Maryland | 04-3445278 | |
(State or Other Jurisdiction of Incorporation or Organization) | (IRS Employer Identification No.) |
Large accelerated filer ☒ | Accelerated filer ☐ | |
Non-accelerated filer ☐ | 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. ☐ |
Title Of Each Class | Trading Symbols(s) | Name Of Each Exchange On Which Registered |
Common Shares of Beneficial Interest | SNH | The Nasdaq Stock Market LLC |
5.625% Senior Notes due 2042 | SNHNI | The Nasdaq Stock Market LLC |
6.25% Senior Notes due 2046 | SNHNL | The Nasdaq Stock Market LLC |
Page | ||
March 31, | December 31, | |||||||
2019 | 2018 | |||||||
ASSETS | ||||||||
Real estate properties: | ||||||||
Land | $ | 837,575 | $ | 844,567 | ||||
Buildings and improvements | 7,022,101 | 7,031,733 | ||||||
Total real estate properties, gross | 7,859,676 | 7,876,300 | ||||||
Accumulated depreciation | (1,560,690 | ) | (1,534,392 | ) | ||||
Total real estate properties, net | 6,298,986 | 6,341,908 | ||||||
Cash and cash equivalents | 39,875 | 54,976 | ||||||
Restricted cash | 14,877 | 15,095 | ||||||
Acquired real estate leases and other intangible assets, net | 401,209 | 419,244 | ||||||
Other assets, net | 390,953 | 329,203 | ||||||
Total assets | $ | 7,145,900 | $ | 7,160,426 | ||||
LIABILITIES AND EQUITY | ||||||||
Unsecured revolving credit facility | $ | 225,000 | $ | 139,000 | ||||
Unsecured term loans, net | 548,493 | 548,286 | ||||||
Senior unsecured notes, net | 2,217,989 | 2,216,945 | ||||||
Secured debt and capital leases, net | 742,883 | 744,186 | ||||||
Accrued interest | 35,241 | 26,182 | ||||||
Assumed real estate lease obligations, net | 83,919 | 86,304 | ||||||
Other liabilities | 178,937 | 219,653 | ||||||
Total liabilities | 4,032,462 | 3,980,556 | ||||||
Commitments and contingencies | ||||||||
Equity: | ||||||||
Equity attributable to common shareholders: | ||||||||
Common shares of beneficial interest, $.01 par value: 300,000,000 shares authorized, 237,729,900 shares issued and outstanding at March 31, 2019 and December 31, 2018 | 2,377 | 2,377 | ||||||
Additional paid in capital | 4,611,634 | 4,611,419 | ||||||
Cumulative net income | 2,170,878 | 2,140,796 | ||||||
Cumulative other comprehensive loss | (200 | ) | (266 | ) | ||||
Cumulative distributions | (3,823,928 | ) | (3,731,214 | ) | ||||
Total equity attributable to common shareholders | 2,960,761 | 3,023,112 | ||||||
Noncontrolling interest: | ||||||||
Total equity attributable to noncontrolling interest | 152,677 | 156,758 | ||||||
Total equity | 3,113,438 | 3,179,870 | ||||||
Total liabilities and equity | $ | 7,145,900 | $ | 7,160,426 |
Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
Revenues: | ||||||||
Rental income | $ | 158,241 | $ | 173,728 | ||||
Residents fees and services | 108,045 | 102,042 | ||||||
Total revenues | 266,286 | 275,770 | ||||||
Expenses: | ||||||||
Property operating expenses | 117,222 | 108,098 | ||||||
Depreciation and amortization | 72,230 | 70,339 | ||||||
General and administrative | 9,816 | 25,118 | ||||||
Acquisition and certain other transaction related costs | 7,814 | 20 | ||||||
Impairment of assets | 6,206 | — | ||||||
Total expenses | 213,288 | 203,575 | ||||||
(Loss) gain on sale of properties | (122 | ) | 181,154 | |||||
Dividend income | 923 | 659 | ||||||
Unrealized gains and losses on equity securities, net | 22,932 | 27,241 | ||||||
Interest and other income | 114 | 54 | ||||||
Interest expense (including net amortization of debt premiums, discounts and issuance costs of $1,652 and $1,411, respectively) | (45,611 | ) | (43,552 | ) | ||||
Loss on early extinguishment of debt | — | (130 | ) | |||||
Income from continuing operations before income tax expense and equity in earnings of an investee | 31,234 | 237,621 | ||||||
Income tax expense | (134 | ) | (260 | ) | ||||
Equity in earnings of an investee | 404 | 44 | ||||||
Net income | 31,504 | 237,405 | ||||||
Net income attributable to noncontrolling interest | (1,422 | ) | (1,383 | ) | ||||
Net income attributable to common shareholders | $ | 30,082 | $ | 236,022 | ||||
Other comprehensive income: | ||||||||
Equity in unrealized gain (loss) of an investee | 66 | (93 | ) | |||||
Other comprehensive income (loss) | 66 | (93 | ) | |||||
Comprehensive income | 31,570 | 237,312 | ||||||
Comprehensive income attributable to noncontrolling interest | (1,422 | ) | (1,383 | ) | ||||
Comprehensive income attributable to common shareholders | $ | 30,148 | $ | 235,929 | ||||
Weighted average common shares outstanding (basic) | 237,568 | 237,478 | ||||||
Weighted average common shares outstanding (diluted) | 237,600 | 237,493 | ||||||
Per common share amounts (basic and diluted): | ||||||||
Net income attributable to common shareholders | $ | 0.13 | $ | 0.99 |
Number of Shares | Common Shares | Additional Paid-in Capital | Cumulative Net Income | Cumulative Other Comprehensive Income (Loss) | Cumulative Distributions | Total Equity Attributable to Common Shareholders | Total Equity Attributable to Noncontrolling Interest | Total Equity | |||||||||||||||||||||||||||
Balance at December 31, 2018: | 237,729,900 | $ | 2,377 | $ | 4,611,419 | $ | 2,140,796 | $ | (266 | ) | $ | (3,731,214 | ) | $ | 3,023,112 | $ | 156,758 | $ | 3,179,870 | ||||||||||||||||
Comprehensive income (loss) | — | — | — | 30,082 | 66 | — | 30,148 | 1,422 | 31,570 | ||||||||||||||||||||||||||
Distributions | — | — | — | — | — | (92,714 | ) | (92,714 | ) | — | (92,714 | ) | |||||||||||||||||||||||
Share grants | — | — | 215 | — | — | — | 215 | — | 215 | ||||||||||||||||||||||||||
Distributions to noncontrolling interest | — | — | — | — | — | — | — | (5,503 | ) | (5,503 | ) | ||||||||||||||||||||||||
Balance at March 31, 2019: | 237,729,900 | $ | 2,377 | $ | 4,611,634 | $ | 2,170,878 | $ | (200 | ) | $ | (3,823,928 | ) | $ | 2,960,761 | $ | 152,677 | $ | 3,113,438 | ||||||||||||||||
Balance at December 31, 2017: | 237,630,409 | $ | 2,376 | $ | 4,609,316 | $ | 1,766,495 | $ | 87,231 | $ | (3,360,468 | ) | $ | 3,104,950 | $ | 172,238 | $ | 3,277,188 | |||||||||||||||||
Cumulative adjustment upon adoption of ASU No. 2016-01 | — | — | — | 87,429 | (87,429 | ) | — | — | — | — | |||||||||||||||||||||||||
Balance at January 1, 2018: | 237,630,409 | 2,376 | 4,609,316 | 1,853,924 | (198 | ) | (3,360,468 | ) | 3,104,950 | 172,238 | 3,277,188 | ||||||||||||||||||||||||
Comprehensive income (loss) | — | — | — | 236,022 | (93 | ) | — | 235,929 | 1,383 | 237,312 | |||||||||||||||||||||||||
Distributions | — | — | — | — | — | (92,674 | ) | (92,674 | ) | — | (92,674 | ) | |||||||||||||||||||||||
Share grants | 3,000 | — | 47 | — | — | — | 47 | — | 47 | ||||||||||||||||||||||||||
Share repurchases | (4,628 | ) | — | (89 | ) | — | — | — | (89 | ) | — | (89 | ) | ||||||||||||||||||||||
Distributions to noncontrolling interest | — | — | — | — | — | — | — | (5,667 | ) | (5,667 | ) | ||||||||||||||||||||||||
Balance at March 31, 2018: | 237,628,781 | $ | 2,376 | $ | 4,609,274 | $ | 2,089,946 | $ | (291 | ) | $ | (3,453,142 | ) | $ | 3,248,163 | $ | 167,954 | $ | 3,416,117 |
Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 31,504 | $ | 237,405 | ||||
Adjustments to reconcile net income to cash provided by operating activities: | ||||||||
Depreciation and amortization | 72,230 | 70,339 | ||||||
Amortization of debt issuance costs and debt discounts and premiums | 1,652 | 1,411 | ||||||
Straight line rental income | (1,934 | ) | (2,993 | ) | ||||
Amortization of acquired real estate leases and other intangible assets | (1,525 | ) | (1,381 | ) | ||||
Loss on early extinguishment of debt | — | 130 | ||||||
Impairment of assets | 6,206 | — | ||||||
Loss (gain) on sale of properties | 122 | (181,154 | ) | |||||
Unrealized gains and losses on equity securities, net | (22,932 | ) | (27,241 | ) | ||||
Other non-cash adjustments | (943 | ) | (943 | ) | ||||
Equity in earnings of an investee | (404 | ) | (44 | ) | ||||
Change in assets and liabilities: | ||||||||
Other assets | (5,862 | ) | 3,097 | |||||
Accrued interest | 9,059 | 17,088 | ||||||
Other liabilities | (45,658 | ) | (31,680 | ) | ||||
Net cash provided by operating activities | 41,515 | 84,034 | ||||||
Cash flows from investing activities: | ||||||||
Real estate acquisitions and deposits | — | (122,221 | ) | |||||
Real estate improvements | (46,237 | ) | (13,443 | ) | ||||
Proceeds from sale of properties | 2,929 | 216,013 | ||||||
Net cash (used in) provided by investing activities | (43,308 | ) | 80,349 | |||||
Cash flows from financing activities: | ||||||||
Proceeds from issuance of senior unsecured notes, net | — | 491,560 | ||||||
Proceeds from borrowings on revolving credit facility | 178,000 | 316,000 | ||||||
Repayments of borrowings on revolving credit facility | (92,000 | ) | (857,000 | ) | ||||
Repayment of other debt | (1,309 | ) | (6,166 | ) | ||||
Loss on early extinguishment of debt settled in cash | — | (130 | ) | |||||
Payment of debt issuance costs | — | (4,296 | ) | |||||
Repurchase of common shares | — | (90 | ) | |||||
Distributions to noncontrolling interest | (5,503 | ) | (5,667 | ) | ||||
Distributions to shareholders | (92,714 | ) | (92,674 | ) | ||||
Net cash used in financing activities | (13,526 | ) | (158,463 | ) | ||||
(Decrease) increase in cash and cash equivalents and restricted cash | (15,319 | ) | 5,920 | |||||
Cash and cash equivalents and restricted cash at beginning of period | 70,071 | 47,321 | ||||||
Cash and cash equivalents and restricted cash at end of period | $ | 54,752 | $ | 53,241 | ||||
Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
Supplemental cash flows information: | ||||||||
Interest paid | $ | 35,034 | $ | 25,053 | ||||
Income taxes paid | $ | 31 | $ | — | ||||
Non-cash investing activities: | ||||||||
Acquisitions funded by assumed debt | $ | — | $ | (27,798 | ) | |||
Non-cash financing activities: | ||||||||
Assumption of mortgage notes payable | $ | — | $ | 27,798 |
As of March 31, | ||||||||
2019 | 2018 | |||||||
Cash and cash equivalents | $ | 39,875 | $ | 39,161 | ||||
Restricted cash (1) | 14,877 | 14,080 | ||||||
Total cash and cash equivalents and restricted cash shown in the statements of cash flows | $ | 54,752 | $ | 53,241 |
Year | Amount | |||
2019 | $ | 373,701 | ||
2020 | 347,718 | |||
2021 | 324,230 | |||
2022 | 302,712 | |||
2023 | 279,407 | |||
Thereafter | 1,105,830 | |||
Total | $ | 2,733,598 |
Date of Sale | Location | Type of Property | Number of Properties | Gross Sales Price (1) | ||||||
February 2019 | Florida | MOB | 1 | $ | 2,900 | |||||
March 2019 | Massachusetts | MOB | 1 | 75 | ||||||
2 | $ | 2,975 |
(1) | Gross sales price excludes closing costs. |
Fair Value at Reporting Date Using | ||||||||||||||||
Quoted Prices in Active Markets for Identical Assets | Significant Other Observable Inputs | Significant Unobservable Inputs | ||||||||||||||
Description | Total | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
Recurring Fair Value Measurements | ||||||||||||||||
Assets: | ||||||||||||||||
Investment in RMR Inc. (1) | $ | 160,830 | $ | 160,830 | $ | — | $ | — | ||||||||
Investment in Five Star (2) | $ | 4,129 | $ | 4,129 | $ | — | $ | — |
(1) | Our 2,637,408 shares of class A common stock of The RMR Group Inc., or RMR Inc., which are included in other assets in our condensed consolidated balance sheets, are reported at fair value which is based on quoted market prices (Level 1 inputs). Our historical cost basis for these shares is $69,826 as of March 31, 2019. During the three months ended March 31, 2019, we recorded an unrealized gain of $20,836 to adjust the carrying value of our investment in RMR Inc. class A common shares to their fair value. |
(2) | Our 4,235,000 common shares of Five Star Senior Living Inc., or Five Star, which are included in other assets in our condensed consolidated balance sheets, are reported at fair value which is based on quoted market prices (Level 1 inputs). Our adjusted cost basis for these shares is $6,353 as of March 31, 2019. During the three months ended March 31, 2019, we recorded an unrealized gain of $2,096 to adjust the carrying value of our investment in Five Star common shares to their fair value. |
Quoted Prices in Active Markets for Identical Assets | Significant Other Observable Inputs | Significant Unobservable Inputs | ||||||||||||||
Description | Total | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
Non-Recurring Fair Value Measurements | ||||||||||||||||
Real estate properties held for sale | $ | 7,489 | $ | — | $ | 7,489 | $ | — |
As of March 31, 2019 | As of December 31, 2018 | |||||||||||||||
Description | Carrying Amount (1) | Estimated Fair Value | Carrying Amount (1) | Estimated Fair Value | ||||||||||||
Senior unsecured notes | $ | 2,217,989 | $ | 2,225,390 | $ | 2,216,945 | $ | 2,138,202 | ||||||||
Secured debts(2) | 742,883 | 720,339 | 744,186 | 723,003 | ||||||||||||
$ | 2,960,872 | $ | 2,945,729 | $ | 2,961,131 | $ | 2,861,205 |
(1) | Includes unamortized debt issuance costs, premiums and discounts. |
(2) | We assumed certain of these secured debts in connection with our acquisitions of certain properties. We recorded the assumed mortgage notes debts at estimated fair value on the date of acquisition and we are amortizing the fair value adjustments, if any, to interest expense over the respective terms of the mortgage notes to reduce interest expense to the estimated market interest rates as of the date of acquisition. |
For the Three Months Ended March 31, 2019 | ||||||||||||||||||||
MOBs | Triple Net Leased Senior Living Communities | Managed Senior Living Communities | All Other Operations | Consolidated | ||||||||||||||||
Revenues: | ||||||||||||||||||||
Rental income | $ | 103,221 | $ | 50,320 | $ | — | $ | 4,700 | $ | 158,241 | ||||||||||
Residents fees and services | — | — | 108,045 | — | 108,045 | |||||||||||||||
Total revenues | 103,221 | 50,320 | 108,045 | 4,700 | 266,286 | |||||||||||||||
Expenses: | ||||||||||||||||||||
Property operating expenses | 32,177 | — | 85,045 | — | 117,222 | |||||||||||||||
Depreciation and amortization | 36,101 | 19,422 | 15,760 | 947 | 72,230 | |||||||||||||||
General and administrative | — | — | — | 9,816 | 9,816 | |||||||||||||||
Acquisition and certain other transaction related costs | — | — | — | 7,814 | 7,814 | |||||||||||||||
Impairment of assets | — | 6,206 | — | — | 6,206 | |||||||||||||||
Total expenses | 68,278 | 25,628 | 100,805 | 18,577 | 213,288 | |||||||||||||||
Loss on sale of properties | (122 | ) | — | — | — | (122 | ) | |||||||||||||
Dividend income | — | — | — | 923 | 923 | |||||||||||||||
Unrealized gains on equity securities | — | — | — | 22,932 | 22,932 | |||||||||||||||
Interest and other income | — | — | — | 114 | 114 | |||||||||||||||
Interest expense | (6,030 | ) | (238 | ) | (820 | ) | (38,523 | ) | (45,611 | ) | ||||||||||
Income (loss) from continuing operations before income tax expense and equity in earnings of an investee | 28,791 | 24,454 | 6,420 | (28,431 | ) | 31,234 | ||||||||||||||
Income tax expense | — | — | — | (134 | ) | (134 | ) | |||||||||||||
Equity in earnings of an investee | — | — | — | 404 | 404 | |||||||||||||||
Net income (loss) | 28,791 | 24,454 | 6,420 | (28,161 | ) | 31,504 | ||||||||||||||
Net income attributable to noncontrolling interest | (1,422 | ) | — | — | — | (1,422 | ) | |||||||||||||
Net income (loss) attributable to common shareholders | $ | 27,369 | $ | 24,454 | $ | 6,420 | $ | (28,161 | ) | $ | 30,082 |
As of March 31, 2019 | ||||||||||||||||||||
MOBs | Triple Net Leased Senior Living Communities | Managed Senior Living Communities | All Other Operations | Consolidated | ||||||||||||||||
Total assets | $ | 3,325,184 | $ | 2,030,946 | $ | 1,388,949 | $ | 400,821 | $ | 7,145,900 |
For the Three Months Ended March 31, 2018 | ||||||||||||||||||||
MOBs | Triple Net Leased Senior Living Communities | Managed Senior Living Communities | All Other Operations | Consolidated | ||||||||||||||||
Revenues: | ||||||||||||||||||||
Rental income | $ | 101,151 | $ | 67,975 | $ | — | $ | 4,602 | $ | 173,728 | ||||||||||
Residents fees and services | — | — | 102,042 | — | 102,042 | |||||||||||||||
Total revenues | 101,151 | 67,975 | 102,042 | 4,602 | 275,770 | |||||||||||||||
Expenses: | ||||||||||||||||||||
