Seniors Housing Business

AUG-SEP 2015

Seniors Housing Business is the magazine that helps you navigate the evolution of the seniors housing industry.

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Page 68 of 87 69 August-September 2015 n Seniors Housing Business F o r i n f o r m a t i o n re g a rd i n g o u r e x t e n s i v e l i n e o f s u s t a i n a b l e v i n y l f l o o r i n g , p l e a s e c a l l 8 0 0 - 2 7 5 - 7 9 4 3 o r v i s i t u s o n l i n e a t w w w. e a r t h w e r k s . c o m HIGH STYLE FOR THEM, HIGH PERFORMANCE FOR YOU There's a difference in LVT that truly performs at both levels. With over three decades of innovative designs and manufacturing technology, we're pioneers in LVT fashion flooring for a variety of demanding environments. Flooring that can take traffic and make turnarounds easy. Tough and luxurious, that's LVT experience you can trust. Get a new splash of color and less-worry warranties, from EarthWerks ® . SOME OFFER LVT – WE ARE LVT ™ OUGH LUXURY further improvements. Holiday will remain the exist- ing operator at the properties, so it eliminates operator transition risk. We also expand our relation- ship with Holiday, which is the largest operator of independent living properties in the U.S. and has delivered strong performance on our existing properties that it operates. Having a strong relationship with Holiday gives us a com- petitive advantage, and its proven track record of success makes us confdent that it can achieve simi- lar results with this portfolio. SHB: Some 48 percent of New Senior's NOI is derived from properties that are triple-net leased to operators. The other 52 percent comes from managed properties. What does "managed" in this case mean exactly? Givens: The managed portfolio is a structure whereby we enter into a property management agreement with an operator and pay the oper- ator a base management fee on rev- enue and, in some cases, an incen- tive fee based on performance. We are then the direct recipient of the NOI at the property, so we typically place our higher growth acquisi- tions in this structure as it allows us to capture the operational upside at the properties. SHB: That sounds similar to the RIDEA (REIT Investment Diver- sifcation and Empowerment Act) vehicle used by Ventas and Health Care REIT for growth opportunities. Givens: Yes, it's similar. The only difference is the RIDEA structure is only used for assets where there's a healthcare component, such as assisted living or memory care. Here we have a signifcant concen- tration of our portfolio in indepen- dent living. Bumpy ride in stock market SHB: When the company was spun off last November, the stock price was over $19 per share. This interview is being conducted in early August 2015, and now the share price is just over $12 per share. What accounts for that drop in the stock price? Givens: Spin-offs are always dif- ferent from initial public offerings (IPOs). Since it involves taking assets from one company and spinning them out into a new com- pany, sometimes the initial stock price and where the stock lands is a little less straightforward than with an IPO. Since we were spun off, we have done exactly what we told the mar- ket we would do. We invested our cash on hand in attractive acqui- sitions, including a $435 million acquisition of 17 private pay inde- pendent living assets that closed in March. We refnanced our capital structure with the completion of our $670 million Freddie Mac fnancing in March that lowered our overall effective rate of our debt by 85 basis points and extended our overall term of our debt. Lastly, we generated strong organic growth with 6.3 percent same-store growth in NOI in the frst quarter and 4.5 percent in the second quarter for our managed portfolio, which has been among the highest in the industry. We're trading at a discount to our peers despite outsized growth, a demonstrated track record of high-quality accretive acquisitions, posting really strong fnancial results and increasing our divi- dend by 13 percent. In our view, the discount is way too steep, and we don't think it will last given the uniqueness and qual- ity of our portfolio, the embedded growth potential of our portfolio, our disciplined acquisition strategy,

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