New Senior Announces First Quarter 2018 Results

  New Senior Announces First Quarter 2018 Results

 Repositions Leased Portfolio and Continues Review of Strategic Alternatives

Business Wire

NEW YORK -- May 10, 2018

New Senior Investment Group Inc. (“New Senior” or the “Company”) (NYSE: SNR)
announced today its results for the quarter ended March 31, 2018.

1Q 2018 FINANCIAL HIGHLIGHTS

  * Net loss of $13.3 million, or $(0.16) per basic and diluted share
  * Total net operating income (“NOI”) of $47.1 million
  * Normalized Funds from Operations (“Normalized FFO”) of $17.6 million, or
    $0.21 per basic and diluted share
  * AFFO of $16.8 million, or $0.20 per basic and diluted share
  * Normalized Funds Available for Distribution (“Normalized FAD”) of $15.1
    million, or $0.18 per basic and diluted share

1Q 2018 AND RECENT BUSINESS HIGHLIGHTS

  * Total same store cash NOI decreased 1.0% vs. 1Q’17
  * Managed same store cash NOI decreased 4.8% vs. 1Q’17
  * Triple net same store cash NOI increased 3.5% vs. 1Q’17
  * On May 9, entered into an agreement to terminate the Company’s triple net
    leases with Holiday
  * Intend to announce first quarter dividend by June 1, 2018
  * Review of strategic alternatives is ongoing

FIRST QUARTER 2018 RESULTS

Dollars in thousands, except per share data
                                                  
                 For the Quarter Ended March       For the Quarter Ended March
                 31, 2018                          31, 2017
                             Per       Per                    Per       Per
                 Amount      Basic     Diluted     Amount     Basic     Diluted
                             Share     Share                  Share     Share
GAAP
Net loss         $(13,349)   $(0.16)   $(0.16)     $(9,895)   $(0.12)   $(0.12)
                                                                         
Non-GAAP^(A)
NOI              $47,119     N/A       N/A         $55,389    N/A       N/A
FFO              13,376      $0.16     $0.16       23,424     $0.29     $0.28
Normalized       17,644      $0.21     $0.21       24,282     $0.30     $0.29
FFO
AFFO             16,803      $0.20     $0.20       22,338     $0.27     $0.27
Normalized       15,113      $0.18     $0.18       20,644     $0.25     $0.25
FAD ^(B)
                                                                         

(A) See end of press release for reconciliation of non-GAAP measures to net
loss.
(B) Normalized FAD, which does not reflect debt principal payments and certain
other expenses, does not represent cash available for distribution to
shareholders.
 

FIRST QUARTER 2018 GAAP RESULTS

New Senior recorded GAAP net loss of $13.3 million, or $(0.16) per basic and
diluted share, for the first quarter of 2018, compared to GAAP net loss of
$9.9 million, or $(0.12) per basic and diluted share, for the first quarter of
2017. The year over year decrease was primarily driven by no gain on sale of
assets recognized during the first quarter of 2018 compared to a $4.2 million
gain on sale of assets recognized during the first quarter of 2017.

FIRST QUARTER 2018 PORTFOLIO PERFORMANCE

Total NOI decreased 14.9% to $47.1 million compared to $55.4 million for 1Q
2017. Total same store cash NOI decreased 1.0% vs. 1Q 2017.

For the managed portfolio, same store average occupancy decreased 160 basis
points to 85.4% compared to 87.0% for 1Q 2017, and same store RevPOR increased
1.6% to $3,113 compared to $3,063 for 1Q 2017. Year-over-year, same store cash
NOI decreased 4.8% to $22.9 million compared to $24.1 million for 1Q 2017.

For the triple net portfolio, same store cash NOI increased 3.5% to $20.6
million compared to $19.9 million for 1Q 2017. Same store triple net average
occupancy decreased 210 basis points to 87.4% compared to 89.5% for 1Q 2017.
Same store EBITDARM coverage as of March 31, 2018 was 1.15x, down from 1.20x
as of March 31, 2017. Triple net average occupancy and EBITDARM coverage are
presented one quarter in arrears on a trailing twelve month basis.