Property operating expenses | 30,938 | — | 77,160 | — | 108,098 | |||||||||||||||
Depreciation and amortization | 34,385 | 20,195 | 14,811 | 948 | 70,339 | |||||||||||||||
General and administrative | — | — | — | 25,118 | 25,118 | |||||||||||||||
Acquisition and certain other transaction related costs | — | — | — | 20 | 20 | |||||||||||||||
Total expenses | 65,323 | 20,195 | 91,971 | 26,086 | 203,575 | |||||||||||||||
Gain on sale of properties | — | 181,154 | — | — | 181,154 | |||||||||||||||
Dividend income | — | — | — | 659 | 659 | |||||||||||||||
Unrealized gains and losses on equity securities, net | — | — | — | 27,241 | 27,241 | |||||||||||||||
Interest and other income | — | — | — | 54 | 54 | |||||||||||||||
Interest expense | (5,909 | ) | (571 | ) | (1,327 | ) | (35,745 | ) | (43,552 | ) | ||||||||||
Loss on early extinguishment of debt | — | — | (130 | ) | — | (130 | ) | |||||||||||||
Income (loss) from continuing operations before income tax expense and equity in earnings of an investee | 29,919 | 228,363 | 8,614 | (29,275 | ) | 237,621 | ||||||||||||||
Income tax expense | — | — | — | (260 | ) | (260 | ) | |||||||||||||
Equity in earnings of an investee | — | — | — | 44 | 44 | |||||||||||||||
Net income (loss) | 29,919 | 228,363 | 8,614 | (29,491 | ) | 237,405 | ||||||||||||||
Net income attributable to noncontrolling interest | (1,383 | ) | — | — | — | (1,383 | ) | |||||||||||||
Net income (loss) attributable to common shareholders | $ | 28,536 | $ | 228,363 | $ | 8,614 | $ | (29,491 | ) | $ | 236,022 |
As of December 31, 2018 | |||||||||||||||||||
MOBs | Triple Net Leased Senior Living Communities | Managed Senior Living Communities | All Other Operations | Consolidated | |||||||||||||||
Total assets | $ | 3,344,581 | $ | 2,044,939 | $ | 1,395,657 | $ | 375,249 | $ | 7,160,426 |
Revenue from contracts with customers: | Three Months Ended March 31, 2019 | |||
Basic housing and support services | $ | 87,412 | ||
Medicare and Medicaid programs | 8,745 | |||
Private pay and other third party payer SNF services | 11,888 | |||
Total residents fees and services | $ | 108,045 |
Three Months Ended March 31, | ||||||
2019 | 2018 | |||||
Weighted average common shares for basic earnings per share | 237,568 | 237,478 | ||||
Effect of dilutive securities: unvested share awards | 32 | 15 | ||||
Weighted average common shares for diluted earnings per share | 237,600 | 237,493 |
• | our five existing master leases with Five Star for all of our senior living communities that are leased by Five Star, as well as our existing management agreements and pooling agreements with Five Star for our senior living communities that are operated by Five Star, will be terminated and replaced, or the Conversion, with new management agreements for all of these senior living communities, or collectively, the New Management Agreements; |
• | Five Star will issue to us such number of Five Star common shares as is necessary to cause us to own, when considered together with our then owned Five Star common shares, approximately 34% of the then outstanding Five Star common shares, and we will declare a pro rata distribution to holders of our common shares of beneficial interest |
• | as consideration for the Five Star Share Issuances, we will provide to Five Star $75,000 of additional consideration, or, collectively with the Conversion and the Five Star Share Issuances, the Five Star Restructuring Transactions. |
(As of March 31, 2019) | Number of Properties | Square Feet or Number of Units | Carrying Value of Investment(1) | % of Total Investment | Investment per Square Foot or Unit(2) | Q1 2019 Revenues (3) | % of Q1 2019 Revenues | Q1 2019 NOI (3)(4) | % of Q1 2019 NOI | ||||||||||||||||||||||||
Facility Type | |||||||||||||||||||||||||||||||||
MOBs (5) | 153 | 12,546,791 | sq. ft. | $ | 3,746,171 | 44.6 | % | $ | 299 | $ | 103,098 | 38.7 | % | $ | 71,024 | 47.6 | % | ||||||||||||||||
Independent living (6) | 68 | 15,090 | 2,281,288 | 27.1 | % | $ | 151,179 | 85,151 | 32.0 | % | 35,991 | 24.1 | % | ||||||||||||||||||||
Assisted living (6) | 198 | 14,766 | 2,085,099 | 24.8 | % | $ | 141,209 | 68,730 | 25.8 | % | 32,845 | 22.1 | % | ||||||||||||||||||||
Skilled nursing facilities (6) | 38 | 3,763 | 118,230 | 1.4 | % | $ | 31,419 | 4,484 | 1.7 | % | 4,484 | 3.0 | % | ||||||||||||||||||||
Subtotal senior living communities | 304 | 33,619 | 4,484,617 | 53.3 | % | $ | 133,395 | 158,365 | 59.5 | % | 73,320 | 49.2 | % | ||||||||||||||||||||
Wellness centers | 10 | 812,000 | sq. ft. | 178,109 | 2.1 | % | $ | 219 | 4,700 | 1.8 | % | 4,700 | 3.2 | % | |||||||||||||||||||
Total | 467 | $ | 8,408,897 | 100.0 | % | $ | 266,163 | 100.0 | % | $ | 149,044 | 100.0 | % | ||||||||||||||||||||
Tenant / Operator / Managed Properties | |||||||||||||||||||||||||||||||||
MOBs (5) | 153 | 12,546,791 | sq. ft. | $ | 3,746,171 | 44.6 | % | $ | 299 | $ | 103,098 | 38.7 | % | $ | 71,024 | 47.6 | % | ||||||||||||||||
Five Star (leased) (7) | 184 | 19,918 | 2,225,885 | 26.5 | % | $ | 111,752 | 39,313 | 14.8 | % | 39,313 | 26.4 | % | ||||||||||||||||||||
Brookdale | 18 | 940 | 65,912 | 0.8 | % | $ | 70,119 | 2,015 | 0.7 | % | 2,015 | 1.4 | % | ||||||||||||||||||||
10 private senior living companies (combined) | 26 | 2,995 | 464,525 | 5.5 | % | $ | 155,100 | 8,992 | 3.4 | % | 8,992 | 6.0 | % | ||||||||||||||||||||
Subtotal triple net leased senior living communities | 228 | 23,853 | 2,756,322 | 32.8 | % | $ | 115,555 | 50,320 | 18.9 | % | 50,320 | 33.8 | % | ||||||||||||||||||||
Managed senior living communities (8) | 76 | 9,766 | 1,728,295 | 20.5 | % | $ | 176,971 | 108,045 | 40.6 | % | 23,000 | 15.4 | % | ||||||||||||||||||||
Subtotal senior living communities | 304 | 33,619 | 4,484,617 | 53.3 | % | $ | 133,395 | 158,365 | 59.5 | % | 73,320 | 49.2 | % | ||||||||||||||||||||
Wellness centers | 10 | 812,000 | sq. ft. | 178,109 | 2.1 | % | $ | 219 | 4,700 | 1.8 | % | 4,700 | 3.2 | % | |||||||||||||||||||
Total | 467 | $ | 8,408,897 | 100.0 | % | $ | 266,163 | 100.0 | % | $ | 149,044 | 100.0 | % |
Rent Coverage | Occupancy | |||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||
MOBs (5) | N/A | N/A | 94.0 | % | 95.1 | % | ||||||
Five Star (10) | 0.99 | x | 1.15 | x | 82.7 | % | 82.3 | % | ||||
Brookdale | 2.05 | x | 2.30 | x | 84.6 | % | 84.0 | % | ||||
9 private senior living companies (combined) (11) | 1.25 | x | 1.27 | x | 86.0 | % | 87.9 | % | ||||
Subtotal triple net leased senior living communities | 1.06 | x | 1.21 | x | 83.2 | % | 83.1 | % | ||||
Managed senior living communities (8) | N/A | N/A | 86.1 | % | 85.8 | % | ||||||
Subtotal senior living communities | 1.06 | x | 1.21 | x | 84.0 | % | 83.9 | % | ||||
Wellness centers | 1.99 | x | 1.78 | x | 100.0 | % | 100.0 | % | ||||
Total | 1.12 | x | 1.24 | x |
(1) | Represents the gross book value of real estate assets before depreciation and purchase price allocations, less impairment write downs, if any. Amounts exclude investment carrying value of properties classified as held for sale as of March 31, 2019, which are included in other assets in our condensed consolidated balance sheet. |
(2) | Represents carrying value of investment divided by number of rentable square feet or living units, as applicable, at March 31, 2019. |
(3) | Excludes $123 of revenues and $20 of NOI from properties sold or for which there was a transfer of operations during the three months ended March 31, 2019. |
(4) | NOI is defined and calculated by reportable segment. Our definition of NOI and our reconciliation of net income to consolidated NOI are included below under the heading “Non-GAAP Financial Measures.” |
(5) | Our MOB leases include some triple net leases where, in addition to paying fixed rents, the tenants assume the obligation to operate and maintain the properties at their expense, and some net and modified gross leases where we are responsible for the operation and maintenance of the properties and we charge tenants for some or all of the property operating costs. A small percentage of our MOB leases are "full-service" leases where we receive fixed rent from our tenants and no reimbursement for our property operating costs. |
(6) | Senior living communities are categorized by the type of living units which constitute a majority of the living units at the community. |
(7) | See Notes 9 and 14 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for information on our restructuring arrangements with Five Star pursuant to the Transaction Agreement. |
(8) | These senior living communities are managed by Five Star. The occupancy for the 12 month period ended, or, if shorter, from the date of acquisitions through, March 31, 2019 was 86.2%. |
(9) | Operating data for MOBs are presented as of March 31, 2019 and 2018 and include (i) space being fitted out for occupancy and (ii) space which is leased but is not occupied or is being offered for sublease by tenants; operating data for other properties, tenants and managers are presented based upon the operating results provided by our tenants and manager for the 12 months ended December 31, 2018 and 2017, or the most recent prior period for which tenant operating results are made available to us. Rent coverage is calculated as operating cash flows from our tenants’ facility operations of our properties, before subordinated charges, if any, divided by rents payable to us. We have not independently verified tenant operating data. Excludes data for periods prior to our ownership of certain properties, as well as data for properties sold or classified as held for sale during the periods presented. |
(10) | Rent coverage is calculated based on annualized rental income as of December 31, 2018. If the terms of the Transaction Agreement had been in effect as of December 31, 2018, based on the $132,000 of annualized rental |
(11) | Excludes data for one senior living community for which we transferred the operations of the community to our TRS and entered into a management agreement with Five Star for Five Star to manage the community for our account in April 2019. |
Year | Annualized Rental Income(1) | Percent of Total Annualized Rental Income Expiring | Cumulative Percentage of Annualized Rental Income Expiring | |||||||
2019 (2) | $ | 34,707 | 8.6 | % | 8.6 | % | ||||
2020 | 34,911 | 8.7 | % | 17.3 | % | |||||
2021 | 28,490 | 7.1 | % | 24.4 | % | |||||
2022 | 33,404 | 8.3 | % | 32.7 | % | |||||
2023 | 21,995 | 5.5 | % | 38.2 | % | |||||
2024 | 46,877 | 11.6 | % | 49.8 | % | |||||
2025 | 18,174 | 4.5 | % | 54.3 | % | |||||
2026 | 25,786 | 6.4 | % | 60.7 | % | |||||
2027 | 10,359 | 2.6 | % | 63.3 | % | |||||
2028 and thereafter | 148,160 | 36.7 | % | 100.0 | % | |||||
Total | $ | 402,863 | 100.0 | % |
(1) | Annualized rental income is based on rents pursuant to existing leases as of March 31, 2019, including straight line rent adjustments, estimated recurring expense reimbursements for certain net and modified gross leases and excluding lease value amortization at certain of our MOBs. Rental income amounts also include 100% of rental income as reported under GAAP from a property owned by a joint venture in which we own a 55% equity interest. |
(2) | Includes two MOB tenants with aggregate annualized rental income of $17,698 that we expect to vacate during the second quarter of 2019. |
Year | Number of Tenants | Percent of Total Number of Tenancies Expiring | Cumulative Percentage of Number of Tenancies Expiring | ||||||
2019 (1) | 114 | 16.9 | % | 16.9 | % | ||||
2020 | 105 | 15.5 | % | 32.4 | % | ||||
2021 | 94 | 13.9 | % | 46.3 | % | ||||
2022 | 97 | 14.3 | % | 60.6 | % | ||||
2023 | 59 | 8.7 | % | 69.3 | % | ||||
2024 | 61 | 9.0 | % | 78.3 | % | ||||
2025 | 40 | 5.9 | % | 84.2 | % | ||||
2026 | 33 | 4.9 | % | 89.1 | % | ||||
2027 | 23 | 3.4 | % | 92.5 | % | ||||
2028 and thereafter | 50 | 7.5 | % | 100.0 | % | ||||
Total | 676 | 100.0 | % |
(1) | Includes two MOB tenants that we expect to vacate during the second quarter of 2019. |
Year | Square Feet (1) | Percent of Total Square Feet Expiring | Cumulative Percent of Total Square Feet Expiring | ||||||
2019 (2) | 964,146 | 8.2 | % | 8.2 | % | ||||
2020 | 1,446,336 | 12.3 | % | 20.5 | % | ||||
2021 | 867,206 | 7.4 | % | 27.9 | % | ||||
2022 | 1,202,812 | 10.2 | % | 38.1 | % | ||||
2023 | 1,075,104 | 9.1 | % | 47.2 | % | ||||
2024 | 1,718,691 | 14.6 | % | 61.8 | % | ||||
2025 | 779,948 | 6.6 | % | 68.4 | % | ||||
2026 | 890,227 | 7.5 | % | 75.9 | % | ||||
2027 | 412,573 | 3.5 | % | 79.4 | % | ||||
2028 and thereafter | 2,434,556 | 20.6 | % | 100.0 | % | ||||
Total | 11,791,599 | 100.0 | % |
(1) | Includes 100% of square feet from a property owned by a joint venture in which we own a 55% equity interest. |
(2) | Includes two MOB tenants that we expect to vacate during the second quarter of 2019 the 522,118 of aggregate square feet leased to them. |
Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
Revenues: | ||||||||
MOBs | $ | 103,221 | $ | 101,151 | ||||
Triple net leased senior living communities | 50,320 | 67,975 | ||||||
Managed senior living communities | 108,045 | 102,042 | ||||||
All other operations | 4,700 | 4,602 | ||||||
Total revenues | $ | 266,286 | $ | 275,770 | ||||
Net income (loss) attributable to common shareholders: | ||||||||
MOBs | $ | 27,369 | $ | 28,536 | ||||
Triple net leased senior living communities | 24,454 | 228,363 | ||||||
Managed senior living communities | 6,420 | 8,614 | ||||||
All other operations | (28,161 | ) | (29,491 | ) | ||||
Net income attributable to common shareholders | $ | 30,082 | $ | 236,022 |
All Properties | Comparable Properties (1) | |||||||||||
As of and For the Three Months | As of and For the Three Months | |||||||||||
Ended March 31, | Ended March 31, | |||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||
Total buildings | 153 | 155 | 139 | 139 | ||||||||
Total square feet (2) | 12,547 | 12,602 | 11,741 | 11,732 | ||||||||
Occupancy (3) | 94.0 | % | 95.1 | % | 93.8 | % | 95.1 | % |
(1) | Consists of MOBs we have owned continuously since January 1, 2018, including our MOB (two buildings) owned in a joint venture arrangement in which we own a 55% equity interest; excludes properties classified as held for sale. |
(2) | Prior periods exclude space re-measurements made subsequent to those periods. |
(3) | MOB occupancy includes (i) space being fitted out for occupancy and (ii) space which is leased but is not occupied or is being offered for sublease by tenants. |
Three Months Ended March 31, | |||||||||||||||
2019 | 2018 | Change | % Change | ||||||||||||
Rental income | $ | 103,221 | $ | 101,151 | $ | 2,070 | 2.0 | % | |||||||
Property operating expenses | (32,177 | ) | (30,938 | ) | 1,239 | 4.0 | % | ||||||||
Net operating income (NOI) | 71,044 | 70,213 | 831 | 1.2 | % | ||||||||||
Depreciation and amortization expense | (36,101 | ) | (34,385 | ) | 1,716 | 5.0 | % | ||||||||
Loss on sale of properties | (122 | ) | — | 122 | 100.0 | % | |||||||||
Interest expense | (6,030 | ) | (5,909 | ) | 121 | 2.0 | % | ||||||||
Net income | 28,791 | 29,919 | (1,128 | ) | (3.8 | )% | |||||||||
Net income attributable to noncontrolling interest | (1,422 | ) | (1,383 | ) | 39 | 2.8 | % | ||||||||
Net income attributable to common shareholders | $ | 27,369 | $ | 28,536 | $ | (1,167 | ) | (4.1 | )% |
Three Months Ended March 31, | |||||||||||||||
2019 | 2018 | Change | % Change | ||||||||||||
Rental income | $ | 98,080 | $ | 96,858 | $ | 1,222 | 1.3 | % | |||||||
Property operating expenses | (30,596 | ) | (29,637 | ) | 959 | 3.2 | % | ||||||||
Net operating income (NOI) | 67,484 | 67,221 | 263 | 0.4 | % | ||||||||||
Depreciation and amortization expense | (33,029 | ) | (32,842 | ) | 187 | 0.6 | % | ||||||||
Interest expense | (5,909 | ) | (5,906 | ) | 3 | 0.1 | % | ||||||||
Net income | 28,546 | 28,473 | 73 | 0.3 | % | ||||||||||
Net income attributable to noncontrolling interest | (1,422 | ) | (1,383 | ) | 39 | 2.8 | % | ||||||||
Net income attributable to common shareholders | $ | 27,124 | $ | 27,090 | $ | 34 | 0.1 | % |
All Properties | Comparable Properties (1) | |||||||||||
As of and For the Three Months | As of and For the Three Months | |||||||||||
Ended March 31, | Ended March 31, | |||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||
