DHC - Earnings call transcript Q2 2019 | Diversified Healthcare Trust

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning, and welcome to the Senior Housing Properties Trust Second 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 Kodesch, Director of Investor Relations. Please go ahead.

Michael Kodesch

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

today's Francis, and are Operating me call Joining on Jennifer Rick Chief Officer; Siedel, President Financial Officer Treasurer. and Chief and

presentation by like written of consent the would that today's Today's call call note includes management by strictly session. to and a recording transcription, Housing. prior are of followed the conference Senior I question-and-answer retransmission without a prohibited

today's of Private contains upon call X, the the Statements and the Securities These XXXX. any Litigation forward-looking Commission revision laws. and Forward-Looking Act beliefs Senior obligation and to Company based the conference Today's in than expectations no today, meaning the forward-looking Reform Exchange results as call within filings through XXXX revise conference or present Securities or other with are securities other of undertakes publicly of SEC. of statements August to Thursday, Housing's release made The statements

Funds operating numbers, basis NOI. In addition, cash FAD cash operating or this net normalized EBITDA attributable income Adjusted EBITDA basis available call components to or or non-GAAP and to in net and these Reconciliations may the our shareholders AFFO, package CAD our www.snhreit.com. common figures calculate found data to including non-GAAP FFO, or and normalized supplemental From income contain on at, of Operations financial are website

materially differ may from those statements. projected results forward Actual any in looking

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

to over the would Now, turn I like call to Jennifer.

Jennifer Francis

of morning our Thank shareholders and to Good call all you, participants. Michael.

shareholder revenue, results, sustainability into Company's transitional XXXX beyond. the announce course remains long-term provide for growth this and to as and of diversified to our returns year improve reliable pleased second quarter moving on are XXXX the deliver We

an important arrangements XXXX progress as milestone advancing us. Five reached largest transaction this June Five planned. Senior XX, On restructured completing completing the tenant our with The Living Star on with business Star is in

through to Meanwhile, SNH one conditions move we of shareholders to requisite voted all-in-all arrangement. favor from assets on located. Star’s of the leased or states shareholders are Five to our SNH in the Star’s in which the and conversion. the assets we Star stocks order restructuring business Five continue transition to in licensing January common In satisfaction applications remain for issuing triple-net Five X, XXXX target with of IBS,

previously the sell value make SNH portfolio both agreements financial In which the to future. of for headway conjunction position we strategy that to we our with $XXX We Star mentioned expect to or our reduce end best million to asset the up Five our our reach by transform target leverage. to under and to XXXX will have restructuring, of disposition continue in leverage sell

abundant both and our and is There markets are Living acquisitions to capital timing and Senior office the we comfortable continue obtainable. that pricing medical in goals feel

to As and a non-core makeup and is disposition Living communities portfolio segment. our reminder, our weighted properties our of Senior MOB the

Living a our from property. $XXX we engaged have on aggregate skill sold two currently an office facilities almost assets nursing and XX we price for for with We sale are each medical approximately office medical have to and currently XX brokers also million. under of segment million. buildings $XX Year-to-date three agreements sell Senior gross communities

for goals. meeting RMR up Xst various our stake stages July on in of at Additionally, disposition in which increased program. there marketing balance us million This flexibility are sold our $XX XX properties Group the makes the net give our that in the process, entire leverage are proceeds. approximately in we equity Also sale

the second property an from compared stability cash XX.X% in Fiver the as leased basis upon the of rent last morning, decrease primarily $XX.X our for in result portfolio. year. This consolidated quarter Earlier quarter transition Living Star’s transaction. triple-net Senior million the quarter’s the reduction April reflected same MOB in full reported this to quarter same was agreed definitive in results segments continuous NOI second we The our decrease in in

rent was communities, second Excluding the Living year. the has the took year, compared Seaport increase same XXXX at last driven triple-net this year. in five-years property mainly X% Same property one base cash that January quarter the in leased on to rent increased our commenced every effect cash year our Senior basis square of a one basis compared lease results Life the segment X.X% foot XX of up by This our an last million XX in increase X% Science NOI Xst property which property in basis NOI in quarter increase same same points district to the the MOB quarter Boston. of of

due on square flat property in The Minneapolis same basis. area. points property Fremont, was Francisco the XX,XXX bay medical was office prior San foot in building California cash portfolio a to drop property we discussed properties roughly same located and XXX,XXX prior two the XXX and quarter foot square on have occupancy to year MOB the in The market calls basis and

advanced portion near-term. same-store strong NOI spreads effects scheduled temporary on offset and drop this are re-leasing in Minneapolis prospects repositioned with discussions medical it entirely and in for a We its property rent believe the of that recently will occupancy, large almost we our growth. several re-lease Despite the growth in office