UPDATE ON REVIEW OF STRATEGIC ALTERNATIVES

As previously announced on February 23, 2018, the Company’s Board of
Directors, together with its management team and legal and financial advisors,
is exploring a full range of strategic alternatives to maximize shareholder
value. The strategic review is ongoing.

As part of the strategic review process, on May 9, 2018, the Company entered
into an agreement (the “Termination Agreement”) to terminate its triple net
leases with affiliates of Holiday Retirement (collectively, “Holiday”). In
exchange, the Company will receive $116 million of total consideration,
including a $70 million termination payment and $46 million of retained
security deposits. The effectiveness of the lease termination is subject to
the Company completing a refinancing of the existing debt on the portfolio,
which had an outstanding face amount of approximately $666 million as of March
31, 2018 and a current coupon of 4.15%, on or before May 21, 2018. The Company
expects to refinance the existing debt with a one-year $720 million secured
loan bearing interest at LIBOR plus 4.0% for the first six months and
increasing by 50 basis points after the sixth monthly payment date and by an
additional 50 basis points after the ninth monthly payment date. If the
Company is successful in refinancing the existing debt, the Company is
expected to incur approximately $65 million of prepayment fees and expenses.
The refinancing is expected to close in May, but it has not been completed and
there can be no assurances that it will be completed on the expected terms or
at all.

In addition, the parties have agreed to enter into property management
agreements (collectively, the “Management Agreements”), concurrently with the
termination of the leases, pursuant to which the Company will pay a management
fee equal to (x) a monthly base fee in the amount of 5% of Effective Gross
Income (as defined in the Management Agreements) in the first year and 4.5% of
Effective Gross Income for the remainder of the term, and (y) provided the
portfolio achieves certain performance thresholds, an annual incentive fee in
an amount not to exceed 2% of the portfolio’s Effective Gross Income. The
Management Agreements are freely terminable without penalty after the first
year of the term.

The Termination Agreement and the Management Agreements were negotiated and
unanimously approved by a special committee (the “Special Committee”) of the
Company’s Board of Directors. The Special Committee was composed entirely of
independent and disinterested members of the Board of Directors, and the
Special Committee was advised by independent legal and financial advisors.
Holiday is majority owned by private equity funds managed by the Company's
manager.

FIRST QUARTER DIVIDEND

The Board continues to evaluate our dividend policy in light of the ongoing
strategic review, our results of operations, liquidity needs and other
factors. We expect the Board to make a final determination on the amount of
the first quarter dividend by June 1, 2018 and, consistent with past practice,
to maintain the payment date as June 22. While the amount of such dividend has
not yet been determined, it may be less than dividends declared in prior
quarters, and such difference could be material.

ADDITIONAL INFORMATION

For additional information that management believes to be useful for
investors, please refer to the presentation posted in the Investor Relations
section of the Company’s website, www.newseniorinv.com.

EARNINGS CONFERENCE CALL

Management will host a conference call on May 10, 2018 at 9:00 A.M. Eastern
Time. The conference call may be accessed by dialing (877) 694-6694 (from
within the U.S.) or (970) 315-0985 (from outside of the U.S.) ten minutes
prior to the scheduled start of the call; please reference “New Senior First
Quarter 2018 Earnings Call.” A simultaneous webcast of the conference call
will be available to the public on a listen-only basis at
www.newseniorinv.com. Please allow extra time prior to the call to visit the
website and download any necessary software required to listen to the internet
broadcast.

A telephonic replay of the conference call will also be available
approximately two hours following the call’s completion through 11:59 P.M.
Eastern Time on June 10, 2018 by dialing (855) 859-2056 (from within the U.S.)
or (404) 537-3406 (from outside the U.S.); please reference access code
“1498898.”