Total properties | 228 | 233 | 208 | 208 | ||||||||
# of units | 23,853 | 24,947 | 22,302 | 22,302 | ||||||||
Tenant operating data (2) | ||||||||||||
Occupancy | 83.2 | % | 83.1 | % | 83.2 | % | 83.1 | % | ||||
Rent coverage | 1.06 | x | 1.21 | x | 1.06 | x | 1.21 | x |
(1) | Consists of triple net leased senior living communities we have owned and operated by the same operator continuously since January 1, 2018; excludes communities classified as held for sale, if any. |
(2) | All tenant operating data presented are based upon the operating results provided by our tenants for the 12 months ended December 31, 2018 and 2017 or the most recent prior period for which tenant operating results are available to us. Rent coverage is calculated as operating cash flows from our triple net lease tenants’ operations of our properties, before subordinated charges, if any, divided by triple net lease minimum rents payable to us. We have not independently verified tenant operating data. Excludes data for historical periods prior to our ownership of certain properties, as well as data for properties sold or classified as held for sale during the periods presented. |
Three Months Ended March 31, | |||||||||||||||
2019 | 2018 | Change | % Change | ||||||||||||
Rental Income | $ | 50,320 | $ | 67,975 | $ | (17,655 | ) | (26.0 | )% | ||||||
Net operating income (NOI) | 50,320 | 67,975 | (17,655 | ) | (26.0 | )% | |||||||||
Depreciation and amortization expense | (19,422 | ) | (20,195 | ) | (773 | ) | (3.8 | )% | |||||||
Impairment of assets | (6,206 | ) | — | 6,206 | 100.0 | % | |||||||||
Gain on sale of properties | — | 181,154 | (181,154 | ) | (100.0 | )% | |||||||||
Interest expense | (238 | ) | (571 | ) | (333 | ) | (58.3 | )% | |||||||
Net income | $ | 24,454 | $ | 228,363 | $ | (203,909 | ) | (89.3 | )% |
All Properties | Comparable Properties (1) | |||||||||||||||
As of and For the Three Months | As of and For the Three Months | |||||||||||||||
Ended March 31, | Ended March 31, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Total properties | 76 | 72 | 70 | 70 | ||||||||||||
# of units | 9,766 | 9,258 | 9,059 | 9,059 | ||||||||||||
Occupancy | 86.3 | % | 85.8 | % | 86.4 | % | 85.9 | % | ||||||||
Average monthly rate (2) | $ | 4,275 | $ | 4,308 | $ | 4,329 | $ | 4,308 |
(1) | Consists of managed senior living communities we have owned and which have been managed by the same operator for our account continuously since January 1, 2018; excludes communities classified as held for sale, if any. |
(2) | Average monthly rate is calculated by taking the average daily rate, which is defined as total residents fees and services divided by occupied units during the period, and multiplying it by 30 days. |
Three Months Ended March 31, | |||||||||||||||
2019 | 2018 | Change | % Change | ||||||||||||
Residents fees and services | $ | 108,045 | $ | 102,042 | $ | 6,003 | 5.9 | % | |||||||
Property operating expenses | (85,045 | ) | (77,160 | ) | 7,885 | 10.2 | % | ||||||||
Net operating income (NOI) | 23,000 | 24,882 | (1,882 | ) | (7.6 | )% | |||||||||
Depreciation and amortization expense | (15,760 | ) | (14,811 | ) | 949 | 6.4 | % | ||||||||
Interest expense | (820 | ) | (1,327 | ) | (507 | ) | (38.2 | )% | |||||||
Loss on early extinguishment of debt | — | (130 | ) | (130 | ) | (100.0 | )% | ||||||||
Net income | $ | 6,420 | $ | 8,614 | $ | (2,194 | ) | (25.5 | )% |
Three Months Ended March 31, | |||||||||||||||
2019 | 2018 | Change | % Change | ||||||||||||
Residents fees and services | $ | 101,612 | $ | 100,358 | $ | 1,254 | 1.2 | % | |||||||
Property operating expenses | (78,447 | ) | (75,804 | ) | 2,643 | 3.5 | % | ||||||||
Net operating income (NOI) | 23,165 | 24,554 | (1,389 | ) | (5.7 | )% | |||||||||
Depreciation and amortization expense | (13,393 | ) | (14,010 | ) | (617 | ) | (4.4 | )% | |||||||
Interest expense | (389 | ) | (1,179 | ) | (790 | ) | (67.0 | )% | |||||||
Loss on early extinguishment of debt | — | (130 | ) | (130 | ) | 100.0 | % | ||||||||
Net income | $ | 9,383 | $ | 9,235 | $ | 148 | 1.6 | % |
Three Months Ended March 31, | |||||||||||||||
2019 | 2018 | Change | % Change | ||||||||||||
Rental income | $ | 4,700 | $ | 4,602 | $ | 98 | 2.1 | % | |||||||
Expenses: | |||||||||||||||
Depreciation and amortization expense | (947 | ) | (948 | ) | (1 | ) | 0.1% | ||||||||
General and administrative | (9,816 | ) | (25,118 | ) | (15,302 | ) | (60.9 | )% | |||||||
Acquisition and certain other transaction related costs | (7,814 | ) | (20 | ) | 7,794 | 38,970.0 | % | ||||||||
Total expenses | (18,577 | ) | (26,086 | ) | (7,509 | ) | (28.8 | )% | |||||||
Dividend income | 923 | 659 | 264 | (40.1 | )% | ||||||||||
Unrealized gains and losses on equity securities, net | 22,932 | 27,241 | (4,309 | ) | (15.8 | )% | |||||||||
Interest and other income | 114 | 54 | 60 | 111.1 | % | ||||||||||
Interest expense | (38,523 | ) | (35,745 | ) | 2,778 | 7.8 | % | ||||||||
Loss before income tax expense and equity in earnings of an investee | (28,431 | ) | (29,275 | ) | (844 | ) | (2.9 | )% | |||||||
Income tax expense | (134 | ) | (260 | ) | (126 | ) | (48.5 | )% | |||||||
Equity in earnings of an investee | 404 | 44 | 360 | 818.2 | % | ||||||||||
Net loss | $ | (28,161 | ) | $ | (29,491 | ) | $ | (1,330 | ) | (4.5 | )% |
(1) | All other operations includes all of our other operations, including certain properties that offer wellness, fitness and spa services to members, which segment we do not consider to be sufficiently material to constitute a separate reporting segment, and any operating expenses that are not attributable to a specific reporting segment. |
Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
Net income attributable to common shareholders | $ | 30,082 | $ | 236,022 | ||||
Depreciation and amortization expense | 72,230 | 70,339 | ||||||
FFO attributable to noncontrolling interest | (5,297 | ) | (5,300 | ) | ||||
Loss (gain) on sale of properties | 122 | (181,154 | ) | |||||
Impairment of assets | 6,206 | — | ||||||
Unrealized gains and losses on equity securities, net | (22,932 | ) | (27,241 | ) | ||||
FFO attributable to common shareholders | 80,411 | 92,666 | ||||||
Estimated business management incentive fees (1) | — | 14,347 | ||||||
Acquisition and certain other transaction related costs | 7,814 | 20 | ||||||
Loss on early extinguishment of debt | — | 130 | ||||||
Normalized FFO attributable to common shareholders | $ | 88,225 | $ | 107,163 | ||||
Weighted average common shares outstanding (basic) | 237,568 | 237,478 | ||||||
Weighted average common shares outstanding (diluted) | 237,600 | 237,493 | ||||||
Per common share data (basic and diluted): | ||||||||
Net income attributable to common shareholders | $ | 0.13 | $ | 0.99 | ||||
FFO attributable to common shareholders | $ | 0.34 | $ | 0.39 | ||||
Normalized FFO attributable to common shareholders | $ | 0.37 | $ | 0.45 | ||||
Distributions declared | $ | 0.39 | $ | 0.39 |
(1) | Incentive fees under our business management agreement are payable after the end of each calendar year, are calculated based on common share total return, as defined, and are included in general and administrative expense in our condensed consolidated statements of comprehensive income. In calculating net income attributable to common shareholders in accordance with GAAP, we recognize estimated business management incentive fee expense, if any, in the first, second and third quarters. Although we recognize this expense, if any, in the first, second and third quarters for purposes of calculating net income attributable to common shareholders, we do not include these amounts in the calculation of Normalized FFO attributable to common shareholders until the fourth quarter, when the amount of the business management incentive fee expense for the calendar year, if any, is determined. |
Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
Reconciliation of Net Income to NOI: | ||||||||
Net income | $ | 31,504 | $ | 237,405 | ||||
Equity in earnings of an investee | (404 | ) | (44 | ) | ||||
Income tax expense | 134 | 260 | ||||||
Income from continuing operations before income tax expense and equity in earnings of an investee | 31,234 | 237,621 | ||||||
Loss on early extinguishment of debt | — | 130 | ||||||
Interest expense | 45,611 | 43,552 | ||||||
Interest and other income | (114 | ) | (54 | ) | ||||
Unrealized gains and losses on equity securities, net | (22,932 | ) | (27,241 | ) | ||||
Dividend income | (923 | ) | (659 | ) | ||||
Loss (gain) on sale of properties | 122 | (181,154 | ) | |||||
Impairment of assets | 6,206 | — | ||||||
Acquisition and certain other transaction related costs | 7,814 | 20 | ||||||
General and administrative expense | 9,816 | 25,118 | ||||||
Depreciation and amortization expense | 72,230 | 70,339 | ||||||
Total NOI | $ | 149,064 | $ | 167,672 | ||||
MOB NOI | $ | 71,044 | $ | 70,213 | ||||
Triple net leased communities NOI | 50,320 | 67,975 | ||||||
Managed communities NOI | 23,000 | 24,882 | ||||||
All other operations NOI | 4,700 | 4,602 | ||||||
Total NOI | $ | 149,064 | $ | 167,672 |
• | our ability to maintain or increase the occupancy of, and the rental rates at, our properties; |
• | our ability to control operating expenses and capital expenses at our properties; |
• | our manager's ability to operate our managed senior living communities so as to maintain or increase our returns; and |
• | our ability to purchase additional properties which produce cash flows in excess of our cost of acquisition capital and the related property operating expenses. |
Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
MOB tenant improvements (1) | $ | 5,000 | $ | 1,600 | ||||
MOB leasing costs (2) | 4,132 | 422 | ||||||
MOB building improvements (3) | 995 | 2,779 | ||||||
Managed senior living communities capital improvements | 3,312 | 2,407 | ||||||
Recurring capital expenditures | $ | 13,439 | $ | 7,208 | ||||
Development, redevelopment and other activities - MOBs (4) | 6,059 | 397 | ||||||
Development, redevelopment and other activities - Managed senior living communities (4) | 9,079 | 2,824 | ||||||
Total development, redevelopment and other activities | $ | 15,138 | $ | 3,221 |
(1) | MOB tenant improvements generally include capital expenditures to improve tenants’ space or amounts paid directly to tenants to improve their space. |
(2) | MOB leasing costs generally include leasing related costs, such as brokerage commissions and tenant inducements. |
(3) | MOB building improvements generally include capital expenditures to replace obsolete building components and capital expenditures that extend the useful life of existing assets. |
(4) | Development, redevelopment and other activities generally include (i) capital expenditures that are identified at the time of acquisition of a property and incurred within a short period thereafter and (ii) capital expenditure projects that reposition a property or result in new sources of revenues. |
New Leases | Renewals | Total | ||||||||||
Square feet leased during the quarter | 51 | 447 | 498 | |||||||||
Total leasing costs and concession commitments (1) | $ | 1,857 | $ | 12,518 | $ | 14,375 | ||||||
Total leasing costs and concession commitments per square foot (1) | $ | 36.28 | $ | 28.01 | $ | 28.86 | ||||||
Weighted average lease term (years) (2) | 5.0 | 8.9 | 8.5 | |||||||||
Total leasing costs and concession commitments per square foot per year (1) | $ | 7.20 | $ | 3.16 | $ | 3.40 |
(1) | Includes commitments made for leasing expenditures and concessions, such as tenant improvements, leasing commissions, tenant reimbursements and free rent. |
(2) | Weighted based on annualized rental income pursuant to existing leases as of March 31, 2019, including straight line rent adjustments and estimated recurring expense reimbursements, and excluding lease value amortization. |
Annual | Annual | ||||||||||||||
Principal | Interest | Interest | Interest | ||||||||||||
Debt | Balance (1) | Rate (1) | Expense | Maturity | Payments Due | ||||||||||
Senior unsecured notes (2) | $ | 400,000 | 3.25 | % | $ | 13,000 | 2019 | Semi-Annually | |||||||
Senior unsecured notes | 200,000 | 6.75 | % | 13,500 | 2020 | Semi-Annually | |||||||||
Senior unsecured notes | 300,000 | 6.75 | % | 20,250 | 2021 | Semi-Annually | |||||||||
Senior unsecured notes | 250,000 | 4.75 | % | 11,875 | 2024 | Semi-Annually | |||||||||
Senior unsecured notes | 500,000 | 4.75 | % | 23,750 | 2028 | Semi-Annually | |||||||||
Senior unsecured notes | 350,000 | 5.63 | % | 19,705 | 2042 | Quarterly | |||||||||
Senior unsecured notes | 250,000 | 6.25 | % | 15,625 | 2046 | Quarterly | |||||||||
Mortgage note (3) | 42,372 | 3.79 | % | 1,606 | 2019 | Monthly | |||||||||
Mortgage notes | 1,889 | 7.49 | % | 141 | 2022 | Monthly | |||||||||
Mortgage notes | 12,992 | 6.28 | % | 816 | 2022 | Monthly | |||||||||
Mortgage note | 11,126 | 4.85 | % | 540 | 2022 | Monthly | |||||||||
Mortgage notes | 16,362 | 5.75 | % | 941 | 2022 | Monthly | |||||||||
Mortgage note | 16,344 | 6.64 | % | 1,085 | 2023 | Monthly | |||||||||
Mortgage notes (4) | 620,000 | 3.53 | % | 21,886 | 2026 | Monthly | |||||||||
Mortgage note | 1,742 | 6.25 | % | 109 | 2033 | Monthly | |||||||||
Mortgage note | 10,845 | 4.44 | % | 482 | 2043 | Monthly | |||||||||
$ | 2,983,672 | $ | 145,311 |
(1) | The principal balances and interest rates are the amounts stated in the applicable contracts. In accordance with GAAP, our carrying values and recorded interest expense may differ from these amounts because of market conditions at the time we assumed these debts. This table does not include obligations under capital leases. |
(2) | In May 2019, we redeemed these senior unsecured notes, at par plus accrued interest. |
(3) | In April 2019, we gave notice of our intention to prepay, at par plus accrued interest, this mortgage note. We expect to make this prepayment in May 2019. |
(4) | The properties encumbered by these mortgages are subject to a joint venture in which we own a 55% equity interest. The principal amounts listed in the table for these mortgage notes have not been adjusted to reflect the equity interests in the joint venture that we do not own. |
Impact of Changes in Interest Rates | |||||||||||||||
Outstanding | Total Interest | Annual Earnings | |||||||||||||
Interest Rate (1) | Floating Rate Debt | Expense Per Year | Per Share Impact (2) | ||||||||||||
At March 31, 2019 | 3.80 | % | $ | 775,000 | $ | 29,450 | $ | 0.12 | |||||||
One percentage point increase | 4.80 | % | $ | 775,000 | $ | 37,200 | $ | 0.16 |
(1) | Weighted based on the respective interest rates and outstanding borrowings under our credit facility and term loans as of March 31, 2019. |
(2) | Based on weighted average number of shares outstanding (basic and diluted) for the three months ended March 31, 2019. |
Impact of Changes in Interest Rates | |||||||||||||||
Outstanding | Total Interest | Annual Earnings | |||||||||||||
Interest Rate (1) | Floating Rate Debt | Expense Per Year | Per Share Impact (2) | ||||||||||||
At March 31, 2019 | 3.70 | % | $ | 1,550,000 | $ | 57,350 | $ | 0.24 | |||||||
One percentage point increase | 4.70 | % | $ | 1,550,000 | $ | 72,850 | $ | 0.31 |
(1) | Weighted based on the respective interest rates and outstanding borrowings under our credit facility (assuming fully drawn) and term loans as of March 31, 2019. |
(2) | Based on weighted average number of shares outstanding (basic and diluted) for the three months ended March 31, 2019. |
• | Our ability to pay distributions to our shareholders and to sustain the amount of such distributions, |
• | Our ability to retain our existing tenants, attract new tenants and maintain or increase current rental rates, |
• | Five Star, our former subsidiary and largest tenant and the manager of our managed senior living communities, having adequate financial resources and liquidity and Five Star's ability to meet its obligations to us and to manage our senior living communities satisfactorily, |
• | Whether the aging U.S. population and increasing life spans of seniors will increase the demand for senior living communities, wellness centers and other medical and healthcare related properties and healthcare services, |
