DHC - Earnings call transcript Q1 2019 | Diversified Healthcare Trust

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Operator

Good morning, and welcome to the Senior Housing Properties Trust First Quarter 2019 Financial Results Conference Call. [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference over to Michael Carroll [ph] Director, Investor Relations. Please go ahead.

Unidentified Company Representative

you. Thank Housing covering Senior and first Trust results. XXXX Properties to the call quarter Welcome

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

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

forward-looking the cautioned those factors filings statements. that contained Investors any undue could not are Additional SEC. is reliance our differences upon place information concerning cause in to within

like to call the I'd to turn over Jennifer. Now,

Jennifer Francis

and and we SNH the both strategy our aggressive plan transitional reset you, business focused future. of was of still position leverage then, reduce portfolio our best XXXX have Five Since for executing restructuring we SNH, earnings real management the our arrangements is be and year disposition going that a to dividend everyone. that Good active morning, call, with quarter case. science on Thank an and and the office we senior for Michael. we fourth the are On estate. commented believe transform our to announced believe disposition our To living, asset to laser our financial life on medical Star,

improve into for services produce products that in to excited and the demand are portfolio growth U.S. the our shareholders one for as SNH's grows. will We strong healthcare returns value, healthcare-related and

represent last morning, same this The the in quarter quarter our in in from Star reduction same-property of our first compared we million first result $XX.X triple-net the transition was for decrease year. our quarter's and rent Five living in on NOI and March This primarily basis cash MOB February X.X% the X lease call. results April discussed senior consolidated reported portfolio the to of stability from portfolio. an a mix decrease Earlier

NOI year-end. leased our basis X rent points increase cash to The driven located a Francisco life a Fremont, at square-foot Bay the building base our an XX,XXX every of the commenced R&D flat last square in the same the the in cash in California same the million the in This X% increase by in last X.X% property properties, in compared XXXX segment This quarter quarter lease mainly first XX-year Same-property of same-property X, XXXX. quarter effect was one year. has MOB years, Boston. year, increase in science communities, living market. result in life which science basis Area, NOI triple-net foot took XX a senior X vacating tenant a to by leased is of our strong San triple-net increased property compared offset located increase the Excluding on District the was Seaport that basis January

We believe will we have a the up activity with roll in building rent. the had that meaningful at lease property leasing and good

a in building, same-property cash NOI decrease in office occupancy This Minneapolis and the building same-property medical repositioned lease with of in point term improvements the a year. with XXX and per square with strong our portfolio several discussions basis generated years in been corresponding per renewal costs results X.X% leasing market square-foot leasing average foot medical leases and tenant new Our basis we has close quarter. and quarter prospects. We vacating X.X XXX,XXX fourth the lease of in feet property office of are currently the into result during is tenant multitenant decrease of the weighted XXX,XXX to executed the in square and a $X.XX

of close been the discussed located to under We're foot of life San previously in submarket that for the markets the back. buildings country. Pines be are XXX,XXX sales, We've rebuilding would Torrey XX great XX containing the expires Last science the these that March, leased Diego that We remaining mentioned get of agreement square quarter, whose they lease. vacated a I in life vacancies very renewals sit has and end does the have Reliant as leasing square the we a the getting sale, at excited marketing leasing expiration of in Central following In buildings job when we the lease we also strong our team about feet May. ahead space in end and the the top for Group, one one XXX,XXX for sold property at month. Massachusetts prospects science Medical to buildings of these of scheduled next of

planning completion them nearing and of redevelopment now buildings marketing potential actively are permitting for We and for lease. the are