ABOUT NEW SENIOR

New Senior Investment Group (NYSE: SNR) is a publicly-traded real estate
investment trust with a diversified portfolio of senior housing properties
located across the United States. As of March 31, 2018, New Senior is one of
the largest owners of senior housing properties, with 133 properties across 37
states. New Senior is managed by an affiliate of Fortress Investment Group
LLC, a global investment management firm. More information about New Senior
can be found at www.newseniorinv.com.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain information in this press release may constitute “forward-looking
statements” within the meaning of the Private Securities Litigation Reform Act
of 1995, including without limitation statements regarding the Company’s
exploration of strategic alternatives, the anticipated termination of the
leases with Holiday, as well as the related refinancing and entry into new
management agreements, the repositioning of the lease portfolio, and the
declaration or amount of any future dividend. These statements are not
historical facts. They represent management’s current expectations regarding
future events and are subject to a number of risks and uncertainties, many of
which are beyond our control, that could cause actual results to differ
materially from those described in the forward-looking statements. These risks
and uncertainties include, but are not limited to, risks and uncertainties
relating to the Company’s review of strategic alternatives and announcement
thereof. Accordingly, you should not place undue reliance on any
forward-looking statements contained herein. For a discussion of these and
other risks and important factors that could affect such forward-looking
statements, see the sections entitled “Risk Factors” and “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” in
the Company’s most recent annual and quarterly reports filed with the
Securities and Exchange Commission, which are available on the Company’s
website (www.newseniorinv.com). New risks and uncertainties emerge from time
to time, and it is not possible for New Senior to predict or assess the impact
of every factor that may cause its actual results to differ materially from
those contained in any forward-looking statements. Forward-looking statements
contained herein speak only as of the date of this press release, and New
Senior expressly disclaims any obligation to release publicly any updates or
revisions to any forward-looking statements contained herein to reflect any
change in New Senior's expectations with regard thereto or change in events,
conditions or circumstances on which any statement is based.

 
Consolidated Balance Sheets
(dollars in thousands, except share data)
                                                            
                                            March 31, 2018
Assets                                      (Unaudited)      December 31, 2017
Real estate investments:
Land                                        $  182,238       $   182,238
Buildings, improvements and other              2,333,016         2,329,524
Accumulated depreciation                       (297,035  )       (275,794   )
Net real estate property                       2,218,219         2,235,968   
Acquired lease and other intangible            69,139            264,438
assets
Accumulated amortization                       (59,406   )       (249,198   )
Net real estate intangibles                    9,733             15,240      
Net real estate investments                    2,227,952         2,251,208
                                                              
Cash and cash equivalents                      120,834           137,327
Straight-line rent receivables                 85,771            82,445
Receivables and other assets, net              38,190            37,047      
Total Assets                                $  2,472,747     $   2,508,027   
                                                              
Liabilities and Equity
Liabilities
Mortgage notes payable, net                 $  1,902,901     $   1,907,928
Due to affiliates                              8,957             9,550
Accrued expenses and other liabilities         89,709            84,664      
Total Liabilities                           $  2,001,567     $   2,002,142   
                                                              
Commitments and contingencies
                                                              
Equity
Preferred stock $0.01 par value,
100,000,000 shares authorized and none      $  -             $   -
issued or outstanding as of both March
31, 2018 and December 31, 2017
Common stock $0.01 par value,
2,000,000,000 shares authorized,
82,148,869 shares issued and outstanding       821               821
as of both March 31, 2018 and December
31, 2017
Additional paid-in capital                     898,135           898,132
Accumulated deficit                            (427,776  )       (393,068   )
Total Equity                                $  471,180       $   505,885     
                                                              
Total Liabilities and Equity                $  2,472,747     $   2,508,027   
                                                              

 
Consolidated Statements of Operations (unaudited)
(dollars in thousands, except share data)
                                                               
                                               Three Months Ended March 31,
                                                 2018             2017        
Revenues
Resident fees and services                     $ 75,343         $ 86,726
Rental revenue                                   23,875           28,247      
Total revenues                                   99,218           114,973
                                                                 
Expenses
Property operating expense                       52,099           59,584
Depreciation and amortization                    26,725           37,518
Interest expense                                 21,923           23,066
Acquisition, transaction and integration         2,888            348
expense
Management fees and incentive compensation       3,752            3,824
to affiliate
General and administrative expense               3,752            4,011
Loss on extinguishment of debt                   -                375
Other expense                                    1,380            135         
Total expenses                                   112,519          128,861
Gain on sale of real estate                      -                4,199       
                                                                 
