NEWTON, Mass.--(BUSINESS WIRE)--Senior Housing Properties Trust (Nasdaq: SNH) today announced its financial results for the quarter and six months ended June 30, 2019.

“Our senior living business restructuring arrangement with our largest tenant, Five Star Senior Living, announced in April 2019 continues to make progress,” stated Jennifer Francis, President and Chief Operating Officer of Senior Housing Properties Trust. “In June 2019, Five Star shareholders approved the issuances of Five Star stock to us and our shareholders, in satisfaction of a condition to that restructuring. We also continue to make progress on our disposition plan and anticipate selling or having under agreement to sell approximately $900 million of assets by year end, which will enable us to meet our target leverage profile moving forward. Year to date, we have sold or have under agreement to sell 50 properties for total expected proceeds of $197 million, and we have another 60 properties being actively marketed for sale. We also recently sold shares in The RMR Group Inc. for approximately $99 million in net proceeds after underwriting fees and before other offering expenses.”

Results for the Quarter Ended June 30, 2019:

Net loss attributable to common shareholders was $37.2 million, or $0.16 per share, for the quarter ended June 30, 2019 compared to net income attributable to common shareholders of $123.6 million, or $0.52 per share, for the quarter ended June 30, 2018. The net loss attributable to common shareholders for the quarter ended June 30, 2019 includes: (1) $64.4 million of unrealized losses on equity securities, net, compared to $23.3 million of unrealized gains on equity securities, net during the quarter ended June 30, 2018; (2) $17.8 million of gains on sale of properties, net, compared to $80.8 million of gains on sale of properties, net, during the quarter ended June 30, 2018; (3) a decrease in rental income of $21.5 million during the quarter ended June 30, 2019 compared to the quarter ended June 30, 2018 primarily as a result of a reduction in rent paid to SNH by Five Star Senior Living Inc., or Five Star, during the three months ended June 30, 2019 pursuant to the transaction agreement SNH entered into with Five Star in April 2019, or the Transaction Agreement; and (4) a decrease in general and administrative expenses compared to the quarter ended June 30, 2018 as a result of no business management incentive fees accrued during the quarter ended June 30, 2019 compared to $17.6 million of business management incentive fees accrued during the quarter ended June 30, 2018.

Normalized funds from operations attributable to common shareholders, or Normalized FFO attributable to common shareholders, were $81.1 million and $104.8 million, or $0.34 and $0.44 per share, for the quarters ended June 30, 2019 and 2018, respectively.

Reconciliations of net income (loss) attributable to common shareholders determined in accordance with U.S. generally accepted accounting principles, or GAAP, to funds from operations attributable to common shareholders, or FFO attributable to common shareholders, and Normalized FFO attributable to common shareholders for the quarters ended June 30, 2019 and 2018 appear later in this press release.

Results for the Six Months Ended June 30, 2019:

Net loss attributable to common shareholders was $7.1 million, or $0.03 per share, for the six months ended June 30, 2019 compared to net income attributable to common shareholders of $359.6 million, or $1.51 per share, for the six months ended June 30, 2018. The net loss attributable to common shareholders for the six months ended June 30, 2019 includes: (1) $41.5 million of unrealized losses on equity securities, net, compared to $50.5 million of unrealized gains on equity securities, net, during the six months ended June 30, 2018; (2) $17.7 million of gains on sale of properties, net, compared to $261.9 million of gains on sale of properties, net, during the six months ended June 30, 2018; (3) a decrease in rental income of $37.0 million during the six months ended June 30, 2019 compared to the six months ended June 30, 2018, primarily as a result of a reduction in rent paid to SNH by Five Star during the six months ended June 30, 2019 pursuant to the Transaction Agreement, as well as dispositions since January 1, 2018; (4) $8.7 million of transaction and other related costs incurred during the quarter ended June 30, 2019; (5) $8.4 million of impairment charges; and (6) a decrease in general and administrative expenses compared to the six months ended June 30, 2019 as a result of no business management incentive fees accrued for the six months ended June 30, 2019 compared to $32.0 million of business management incentive fees accrued for the six months ended June 30, 2018.

Normalized FFO attributable to common shareholders were $169.4 million and $211.9 million, or $0.71 and $0.89 per share, for the six months ended June 30, 2019 and 2018, respectively.

Reconciliations of net income (loss) attributable to common shareholders determined in accordance with GAAP to FFO attributable to common shareholders and Normalized FFO attributable to common shareholders for the six months ended June 30, 2019 and 2018 appear later in this press release.

Portfolio Operating Results:

For the quarter ended June 30, 2019, cash basis net operating income, or Cash Basis NOI, at properties owned continuously and properties owned and managed continuously by the same operator since April 1, 2018, or same property, decreased 11.1% compared to the quarter ended June 30, 2018, primarily as a result of the reduction in rent paid to SNH by Five Star during the quarter ended June 30, 2019 pursuant to the Transaction Agreement.

