter provide increase excluding index quarter. of year the a management the business our quarter through of fee of was on $X.X over few and administrative estate last XXXX performs business this million has SNH may index; index general incentive comparison how The estimated the for fee. Index during Interest on an X.X% expense second second a lower to our remainder of XX.X% operator result SNH from million interest to million $XX.X per revolver. that decreased $X.XX decrease increased following: debt, statement the in is FFO income open based our paid February year. cover which little $XXX of quarter up based calculated saving slight X.X% result reported X.X%. relative of at equity on and pool in fees resulted $XX.X beginning XXXX quarter. already for real of $X this capitalization The Lastly, share the to and concludes increase X.X% a million XXXX a incentive savings our prepayments on

Operator

question Instructions] now Please from first We’ll The W. begin Baird. Robert Babin ahead. [Operator Drew go of the question-and-answer session. comes

Drew Babin

could although A purposes? yields -- the hoping just question second those comparability on asset the you was quarter the asset small the dispositions in I they’re smaller assisted significant of on for the living provide

Jennifer Francis

that the that’s Sunrise cap rent cap; on that forecast; about the but two XX% of think about -- by that that. a a just note nursing our think on people that the have know talked on that X.X in skilled was it other so we proceeds the assets any an it a So option X.X about Star gets facility is important purchase had only of we talked on purchase was option number I Five leases; we’ve to reductions to was

Drew Babin

that? portfolio split I that be And your I something and and was of right a at activity as in guess triple curious, that at reinvestment of now there’s space JV looking that’s related private portfolio looking enough disposition I worth just question or guess been your or bid a like that opportunities to justify would robust pipeline recently private something net some

Jennifer Francis

nursing our I at that looking within talked management highest the looking portfolio understand so pipeline opportunity closely assets use certainly facilities the best skilled skilled So we’re to across that quarter plan better units. nursing we’re and use of doing closely last consider our there��s a the if better managed pretty to that for this portfolio our another assets, yes like looking of part is robust think as I at very all study at those asset reinvestment we’re about something

Drew Babin

quarter the up little balance last there to bit let options kind rate or sheet And Rick of for first picked second -- guess from that term quarter evaluated comfortable loan, the on I obviously floating-rate floating debt the you’re the unsecured to and then for question be overall would one a and willing your are with any fixing that there fluctuate? exposure being the

Rick Siedel

now rates it couple see soon. we again with I there. sensitivity think and published what’s out of other of and will partners I But flexibility, we is we are points our is talk also rates I the we that where think to some so capacity interest comfortable lot later know I we we’re recycled. some the actively today rate don’t of pretty right a secured a revolving X so attractive, pretty full looking our is opportunistic, a see only increasing are continue something anytime we’re recently, just a think $X.XX share point redeploy of and XX-Q ton have got a have percentage there while of lot facility the of is market at, do a percentage have I banking to the the the don’t again in we capital those team we now on and of again right we look debt, deals credit

options look today. out with for will comfortable to So again it fix we’re it very at long-term where but

Operator

Please The B. from FBR. next question of ahead. Bryan is Maher Riley go

Bryan Maher

give regarding that. then us predominantly in quickly and you think its and life of sense MOB talked you You question assuming pipeline. science your on of how that Can is kind a last deep how I’m briefly and you do act secondarily

Jennifer Francis

Sure.

science everything. agreement we that a incredibly definitely is we’re in focusing on the to is our senior pipeline don’t lot of but everything will We anything group we a and pursuing on market MOB with MOB capital. science have hits life look living, and hard an have at they under looking now couple active and we’re we the and Our looking side right we’re at life opportunities right acquisitions pipeline want the keep don’t now group deploy

Bryan Maher

is there seeing the look are who pipeline seeing as you’re sellers out And new MOB supply you for like the builds. what and what

Jennifer Francis

selling there of your what are there are physicians was market that the second are definitely practices Well that developers are the out in part selling, MOBs, question.