Loss before income taxes                         (13,301    )     (9,689     )
Income tax expense                               48               206         
Net loss                                       $ (13,349    )   $ (9,895     )
                                                                 
Net loss per share of common stock
Basic and diluted ^(A)                         $ (0.16      )   $ (0.12      )
                                                                 
Weighted average number of shares of common
stock outstanding
Basic and diluted ^(B)                           82,148,869       82,140,750  
                                                                 
Dividends declared per share of common stock   $ 0.26           $ 0.26        
                                                                 

(A) Basic earnings per share (“EPS”) is calculated by dividing net income by
the weighted average number of shares of common stock outstanding. Diluted EPS
is computed by dividing net income by the weighted average number of shares of
common stock outstanding plus the additional dilutive effect, if any, of
common stock equivalents during each period.
(B) All outstanding options were excluded from the diluted share calculation
as their effect would have been anti-dilutive.
 

 
Consolidated Statements of Cash Flows (unaudited)
(dollars in thousands)
                                                                  
                                                  Three Months Ended March 31,
                                                     2018            2017     
Cash Flows From Operating Activities
Net loss                                          $  (13,349  )    $ (9,895  )
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation of tangible assets and                  26,749          37,555
amortization of intangible assets
Amortization of deferred financing costs             2,132           2,465
Amortization of deferred revenue, net                331             190
Amortization of premium on mortgage notes            -               (144    )
payable
Non-cash straight-line rent                          (3,326   )      (4,581  )
Gain on sale of real estate                          -               (4,199  )
Loss on extinguishment of debt                       -               375
Provision for bad debt                               345             645
Other non-cash expense                               1,322           87
Changes in:
Receivables and other assets, net                    (796     )      (198    )
Due to affiliates                                    (593     )      (549    )
Accrued expenses and other liabilities               2,915           (297    )
Net cash provided by operating activities         $  15,730        $ 21,454   
                                                                    
Cash Flows From Investing Activities
Proceeds from the sale of real estate, net        $  -             $ 14,956
Capital expenditures, net of insurance proceeds      (3,561   )      (4,386  )
Net cash (used in) provided by investing          $  (3,561   )    $ 10,570   
activities
                                                                    
Cash Flows From Financing Activities
Principal payments of mortgage notes payable      $  (7,159   )    $ (4,900  )
Repayments of mortgage notes payable                 -               (14,730 )
Payment of exit fee on extinguishment of debt        -               (178    )
Payment of deferred financing costs                  (587     )      -
Purchase of interest rate caps                       (280     )      -
Payment of common stock dividend                     (21,359  )      (21,357 )
Net cash used in financing activities             $  (29,385  )    $ (41,165 )
Net decrease in cash, cash equivalents and           (17,216  )      (9,141  )
restricted cash
Cash, cash equivalents and restricted cash,          157,485         97,517   
beginning of period
Cash, cash equivalents and restricted cash, end   $  140,269       $ 88,376   
of period
                                                                    
Supplemental Disclosure of Cash Flow
Information
Cash paid during the period for interest          $  19,633        $ 20,679
expense
                                                                    
Supplemental Disclosure of Non-Cash Investing
and Financing Activities
Issuance of common stock                          $  -             $ 139
                                                                              

 
Reconciliation of NOI to Net Loss
(dollars in thousands)
                                                        
                                                         For the Quarter Ended
                                                         March 31, 2018
Total revenues                                           $     99,218
Property operating expense                                     (52,099    )
NOI                                                            47,119
                                                          
Depreciation and amortization                                  (26,725    )
Interest expense                                               (21,923    )
Acquisition, transaction and integration expense               (2,888     )
Management fees and incentive compensation to                  (3,752     )
affiliate
General and administrative expense                             (3,752     )
Other expense                                                  (1,380     )
Income tax expense                                             (48        )
Net Loss                                                 $     (13,349    )
                                                                           

 
Reconciliation of Net Loss to FFO, Normalized FFO, AFFO and Normalized FAD
(dollars and shares in thousands, except per share data)
                                                       