X.X X.X feet square medical comprised of feet X.X SNH’s weighted of assets million XX.X a million with Sciences feet MOB Life term contains buildings of segment and office approximately million square square of years. average

rent, weighted new quarter term leases of of leasing and with executed feet in a results leasing strong average years average just per year. We during a X.X% an XX.X roll-up of per with renewal lease square and over the foot XXX,XXX cost square generated $X.XX

leasing potential Furthermore, vacant for prospects space robust for and upcoming a strong are renewals creating activity exploration. new or tenant pipeline

San Torrey three foot campus Life Diego approximate in square our As prior XXX,XXX Sciences greater underway are redevelop building stated located to in area. the within quarters, plans the Pines

one undergo to transformation is Life for includes the to country, both Torrey The demolition and and the steel. the Sciences concrete of buildings third full which considered ranking Boston markets behind a complete top property the down the Pines site San Francisco. in and will

completion space, Following and late its offering flexible well XXXX, lab as modern be as office campus prominent property the A a will in Class estimated amenities.

We in square an the sizable are already discussions roll-up overall tenants and the in possible buildings anticipate campus and a for with to rent. increase footage

to same Living the Senior Managed XX points prior portfolio period Our same basis compared year. decreased the in occupancy property

expected, up the on $X.X cash As down which primarily property were and NOI same was wages, we to million basis. same salaries basis, increased due property

challenges some across pressure team Senior types all which much quality this, Living are see competition biggest leadership. as commitments for has in its members, address and said, Star As increased we have to wage move. its a Five needed employee strategic of fierce we the To

use labor. Additionally, support replace the entirely Five will eliminate to to Star costly workforce. and believe with high lead Five into ultimately employee to it and contract and workforce services Star’s even led past hopes third-party higher increase turnover increased occupancy. of to We investment this in the labor residents permanent quality better

Five This agreement resulting XX-months X.XX has rent times Senior ended from Star incorporates in Our transaction rent the X.XX April. leases, XX, from reduced times the for of new includes portfolio which the Living the triple-net announced March coverage XXXX. coverage lease

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

the I to for to will discussions the Rick now turn our quarter. of call financial further over provide results

Richard Siedel

Thank everyone. what highlights financial you, Jennifer Jennifer, morning the covered. beyond some good and of just be discussing will I second quarter

to Senior to was the largely $XX the XXXX of quarter year. came second lease our quarter down the effect same from decrease in the was normalized Communities, $X.XX which share, million a full share for compared FFO due per of triple-net Normalized in rent. $X.XX last Five per Star’s Living of reduction quarter or FFO $X.XX

XXXX. In third July, payable on $X.XX was the normalized payout approximately a the new for based declared ratio of second dividend share XX%. quarter The FFO in our dividend per we quarter

stated and call, available assets after projected our approximately we the of dividend XX% target. meet ratio selling after conversion distribution based of to As payout on is target our on communities leased of this cash for leverage last

administrative stock incentive of to a quarter business million no and a base and reduced General second for as compared the our to lower therefore year fee paid result XX% accrued estimated XXXX decreased and $XX.X fee or expenses price management our almost last manager.

anyway. is the quarter driven capitalization line our market this base investors is being total business we in capitalization and business by management $XX.X historical As stock and annualized the reduction recaptureable of the remind market not reduced fees RMR. cost interest as in about or second to price shareholders of believe paid to that strong base million fee run in We of management assets, RMR not less RMR by the SNH on deferred manager paid the currently rate decrease reduced demonstrates in translated between this

to portfolios. on recurring Washington Minnesota In and Senior that capital and on in and was our repositioning made multi-tenant projects of the spent $XX.X in property MOB completed DC progress we discussed Living single-tenant redevelopment this segment a MOB have to Turning conversion a between in on capital expenditures. prior we quarter. The CapEx split redevelopment Managed in million We $X.X million calls.