Bryan Maher

percentage know what was far I like, maybe existing as just supply seeing. of guys want a assets what as to pipeline as are the you

Jennifer Francis

campus I I’m not assets huge sense that from fall sit away sure not have through opposed or as thinking It's considered the or to seven few and we we all six of don’t week, hospitals. about campus market, on they that properties farther that the not there about I is because as writing a are the of weekly we’re is have are our preferences and too make or those a talk the percentage of of that off probably will go a number up where old there existing for there down are being hitting don't assets, just this. are away buildings us, answer that to

Bryan Maher

is And living on But talk off there then like now, decent thinking on the is buyers side are selling selling. lastly amount table. who the a who market side, owners of that about it in the other out or seems of senior amongst there place the

Jennifer Francis

tend that be to now. equity private it’s think I right buyers the

Rick Siedel

the when housing versus what disciplined the its faced. we I go been through senior REITs about I talk MOB lines space been on know side that of that’s think on have senior we internally we’ve most seen the while pretty housing. headwinds faces the and

Bryan Maher

or when that it to one our still around talk living years? to more kind of is come to leads at do is or that seems hotel we cover that is for guess couple senior When here companies coming me. that for to supply level; the we like I the the look low there's X% supply peaking you growth a to it think And kind peaking you more X% do and sense market get of market you that’s coming the

Jennifer Francis

I down still I’d to to if we think I be that down; inventory I imagine to construction to hard I really another the that’s slowing trend. data It’s again absorption, enough or quarters think don’t but a quarter love those a hope outpacing down, annual the they've this trend; it’s know whether determine and quarter need starts mix they two are about is been two but last growth data talk are mean of

Operator

The next RBC ahead. Capital go question Markets. Carroll is Please from Michael of

Unidentified Analyst

with Hey this Jason Mike. here is

the team and what do operators wondering your and drive ratios potentially higher? Star what what is SNH’s to could could doing coverage the We’re metrics outlook those on Five be

Jennifer Francis

do, to of compete that that lots the competition head facing fierce the MOB life capital sciences capital to senior that’s or markets into and do going on I’ve about that. a but we’re space, look pace at really living what a to all been call managed we we’ve -- early nursing our the skilled lot our the can on use taking spent and uses our assets both portfolio think that’s we’re assets and talking at I competition think asset I leased of were deploying continue -- to both talked about in of and Well the managed redevelop those that the understanding a competition looking I when on doing there’re out those and best been in with are within keep understand market team deploying and highest a and amount good studies management for and the portfolio I’ve to minute if are and better to best

Unidentified Analyst

coverage? sales fair so the that to recent is should it improve net say help Great,

Rick Siedel

proceeds one’s done within Jennifer up mean that the again questions portfolio portfolio that when Absolutely the is with again they sale because XX% do around wind lot X.X think focused to of I to now coverage of at job again Star and in the do -- Five mentioned bottom and was the in the contract that, we the similar; but bit rent of terms encourage a be go something place up they’re we’ll just I a lowers a great need laser should to opportunistic just all these it small operations proceeds at answer higher amount rent right stabilizing the but reduction living easier they but again a little from we’d senior the their perspective a redeploy and assets a that can them caring a and on coverage so that for other certainly helps people looking that and little it senior them or of lift to operations and just they clean bit them do a housing we’re portfolio those. for are and look

Jennifer Francis

those their making just great They’re at focusing of keep EB up they’re lot also bringing a business might growing and within I operator just keep and and that on it’s their unemployment spending keep but employees their positions but lot X.X a and sure strong. business hard the organization, the making and to think hole to time up be that employees people strengthening to obviously doing bring coming core again they’re because to get to employees plugging business fill sure the a they’re

Operator

The question Bank Please Juan Merrill is Sanabria go of ahead. next America from of Lynch.

Unidentified Analyst

area. projects of I’m renovation CapEx general the have just an the if in kind senior just of give on on guys this going update housing hoping us kind you right progress on update could you just is on variety for Juan. Kevin that on if Hi of now, MLB

Jennifer Francis

of, did was the building that got MLB we lease MLBs Washington complete stats some on foot, interestingly XXX,XXX enough XX%. and positioning lease I we’re that to foot down push to this square DC at side they a doing looking saw quarter square building Sure a we rent close and in there XX,XXX the able reposition got a we’re and

and about on TRF range projects, But looking those the growth up assistance seven or that the come repositioning competition. in suburban repositioning they've reposition the operators about they started how the then the so repositioning up one with side, just portfolio or so assets at X.X down Star's were it’s projects mostly asset it keep story in we our working competition the on looking on trying underway or And Five a either of about think of or there building looking a there again million at lease plans we’re got that and the and of are figure on so Pennsylvania million Again work. and really heavy at always reposition XX improvement MLB and or range. that’s living a on got time I about we a so that $XX range that with wide a these managed got to are from and that it's with units projects portfolio with independent to to underway keep properties refreshing think to up get a

Unidentified Analyst

is and from you coverage expansion I that or of I this think on more that environment then road for is funding guess to supply Thank the operations. I a guess CapEx addition

Jennifer Francis

CapEx that still coverage pretty road We did two to so comfortable over coverage, their times. at we’re with fund a

Operator

The next Please is Wells Stender of from ahead. go Todd question Fargo.