NOI portfolio increase basis was was living contributor and cash on to revenue due managed residence down, or the $X.X last and to however, were year. same-property increased service The the wages, basis same-property occupancy X.X% Our expenses. million salaries fees which X.X% and increased quarter main up XX to a points increased basis. senior Same-property compared same operating

is senior pressure in through quality and focuses we already ago strategic was contract to employee address the Yesterday, of employee Star on for High impact. Star noticeable the first that is XX% XX% the Five and commitment contributed down turnover March, led the in living January. its increased employee increase labor. compensation, Five which As use to the reported XX% Part companywide much-needed hopes and challenges residents increased company's replace its recognition wage in we've and permanent this, commitment To both to all said, increased of We competition turnover the to This a wage rent which salaries promotion one from commitment, this Star's services and past leadership. eliminate a members. investment team Star in fierce quality a move, has of Five with and growth. in year living costly occupancy a across lead biggest workforce. it and and third-party senior having expense higher support and see Five ultimately better believe to as quarter. this workforce labor entirely to will types

which from have includes transaction the portfolio triple-net in the XXXX. had ended coverage announced leases, X.XXx the X.XXx would XX, year agreement new April. senior been based Five Our Star for coverage living leased coverage of This rent X.XXx resulting on the from rent December reduced

they transitioned we to January the XXXX. agreements, management continue leases expect the report will coverage of to these are to X, new until happen We which on

coverage Excluding Five the rent Star, was X.XXx.

to XXXX Finally, on expect end we million our properties sell of target to our April up mentioned call, at reach that X to we I'd give conference leverage. to $XXX the an like update our dispositions. On valued by

we senior disposition three each nursing We in property those In are the markets, sell. under our is and had toward engaging the we timing have MOB communities MOBs. segment, or and the our nursing feel underperforming medical to two to makeup Subsequent quarter, the on finalized, facilities first in process quarter. a acquisitions and living obtainable. of quarter, noncore properties sold and and of now weighted we pricing list on office of the to Rick There goals properties the agreement the abundant comfortable to at of will are three the that is an And we of XX portfolio. brokers MOBs for which the skilled XX results to I end financial and quarter, of agreements additional in discussion living both our and facilities, senior the over entered call we sell further provide turn sold into skilled end MOBs. capital

Richard Siedel

Star's compared to first dividend per from to financial the in $X.XX was came based dividend declared for in we and quarter good quarter. the senior mainly morning, approximately Jennifer the first same the for be of communities, a last you, quarter just quarter the which FFO in Normalized was triple-net FFO quarter our $XX.X the highlights quarter beyond per Jennifer, FFO of was million everyone. first of down $X.XX second Five of share for normalized rent XXXX XXXX. living share, discussing $X.XX share some covered. $X.XX Thank due per the normalized The payout reduction what ratio In first April, the year. or the XX%. on I'll decrease new

leverage of after the first as XX% last interests demonstrates XX% communities ratio run of to REIT alignment and of by shareholders shareholder improvements to and target. included as and April General March on reduced at the and our which this to return price spent the spent In last and the capitalization managed $XX.X costs for believe lower. approximately expenditures million, lost conversion capital both cash at available administrative based expenditures, of price of decreased on living $XX.X capital approximately The our meet dividend SNH's senior the a on and compared on was SNH's recurring tenant was projects. development compared stated projected quarter, assets result we considered selling or quarter the In We leased MOBs communities. our our traded RMR. this call, year, $XX.X to our quarter. leasing stock to an a revenues after redevelopment market $XX.X Healthcare of we distribution total almost MOBs run stock payout for million between our XXXX, Index and building portion of capital $XX.X RMR increased target $XX.X As as million driven and million is first expenses of during for the lower RMR for the million strong shares million the of rate reduced in lost rate annualized year revenues per translated and remaining improvements of

of XXX,XXX of heart conversion Washington A the located redevelopment D.C.'s Much spent redevelopment building. million managed multitenant to to square tenant first the senior the Loudon, in our MOB at in Business single a building in foot of $X quarter living XX medical the at Minneapolis was and expansion from repositioning unit of projects. earlier, mentioned related is the community Central CapEx the Our Jennifer two Tennessee. office that CapEx living independent buildings in District of

is units summer. these be team and the end nearly completed expected by Our the XX% to pre-leased construction of of is

first cash credit $XXX notes million of We $XX.X million sheet. facility. to quarter balance outstanding under hand our our end, Subsequent and facility. on our hand million to X.XX% ended credit senior Moving revolving cash $XXX on the quarter revolving redeemed borrowings using of and with on we