Living Tennessee calls. of also to related on Senior XX prior capital that portfolio, of in the have the the Managed our we our expansion of are properties expenditures majority In unit one discussed redevelopment

Washington MOB we expenditure portfolios Going current as and DC capital continue spend we In to expenditure forward Living segment repositioning $XXXX per in Torrey our our we to unit we redevelop expect capital to expect property year. to see Senior our in redevelopment each about Pines. in the as begin

being with structure strong occupancy look and needs revenue of are goal investing We and of growing the forward to transitioned capital properties assets IBS these in the additional returns. to assessing creating the the and

sheet, and under balance as outstanding shares. second $XXX sale today asset RMR revolving Subsequent using from we million borrowings Moving cash-on-hand our quarter we proceeds facility. million our reduced to the to of credit facility $XX revolving of of roughly and the to $XXX our quarter end, million the on credit sales ended our with

our and RMR XXth the the disposition that The proceeds these on the costing to X% was use investments June from we able were shares us reduce price shares the X.X%. was in of to based debt dividend on yield closing

generated During investment. our ownership on period XXX% we return this a

debt-to-adjusted-EBITDA assets XX%. gross June and just XXth times of debt XX to reported was was our As under

XXXX. roughly to the We third of assets in or by to debt-to-adjusted-EBITDA to mentioned to year previous our the to million plan sell have of during lower. we agreements under produce up to As in $XXX times sold end the order calls, six or debt-to-adjusted-EBITDA expect quarter peak

That concludes questions. open for the our prepared remarks. up Operator, phone please line

Operator

the go begin ahead. answer session. of Carroll question and The Markets. Michael will Capital We RBC [Operator from question first now comes Please Instructions]

Unidentified Analyst

on guys. morning for Good This [Jason] Mike. is (Ph)

Jennifer Francis

morning. Good

Unidentified Analyst

$XXX in sale. on million the question asset a Got

RMR So, stake is the that? included in

Jennifer Francis

you can disposition so $XXX said that share No. are flexibility. actually in I certainly RMR us group sale on in target $X.X $XXX The identified have million billion to hit helps still asset as past, we assets. sell we the in create billion But target.

Unidentified Analyst

guys Okay, And supply into XXXX? it. about XXXX then how do you think moving Senior forward got and Housing

Jennifer Francis

Well, inventory Hopefully, I that kind to there that that are think is of to mean probably construction even quarters doesn't starts That we five or I is. are turning there Construction see happening. four quarters, starts where been But that of trend are think next continuing the happy data. has the trend lower. lower. to five isn't growth, trending

continue will hopefully, on. that So

Unidentified Analyst

Got it. for wondering in expectations XXXX. was shop what are your And I then the

things what costs So, the then balance two elevated starts your with paired labor do construction have the you trending those and out you expectations lower, for portfolio? are know how if

Richard Siedel

fairly Rick. or expected in is XXXX. hope continued we this NOI double-digit XXXX, transparent that pressure been we declines we some in anticipated that clear and have Jason I in

into actually just further and We occupancy. a supply, the result quarter than to fill and markets that in a have current saw little (Ph) little slightly inventory modeled resulted within growth did that point portfolio, [NIC] it we the XX basis higher our a in TRS flatter decline this as new

things and in-line our to in investing believe we happy much doing And are with really around management are the team and we expectations the in confident So so turn doing portfolio it's very the the things that and new business the they workforce. and are far. right Five Star’s

Unidentified Analyst

Okay. Thank you guys.

Jennifer Francis

you. Thank

Operator

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

Todd Stender

Thanks.

expecting that that contract. - bleed from of in Just you into to a go the are under suggest XXXX may language back on release sell have suggest to the timing you may the that some basis? Does or XXX just that disposition

Jennifer Francis

will agreement in Todd licensing be Yes, Thanks will your space. due issues Living question. that chunk, for a have on think to we big do year-end. the Senior we but to will by That we agreements, be under close really is closed under

getting that is SNH and at idea we risk. to triple-net put Senior Living for from licensed licensing transition all the with So want the Communities, don't of to

that marketing the assets, happen and decided have first we will after we the And it year. then while so the we those be will expect agreements we are under that closing still of

Todd Stender

in your same And XXX, the So there then million in timing is is another is Okay. that purely sniffs that to addition XXX and expectations?