Todd Stender

said I number you of you'll this think improvements year, I did right. get about XX capital that deploy million Rick

Rick Siedel

and MOBs expect the be to for the we between communities living managed about what that’s year. senior Yes, the

Todd Stender

those What expectations of different each you each for the buckets, have do two for return one. breakout and

Rick Siedel

Interestingly regularly. the change seems breakout, somewhat to

managed where projects forward. to and a in of some to competitive have but we moving the the enough quarter, bit it and shifted of that have little side were a number bogged fairly construction around the order process go the I through side, the bids everything got right XX bit is XX little in accelerated, the remarks we think and market out again the relationships go getting have down we where the prepared in and I that MOB on want way the work to that probably country through last the a mentioned we others tight done get have we on million bids capacity

accelerate come down the MOB of up a but the managed where bit, able a bit million less some to about side the net-net I on number think think some I side. to little been slow little still million and on we're MOB living same it's we've XX and of that probably bit the the numbers So XX so senior

your was what question? second Sorry

Todd Stender

is cap about rate little a gain those? what -- be expectations for that little more would your or Return you'd returns a and juice

Rick Siedel

Interestingly there’s market usually aggressive you more about high we’re the single a there we’ve see is cap again out juice, so the or frankly bit better double of little acquisitions and been why return what usually that’s the digit digit in investing with in CapEx rate. because some than compressed

Todd Stender

guys Great, QX acquiring? stuff then is shifting X.X acquisition and on acquisitions thank science general be of that just cap to there you’re looking at range this I you. we’ve And you’ll you tenant a about X%, mid single then the believe rates life seen all were criteria that in the cap is just acquire two and

Jennifer Francis

looking into are compressed heavily are the is below that, cap been markets. been that those to at the kind get life going concentrated we’ve look bit the a say so -- cap above market in to of a and we’re be below this the sciences quarter sciences what little markets; rates side really or we’ve been in on at Not rates are X, I’d looking life buildings the that little in that we’ve at seeing

Todd Stender

out Francisco areas? of South even or San West, be kind in that Cambridge Would

Jennifer Francis

in in at for would Cambridge that’s but a in down us is hard well. and a Cambridge huge be and around -- amount to down trading California in Southern it tough there’re as there’re Cambridge market the fixed properties there assets Cambridge looking some we’re not cap trading there’s then yes get

Operator

of Please go Stanley. question Malhotra ahead. next The from is Morgan Vikram

Vikram Malhotra

referred of growing X your while about get think can in varying rather X a us of year sense that press you down the release how to company? view than a just You and give you in maybe the of up you sort shapes for exposure remarks certain segments

Jennifer Francis

medical we’re we’ve it’s MOB -- and it’s what be market, life to with our hit saying considerably, so that grow so it’s to our successful to in in at, going they science even we’re percentage very senior I it’s the hard of we’re two focus communities would continue hard could percentage opportunistic been and going so and we’re we’re focused on what so be much looking the year exactly and that and properties to three say the the market on -- that hit again acquiring more when see and going Well life say at to end or what know portfolio acquisitions never to mind will just science at but living years. of office

Vikram Malhotra

at And one then space you about look portfolio percentage portfolio as there’s just the on thinking times? of the is a EBITDAR the or below can what where coverages, on and question us kind you us remind senior housing a update of maybe basis are we

Rick Siedel

managed lot below property quarter we’re currently with TRS small times the the our past portfolio that’s one one operator, we also together, leases this a as private working portfolio may most from to move private operator that just another part master a one in generally into not function of properties we there should the in There’s or our transitioned positive. individual a positive, lot of a leases but that some leases be operator leased on are look for are are the the in

Operator

the to to for I turn question-and-answer back remarks. Jennifer over conference This like concludes our would closing Francis session.

Jennifer Francis

nice us upcoming joining to seeing a call. at Have our many forward day. for you second our conferences. look you quarter of investor I Thank earnings on

Operator

today’s Thank for concluded. now attending is conference The you presentation.

may You disconnect. now

Diversified Healthcare Trust (DHC) 7 Aug 182018 Q2 Earnings call transcript