                                                        For the Quarter Ended
                                                        March 31, 2018
Net loss                                                $     (13,349    )
Adjustments:
Depreciation and amortization                                 26,725      
FFO                                                     $     13,376
FFO per diluted share                                   $     0.16        
Acquisition, transaction and integration expense              2,888
Other expense                                                 1,380       
Normalized FFO                                          $     17,644
Normalized FFO per diluted share                        $     0.21        
Straight-line rent                                            (3,326     )
Amortization of deferred financing costs                      2,132
Amortization of deferred community fees and other^(1)         353         
AFFO                                                    $     16,803
AFFO per diluted share                                  $     0.20        
Routine capital expenditures                                  (1,690     )
Normalized FAD                                          $     15,113
Normalized FAD per diluted share                        $     0.18        
                                                         
Weighted average diluted shares outstanding^(2)               82,738
                                                                          

(1) Includes amortization of above / below market lease intangibles,
amortization of premium on mortgage notes payable and amortization of deferred
community fees and other, which includes the net change in deferred community
fees and other rent discounts or incentives.
(2) Includes dilutive effect of options.
 

 
Reconciliation of Year-over-Year Cash NOI (unaudited)
(dollars in thousands)
                                                                                                                                      
                 1Q 2017                                                           1Q 2018
                 Same Store   Non-Same     Same Store   Non-Same                   Same Store   Non-Same     Same Store   Non-Same
                 NNN          Store NNN    Managed      Store        Total         NNN          Store NNN    Managed      Store        Total
                 Properties   Properties   Properties   Managed                    Properties   Properties   Properties   Managed
                                                        Properties                                                        Properties
Cash NOI         $ 19,882     $  3,825     $ 24,079     $   3,336    $ 51,122      $ 20,574     -            $ 22,927     $  644       $ 44,145
Straight-line      4,019         562         -              -          4,581         3,326      -              -             -           3,326
rent
Amortization
of deferred        (26    )      (15   )     (318   )       45         (314    )     (25    )   -              (325   )      (2   )      (352     )
community fees
and other^(1)
                                                                                                                                        
Segment /        $ 23,875     $  4,372     $ 23,761     $   3,381    $ 55,389      $ 23,875     -            $ 22,602     $  642       $ 47,119
Total NOI
                                                                                                                                        
Depreciation
and                                                                    (37,518 )                                                         (26,725  )
amortization
Interest                                                               (23,066 )                                                         (21,923  )
expense
Acquisition,
transaction &                                                          (348    )                                                         (2,888   )
integration
expense
Management
fees and
incentive                                                              (3,824  )                                                         (3,752   )
compensation
to affiliate
General and
administrative                                                         (4,011  )                                                         (3,752   )
expense
Loss on
extinguishment                                                         (375    )                                                         -
of debt
Other expense                                                          (135    )                                                         (1,380   )
Gain on sale                                                           4,199                                                             -
of real estate
Income tax                                                             (206    )                                                         (48      )
expense
Net loss                                                               ($9,895 )                                                         ($13,349 )
                                                                                                                                                   

(1) Includes amortization of above / below market lease intangibles and
amortization of deferred community fees and other, which includes the net
change in deferred community fees and other rent discounts or incentives.
 

NON-GAAP FINANCIAL MEASURES

The tables above set forth reconciliations of non-GAAP measures to net income
(loss), which is the most directly comparable GAAP financial measure.

A non-GAAP financial measure is a measure of historical or future financial
performance, financial position or cash flows that excludes or includes
amounts that are not excluded from or included in the most comparable GAAP
measure. We consider certain non-GAAP financial measures to be useful
supplemental measures of our operating performance. GAAP accounting for real
estate assets assumes that the value of real estate assets diminishes
predictably over time, even though real estate values historically have risen
or fallen with market conditions. As a result, many industry investors look to
non-GAAP financial measures for supplemental information about real estate
companies.

You should not consider non-GAAP measures as alternatives to GAAP net (loss)
income, which is an indicator of our financial performance, or as alternatives
to GAAP cash flow from operating activities, which is a liquidity measure, nor
are non-GAAP measures necessarily indicative of our ability to satisfy our
funding requirements. In order to facilitate a clear understanding of our
consolidated historical operating results, you should examine our non-GAAP
measures in conjunction with GAAP net (loss) income as presented in our
Consolidated Financial Statements and other financial data included elsewhere
in this report. Moreover, the comparability of non-GAAP financial measures
across companies may be limited as a result of differences in the manner in
which real estate companies calculate such measures, the capital structure of
such companies or other factors.