• | The credit qualities of our tenants, |
• | Our ability to compete for tenancies and acquisitions effectively, |
• | Our ability to maintain and increase occupancy, revenues and NOI at our senior living communities, |
• | Our acquisitions and sales of properties, |
• | Our ability to raise debt or equity capital, |
• | The future availability of borrowings under our revolving credit facility, |
• | Our policies and plans regarding investments, financings and dispositions, |
• | Our ability to pay interest on and principal of our debt, |
• | Our ability to appropriately balance our use of debt and equity capital, |
• | Our credit ratings, |
• | Our expectation that we benefit from our ownership interest in and other relationships with RMR Inc., |
• | Our expectation that we benefit from our ownership interest in and other relationships with AIC and from our participation in insurance programs arranged by AIC, |
• | Our qualification for taxation as a REIT, and |
• | Other matters. |
• | The impact of conditions in the economy and the capital markets on us and our tenants and managers, |
• | Compliance with, and changes to, federal, state and local laws and regulations, accounting rules, tax laws and similar matters, |
• | Limitations imposed on our business and our ability to satisfy complex rules in order for us to qualify for taxation as a REIT for U.S. federal income tax purposes, |
• | Competition within the healthcare and real estate industries, particularly in those markets in which our properties are located, |
• | Actual and potential conflicts of interest with our related parties, including our Managing Trustees, Five Star, RMR LLC, RMR Inc., AIC and others affiliated with them, |
• | Acts of terrorism, outbreaks of so called pandemics or other manmade or natural disasters beyond our control, and |
• | The impact of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively, the ACA, or the possible future repeal, replacement or modification of the ACA and other existing or proposed legislation or regulations on us or our tenants and managers and their ability to pay their obligations to us. |
• | Five Star, our largest tenant and the manager of our managed senior living communities, has been experiencing significant operating and financial challenges and determined that a substantial doubt existed as to whether it would be able to continue as a going concern. Five Star's operating and financial difficulties result from a number of factors, some of which are beyond Five Star's control, including, but not limited to: |
• | Five Star's high operating leverage, |
• | Increases in Five Star’s labor costs or in costs Five Star pays for goods and services, |
• | Competition within the senior living industry, |
• | Seniors delaying or forgoing moving into senior living communities or purchasing healthcare services, |
• | The impact of changes in the economy and the capital markets on Five Star and its residents and other customers, |
• | Changes in Medicare or Medicaid policies and regulations, including those that may result from the ACA or the possible future repeal, replacement or modification of the ACA and other existing or proposed legislation or regulations, |
• | Increases in compliance costs, |
• | Continued efforts by third party payers to reduce healthcare costs, and |
• | Increases in tort and insurance liability costs. |
• | If Five Star’s operations continue to be unprofitable, it could become insolvent and default on its rent obligations to us, |
• | If Five Star fails to provide quality services at our senior living communities, the NOI generated by these communities may be adversely affected, |
• | We entered into the Transaction Agreement to modify our existing business arrangements with Five Star, and certain of the transactions contemplated by the Transaction Agreement are expected to be effective January 1, 2020. These transactions are subject to conditions, including, among others, the receipt of approval by Five Star’s stockholders and certain licensing and other regulatory approvals. We cannot be sure that any or all of such conditions will be satisfied. Accordingly, these transactions may not become effective as of January 1, 2020 or at all, or the terms of such transactions may change, |
• | The issuance of Five Star common shares will require approval by Five Star’s stockholders, and the effectiveness of a registration statement on Form S-1 to be filed by Five Star with the SEC to register the Five Star common shares to be |
• | If Five Star's stockholders fail to approve the Five Star Share Issuances by December 31, 2019, the Transaction Agreement will terminate, including the current rent reductions, and our existing master leases and management agreements and pooling agreements with Five Star will remain in effect. If that occurs, Five Star does not expect to be able to fund its operating and capital expenses or debt service obligations, and Five Star may not then be able to continue as a going concern, |
• | If the transactions contemplated by the Transaction Agreement are completed, we expect to retain approximately 34% of ownership of Five Star for the foreseeable future. However, we may sell some or all of our Five Star common shares. Our ownership of Five Star may also be diluted in the future, |
• | We plan to pay distributions at an annual rate of $0.60 per common share going forward, based on a target distribution payout ratio of approximately 80% of projected cash available for distribution in the future. Our distribution will be set and reset from time to time by our Board of Trustees. The Board of Trustees will consider many factors when setting the distribution, including our historical and projected net income, Normalized FFO, the then current and expected needs and availability of cash to pay our obligations, distributions which we may be required to pay to maintain our qualification for taxation as a REIT and other factors deemed relevant by our Board of Trustees in its discretion. Further, our projected cash available for distribution in the future may change and may vary from our expectations. Accordingly, future distributions may be increased or decreased and we cannot be sure as to the rate at which future distributions will be paid, |
• | Our ability to make future distributions to our shareholders and to make payments of principal and interest on our indebtedness depends upon a number of factors, including our future earnings, the capital costs we incur to lease and operate our properties and our working capital requirements. We may be unable to pay our debt obligations or to maintain our current rate of distributions on our common shares and future distributions may be reduced or eliminated, |
• | We expect to sell up to $900.0 million of properties to reduce our leverage to stated targets. However, we may not be able to successfully sell properties in the future. Also, we may sell properties at prices that are less than their carrying values and we may incur future losses, |
• | Contingencies in our acquisition and sale agreements may not be satisfied and our pending acquisitions and sales and any related management or lease arrangements we expect to enter may not occur, may be delayed or the terms of such transactions or arrangements may change, |
• | The capital investments we are making at our senior living communities in response to competitive pressures resulting from ongoing new supply of senior living communities may not achieve expected results and our senior living communities may not be competitive, despite these capital investments, |
• | We may spend more for capital expenditures than we currently expect, |
• | Any joint venture arrangements that we may enter may not be successful, |
• | Our tenants may experience losses and default on their rent obligations to us, |
• | Some of our tenants may not renew expiring leases, and we may be unable to obtain new tenants to maintain or increase the historical occupancy rates of, or rents from, our properties, |
• | Our ability to grow our business and maintain or increase our distributions depends in large part upon our ability to buy properties and arrange for their profitable operation or lease them for rents, less their property operating expenses, that exceed our capital costs. We may be unable to identify properties that we want to acquire and we may fail to reach agreement with the sellers and complete the purchase of any properties we do want to acquire. In addition, any properties we may acquire may not provide us with rents or revenues less property operating costs that exceed our capital costs or achieve our expected returns. If our cash flows are reduced and our leverage increases, we may need to sell, rather than buy, properties, |
• | Rents that we can charge at our properties may decline upon renewals or expirations because of changing market conditions or otherwise, |
• | We expect to enter into additional management arrangements with Five Star for additional senior living communities that we own or may acquire in the future. However, we cannot be sure that we will enter into any additional management arrangements or other transactions with Five Star, |
• | Continued availability of borrowings under our revolving credit facility is subject to our satisfying certain financial covenants and other credit facility conditions that we may be unable to satisfy, |
• | Actual costs under our revolving credit facility or other floating rate debt will be higher than LIBOR plus a premium because of fees and expenses associated with such debt, |
• | The maximum borrowing availability under our revolving credit facility and term loans may be increased to up to $3.1 billion on a combined basis in certain circumstances. However, increasing the maximum borrowing availability under our revolving credit facility and term loans is subject to our obtaining additional commitments from lenders, which may not occur, |
• | We have the option to extend the maturity date of our revolving credit facility upon payment of a fee and meeting other conditions; however, the applicable conditions may not be met, |
• | The premiums used to determine the interest rate payable on our revolving credit facility and term loans and the facility fee payable on our revolving credit facility are based on our credit ratings. Changes in our credit ratings may cause the interest and fees we pay to increase, |
• | We may be unable to repay our debt obligations when they become due, |
• | We intend to conduct our business activities in a manner that will afford us reasonable access to capital for investment and financing activities. However, we may not succeed in this regard and we may not have reasonable access to capital, |
• | For the three months ended March 31, 2019, approximately 97% of our NOI was generated from properties where a majority of the revenues are derived from our tenants’ and residents’ private resources. This may imply that we will maintain or increase the percentage of our NOI generated from private resources at our senior living communities. However, our residents and patients may become unable to fund our charges with private resources and we may be required or may elect for business reasons to accept or pursue revenues from government sources, which could result in an increased part of our NOI and revenue being generated from government payments and our becoming more dependent on government payments, |
• | Circumstances that adversely affect the ability of seniors or their families to pay for our tenants' and manager's services, such as economic downturns, weak housing market conditions, higher levels of unemployment among our residents' family members, lower levels of consumer confidence, stock market volatility and/or changes in demographics generally could affect the profitability of our senior living communities, |
• | As of March 31, 2019, we had estimated unspent leasing related obligations of $24.3 million. It is difficult to accurately estimate tenant space preparation costs. Our unspent leasing related obligations may cost more or less and may take longer to complete than we currently expect, and we may incur increasing amounts for these and similar purposes in the future, |
• | We may not be able to sell properties that we may determine to offer for sale on terms acceptable to us or otherwise, and we may incur losses on any such sales or in connection with decisions to pursue selling our properties, |
• | Our senior living communities are subject to extensive government regulation, licensure and oversight. We sometimes experience deficiencies in the operation of our senior living communities and some of our communities may be prohibited from admitting new residents or our license to continue operations at a community may be revoked. Also, operating deficiencies or a license revocation at one or more of our senior living communities may have an adverse impact on our ability to obtain licenses for or attract residents to our other communities, |
• | We believe that our relationships with our related parties, including Five Star, RMR LLC, RMR Inc., ABP Trust, AIC and others affiliated with them may benefit us and provide us with competitive advantages in operating and growing our business. However, the advantages we believe we may realize from these relationships may not materialize, |
• | RMR Inc. may reduce the amount of its distributions to its shareholders, including us, or we may sell some or all of our RMR Inc. common shares. In addition, we may not receive the proceeds we may hope from any sale of some or all of the shares of RMR Inc. common stock that we own, if we elect to sell any of those shares and |
• | The business and property management agreements between us and RMR LLC have continuing 20 year terms. However, those agreements permit early termination in certain circumstances. Accordingly, we cannot be sure that these agreements will remain in effect for continuing 20 year terms. |
Exhibit Number | Description | |
3.1 | ||
3.2 | ||
3.3 | ||
3.4 | ||
3.5 | ||
4.1 | ||
4.2 | ||
4.3 | ||
4.4 | ||
4.5 | ||
4.6 | ||
4.7 | ||
4.8 | ||
4.9 | ||
4.10 | ||
4.11 | ||
10.1 | ||
10.2 | ||
31.1 |
31.2 | ||
31.3 | ||
31.4 | ||
32.1 | ||
101.1 | The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2019 formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Comprehensive Income, (iii) the Condensed Consolidated Statements of Shareholders’ Equity, (iv) the Condensed Consolidated Statements of Cash Flows and (v) related notes to these financial statements, tagged as blocks of text and in detail. (Filed herewith.) |
SENIOR HOUSING PROPERTIES TRUST | ||
By: | /s/ Jennifer F. (Francis) Mintzer | |
Jennifer F. (Francis) Mintzer | ||
President and Chief Operating Officer | ||
Dated: May 9, 2019 | ||
By: | /s/ Richard W. Siedel, Jr. | |
Richard W. Siedel, Jr. | ||
Chief Financial Officer and Treasurer | ||
(principal financial and accounting officer) | ||
Dated: May 9, 2019 |
1. | I have reviewed this Quarterly Report on Form 10-Q of Senior Housing Properties Trust; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: May 9, 2019 | /s/ Adam D. Portnoy |
Adam D. Portnoy | |
Managing Trustee |
1. | I have reviewed this Quarterly Report on Form 10-Q of Senior Housing Properties Trust; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: May 9, 2019 | /s/ Jennifer B. Clark |
Jennifer B. Clark | |
Managing Trustee |
1. | I have reviewed this Quarterly Report on Form 10-Q of Senior Housing Properties Trust; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: May 9, 2019 | /s/ Jennifer F. (Francis) Mintzer |
Jennifer F. (Francis) Mintzer | |
President and Chief Operating Officer |
1. | I have reviewed this Quarterly Report on Form 10-Q of Senior Housing Properties Trust; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: May 9, 2019 | /s/ Richard W. Siedel, Jr. |
Richard W. Siedel, Jr. | |
Chief Financial Officer and Treasurer |
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Adam D. Portnoy | /s/ Jennifer F. (Francis) Mintzer | |
Adam D. Portnoy | Jennifer F. (Francis) Mintzer | |
Managing Trustee | President and Chief Operating Officer | |
