Invesque Inc. Reports Third Quarter 2019 Results and Successful Transition of the Majority of its Greenfield Portfolio
Toronto, Ontario, November 13, 2019 – Invesque Inc. (TSX: IVQ.U and IVQ) (the “Company” or “Invesque”) today announced its results for the three and nine months ended September 30, 2019. The Company also announced the successful transition of the majority of the assets operated by affiliates of Greenfield Senior Living (“Greenfield”) to Commonwealth Senior Living (“Commonwealth”) and Heritage Senior Living (“Heritage”) (together the “Transition”). The Transition has largely been effectuated pursuant to interim management agreements until final regulatory approval is received.
Greenfield Transition Update and Highlights
- Ten of the thirteen communities had been subject to triple-net lease agreements with Greenfield. Under the arrangements with Commonwealth (which is owned by affiliates of Invesque) and Heritage, the Company will benefit from a higher share of portfolio net operating income (“NOI”).
- Ten of the communities have or will be transitioned to Commonwealth. Certain communities were transitioned to Commonwealth under interim management agreements until final licensure approval is received, which is likely to occur by year-end.
- With 34 communities and almost 2,400 units under management, Commonwealth will be the largest seniors housing operator in Virginia (27 communities) and one of the largest operators of seniors housing in the Mid-Atlantic.
- Commonwealth is now the Company’s largest source of NOI, representing approximately 26% of Invesque’s NOI on a pro-forma basis.
- The Company transitioned two communities to Heritage under interim management agreements until final licensure approval is received, which is likely to occur by year-end.
- The two communities, located in Pennsylvania and New Jersey, are in close proximity to other Invesque communities managed by Heritage, thus providing strategic overlap.
- Heritage is now the Company’s third-largest source of NOI, representing approximately 8% of Invesque’s NOI on a pro-forma basis.
- The Company is currently evaluating a sale of the last remaining Greenfield operated property, located in Arlington, TX.
- The aggregate Transition is expected to be US$0.03 – US$0.04 accretive to 2020 adjusted funds from operations (“AFFO”) per common share.
“We are excited to announce that we were able to expedite the process of transitioning the Greenfield operated properties to our new operators ahead of our year-end target,” commented Adlai Chester, Chief Investment Officer for the Company. “Upon the expected disposition of the final asset in the Transition pool, we will have executed a smooth transfer to our preferred operating partners in an accretive manner.”
Third Quarter and Subsequent Highlights
- Closed on the previously announced acquisition of Commonwealth and 17 of its private pay seniors housing communities for US$285.4 Million.
- The remaining three assets of the Commonwealth transition announced on May 22, 2019 (the “Second Tranche”) are expected to close by year-end, subject to lender approval, regulatory approval and customary closing conditions.
- Combining the Transition discussed above with the aggregate Commonwealth transaction announced on May 22, 2019, the Company expects US$0.09 – US$0.12 in accretion to 2020 AFFO per common share.
- Closed on the previously announced acquisition of three memory care properties, developed by Ellipsis Real Estate Partners (“Ellipsis”) and operated by Constant Care Management Company (“Constant Care”), for US$30.7 Million.
- The three properties were added to the Company’s existing absolute net master lease agreement with Constant Care. The master lease carries a 15-year term with two, five-year extension options.
- The acquisition expanded the Company’s relationship with Constant Care from four properties to seven properties.
- Rental income from Constant Care represents approximately 3% of Invesque’s NOI on a pro-forma basis.
- Closed on an approximately US$1.2 Million mezzanine loan to Ellipsis to fund the development of a 38-unit (42-bed) class-A, freestanding memory care building outside of Grand Rapids, MI.
- The property is currently under construction and is being developed by Ellipsis, one of Invesque’s strategic development partners, with an expected completion date in the summer of 2020.
- Upon completion of construction, the property will be operated by Constant Care.
- The Company obtained an option to purchase the property at fair market value after completion.