Below is a description of the non-GAAP financial measures presented herein.

NOI and Cash NOI

The Company evaluates the performance of each of its two business segments
based on NOI. The Company defines NOI as total revenues less property-level
operating expenses, which include property management fees and travel cost
reimbursements. The sum of the NOI for each segment is total NOI, which the
Company uses to evaluate the aggregate performance of its segments.

The Company defines cash NOI as NOI excluding the effects of straight-line
rent, amortization of above / below market lease intangibles and amortization
of deferred community fees and other, which includes the net change in
deferred community fees and other rent discounts or incentives. We believe
that NOI and cash NOI serve as useful supplemental measures to net income
because they allow investors, analysts and management to measure unlevered
property-level operating results and to compare our operating results between
periods and to the operating results of other real estate companies on a
consistent basis.

Same store NOI and same store cash NOI include only properties owned for the
entirety of comparable periods. Properties acquired, sold, transitioned to
other operators or classified as held for sale during the comparable periods
are excluded from the same store amounts.

FFO and Other Non-GAAP Measures

We use Funds From Operations ("FFO") and Normalized FFO as supplemental
measures of our operating performance. We use the National Association of Real
Estate Investment Trusts ("NAREIT") definition of FFO. NAREIT defines FFO as
GAAP net income excluding gains (losses) from sales of depreciable real estate
assets and impairment charges of depreciable real estate, plus real estate
depreciation and amortization, and after adjustments for unconsolidated
entities and joint ventures to reflect FFO on the same basis. FFO does not
account for debt principal payments and is not intended as a measure of a
REIT’s ability to satisfy such payments or any other cash requirements.

Normalized FFO, as defined below, measures the financial performance of our
portfolio of assets excluding items that, although incidental to, are not
reflective of the day-to-day operating performance of our portfolio of assets.
We believe that Normalized FFO is useful because it facilitates the evaluation
of our portfolio’s operating performance (i) between periods on a consistent
basis and (ii) to the operating performance of other real estate companies.
However, comparability may be limited because our calculation of Normalized
FFO may differ significantly from that of other companies, or because of
features of our business that are not present in other companies.

We define Normalized FFO as FFO excluding the following income and expense
items, as applicable: (a) acquisition, transaction

and integration related costs and expenses; (b) the write off of unamortized
discounts, premiums, deferred financing costs, or additional costs, make whole
payments and penalties or premiums incurred as the result of early repayment
of debt (collectively

“Gain (Loss) on extinguishment of debt”); (c) incentive compensation
recognized as a result of sales of property; (d) the remeasurement of deferred
tax assets and (e) other items that we believe are not indicative of operating
performance, generally reported as “Other (income) expense” in the
Consolidated Statements of Operations.

Management also uses AFFO and Normalized FAD as supplemental measures of the
Company’s operating performance.

We define AFFO as Normalized FFO excluding the impact of the following: (a)
straight-line rents; (b) amortization of above / below market lease
intangibles; (c) amortization of deferred financing costs; (d) amortization of
premium on mortgage notes payable and (e) amortization of deferred community
fees and other, which includes the net change in deferred community fees and
other rent discounts or incentives. We believe AFFO is useful because it
facilitates the evaluation of (i) the current economic return on our portfolio
of assets between periods on a consistent basis and (ii) our portfolio versus
those of other real estate companies that report AFFO. However, comparability
may be limited because our calculation of AFFO may differ significantly from
that of other companies, or because of features of our business that are not
present in other companies.

We define Normalized FAD as AFFO less routine capital expenditures, which we
view as a cost associated with the current economic return. Normalized FAD,
which does not reflect debt principal payments and certain other expenses,
does not represent cash available for distribution to shareholders.

View source version on businesswire.com:
https://www.businesswire.com/news/home/20180510005575/en/

Contact:

New Senior Investment Group Inc.
David Smith, 212-515-7783
Press spacebar to pause and continue. Press esc to stop.