Additionally, million of senior quarter. four prepay the intention encumbering $XX.X communities we living our gave debt during of approximately notice second to secured

assets EBITDAR XX, March reported of debt-to-gross X.Xx was and As was our debt-to-adjusted XX.X%.

to to to our expect please transaction the call, climb, disposition the line our by Star I up from debt-to-adjusted as following middle or above year. As a order the reduced reduce communities. our debt-to-adjusted complete living Xx Xx just of EBITDAR rent we in the our In for to That remarks. Operator, on we result lease to mentioned lower, Five concludes our end questions. plan XXXX senior of program the prepared X the open of April EBITDAR

Operator

Instructions]. [Operator

The Baird. comes first of question Drew from Babin

Alexander Kubicek

that's potential as demand. This vacated plans base later strong hoping you're well like expectations Drew. on seeing your this on mark-to-market is little potential sounds year. at Scripps a were It for as that for - for redevelopment Alex your when general We that more detail

does today? like that what So market look

Jennifer Francis

The that $XX California report foot strong that rents. market's There actually this quite they $X rents so morning very was a market. that, talk generated are month from strong. approaching as Jones [ph] a saying It's net was market in a a line

and We are prepared my remarks, permitting planning. the planning building. complete we're now redevelopment stage our completing are, that as I marketing in we're is a right said and actively This

now buildings B the this what strong And Class prior off this just of market, so because there's these not as lease, really - building length a tenant of are came is which lease. the XX-year and of

three Class looking keeping - space, slab to we're reposition really working a steel, the a we're - and buildings now. footprint complete that density market. the that existing maximize to complete A grandfather building It's of we've been in the we not the to - a so to build demo demo to buildings we're tough so And in can that place as we have able because the it

big about close pretty We to good a but great and We're all said market. feel it's project, cash-on-cash. So when expecting such it's double-digit it. returns it's done a

Alexander Kubicek

Great.

color. a that's great Now lot of

one go of So EBITDA? After left valuing your should got got announced look one slated being marketed other XX negative I insight there. And are me. disposition? Just skilled or of some your given we And currently sales, nursing looking like generally, facilities these do helpful think sales you these a their how color from there. for portfolio, for all in about it you have

Jennifer Francis

our marketing and skilled selling We're Yes. all standalone of nursing.

very are that. the so in process along And far of

these underperforming really of Some and are assets. struggling

it's both nursing skilled not So - and not senior of cap there a is lot a play, market capital but the in rate for living. certainly

complete be think the of in we'll disposition very I the the going We pretty comfortable assets. we're So quickly. feel disposition to pretty successful that

Operator

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

Bryan Maher

stabilization? and occupancy living a color of the in uptick in you us So with bit there? What's of there? balance the Can give on continue first in release market? there the Is do quarter. on we senior expect little couple And the you going the it what a space, the your Is more to noticed others an a seeing a in turn you're for year? there

Jennifer Francis

most turn that in Well, a was I in recent market, is the think the by reality released Nick. report

quarter slightly was Absorption typical lower at for versus New that, construction quarters. first quarter, And number was they've XXXX. since starts quarter. the delivered XXXX its that that's quarter, last than I senior number sorry, interesting inventory the living five first absorbed less slowed, been the time the pretty but think, has growth this - about talking the have units now XXXX, highest since for continued to for slow, units fourth it's of first of in highest since

So across we say we're think are, are the things market, that look but the bottom, along I balancing things to up. starting

Bryan Maher

of transaction maybe Star, Five read changes on little scheduled all? any a the XXXX, with bit chance that, place January But on on the would take there then Is for give us X mix January me. doesn't fully gets is delayed got And pause that going just that X? Okay. Five and it's that of Star at that there anything it