/s/ Jennifer B. Clark | /s/ Richard W. Siedel, Jr. | |
Jennifer B. Clark | Richard W. Siedel, Jr. | |
Managing Trustee | Chief Financial Officer and Treasurer |
Date: May 9, 2019 |
Document and Entity Information - shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
May 08, 2019 |
|
Document and Entity Information | ||
Entity Registrant Name | SENIOR HOUSING PROPERTIES TRUST | |
Entity Central Index Key | 0001075415 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2019 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding (in shares) | 237,726,371 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q1 | |
Entity Emerging Growth Company | false | |
Entity Smaller Reporting Company | false |
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Common shares of beneficial interest, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common shares of beneficial interest, shares authorized (in shares) | 300,000,000 | 300,000,000 |
Common shares of beneficial interest, shares issued (in shares) | 237,729,900 | 237,729,900 |
Common shares of beneficial interest, shares outstanding (in shares) | 237,729,900 | 237,729,900 |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Income Statement [Abstract] | ||
Amortization of debt issuance costs and debt discounts and premiums | $ 1,652 | $ 1,411 |
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - USD ($) $ in Thousands |
Total |
Common Shares |
Additional Paid-in Capital |
Cumulative Net Income |
Cumulative Other Comprehensive Income (Loss) |
Cumulative Distributions |
Total Equity Attributable to Common Shareholders |
Total Equity Attributable to Noncontrolling Interest |
---|---|---|---|---|---|---|---|---|
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Cumulative adjustment upon adoption of ASU No. 2016-01 | $ 0 | $ 87,429 | $ (87,429) | |||||
Adjusted balance | 3,277,188 | $ 2,376 | $ 4,609,316 | 1,853,924 | (198) | $ (3,360,468) | $ 3,104,950 | $ 172,238 |
Beginning balance (in shares) at Dec. 31, 2017 | 237,630,409 | |||||||
Beginning balance at Dec. 31, 2017 | 3,277,188 | $ 2,376 | 4,609,316 | 1,766,495 | 87,231 | (3,360,468) | 3,104,950 | 172,238 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Comprehensive income (loss) | 237,312 | 236,022 | (93) | 235,929 | 1,383 | |||
Distributions | (92,674) | (92,674) | (92,674) | |||||
Share grants (in shares) | 3,000 | |||||||
Share grants | 47 | 47 | 47 | |||||
Share repurchases (in shares) | (4,628) | |||||||
Share repurchases | (89) | (89) | (89) | |||||
Distributions to noncontrolling interest | (5,667) | (5,667) | ||||||
Ending balance (in shares) at Mar. 31, 2018 | 237,628,781 | |||||||
Ending balance at Mar. 31, 2018 | $ 3,416,117 | $ 2,376 | 4,609,274 | 2,089,946 | (291) | (3,453,142) | 3,248,163 | 167,954 |
Beginning balance (in shares) at Dec. 31, 2018 | 237,729,900 | 237,729,900 | ||||||
Beginning balance at Dec. 31, 2018 | $ 3,179,870 | $ 2,377 | 4,611,419 | 2,140,796 | (266) | (3,731,214) | 3,023,112 | 156,758 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Comprehensive income (loss) | 31,570 | 30,082 | 66 | 30,148 | 1,422 | |||
Distributions | (92,714) | (92,714) | (92,714) | |||||
Share grants | 215 | 215 | 215 | |||||
Distributions to noncontrolling interest | $ (5,503) | (5,503) | ||||||
Ending balance (in shares) at Mar. 31, 2019 | 237,729,900 | 237,729,900 | ||||||
Ending balance at Mar. 31, 2019 | $ 3,113,438 | $ 2,377 | $ 4,611,634 | $ 2,170,878 | $ (200) | $ (3,823,928) | $ 2,960,761 | $ 152,677 |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
Mar. 31, 2018 |
Mar. 31, 2017 |
---|---|---|---|---|
Statement of Cash Flows [Abstract] | ||||
Cash and cash equivalents | $ 39,875 | $ 54,976 | $ 39,161 | |
Restricted cash | 14,877 | 15,095 | 14,080 | |
Total cash and cash equivalents and restricted cash shown in the statements of cash flows | $ 54,752 | $ 70,071 | $ 53,241 | $ 47,321 |
Basis of Presentation |
3 Months Ended |
---|---|
Mar. 31, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying condensed consolidated financial statements of Senior Housing Properties Trust and its subsidiaries, or we, us, or our, are unaudited. Certain information and disclosures required by U.S. generally accepted accounting principles, or GAAP, for complete financial statements have been condensed or omitted. We believe the disclosures made are adequate to make the information presented not misleading. However, the accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes contained in our Annual Report on Form 10-K for the year ended December 31, 2018, or our Annual Report. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement of results for the interim period have been included. All intercompany transactions and balances with or among our consolidated subsidiaries have been eliminated. Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year. The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect reported amounts. Actual results could differ from those estimates. Significant estimates in our condensed consolidated financial statements include purchase price allocations, useful lives of fixed assets and impairment of real estate and intangible assets. We have made reclassifications to the financial statements of prior periods to conform to the current period presentation. These reclassifications had no effect on net income or equity. We have a joint venture arrangement with a sovereign investor for one of our properties (two buildings) leased to medical providers, medical related business, clinics and biotech laboratory tenants, or MOBs, located in Boston, Massachusetts. The investor owns a 45% equity interest in the joint venture, and we own the remaining 55% equity interest in the joint venture. We have determined that this joint venture is a variable interest entity, or VIE, as defined under the Consolidation Topic of the Financial Accounting Standards Board, or FASB, Accounting Standards Codification. We concluded that we must consolidate this VIE because we have the power to direct the activities that most significantly impact the VIE’s economic performance and we have the obligation to absorb losses of, and the right to receive benefits from, the VIE that could be significant to the VIE, and therefore are the primary beneficiary of the VIE. The assets of this VIE were $1,050,254 and $1,061,593 as of March 31, 2019 and December 31, 2018, respectively, and consist primarily of the net real estate owned by the joint venture. The liabilities of this VIE were $711,792 and $714,226 as of March 31, 2019 and December 31, 2018, respectively, and consist primarily of the debt securing the property. The sovereign investor's interest in this consolidated entity is reflected as noncontrolling interest in our condensed consolidated financial statements. See Note 6 for further information about this joint venture. |
Recent Accounting Pronouncements |
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Accounting Changes and Error Corrections [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||
Recent Accounting Pronouncements | Recent Accounting Pronouncements In February 2016, the FASB issued Accounting Standards Update, or ASU, No. 2016-02, Leases. In July 2018, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases and ASU No. 2018-11, Leases (Topic 842): Targeted Improvements. In December 2018, the FASB issued ASU No. 2018-20 Leases (Topic 842), Narrow-Scope Improvements for Lessors. Collectively, these standards set out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). ASU No. 2016-02 requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase of the leased asset by the lessee. This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight line basis over the term of the lease. ASU No. 2016-02 requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales type leases, direct financing leases and operating leases. These standards were effective as of January 1, 2019. Upon adoption, we applied the package of practical expedients that has allowed us to not reassess (i) whether any expired or existing contracts are or contain leases, (ii) lease classification for any expired or existing leases and (iii) initial direct costs for any expired or existing leases. Furthermore, we applied the optional transition method in ASU No. 2018-11, which has allowed us to initially apply the new leases standard at the adoption date and recognize a cumulative effect adjustment to the opening balance of retained earnings in the adoption period, although we did not have an adjustment. Additionally, our leases met the criteria in ASU No. 2018-11 to not separate non-lease components from the related lease component; therefore, the accounting for these leases remained largely unchanged from the previous standard. The adoption of ASU No. 2016-02 and the related improvements did not have a material impact in our condensed consolidated financial statements. Upon adoption, (i) allowances for bad debts are now recognized as a direct reduction of rental income, and (ii) legal costs associated with the execution of our leases, which were previously capitalized and amortized over the life of their respective leases, are expensed as incurred. Subsequent to January 1, 2019, provisions for credit losses are now included in rental income in our condensed consolidated financial statements. Provisions for credit losses prior to January 1, 2019 were previously included in property operating expenses in our condensed consolidated financial statements and prior periods are not reclassified to conform to the current presentation. We completed our assessment of predominance as it relates to our contracts with residents for housing services at properties leased to our taxable REIT subsidiaries, or TRSs, and have recognized revenue from these properties under ASC 606, which did not have any impact to the timing or amount of our revenue recognized. For leases in which we are the lessee, we recognized a right of use asset and a lease liability equal to the present value of the minimum lease payments with rental payments being applied to the lease liability and the right of use asset being amortized over the term of the lease. The adoption of this standard resulted in an increase in total assets and liabilities of $4,507. The right of use asset and related lease liability are included within other assets, net and other liabilities, respectively, within our condensed consolidated balance sheets. In addition, we lease equipment at certain of our managed senior living communities. These leases are short term in nature, are cancelable with no fee or do not result in an annual expense in excess of our capitalization policy and, as a result, will not be recorded on our condensed consolidated balance sheets. The adoption of ASU No. 2016-02 and the related ASU improvements did not have a material impact in our condensed consolidated financial statements. Revenue Recognition. We are a lessor of MOBs, senior living communities and wellness centers. Our leases provide our tenants with the contractual right to use and economically benefit from all of the premises demised under the leases; therefore, we have determined to evaluate our leases as lease arrangements. Certain of our leases provide for base rent payments and in addition may include variable payments. Rental income from operating leases, including any payments derived by index or market based indices, is recognized on a straight line basis over the lease term when we have determined that the collectability of substantially all of the lease payments is probable. Some of our leases have options to extend or terminate the lease exercisable at the option of our tenants, which are considered when determining the lease term. We do not include in our measurement of our lease receivables certain variable payments, including changes in the index or market based indices after the inception of the lease, certain tenant reimbursements and other income until the specific events that trigger the variable payments have occurred. Such payments totaled $18,845 for the three months ended March 31, 2019. Certain of our leases contain non-lease components, such as property level operating expenses and capital expenditures reimbursed by our tenants as well as other required lease payments. We have determined that all of our leases qualify for the practical expedient to not separate the lease and non-lease components because (i) the lease components are operating leases and (ii) the timing and pattern of recognition of the non-lease components are the same as those of the lease components. We apply Accounting Standards Codification Topic 842, Leases, to the combined component. Income derived by our leases is recorded in rental income in our condensed consolidated statements of comprehensive income. Certain tenants are obligated to pay directly their obligations under their leases for insurance, real estate taxes and certain other expenses. These obligations, which have been assumed by the tenants under the terms of their respective leases, are not reflected in our condensed consolidated financial statements. To the extent any tenant responsible for any such obligations under the applicable lease defaults on such lease or if it is deemed probable that the tenant will fail to pay for such obligations, we would record a liability for such obligations. The following table presents our operating lease maturity analysis as of March 31, 2019:
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires that entities use a new forward-looking “expected loss” model that generally will result in the earlier recognition of allowance for credit losses. The measurement of expected credit losses is based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. ASU No. 2016-13 will be effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. We are currently assessing the potential impact the adoption of ASU No. 2016-13 will have in our condensed consolidated financial statements although lease related receivables are governed by the lease standards referred to above and are not subject to ASU No. 2016-13. We currently expect to adopt this standard using the modified retrospective approach. |
Real Estate Properties |
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Real Estate [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Real Estate Properties | Real Estate Properties At March 31, 2019, we owned 467 properties, including 30 properties classified as held for sale, located in 42 states and Washington, D.C., including one MOB (two buildings) owned by a joint venture in which we own a 55% equity interest. Impairment: We periodically evaluate our assets for impairments. Impairment indicators may include declining tenant or resident occupancy, weak or declining profitability from the property, decreasing tenant cash flows or liquidity, our decision to dispose of an asset before the end of its estimated useful life, and legislative, market or industry changes that could permanently reduce the value of an asset. If indicators of impairment are present, we evaluate the carrying value of the affected assets by comparing it to the expected future undiscounted net cash flows to be generated from those assets. If the sum of these expected future net cash flows is less than the carrying value, we reduce the net carrying value of the asset to its estimated fair value. During the three months ended March 31, 2019, we recorded impairment charges of $6,206 to adjust the carrying values of 15 skilled nursing facilities, or SNFs, located in Kansas, Iowa and Nebraska, to their aggregate estimated fair value. These SNFs are classified as held for sale in our condensed consolidated balance sheet as of March 31, 2019, and the associated impairment charges are included in impairment of assets in our condensed consolidated statements of comprehensive income as of March 31, 2019. Dispositions: During the three months ended March 31, 2019, we sold two MOBs with an aggregate of 64,796 rentable square feet for an aggregate sales price of $2,975, excluding closing costs, as presented in the following table. We recognized rental income of $123 during the three months ended March 31, 2019 related to these MOBs.