Richard Siedel

our sniffs are for The and majority most of in XXX the are included part, them agreement. already under vast the

had throughout this to expect year. close progress some and rest we more we have So of this selling the season

Todd Stender

Okay. And stick to then Rick, you. just with

to you I peak dispositions your and sooner it down a to proceeds the going guess pay suggests timing line? because If this guess you on that for are are could will quarter. basis, be I Does than leverage disposition be debt-to-EBITDA using later

Richard Siedel

we very third of of won’t QX if confident lot will, the are agreement I a we lot execution our able quarter. and are know end properties will lot interested at said, execute under It planned. we very We We think Jennifer the me to to we of on as have of in surprise closing. have had we a our are likely be a that folks plan as

think will likely I we October, October these metrics yes, close peak up can may sometime but in if QX if from will wind lower report, at peak and report closings leverage versus we what leverage, of will September So it we overall some XXX. we with in properties leverage

Todd Stender

Okay thank you.

Jennifer Francis

Thanks.

Operator

go Mr. The from from Riley Riley. of B. Bryan Maher comes next question please Please FBR. go B. Maher ahead. ahead

Bryan Maher

of view we you And for look the of question that when three we picture modest when around morning, a like last on calls quarters for going of of occupancy is lot trends with at I occupancy mute. for the your bigger in or Senior general What we we level all-in. on a look face at the supplemental Kind your what assets the new but blended is so that good see occupancy optimal Living kind get was Senior is kind the still of XX% supply. Hi increases in Living own? in

Jennifer Francis

We would XX%. love to see at that

that a Living good low ownerships Living is I pull and up all Living across all Living so XX% think dragging a Living is industry think because this Independent Assisted would Senior I about ownership is according Assisted and is the all-time bit, Assisted think down, if I NIC the Data, XX% could across we be target.

Bryan Maher

rates weigh have you the occupancies managing also do And in is up going how noticed What going little do where and variables? down your maybe there rate properties because flexibility quarters bit. we a have occupancy type of

Jennifer Francis

different in management occupied more. they for of types a become community. to able charging a the bit Well management portfolio and across rate are revenue be a with to more deal the and units as working give I think and them rolled across Also that Star that able flexibility out get trying properties has little been dynamic great push you to will of Five on the revenue are what

market communities hopefully if push then market I an within and them to occupancy just will internal help continues, the the So eye then keeping on the and rates. that think push

Bryan Maher

or decision So property are food that the the chain decisions at is basically really where being the along decentralized made? a level management

Jennifer Francis

think both the it’s a combination and I corporate, local within two. it’s of

Bryan Maher

January think X, X, If is happen it correct? any that XXXX. or and then done Star guys still doesn’t it's of pushed on between And I Is none. done XXXX, over risk you out you Five is the to minute an to it would and consider doesn't kind gears X, X now I all January major January in hurdles because I Okay. it that the get saying transition, shifting January get a for there to that like recall all think

Jennifer Francis

of the and licensed that of that at able that were is. a confident experts the has hurdles, It are be structure, has is will I licensing and licenses, occurred operator was deal vote transition SNH Five lease so hit next Star and working and There and feel two really will communities that so to with now the the right as we already one well this on vote that have with milestone milestone met. have team is The been the be first communities still happen triple-net structure the licensing that in a shareholder that year-end.

Bryan Maher

last just me. then and for Okay,

profound you assets? comment million made most be are the I a marketing selling sold, the get and there. was Jennifer are these buyers the think you that kind there you of are That confidence, money out gives to XXX running lot who into when will able you of you

Jennifer Francis

Yes.

across it's think the I spectrum.

with operators think operators are in-hand. private or buyers lot I of private there that a

We we out with out the may primarily. a small there are be buyers seeing equity there manager think It still buyer with still partnership I is JV an and private of it's in-hand, of and but our kind there, that, a operator. lot are some private lease

Bryan Maher

all is That Thanks. Okay. me. for

Jennifer Francis

Thank you.

Operator

The of ahead. next from comes Baird. Babin question Please Drew go

Drew Babin

Good morning.