Jennifer Francis

No. place, pretty a do as take think a lot needs now go We will licensing to feel will of But lot licensed. it There's SNH between take expected. that that pretty to it There's place. and getting then. feel we that comfortable that I comfortable

Operator

The from next Capital RBC Carroll question of comes Markets. Michael

Michael Carroll

that I'm guess, were specifically, the just assets? sales bit these assets you all Five EBITDAR assuming leased about completed? you previously can How Star nursing those facilities with sales. those skilled little much generating? Jennifer, Yes. a that talk I

Jennifer Francis

closed. Yes. for They the as did were communities, have said. assets I These that struggling

So I had these think for EBITDAR that communities. negative we

Michael Carroll

How much closed also they? then you or [indiscernible]? that ones were that agreed ones - negative was for - how that have And the to that - the and

Richard Siedel

that EBITDAR negative as well. confident generally but a one be right those. had under generate portfolio will are have EBITDA, agreement the our we on does currently pricing better is being marketed The now some There

come and could been sold and trying properties for properties unit were of, cap maximize, As in they really of somebody some - - to better. Jennifer per and the current plays. it already kind the redevelop really to think rate run that looking pricing they said, the weren't have They

maybe pricing future But hoping marketed we're earlier were in plans. somewhere around properties or So a the seven overall is our disposition already little of guidance from separate still line some the below. with of cap being

one-off. more they're So

Michael Carroll

this correctly. get sure just clear hearing So I'm I to and want make this

or You was negative EBITDA said EBITDAR negative? the was the

Richard Siedel

R sure, number if EBITDA properties. a you was of rent. for EBITDAR for these was without the have negative negative

Michael Carroll

marking X? that? you the your a Housing we said kind much, generating - dilution can out guess, portion we of Five think that good I from guess, on should I of EBITDAR I how that of now underperforming about how And out how the And unexpected many Jennifer, sale they and were. that think, transition Okay. them right Senior figure assets then And in assets? are remarks, you're the were for model be Jan will Star what the prepared

Jennifer Francis

have about know noncore about an has $XXX don't that think I about the that breakdown. I living asset. to senior XX-XX I disposition - it's It's million MOB. plan the

don't can't talk I probably asset. - each individually So about

Richard Siedel

think, our an that, XX% I after CAD is it into easiest dividend that ratio take on way after rate, the payout future and Mike, Yes. said to back CAD sale. we've is and to conversion asset

as that's think until agreement. these on give properties we'd under probably it want I guidance So to are much as

Michael Carroll

you the guess, bit I are Okay. in the were marketing, interested I million can far then total? who talk those little parties $XXX a assets? in guess, about along you with And buying how

Jennifer Francis

the of see opinions compiled all values them. We've list. on We or broker

and market the We few are we'll hit over the with conducting them. broker days interviews next then

market So because lot a is they for though of we brokers we're assets. right good with have they're buyers not these excited know discussions any now, - that in the

Richard Siedel

There's number been a calls. of inbound

Jennifer Francis

certainly. Yes,

Richard Siedel

certainly demand market. in there's So

Operator

Todd Fargo. Stender The next Wells from question with is

Todd Stender

we debt-to-EBITDA and year some what What off that for pretty the just piece? the are debt mortgages, far paydowns? expected coupons going Rick, but leverage in addressing piece, cheap saw doing of the push more debt some We are can what how backup is this expect to paydown so you paid obviously being you which mentioned metric But your - denominator? probably drop on EBITDA, you up.

Richard Siedel

did. We

$XXX quarter bond of have maturity I that paid We with due was off think to did $XXX we notes million revolver. the that this of earlier million the month.

a but dilutive, slightly less it's or So push. more

of moving any encumbers paying off that living until our communities. are mortgage And next year. senior don't forward, We maturities have four then we of really

we proceeds generate ability term down the have the the revolving So credit the existing we be the proceeds, pay pay down to have extra that And to used we to loans. facility. will extent,

Todd Stender

Any that at I it gears trended The color we how Okay. a NOI look specifically same-store cash on go on positive, pool? then, should basis guess, And to MOBs, negative. switching the but nuance there? did

Jennifer Francis

Yes. XXXX. grow, but quarter vacate that's in to tenant released got rents we've We those the of We're buildings causing single the seeing really had last some get buildings drop.