As of March 31, 2019, we had 10 MOBs under agreements to sell for an aggregate sales price of approximately $15,609, excluding closing costs, which have an aggregate undepreciated carrying value of $17,347. These 10 MOBs are classified as held for sale in our condensed consolidated balance sheet as of March 31, 2019. As of March 31, 2019, we had 20 SNFs under agreements to sell for an aggregate sales price of approximately $40,500, excluding closing costs, which have an aggregate undepreciated carrying value of $44,342. These 20 SNFs are classified as held for sale in our condensed consolidated balance sheet as of March 31, 2019. In May 2019, we sold three of these SNFs located in California for an aggregate sales price of $21,500, excluding closing costs. Subsequent to March 31, 2019, we entered into agreements to sell three MOBs located in Massachusetts for an aggregate sales price of approximately $4,955, excluding closing costs. These three MOBs are not classified as held for sale in our condensed consolidated balance sheet as of March 31, 2019. |
Indebtedness |
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Mar. 31, 2019 | |
Debt Disclosure [Abstract] | |
Indebtedness | Indebtedness Our principal debt obligations at March 31, 2019 were: (1) outstanding borrowings under our $1,000,000 unsecured revolving credit facility; (2) seven public issuances of senior unsecured notes, including: (a) $400,000 principal amount at an annual interest rate of 3.25% due 2019, (b) $200,000 principal amount at an annual interest rate of 6.75% due 2020, (c) $300,000 principal amount at an annual interest rate of 6.75% due 2021, (d) $250,000 principal amount at an annual interest rate of 4.75% due 2024, (e) $500,000 principal amount at an annual interest rate of 4.75% due 2028, (f) $350,000 principal amount at an annual interest rate of 5.625% due 2042 and (g) $250,000 principal amount at an annual interest rate of 6.25% due 2046; (3) our $350,000 principal amount unsecured term loan due 2020; (4) our $200,000 principal amount unsecured term loan due 2022; and (5) $733,672 aggregate principal amount of mortgages (excluding premiums, discounts and net debt issuance costs) secured by 14 properties with maturity dates between 2019 and 2043. These 14 mortgaged properties had a carrying value (before accumulated depreciation) of $1,035,640 at March 31, 2019. We also had two properties subject to capital leases with lease obligations totaling $9,599 at March 31, 2019; these two properties had a carrying value (before accumulated depreciation) of $34,828 at March 31, 2019, and the capital leases expire in 2026. We have a $1,000,000 revolving credit facility that is available for general business purposes, including acquisitions. The maturity date of our revolving credit facility is January 15, 2022, and, subject to the payment of an extension fee and meeting other conditions, we have the option to extend the maturity date of the facility for an additional year. Our revolving credit facility provides that we can borrow, repay and re-borrow funds available under our revolving credit facility until maturity, and no principal repayment is due until maturity. Our revolving credit facility requires annual interest to be paid on borrowings at the rate of LIBOR plus a premium of 120 basis points, plus a facility fee of 25 basis points per annum on the total amount of lending commitments under the facility. The interest rate premium and facility fee are each subject to adjustment based upon changes to our credit ratings. The facility also includes a feature pursuant to which in certain circumstances maximum borrowings under the facility may be increased to up to $2,000,000. As of March 31, 2019, the annual interest rate payable on borrowings under our revolving credit facility was 3.6%. The weighted average annual interest rates for borrowings under our revolving credit facility were 3.6% and 2.7% for the three months ended March 31, 2019 and 2018, respectively. As of March 31, 2019, we had $225,000 outstanding and $775,000 available for borrowing, and as of May 8, 2019, we had $628,000 outstanding and $372,000 available for borrowing under our revolving credit facility. We have a $350,000 term loan that matures in January 2020 and is prepayable without penalty at any time. This term loan requires annual interest to be paid at the rate of LIBOR plus a premium of 140 basis points that is subject to adjustment based upon changes to our credit ratings. At March 31, 2019, the annual interest rate payable on amounts outstanding under this term loan was 3.9%. The weighted average annual interest rate for amounts outstanding under this term loan was 4.0% and 3.1% for the three months ended March 31, 2019 and 2018, respectively. This term loan includes an accordion feature under which maximum borrowings may be increased to up to $700,000 in certain circumstances. We have a $200,000 term loan that matures in September 2022 and is prepayable without penalty at any time. This term loan requires annual interest to be paid at the rate of LIBOR plus a premium of 135 basis points that is subject to adjustment based upon changes to our credit ratings. At March 31, 2019, the annual interest rate payable on amounts outstanding under this term loan was 3.8%. The weighted average annual interest rate for amounts outstanding under this term loan was 3.9% and 3.0% for the three months ended March 31, 2019 and 2018, respectively. This term loan includes an accordion feature under which maximum borrowings may be increased to up to $400,000 in certain circumstances. In May 2019, we redeemed at par all of our outstanding 3.25% senior notes due 2019 for a redemption price equal to the principal amount of $400,000, plus accrued and unpaid interest of $6,500. We funded this redemption with cash on hand and borrowings under our revolving credit facility. In April 2019, we gave notice of our intention to prepay, at par plus accrued interest, a mortgage note secured by four of our senior living communities with an outstanding principal balance of approximately $42,211, a maturity date in July 2019 and an annual interest rate of 3.79%. We expect to make this prepayment in May 2019 using cash on hand and borrowings under our revolving credit facility. Our revolving credit facility and term loan agreements and our senior unsecured notes indentures and their supplements provide for acceleration of payment of all amounts due thereunder upon the occurrence and continuation of certain events of default, such as, in the case of our revolving credit facility and term loan agreements, a change of control of us, as defined, which includes The RMR Group LLC, or RMR LLC, ceasing to act as our business and property manager. Our revolving credit facility and term loan agreements and our senior unsecured notes indentures and their supplements also contain covenants, including those that restrict our ability to incur debts, and generally require us to maintain certain financial ratios, and our revolving credit facility and term loan agreements restrict our ability to make distributions under certain circumstances. We believe we were in compliance with the terms and conditions of the respective covenants under our revolving credit facility and term loan agreements and our senior unsecured notes indentures and their supplements at March 31, 2019. |
Fair Value of Assets and Liabilities |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value of Assets and Liabilities | Fair Value of Assets and Liabilities Items Measured at Fair Value on a Recurring Basis: The following table presents certain of our assets that are measured at fair value on a recurring basis at March 31, 2019, categorized by the level of inputs as defined in the fair value hierarchy under GAAP, used in the valuation of each asset or liability.
Items Measured at Fair Value on a Nonrecurring Basis: In addition to items that are measured at fair value on a recurring basis, we also have assets in our condensed consolidated balance sheets that are measured at fair value on a nonrecurring basis. During the three months ended March 31, 2019, we recorded impairment charges of $6,206 to reduce the carrying value of 15 SNFs that are classified as held for sale to their estimated sales price, based on a letter of intent, less estimated costs to sell of $7,489. See Note 3 for further information about impairment charges and these and other properties we have classified as held for sale. The estimated fair value of these 15 SNFs as of March 31, 2019 was as follows:
In addition to the assets described in the tables above, our financial instruments at March 31, 2019 and December 31, 2018 included cash and cash equivalents, restricted cash, other assets, our revolving credit facility, term loans, senior unsecured notes, secured debt and capital leases and other unsecured obligations and liabilities. The fair values of these financial instruments approximated their carrying values in our condensed consolidated financial statements as of such dates, except as follows:
We estimated the fair value of our two issuances of senior unsecured notes due 2042 and 2046 based on the closing price on The Nasdaq Stock Market LLC, or Nasdaq, (a Level 1 input) as of March 31, 2019. We estimated the fair values of our five issuances of senior unsecured notes due 2019, 2020, 2021, 2024 and 2028 using an average of the bid and ask price on or about March 31, 2019 (Level 2 inputs as defined in the fair value hierarchy under GAAP). We estimated the fair values of our secured debts by using discounted cash flows analyses and currently prevailing market terms as of the measurement date (Level 3 inputs as defined in the fair value hierarchy under GAAP). Because Level 3 inputs are unobservable, our estimated fair value may differ materially from the actual fair value. |
Noncontrolling Interest |
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Mar. 31, 2019 | |
Noncontrolling Interest [Abstract] | |
Noncontrolling Interest | Noncontrolling Interest We have a joint venture arrangement with a sovereign investor for one of our MOBs (two buildings) located in Boston, Massachusetts. The investor owns a 45% equity interest in the joint venture, and we own the remaining 55% equity interest in the joint venture. We continue to control this property and therefore continue to account for this property on a consolidated basis in our condensed consolidated financial statements under the VIE model. The portion of the joint venture's net income and comprehensive income not attributable to us, or $1,422 and $1,383 for the three months ended March 31, 2019 and 2018, respectively, is reported as noncontrolling interest in our condensed consolidated statements of comprehensive income. We made aggregate cash distributions to our joint venture partner of $5,503 and $5,667 for the three months ended March 31, 2019 and 2018, respectively, which are reflected as a decrease in total equity attributable to noncontrolling interest in our condensed consolidated balance sheets. As of March 31, 2019, this joint venture held real estate assets with an aggregate net book value of $740,105, subject to mortgage notes of $620,000. In assessing whether we have a controlling interest in this joint venture arrangement and are required to consolidate the accounts of the joint venture entity, we considered the members' rights to residual gains and obligations to absorb losses, which activities most significantly impact the economic performance of the entity and which member has the power to direct those activities. |
Shareholders' Equity |
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Mar. 31, 2019 | |
Stockholders' Equity Note [Abstract] | |
Shareholders' Equity | Shareholders’ Equity Share Purchases: On April 5, 2019, we purchased 3,529 of our common shares, valued at $9.47 per share, the closing price of our common shares on Nasdaq on that day, from a former employee of RMR LLC in satisfaction of tax withholding and payment obligations in connection with the vesting of awards of our common shares. Distributions: On February 21, 2019, we paid a regular quarterly distribution to common shareholders of $0.39 per share, or approximately $92,714, that was declared on January 18, 2019 and was payable to shareholders of record on January 28, 2019. On April 18, 2019, we declared a regular quarterly distribution payable to common shareholders of record on April 29, 2019, of $0.15 per share, or approximately $35,659. We expect to pay this distribution on or about May 16, 2019. |
Segment Reporting |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting | Segment Reporting As of March 31, 2019, we have four operating segments, of which three are separate reporting segments. We aggregate the reporting units in each of our MOBs, our triple net leased senior living communities and our managed senior living communities into three reporting segments, based on their similar operating and economic characteristics. The first reporting segment includes MOBs where the tenants pay us rent. The second reporting segment includes triple net leased senior living communities that provide short term and long term residential care and other services for residents and from which we receive rents from the operators. The third reporting segment includes managed senior living communities that provide short term and long term residential care and other services for residents where we pay fees to the operator to manage the communities for our account. Our fourth segment includes all of our other operations, including certain properties that offer wellness, fitness and spa services to members and with respect to which we receive rents from operators, which we do not consider to be sufficiently material to constitute a separate reporting segment.
