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Senior Housing Properties Continues Strategy of “Disciplined Capital Allocation”

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In a recent Q1 report, Newton, MA-based Senior Housing Properties Trust revealed that the REIT continued to execute its strategy of “disciplined capital allocation, highlighted by our first joint venture transaction.” That was according to David Hegarty, president and Chief Operating Officer.

“This transaction allowed us to showcase the value of a portion of our portfolio, reduce our concentration risk by tenant and asset, decrease our leverage and demonstrate our ability to access cost efficient capital. Also, during the quarter we acquired one medical office building for $15 million and continued to invest capital in our existing senior living properties in order to remain competitive with new supply.”

Results for Q1 showed that net income attributable to common shareholders was $32.2 million, or $0.14 per diluted share, for the quarter ended March 31, 2017, compared to $31.3 million, or $0.13 per diluted share, for the quarter ended March 31, 2016. This increase in net income attributable to common shareholders is primarily the result of acquisitions since January 1, 2016 and a loss on impairment of assets recognized for the quarter ended March 31, 2016, partially offset by an increase in interest expense. Normalized funds from operations, or Normalized FFO, were $108.4 million and $110.3 million, respectively, or $0.46 per diluted share, for each of the quarters ended March 31, 2017 and March 31, 2016.

According to outside analyst RBC Capital Markets, the stock has performed well since year end 2015, which significantly closed the valuation gap between the current share price and its NAV estimate. “Given the outperformance, SNH will likely be required to pay a sizeable incentive fee to RMR over the next three years,” the analyst said in a report to investors. “Additionally, the company’s largest tenant, FVE, should continue to face headwinds, and the underlying lease coverage ratios will likely trend lower.”