- Instituted and executed amendments with certain of the Company’s operators to consolidate various leases into master lease agreements. Approximately 92% of Invesque’s forward 12-month rent in its triple-net lease portfolio now comes from assets subject to master leases or leases where the Company has the right to consolidate into a single master lease.
- Closed on the previously announced private placement of Class A Series 4 convertible preferred shares of the Company (“Preferred Shares”) with funds affiliated with Magnetar Financial, LLC (“Magnetar”) for net proceeds of approximately US$14.6 Million.
- Magnetar received 1,538,461 Preferred Shares at a price per share of US$9.4575.
- The Preferred Shares are convertible into common shares of the Company at a conversion price of US$9.75.
- Introduced a Canadian dollar listing of the Company’s common shares on the Toronto Stock Exchange (“TSX”) under the ticker symbol “IVQ” which has led to an over 50% increase in the Company’s aggregate trading volume across both listings.
- The Company’s shares also continue to trade in U.S. dollars under the ticker symbol “IVQ.U”.
- The Company’s dividends will continue to be paid to all shareholders in U.S. dollars for both the IVQ.U and IVQ listings.
- Reported funds from operations (“FFO”) of US$0.23 and US$0.66 per common share for the three and nine months respectively ending September 30, 2019. The Company reported AFFO of US$0.20 and US$0.59 per common share for the three and nine months respectively ending September 30, 2019.
“As one of the fastest growing North American publicly traded real estate companies over the last few years, we set out in the third quarter to focus on our portfolio management initiatives and I am pleased with our execution on this front,” commented Scott White, Chairman and Chief Executive Officer for the Company. “We are laser-focused on not only maximizing value with our new vertically-integrated seniors housing operating platform, but also on strengthening the credit underlying our leases with master lease agreements. Today, approximately 92% of our rental income in the triple-net lease portfolio comes from master lease structures, or leases where we have the right to consolidate into a master lease structure, versus approximately 77% at the end of 2017. Heading into the end of the year, we continue to focus internally on strengthening our portfolio while recycling capital at attractive prices to fund external growth through our robust pipeline.”
Financial Highlights
| Three months ended September 30, | Nine months ended September 30, | |||
|---|---|---|---|---|
| (in thousands of U.S dollars, except per share values) | 2019 | 2018 | 2019 | 2018 |
| Revenue | $38,550 | $31,581 | $96,598 | $83,974 |
| Net income (loss) | $(2,346) | $8,654 | $(12,043) | $21,500 |
| Funds from operations (“FFO”) (1) | $12,507 | $12,401 | $35,575 | $39,623 |
| Funds from operations per share | $0.23 | $0.23 | $0.66 | $0.80 |
| Adjusted funds from operations (“AFFO”) (1) | $10,711 | $10,541 | $31,606 | $33,578 |
| Adjusted funds from operations per share | $0.20 | $0.20 | $0.59 | $0.68 |
(1) FFO and AFFO are measures used by management to evaluate operating performance. Please refer to the section “Non-IFRS Measures” in this press release for more information.
Balance Sheet and Portfolio Highlights
| (in thousands of U.S. dollars, except number of properties) | September 30, 2019 | December 31, 2018 |
|---|---|---|
| Total assets | $1,550,029 | $1,283,959 |
| Number of owned properties | 121 | 98 |
| Debt | $947,271 | $731,215 |
| Debt / Gross Book Value | 61.1% | 57.0% |
“We continue to generate interest savings and stagger our maturities to create long-term cash flow stability. Year to date, we have reduced our borrowing costs by approximately 35 basis points while pushing out the weighted average maturity on our debt,” commented Scott Higgs, Chief Financial Officer for the Company. “We are constantly evaluating opportunities to capitalize on mis-pricings of our corporate securities, and we continue to repurchase shares at a significant discount to our view of intrinsic value.”