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Leases and Management Agreements with Five Star |
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Risks and Uncertainties [Abstract] | ||||||||||||||||||||||||||||||||||||
Leases and Management Agreements with Five Star | Leases and Management Agreements with Five Star Our Senior Living Communities Leased by Five Star. We are Five Star’s largest landlord and Five Star is our largest tenant. As of March 31, 2019 and 2018, we leased 184 and 185 senior living communities to Five Star, respectively. We lease senior living communities to Five Star pursuant to five master leases. Five Star has announced that, due to current senior living industry conditions, its recurring operating losses and the risk that it may not be able to obtain sufficient funding for its operating requirements, a substantial doubt existed regarding Five Star's ability to continue as a going concern. On March 11, 2019, we entered into a letter agreement with Five Star, pursuant to which, with respect to our master leases with Five Star, we agreed to defer, until March 31, 2019, payment of the aggregate minimum rent due and payable by Five Star to us under the lease agreements for February 2019. On April 1, 2019, we entered into a transaction agreement with Five Star, or the Transaction Agreement, pursuant to which we agreed to modify our existing business arrangements with Five Star, subject to certain conditions and the receipt of various approvals, as further described in Note 14. We cannot be sure whether the transactions contemplated by the Transaction Agreement will be completed or whether Five Star will be able to continue as a going concern. We recognized rental income payable by Five Star of $39,313 and $51,759 for the three months ended March 31, 2019 and 2018, respectively. These amounts exclude variable payments we received from Five Star of $538 and $1,374 for the three months ended March 31, 2019 and 2018, respectively. We determine actual variable payments due under our Five Star leases annually and recognize any resulting amount as rental income at year end when all contingencies are met. As of March 31, 2019 and December 31, 2018, we had rents receivable from Five Star of $22,000 and $18,697, respectively, which amounts are included in other assets in our condensed consolidated balance sheets. Rental income from Five Star represented 14.8% of our total revenues for the three months ended March 31, 2019, and the properties Five Star leases from us represented 26.5% of our real estate investments, at cost, as of March 31, 2019. Pursuant to the terms of our leases with Five Star, for the three months ended March 31, 2019, we funded $22,579 of improvements to communities leased to Five Star. We did not fund any capital improvements at communities leased to Five Star for the three months ended March 31, 2018. Our Senior Living Communities Managed by Five Star. As of March 31, 2019 and 2018, Five Star managed 76 and 72 senior living communities for our account, respectively. We lease our senior living communities that are managed by Five Star and include assisted living units or SNF units to our TRSs, and Five Star manages these communities pursuant to long term management and pooling agreements. As further described in Note 14, pursuant to the Transaction Agreement we have agreed to replace our long term management and pooling agreements with Five Star with new management agreements, subject to certain conditions and the receipt of various approvals. We incurred management fees payable to Five Star of $3,789 and $3,494 for the three months ended March 31, 2019 and 2018, respectively. These amounts are included in property operating expenses or have been capitalized, as appropriate, in our condensed consolidated financial statements. The following table presents residents fees and services revenue disaggregated by type of contract and payer:
Five Star also provides certain other services directly to residents at some of the senior living communities it manages for our account, such as rehabilitation services. At senior living communities Five Star manages for us where Five Star provides rehabilitation services on an outpatient basis, the residents, third party payers or government programs pay Five Star for those rehabilitation services. At senior living communities Five Star manages for us where Five Star provides both inpatient and outpatient rehabilitation services, we generally pay Five Star for these services and charges for these services are included in amounts charged to residents, third party payers or government programs. We incurred fees payable to Five Star of $1,675 and $1,699 for the three months ended March 31, 2019 and 2018, respectively, for rehabilitation services Five Star provided at senior living communities it manages for us; we include these amounts in property operating expenses in our condensed consolidated statement of comprehensive income. |
Business and Property Management Agreements with RMR LLC |
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Mar. 31, 2019 | |
Related Party Transactions [Abstract] | |
Business and Property Management Agreements with RMR LLC | Business and Property Management Agreements with RMR LLC We have no employees. The personnel and various services we require to operate our business are provided to us by RMR LLC. We have two agreements with RMR LLC to provide management services to us: (1) a business management agreement, which relates to our business generally; and (2) a property management agreement, which relates to the property level operations of our MOBs. We also have a subsidiary level management agreement with RMR LLC related to one of our MOBs located in Boston, Massachusetts, which we entered in connection with the joint venture arrangement for that MOB. Under that agreement, our subsidiary pays RMR LLC certain business management fees directly, which fees are credited against the business management fees payable by us to RMR LLC. Pursuant to our business management agreement with RMR LLC, we recognized net business management fees of $7,719 and $23,323 for the three months ended March 31, 2019 and 2018, respectively. The net business management fees we recognized for the three months ended March 31, 2019 include $725 of management fees related to our subsidiary level management agreement with RMR LLC entered in connection with our joint venture arrangement. Based on our common share total return, as defined in our business management agreement, as of March 31, 2019, no estimated 2019 incentive fees are included in the net business management fees we recognized for the three months ended March 31, 2019. The actual amount of annual incentive fees for 2019, if any, will be based on our common share total return as defined in our business management agreement, for the three-year period ending December 31, 2019, and will be payable in 2020. The net business management fees for the three months ended March 31, 2018 included $725 of management fees related to our subsidiary level management agreement with RMR LLC and $14,347 of estimated 2018 incentive fees based on our common share total return, as defined in our business management agreement, as of March 31, 2018. In January 2019, we paid RMR LLC an incentive fee of $40,642 for 2018. We include business management fee amounts in general and administrative expenses in our condensed consolidated statements of comprehensive income. Pursuant to our property management agreement with RMR LLC, we recognized aggregate net property management and construction supervision fees of $3,064 and $2,821 for the three months ended March 31, 2019 and 2018, respectively. These amounts are included in property operating expenses or have been capitalized, as appropriate, in our condensed consolidated financial statements. We are generally responsible for all our operating expenses, including certain expenses incurred or arranged by RMR LLC on our behalf. We are generally not responsible for payment of RMR LLC’s employment, office or administrative expenses incurred to provide management services to us, except for the employment and related expenses of RMR LLC’s employees assigned to work exclusively or partly at our MOBs, our share of the wages, benefits and other related costs of RMR LLC's centralized accounting personnel, our share of RMR LLC’s costs for providing our internal audit function, or as otherwise agreed. Our property level operating expenses are generally incorporated into the rents charged to our tenants, including certain payroll and related costs incurred by RMR LLC. We reimbursed RMR LLC $3,374 and $2,779 for these expenses and costs for the three months ended March 31, 2019 and 2018, respectively. We included these amounts in other operating expenses and general and administrative expenses, as applicable, in our condensed consolidated statements of comprehensive income. |
Related Person Transactions |
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Mar. 31, 2019 | |
Related Party Transactions [Abstract] | |
Related Person Transactions | Related Person Transactions We have relationships and historical and continuing transactions with Five Star, RMR LLC, RMR Inc., Affiliates Insurance Company, or AIC, and others related to them, including other companies to which RMR LLC provides management services and which have trustees, directors and officers who are also our Trustees or officers. Five Star. We are currently one of Five Star’s largest stockholders. As of March 31, 2019, we owned 4,235,000 of Five Star’s common shares, or approximately 8.3% of Five Star’s outstanding common shares. Five Star is our largest tenant and the manager of our managed senior living communities. RMR LLC provides management services to both us and Five Star. As of March 31, 2019, ABP Acquisition LLC, a subsidiary of ABP Trust, the controlling shareholder of RMR Inc., owned 35.4% of Five Star's outstanding common shares. Adam D. Portnoy, one of our Managing Trustees, is the sole trustee of ABP Trust and a managing director of Five Star. Five Star’s president and chief executive officer and executive vice president, chief financial officer and treasurer are officers and employees of RMR LLC. On April 1, 2019, we entered into the Transaction Agreement, pursuant to which we agreed to modify our existing business arrangements with Five Star, subject to certain conditions and the receipt of various approvals. See Notes 9 and 14 for further information regarding our relationships, agreements and transactions with Five Star and Note 5 for further information regarding our investment in Five Star. Our Manager, RMR LLC. We have two agreements with RMR LLC to provide management services to us. See Note 10 for further information regarding our management agreements with RMR LLC. RMR Inc. RMR LLC is a majority owned subsidiary of RMR Inc. and RMR Inc. is the managing member of RMR LLC. Adam D. Portnoy, one of our Managing Trustees, is the sole trustee, an officer and the controlling shareholder of ABP Trust, which is the controlling shareholder of RMR Inc., a managing director, president and chief executive officer of RMR Inc., and an officer and employee of RMR LLC. Jennifer B. Clark, our other Managing Trustee, also serves as a managing director and as executive vice president, general counsel and secretary of RMR Inc. and an officer of ABP Trust and RMR LLC. Other officers and employees of RMR LLC also serve as our officers. As of March 31, 2019, we owned 2,637,408 shares of class A common stock of RMR Inc. See Note 5 for further information regarding our investment in RMR Inc. AIC. We, ABP Trust, Five Star and four other companies to which RMR LLC provides management services currently own AIC in equal amounts. We (including our consolidated joint venture) and the other AIC shareholders participate in a combined property insurance program arranged and reinsured in part by AIC. As of March 31, 2019 and December 31, 2018, our investment in AIC had a carrying value of $9,102 and $8,632, respectively. These amounts are included in other assets in our condensed consolidated balance sheets. We recognized income related to our investment in AIC, which is presented as equity in earnings of an investee in our condensed consolidated statements of comprehensive income. Our other comprehensive income includes our proportionate part of unrealized gains on securities that are owned by AIC related to our investment in AIC. For further information about these and other such relationships and certain other related person transactions, refer to our Annual Report. |
Income Taxes |
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Mar. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes We have elected to be taxed as a real estate investment trust, or REIT, under the Internal Revenue Code of 1986, as amended, and as such, are generally not subject to federal and most state income taxation on our operating income provided we distribute our taxable income to our shareholders and meet certain organization and operating requirements. We do, however, lease certain managed senior living communities to our wholly owned TRSs that, unlike most of our subsidiaries, file a separate consolidated federal corporate income tax return and are subject to federal and state income taxes. Our consolidated income tax provision includes the income tax provision related to the operations of our TRSs and certain state income taxes we incur despite our taxation as a REIT. During the three months ended March 31, 2019 and 2018, we recognized income tax expense of $134 and $260, respectively. |
Weighted Average Common Shares |
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Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||
Weighted Average Common Shares | Weighted Average Common Shares The following table provides a reconciliation of the weighted average number of common shares used in the calculation of basic and diluted earnings per share (in thousands):
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Subsequent Events |
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Subsequent Events [Abstract] | |||||||||||||
Subsequent Events | Subsequent Events In April 2019, Five Star began managing for our account a senior living community we own located in Oregon with 318 living units, pursuant to a management agreement with Five Star on terms substantially similar to those of existing management agreements between us and Five Star, after the previous tenant defaulted on its lease with us. The April 2019 Transaction Agreement with Five Star. In April 2019, we entered into the Transaction Agreement. Among other things, the Transaction Agreement provides that, subject to approval by Five Star’s stockholders of the Five Star Share Issuances (as defined below) and receipt of other required approvals, effective January 1, 2020 (or January 1, 2021 if extended under the Transaction Agreement), or the Conversion Time:
Also pursuant to the Transaction Agreement: (1) commencing February 1, 2019 through December 31, 2019, the aggregate amount of monthly minimum rent payable to us by Five Star under our master leases with Five Star is $11,000, subject to adjustment and extension, and no additional rent is payable to us by Five Star from such date to the Conversion Time; and (2) on April 1, 2019, we purchased from Five Star approximately $50,000 of unencumbered Qualifying PP&E (as defined in the Transaction Agreement) related to our senior living communities leased and operated by Five Star, which amount is subject to adjustment but will not exceed $60,000. The Five Star Restructuring Transactions are subject to conditions, including, among others: (1) approval of the Five Star Share Issuances by at least a majority of the votes cast, in person or by proxy, by the holders of outstanding Five Star common shares at any meeting of Five Star’s stockholders held for that purpose, or the Five Star Stockholder Approval; (2) the receipt of all Required Licenses (as defined in the Transaction Agreement) and any other third party consent or approval required for the consummation of the Five Star Restructuring Transactions; (3) the effectiveness of the registration statement on Form S-1 to be filed by Five Star with the Securities and Exchange Commission, or SEC, to register the Five Star common shares to be issued pursuant to the Five Star Share Issuances; and (4) approval by Nasdaq of the listing of the Five Star common shares to be issued pursuant to the Five Star Share Issuances, subject to official notice of issuance. If any required approval (other than the Five Star Stockholder Approval) is not obtained by December 31, 2019, and the failure to obtain such approval is not the result of a breach or default by Five Star under the Transaction Agreement, we and Five Star have agreed to work in good faith to determine an alternative to allow the Restructuring Transactions to occur on January 1, 2020; provided we are not required to agree to any alternative that would adversely affect our qualification for taxation as a REIT under the Internal Revenue Code of 1986, as amended. If we and Five Star do not agree to any such alternative, and, as of January 1, 2020, the failure to obtain a required approval is the only remaining condition under the Transaction Agreement, the Conversion Time will be automatically extended to January 1, 2021. If the Five Star Stockholder Approval is not obtained by December 31, 2019, and we do not elect to extend the Transaction Agreement, the Transaction Agreement will terminate, our existing master leases and management agreements and pooling agreements with Five Star will remain in effect, and the amount of monthly minimum rent payable to us by Five Star under our existing master leases with Five Star will return to the rate provided for therein and additional rent again will be payable to us by Five Star in accordance therewith. If the Five Star Stockholder Approval is obtained by December 31, 2019, our existing master leases with Five Star will remain at $11,000 per month, subject to adjustment, regardless of whether the Transaction Agreement is extended and/or is terminated. Five Star has agreed to, within six months following the Conversion Time, expand its board of directors to add an independent director (as defined in Five Star’s bylaws) reasonably satisfactory to us. In addition, we and ABP Trust, on behalf of ABP Acquisition LLC, a wholly owned subsidiary of ABP Trust and Five Star’s largest stockholder, have each agreed to vote all the Five Star common shares that we and ABP Trust beneficially own in favor of approval of the Five Star Share Issuances at any meeting of Five Star’s stockholders held for that purpose. Pursuant to the New Management Agreements, Five Star will receive a management fee equal to 5% of the gross revenues realized at the applicable senior living communities plus reimbursement for its direct costs and expenses related to such communities, as well as an annual incentive fee equal to 15% of the amount by which the annual earnings before interest, taxes, depreciation and amortization, or EBITDA, of all communities on a combined basis exceeds the target EBITDA for all communities on a combined basis for such calendar year, provided that in no event shall the incentive fee be greater than 1.5% of the gross revenues realized at all communities on a combined basis for such calendar year. The New Management Agreements provide for 15 year terms, subject to Five Star’s right to extend for two consecutive five year terms if it achieves certain performance targets for the combined managed communities portfolio. The New Management Agreements also provide us with the right to terminate the New Management Agreement for any community that does not earn 90% of the target EBITDA for such community for two consecutive calendar years or in any two of three consecutive calendar years, with the measurement period commencing January 1, 2021 (and the first termination not possible until the beginning of calendar year 2023), provided we may not in any calendar year terminate communities representing more than 20% of the combined revenues for all communities for the calendar year prior to such termination. In connection with the Transaction Agreement, we entered into a credit agreement with Five Star, pursuant to which we extended to Five Star a $25,000 line of credit, or the Five Star credit facility. The Five Star credit facility matures on January 1, 2020, or January 1, 2021 if the Conversion Time is extended pursuant to the Transaction Agreement. The Five Star credit facility provides for interest to be paid on borrowed amounts at a rate of 6% per year and is secured by real estate mortgages on six senior living communities owned by certain of Five Star’s subsidiaries that guarantee Five Star’s obligations under the Five Star credit facility, and certain personal property owned by those and certain other Five Star subsidiaries. The Five Star credit facility provides for acceleration of payment of all amounts outstanding under the Five Star credit facility upon the occurrence and continuation of certain events of default, including a default by Five Star under the Transaction Agreement and certain other agreements. The agreement governing the Five Star credit facility contains covenants, including those that restrict Five Star’s ability to incur debt or to pay dividends or make other distributions to its stockholders in certain circumstances. |