Todd Stender

Okay. as And science, I then - QX? an there guess, What a in reminder just bump, was in there from life an Vertex science? outsize helped life was rent

Jennifer Francis

was. There on Yes. January bumped Their rent X% X.

Operator

Vikram is Morgan The of Stanley. next question from Malhotra

Vikram Malhotra

and especially of sales, it sort when sort talk talk MOB by Just the on noncore, MOB portfolio, number made recently? sort look a has for about the and you just up your just broad sense broke the of give Can pricing what can of mind our been to the these pricing us MOB, gave MOB the robust of as you in skilled. wondering and planned of I'm about, just noncore? given sort you you

Jennifer Francis

a that is noncore I geographic us think for specifically. noncore,

complement markets well. so don't we that And our its portfolio feel

Vikram Malhotra

just of give? are sort sense range Okay. then seeing you any where just cap Or of you of rates? And preliminary sort can

Jennifer Francis

cap seven a think we Yes. in the tighten And lower. based total, we mean, BOVs were up the to a portfolio, around think it is rates going at - cap, overall, be thinking be that I would but would that bit it'll bit. we - on

Vikram Malhotra

whole MOB thing? that for or seven And the

Jennifer Francis

could maybe MOBs that lower the It's I whole and for use but we number on think the slightly on MOBs. thing, the

Vikram Malhotra

of terms in about rent conversion? expectations expenses? components, are high How of of in you you just, this you and seen improvement just Can different as in I Nick seeing, What just you sort data, growth Okay. level? talked our guess, thinking the talk potential which noted And about sort your we've about on baking of some peers in, you're occupancy, then, you're well.

Richard Siedel

expenses, is we're human particular completely Housing think to that making workforce. excited in I the headlines moves, we've main one capital pressures execute see number as And pleased them on it its Senior the to been investments space. the see that. story is agree We there, those wage in Star Five in with modeled and and we're

be in probably So hoping the revenue that's change. the increased portfolio some flattish, occupancy that in modeled has revenue hopeful The management shape. we're bit. rates the are generally bit three to tailwind, over that last quarters. a We've system driver provide as most of should a outperform. pleased we've significant a We're but of Again, the of demographics good seen growth we

at near the we Jennifer turns Senior Housing that market bit. to skipping as As on the and along the still bottom is, bottom, a believe or we're said, hopeful or capitalize

Vikram Malhotra

the last release, or in Okay. And XXXX. then us just the if says that wanted That's XXXX us, on just it conditions under you you helpful. remind conversion gets clarify January transaction press one, extended? to remind extended just I agreement, can the In can early what

Richard Siedel

as that in X/X/XX. worst perspective. be is case just that, a there it's reason of tax fully available, The We is scenario. expect extension a transition ready your to That when kind from to on

You an any properties. operates XX% more a tenant year. your can't given independent XX% or who of own RIDEA you can't TRS than more contractor, generally And of have than in

the through still that there it Star any to do a believe an written all nothing was in be reason expect to X/X/XX. and Five we really were another concern we year, looking on go as kinks. in work way while conversion, but able to we're that we'll But or So going still delay, we some it for contracts for expected event, the

Operator

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

Jennifer Francis

to coming events. including week. be in at New Bank Conference forward Wells America look these events Thank on week, following quarter with you Healthcare the call. of you. Merrill We've you, York Research up, the Lynch we'll Las Vegas thank Thank for and you next us Fargo our first many earnings We joining several seeing and of

Operator

attending today's has now concluded. for Thank conference presentation. The you

You may now disconnect.

Diversified Healthcare Trust (DHC) 9 May 192019 Q1 Earnings call transcript