For the quarter ended June 30, 2019, 50.7% of net operating income, or NOI, came from 145 buildings leased to medical providers, medical related businesses, clinics and biotech laboratory tenants, or MOBs, with 12.4 million leasable square feet. As of June 30, 2019, excluding five MOBs that were held for sale, 94.0% of MOB square feet was leased compared to 95.7% as of June 30, 2018. Same property MOB occupancy was 94.0% as of June 30, 2019 compared to 95.9% as of June 30, 2018. Same property Cash Basis NOI from MOBs increased 3.4% for the quarter ended June 30, 2019 compared to the quarter ended June 30, 2018.

For the quarter ended June 30, 2019, 31.1% of NOI came from 224 triple net leased senior living communities with 23,206 living units. The weighted average rent coverage for triple net leased senior living communities increased to 1.52x for the 12 month period ended March 31, 2019 compared to 1.19x for the 12 month period ended March 31, 2018(1). Same property Cash Basis NOI from triple net leased senior living communities decreased 29.2% for the quarter ended June 30, 2019 compared to the quarter ended June 30, 2018. The increase in rent coverage and decrease in same property Cash Basis NOI were primarily a result of the reduction in rent paid to SNH by Five Star for the quarter ended June 30, 2019 pursuant to the Transaction Agreement.

(1) SNH reports rent coverage one quarter in arrears because operating results from tenants are usually provided to SNH three months after the end of a fiscal quarter. Operating data from triple net leased senior living communities is provided by tenants and SNH has not independently verified this information. Excludes data for periods prior to SNH's ownership of certain properties, as well as properties sold or classified as held for sale during the periods presented. Five Star rent coverage for the twelve months ended March 31, 2019 is calculated based on the $132.0 million of annualized rental income payable to SNH by Five Star in accordance with the Transaction Agreement. The aggregate amount of monthly minimum rent payable to SNH by Five Star is subject to adjustment in accordance with the Transaction Agreement.

For the quarter ended June 30, 2019, 15.0% of NOI came from 77 managed senior living communities with 10,084 living units. Occupancy at managed senior living communities was 85.4% for the quarter ended June 30, 2019 compared to 86.1% for the quarter ended June 30, 2018. Same property occupancy at managed senior living communities was 85.7% for the quarter ended June 30, 2019 compared to 86.1% for the quarter ended June 30, 2018. Same property average monthly rates at managed senior living communities were $4,246 for the quarter ended June 30, 2019 compared to $4,243 for the quarter ended June 30, 2018. Same property Cash Basis NOI from managed senior living communities decreased 8.7% for the quarter ended June 30, 2019 compared to the quarter ended June 30, 2018.

SNH's 10 wellness centers were 100% leased as of each of June 30, 2019 and June 30, 2018, and generated Cash Basis NOI of $4.7 million and $4.4 million for the three months ended June 30, 2019 and 2018, respectively.

Reconciliations of net income (loss) determined in accordance with GAAP to NOI and Cash Basis NOI, and a reconciliation of NOI to same property NOI and calculation of same property Cash Basis NOI by operating segment, for the quarters ended June 30, 2019 and 2018, appear later in this press release.

Disposition Activities:

During the quarter ended June 30, 2019, SNH sold seven MOBs located in Massachusetts and one MOB located in Colorado for an aggregate sales price of approximately $10.6 million, excluding closing costs. In July 2019, SNH sold three MOBs located in Massachusetts for an aggregate sales price of approximately $5.0 million, excluding closing costs.

In May 2019, SNH sold three skilled nursing facilities, or SNFs, located in California for an aggregate sales price of approximately $21.5 million, excluding closing costs.

As previously announced, on July 1, 2019, SNH completed the sale of 2,637,408 shares of class A common stock of The RMR Group Inc. (Nasdaq: RMR), or RMR Inc., in an underwritten public offering at a price to the public of $40.00 per common share. SNH received $98.9 million in net proceeds from this sale after underwriting fees and before other offering expenses that it used to repay amounts outstanding under its revolving credit facility.

Financing Activities:

As previously announced, in May 2019, SNH redeemed at par all of its outstanding 3.25% senior notes due 2019 for a redemption price equal to the $400.0 million principal amount, using cash on hand and borrowings under its revolving credit facility.

Also in May 2019, SNH prepaid at par approximately $42.2 million of secured debt encumbering four senior living communities with an annual interest rate of 3.79% and a maturity date in July 2019. SNH prepaid this secured debt using cash on hand and borrowing under its revolving credit facility.

Supplemental Data:

A copy of SNH’s Second Quarter 2019 Supplemental Operating and Financial Data is available for download at SNH’s website, www.snhreit.com. SNH’s website is not incorporated as part of this press release.

SNH is a real estate investment trust, or REIT, that owns medical office and life science properties, senior living communities and wellness centers throughout the United States. SNH is managed by the operating subsidiary of RMR Inc., an alternative asset management company that is headquartered in Newton, MA.