Recent Accounting Pronouncements (Policies) |
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Accounting Changes and Error Corrections [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||
Recent Accounting Pronouncements | Recent Accounting Pronouncements In February 2016, the FASB issued Accounting Standards Update, or ASU, No. 2016-02, Leases. In July 2018, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases and ASU No. 2018-11, Leases (Topic 842): Targeted Improvements. In December 2018, the FASB issued ASU No. 2018-20 Leases (Topic 842), Narrow-Scope Improvements for Lessors. Collectively, these standards set out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). ASU No. 2016-02 requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase of the leased asset by the lessee. This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight line basis over the term of the lease. ASU No. 2016-02 requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales type leases, direct financing leases and operating leases. These standards were effective as of January 1, 2019. Upon adoption, we applied the package of practical expedients that has allowed us to not reassess (i) whether any expired or existing contracts are or contain leases, (ii) lease classification for any expired or existing leases and (iii) initial direct costs for any expired or existing leases. Furthermore, we applied the optional transition method in ASU No. 2018-11, which has allowed us to initially apply the new leases standard at the adoption date and recognize a cumulative effect adjustment to the opening balance of retained earnings in the adoption period, although we did not have an adjustment. Additionally, our leases met the criteria in ASU No. 2018-11 to not separate non-lease components from the related lease component; therefore, the accounting for these leases remained largely unchanged from the previous standard. The adoption of ASU No. 2016-02 and the related improvements did not have a material impact in our condensed consolidated financial statements. Upon adoption, (i) allowances for bad debts are now recognized as a direct reduction of rental income, and (ii) legal costs associated with the execution of our leases, which were previously capitalized and amortized over the life of their respective leases, are expensed as incurred. Subsequent to January 1, 2019, provisions for credit losses are now included in rental income in our condensed consolidated financial statements. Provisions for credit losses prior to January 1, 2019 were previously included in property operating expenses in our condensed consolidated financial statements and prior periods are not reclassified to conform to the current presentation. We completed our assessment of predominance as it relates to our contracts with residents for housing services at properties leased to our taxable REIT subsidiaries, or TRSs, and have recognized revenue from these properties under ASC 606, which did not have any impact to the timing or amount of our revenue recognized. For leases in which we are the lessee, we recognized a right of use asset and a lease liability equal to the present value of the minimum lease payments with rental payments being applied to the lease liability and the right of use asset being amortized over the term of the lease. The adoption of this standard resulted in an increase in total assets and liabilities of $4,507. The right of use asset and related lease liability are included within other assets, net and other liabilities, respectively, within our condensed consolidated balance sheets. In addition, we lease equipment at certain of our managed senior living communities. These leases are short term in nature, are cancelable with no fee or do not result in an annual expense in excess of our capitalization policy and, as a result, will not be recorded on our condensed consolidated balance sheets. The adoption of ASU No. 2016-02 and the related ASU improvements did not have a material impact in our condensed consolidated financial statements. Revenue Recognition. We are a lessor of MOBs, senior living communities and wellness centers. Our leases provide our tenants with the contractual right to use and economically benefit from all of the premises demised under the leases; therefore, we have determined to evaluate our leases as lease arrangements. Certain of our leases provide for base rent payments and in addition may include variable payments. Rental income from operating leases, including any payments derived by index or market based indices, is recognized on a straight line basis over the lease term when we have determined that the collectability of substantially all of the lease payments is probable. Some of our leases have options to extend or terminate the lease exercisable at the option of our tenants, which are considered when determining the lease term. We do not include in our measurement of our lease receivables certain variable payments, including changes in the index or market based indices after the inception of the lease, certain tenant reimbursements and other income until the specific events that trigger the variable payments have occurred. Such payments totaled $18,845 for the three months ended March 31, 2019. Certain of our leases contain non-lease components, such as property level operating expenses and capital expenditures reimbursed by our tenants as well as other required lease payments. We have determined that all of our leases qualify for the practical expedient to not separate the lease and non-lease components because (i) the lease components are operating leases and (ii) the timing and pattern of recognition of the non-lease components are the same as those of the lease components. We apply Accounting Standards Codification Topic 842, Leases, to the combined component. Income derived by our leases is recorded in rental income in our condensed consolidated statements of comprehensive income. Certain tenants are obligated to pay directly their obligations under their leases for insurance, real estate taxes and certain other expenses. These obligations, which have been assumed by the tenants under the terms of their respective leases, are not reflected in our condensed consolidated financial statements. To the extent any tenant responsible for any such obligations under the applicable lease defaults on such lease or if it is deemed probable that the tenant will fail to pay for such obligations, we would record a liability for such obligations. The following table presents our operating lease maturity analysis as of March 31, 2019:
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires that entities use a new forward-looking “expected loss” model that generally will result in the earlier recognition of allowance for credit losses. The measurement of expected credit losses is based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. ASU No. 2016-13 will be effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. We are currently assessing the potential impact the adoption of ASU No. 2016-13 will have in our condensed consolidated financial statements although lease related receivables are governed by the lease standards referred to above and are not subject to ASU No. 2016-13. We currently expect to adopt this standard using the modified retrospective approach. |
Recent Accounting Pronouncements (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Changes and Error Corrections [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||
Lessee, Operating Lease, Liability, Maturity | The following table presents our operating lease maturity analysis as of March 31, 2019:
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Real Estate Properties Real Estate Properties (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Real Estate [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Real Estate Properties |
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Fair Value of Assets and Liabilities (Tables) |
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Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Assets and liabilities recurring and nonrecurring measured at fair value | The estimated fair value of these 15 SNFs as of March 31, 2019 was as follows:
The following table presents certain of our assets that are measured at fair value on a recurring basis at March 31, 2019, categorized by the level of inputs as defined in the fair value hierarchy under GAAP, used in the valuation of each asset or liability.
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Schedule of carrying value and fair value of the financial instruments | The fair values of these financial instruments approximated their carrying values in our condensed consolidated financial statements as of such dates, except as follows:
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Segment Reporting (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of segment reporting information |
|
Leases and Management Agreements with Five Star Leases and Management Agreements with Five Star (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||
Risks and Uncertainties [Abstract] | ||||||||||||||||||||||||||||||||||||
Disaggregation of Revenue | The following table presents residents fees and services revenue disaggregated by type of contract and payer:
|
Weighted Average Common Shares (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of weighted average number of shares | The following table provides a reconciliation of the weighted average number of common shares used in the calculation of basic and diluted earnings per share (in thousands):
|
Basis of Presentation (Details) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019
USD ($)
building
property
|
Dec. 31, 2018
USD ($)
|
|
Basis Of Presentation [Line Items] | ||
Variable interest entity, consolidated, carrying amount, assets | $ 1,050,254 | $ 1,061,593 |
Variable interest entity, consolidated, carrying amount, liabilities | $ (711,792) | $ (714,226) |
Joint Venture | ||
Basis Of Presentation [Line Items] | ||
Noncontrolling interest, ownership percentage by parent | 45.00% | |
Ownership percentage | 55.00% | |
Massachusetts | MOBs | Joint Venture | ||
Basis Of Presentation [Line Items] | ||
Number of properties included in joint venture agreement | property | 1 | |
Number of buildings included in joint venture agreement | building | 2 |
Recent Accounting Pronouncements - Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Jan. 01, 2019 |
|
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Variable lease, payment | $ 18,845 | |
Accounting Standards Update 2016-02 | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Operating lease, right-of-use asset | $ 4,507 | |
Operating lease, liability | $ 4,507 |
Recent Accounting Pronouncements Recent Accounting Pronouncements - Schedule of Operating Lease Maturity (Details) $ in Thousands |
Mar. 31, 2019
USD ($)
|
---|---|
Accounting Changes and Error Corrections [Abstract] | |
2019 | $ 373,701 |
2020 | 347,718 |
2021 | 324,230 |
2022 | 302,712 |
2023 | 279,407 |
Thereafter | 1,105,830 |
Total | $ 2,733,598 |
Real Estate Properties - Schedule of Real Estate Properties (Details) - Disposal Group, Disposed of by Sale, Not Discontinued Operations $ in Thousands |
1 Months Ended | 3 Months Ended | |
---|---|---|---|
Mar. 31, 2019
USD ($)
building
|
Feb. 28, 2019
USD ($)
building
|
Mar. 31, 2019
USD ($)
building
|
|
Real Estate [Line Items] | |||
Number of Properties | building | 2 | 2 | |
Gross Sales Price | $ 2,975 | ||
MOBs | |||
Real Estate [Line Items] | |||
Gross Sales Price | $ 2,975 | ||
MOBs | Florida | |||
Real Estate [Line Items] | |||
Number of Properties | building | 1 | ||
Gross Sales Price | $ 2,900 | ||
MOBs | Massachusetts | |||
Real Estate [Line Items] | |||
Number of Properties | building | 1 | 1 | |
Gross Sales Price | $ 75 |
Noncontrolling Interest (Details) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019
USD ($)
building
property
|
Mar. 31, 2018
USD ($)
|
|
Noncontrolling Interest [Line Items] | ||
Comprehensive income attributable to noncontrolling interest | $ (1,422) | $ (1,383) |
Cash distribution for joint venture partners | 5,503 | $ 5,667 |
Variable interest entity, consolidated, carrying amount, real estate assets | 740,105 | |
Variable interest entity, consolidated, carrying amount, mortgage debt | $ 620,000 | |
Joint Venture | ||
Noncontrolling Interest [Line Items] | ||
Ownership percentage by noncontrolling owners | 45.00% | |
Ownership percentage | 55.00% | |
Massachusetts | MOBs | Joint Venture | ||
Noncontrolling Interest [Line Items] | ||
Number of properties included in joint venture agreement | property | 1 | |
Number of buildings included in joint venture agreement | building | 2 |
Shareholders' Equity (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | ||||
---|---|---|---|---|---|
Apr. 18, 2019 |
Apr. 05, 2019 |
Feb. 21, 2019 |
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Dividends paid (in dollars per share) | $ 0.39 | ||||
Distributions to shareholders | $ 92,714 | $ 92,714 | $ 92,674 | ||
Subsequent Event | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Distributions to common shareholders declared (in dollars per share) | $ 0.15 | ||||
Distributions to shareholders | $ 35,659 | ||||
Subsequent Event | Former Employees Of RMR LLC | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Shares purchased to satisfy tax withholding and payment obligations (in shares) | 3,529 | ||||
Distributions to common shareholders declared (in dollars per share) | $ 9.47 |
Leases and Management Agreements with Five Star - Narrative (Details) - Five Star $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2019
USD ($)
lease_agreement
community
|
Mar. 31, 2018
USD ($)
community
|
Dec. 31, 2018
USD ($)
|
|
Number of communities leased by the Company | community | 184 | 185 | |
Number of leases with related party | lease_agreement | 5 | ||
Total rental income recognized | $ 39,313 | $ 51,759 | |
Related party transaction, annual rents due | 538 | 1,374 | |
Rents receivable | 22,000 | $ 18,697 | |
Real estate improvements purchased | 22,579 | ||
Property management agreement expense | $ 3,789 | $ 3,494 | |
Rents from significant lessee | Investment | |||
Percentage of rental income | 26.50% | ||
Senior Living Communities | |||
Number of communities managed by related party | community | 76 | 72 | |
Rehabilitation Services | |||
Expenses from transactions with related party | $ 1,675 | $ 1,699 | |
Rental income | Rents from significant lessee | Investment | |||
Percentage of rental income | 14.80% |
Leases and Management Agreements with Five Star Leases and Management Agreements with Five Star - Schedule of Disaggregation of Revenue (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Disaggregation of Revenue [Line Items] | ||
Total revenues | $ 266,286 | $ 275,770 |
Basic housing and support services | ||
Disaggregation of Revenue [Line Items] | ||
Total revenues | 87,412 | |
Medicare and Medicaid programs | ||
Disaggregation of Revenue [Line Items] | ||
Total revenues | 8,745 | |
Private pay and other third party payer SNF services | ||
Disaggregation of Revenue [Line Items] | ||
Total revenues | 11,888 | |
Residents fees and services | ||
Disaggregation of Revenue [Line Items] | ||
Total revenues | $ 108,045 | $ 102,042 |
Related Person Transactions (Details) $ in Thousands |
Mar. 31, 2019
USD ($)
agreement
shares
|
Dec. 31, 2018
USD ($)
|
---|---|---|
RMR Inc | Class A common shares | ||
Related person transactions | ||
Equity securities investment (in shares) | 2,637,408 | |
Number of management agreements | agreement | 2 | |
Five Star | ||
Related person transactions | ||
Equity securities investment (in shares) | 4,235,000 | |
Investment owned, percentage of total shares outstanding | 8.30% | |
AIC | ||
Related person transactions | ||
Equity method investments | $ | $ 9,102 | $ 8,632 |
RMR LLC | Five Star | ||
Related person transactions | ||
Investment owned, percentage of total shares outstanding | 35.40% |
Income Taxes (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Income Tax Disclosure [Abstract] | ||
Income tax expense | $ 134 | $ 260 |
Weighted Average Common Shares (Details) - shares shares in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Earnings Per Share [Abstract] | ||
Weighted average common shares for basic earnings per share (in shares) | 237,568 | 237,478 |
Effect of dilutive securities: unvested share awards (in shares) | 32 | 15 |
Weighted average common shares for diluted earnings per share (in shares) | 237,600 | 237,493 |
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