Investor Conference Call
A conference call hosted by the Company’s senior management team will be held Thursday, November 14, 2019 at 10:00 AM ET. The telephone numbers for the conference call are: Local: (647) 427-7450 or Toll Free: (888) 231-8191. The passcode for the conference call is: 4558826. The conference will also be available via webcast at https://www.invesque.local/company-presentations/. Please log on at least 15 minutes before the call commences. The telephone numbers to listen to the call after it is completed (taped replay) are: Local: (416) 849-0833 or Toll Free: (855) 859-2056. The Passcode for the taped replay is 4558826.
About Invesque
Invesque is a health care real estate company with an investment thesis centered around the opportunity created by the global aging demographic trend. Invesque currently capitalizes on this opportunity by investing in a highly diversified portfolio of income generating health care properties located across the United States and Canada through long-term absolute net leases, joint ventures, and development capital. For more information, visit www.invesque.com.
Forward-Looking Information
This press release contains forward-looking information that reflects the current expectations of management about the future results and opportunities for the Company, including without limitation information with respect to expected additional NOI and AFFO resulting from the Transition and from the Commonwealth acquisition, as well as information with respect to the final licensure approval of certain of the properties subject to the Transition, the acquisition of the Ellipsis assets, the closing of the Second Tranche of Commonwealth and the potential sale of the thirteenth property, located in Arlington, TX, underlying the Transition asset pool. Forward-looking statements generally can be identified by words such as “outlook”, “objective”, “may”, “will”, “expect”, “intend”, “estimate”, “anticipate”, “believe”, “should”, “plans”, “project”, or “continue” or similar expressions suggesting future outcomes or events. By their nature, forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond the Company’s control, including without limitation the risk that final licensure approval of certain of the properties subject to the Transition will not be obtained, the risk that the conditions for completion of the closing of the Second Tranche of Commonwealth (including obtaining lender and regulatory approvals) will not be satisfied or waived, the risk that any one or more of the portfolios being acquired will not be integrated into the Company as currently expected and the risk that expected increases to NOI and AFFO as a result of the Transition and the Commonwealth acquisition do not materialize. Although the Company believes that the expectations in its forward-looking statements are reasonable, its forward-looking statements have been based on factors and assumptions concerning future events which may prove to be inaccurate. Those factors and assumptions are based upon currently available information, including the assumption that the conditions required to obtain final licensure approval of certain of the properties subject to the Transition will be satisfied and that the assets related to each of the transactions described in this press release will be integrated into the Company as currently expected. Such statements are subject to known and unknown risks, uncertainties and other factors that could influence actual results or events and cause actual results or events to differ materially from those stated, anticipated or implied in the forward-looking statements. Accordingly, readers are cautioned not to place undue reliance on the forward-looking statements. Additional risks, uncertainties, material assumptions and other factors that could affect actual results are discussed in the Company’s public disclosure documents available at www.sedar.com, including in the risk factors described in the Company’s current annual information form. Furthermore, the forward-looking statements contained in this document are made as of the date of this document and, except as required by applicable law, the Company does not undertake any obligation to publicly update or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained in this document are expressly qualified by this cautionary statement.
Non-IFRS Measures
The Company reports its financial results in accordance with International Financial Reporting Standard (“IFRS”). Included in this news release are certain non-IFRS financial measures as supplemental indicators used by management to track the Company’s performance. These non-IFRS measures are NOI, FFO and AFFO. The Company believes that these non-IFRS financial measures provide useful information to both management and investors in measuring the financial performance and financial condition of the Company. These measures do not have a standardized meaning prescribed by IFRS and, therefore, may not be comparable to similar measures presented by other companies, nor should they be construed as an alternative to other financial measures determined in accordance with IFRS. For a full definition of these measures and a reconciliation to net profit for the three months and nine months ended September 30, 2019, please refer to the Financial Measures section of the September 30, 2019 MD&A available on the Company’s website and on SEDAR at www.sedar.com.
For Information Contact
Investor Relations
1-317-643-4017
ir@invesque.com