Jennifer Francis

morning. Good

Drew Babin

on fundamentals of It or Senior in XXX leverage underwriting more Are keep scenarios to grade next dispositions in that scenario year. the down where to and like where closer high down year, would in Senior remain to RIDEA probably is the a Housing sufficient remaining investment gets the any million scenarios low getting year-over-year bad maybe keep fundamentals Question sound less is a high-single-digits that forecast fundamentals you presuming necessitate flat. are priority? RIDEA, next might kind there different for internally the leverage the Housing dispositions

Richard Siedel

as of kind ways. have and talked into year but with have double-digit about possible Again, we publicly. have don't year. give have And officially of like feel we declines we transparent next to certainly about flat we we guidance, We a be conservative it what modeled this number fairly as tried expecting been

do excited be about are know Again, us to see and to in kind are still stress And the our we will that particular to agencies how I things looking Five can we able take plan. ratings are of think execute confident I we around. do we very the enough rating So on is business our I doing that turn that. very don't Star seriously

versus mean, Again, back capital also external assets. I but encouraged now need bringing accretively sell will we new that by will to our construction ongoing some will you slowdown leverage of an think to we regular but know I program, don't more think the recycling fund in have starts, more line. in growth be I

Jennifer Francis

I that with what is if a I is just has announced Star pleased Five on They - saying we that been CEO want may. COO hired. are new follow Rick that to doing. just a

So I senior we CFO. think COO team team. it's new and there management a before, by have encouraged CEO, the the with the are management new have now this progress we make can they they new new with new team about talked really new there a a senior but whole that

Drew Babin

just Thank circling property Torrey lease you Is that and there one to the basis GAAP upon talking to know being one prior at? on cash on roll a a to for back me rents where relative about the that expiring cash basis from trend on property. the strips the rents that to maybe up Pines you more of had prior and relative higher that kind or it expect to I just long-term lease was do expired of how initial re-occupancy

Jennifer Francis

I GAAP looking roll numbers up the have at rents. it’s GAAP in been substantial and

it up it out there, every look up. but cash, are basis in quarter like rents rent really tend again and seems getting shaking in at to GAAP flat probably it’s think I are the we pushed rents

Drew Babin

for Thanks great. Okay, color. the

Jennifer Francis

Thank you.

Operator

ahead. have Stender Fargo. of we Todd Wells a follow-up Please from go And

Todd Stender

Thanks.

or may the of a guys maybe kind it it and an participate Licensing, have State in just Just to you back little flush to necessarily needed the none, can out bit? is not be that you all RIDEA so state-by-state to

Jennifer Francis

very in we be expectations them need It are being is applications is it by to in to all. how certain There team long into get filed tied state-by-state, but to takes hard and time. in have order when our is it pushing those very timing state

be to all pushing all we on So PNBs. in are most the - of getting really sense

Richard Siedel

do just or we a There That all a the in planning flexibility property to we is year. extent two it of pushing really some are and so the the but some end contingency done or small it by was place, have to XXX% right. are get -

Todd Stender

just Is on that hear on basis? happen will as they something something conference guess or that we is you a I calls announce quarterly

Richard Siedel

on significant it, there or about effective progress I be I the a if were would I mean, was in - we talk expect we scenario can’t to really right now. certainly license X/X/XXXX really that we can envision road guess the all report but bump to and be that

Todd Stender

the I information? you positive under would you an get a license, release guess But when early acceptance announcement. that

Richard Siedel

applying take are will effect on We to X/X. that is license

So..

Jennifer Francis

they applying know we if a XXX that to it are they that that XXX few days get instance takes so days. days are then for before So a scheduling license application that

goal think of in I to license up lines of get and goal I early isn’t the the apply to the the license November, XXXX. year, So that with is we the it get think that end so beginning

Todd Stender

thank you. it Got

Jennifer Francis

Sure.

Operator

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

Jennifer Francis

thank York us BMO attending our Chicago, and second NIC investor these coming seeing you earnings to up the an addition to you of non-deal events you. on Thank of Real the at many joining call. quarter forward and We look in active Estate including in Thank road Mid-Atlantic on New events. and shows quarter for you With Conferences.

Operator

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

You may now disconnect.

Diversified Healthcare Trust (DHC) 8 Aug 192019 Q2 Earnings call transcript