Invesque Inc. Reports First Quarter 2021 Results and Announces Portfolio Management and Corporate Initiatives to Strengthen and Streamline the Portfolio
Toronto, Ontario, May 12, 2021 – Invesque Inc. (TSX: IVQ.U and IVQ) (the “Company” or “Invesque”) today announced its results for the three-months ended March 31, 2021, as well as the completion of the first phase of the previously announced non-binding memorandum of understanding (“MOU”) to strengthen the Company’s relationship with Symphony Care Network (“SymCare”). The Company is also pleased to announce it has reached an agreement to sell its ownership interests in certain assets as part of Invesque’s ongoing initiative to strengthen and streamline the portfolio and balance sheet.
Update on SymCare Relationship
As previously announced, Invesque and SymCare executed a non-binding MOU in the fourth quarter of 2020. At the time of execution of the MOU and as March 31, 2021, SymCare operated 16 facilities for the Company under an absolute net lease structure.
Under the terms of the MOU, the Company agreed to sell to SymCare, and/or transition to a new tenant, approximately 50% of Invesque’s existing assets operated by SymCare. The MOU also set forth an agreement between Invesque and SymCare to enter into an amended and restated 15-year absolute net master lease with enhanced lease coverage for the remaining properties to be operated by SymCare, and to restructure the outstanding loan agreements (collectively, the “Transaction”).
After the first quarter of 2021, the Company successfully completed the first phase of the Transaction. On April 30, 2021, Invesque sold the Symphony of Chesterton (“Chesterton”) facility to SymCare for US$20.0 million. The sale of Chesterton was consummated at attractive pricing of approximately $189,000 per bed. Concurrent with the sale of Chesterton, Invesque and SymCare terminated the stand-alone lease associated with the Chesterton property.
On April 30, 2021, the Company also entered into a new absolute net lease for four skilled nursing facilities, all of which were previously leased to SymCare, with Cascade Capital Group (“Cascade”). Cascade, headquartered in Skokie, IL, is a privately-held health care real estate investment and management company focused on skilled nursing, rehabilitation, and post-acute care services throughout the Midwest with a significant presence in the Chicago MSA. Cascade is an active skilled nursing investor with over 20 different operating partners and over 135 actively managed facilities in 23 states.
The new lease between Cascade and Invesque features a 10-year initial term and two five-year renewal options. Base rent will be approximately US$3.4 million in year one of the lease, approximately US$5.0 million in year two of the lease, and approximately US$5.5 million in year three of the lease. The lease includes annual base rent escalators of 2% beginning in the fourth year of the lease. Cascade will have a purchase option to acquire the facilities beginning in the fifth year of the lease.
“We are thrilled to have completed the first phase of this important transaction. SymCare is a long-standing partner of Invesque, and we are confident that the overall structure will better position both of us for success with the remaining assets in our respective portfolios,” commented Adlai Chester, Chief Investment Officer for the Company. “We are also excited to welcome Cascade as one of our strategic operating partners. Their existing presence in the Chicago-area will provide for a seamless transition of the facilities and allows for extensive operating efficiencies that will benefit the Invesque portfolio.”
The next phases of the Transaction include the sale of up to four facilities to SymCare, finalizing an amended and restated 15-year master lease for the remaining properties with SymCare, and restructuring the outstanding loan agreements. These additional phases are anticipated to close in the second quarter of 2021. As the MOU is non-binding, there are no assurances that the entire Transaction will be completed on the same terms contemplated in the MOU or at all.
Upon completion of all phases of the Transaction, SymCare will represent approximately 11% of Invesque’s pro-forma NOI, a significant reduction from approximately 25% of pro-forma NOI as of March 31, 2021.
First Quarter and Subsequent Highlights
- Executed a binding purchase and sale agreement to sell the Company’s ownership interests in four communities, currently operated by Inspirit Senior Living (“Inspirit”), to Inspirit for approximately US$35.5 million
- The Company’s ownership interests in the four communities expected to be sold to Inspirit were acquired by Invesque through the acquisition of Care Investment Trust in 2018
- The expected sale of the Company’s ownership interests in the four communities to Inspirit represents attractive pricing of approximately $101,00 per unit and a value above Invesque’s carrying cost
- The disposition allows Inspirit the ability to grow their portfolio of wholly-owned communities while providing Invesque over US$15.0 million of net cash, inclusive of deposits held in escrow to be released back to the Company upon closing, if the sale is consummated as currently contemplated
- The expected sale is anticipated to close in the second quarter of 2021
- Completed expansion projects at three communities in Virginia within the Commonwealth Senior Living (“CSL”) portfolio
- Closed on two strategic refinancing transactions to address near-term maturities and capitalize on the favorable interest rate environment
- Refinanced the US$17.3 million mortgage underlying the Commonwealth Senior Living at Charlottesville property at a fixed interest rate of 2.96%
- Extended the CAD$10.3 million mortgage underlying the Red Oak Villa property located in Sudbury, ON at a fixed interest rate of 2.17%
- Named one of the Best Places to Work in Indiana by the Indiana Chamber of Commerce and Best Companies Group for the second consecutive year
- Commonwealth Senior Living, Invesque’s subsidiary management company, was certified as a Great Place to Work® by the Great Place to Work Institute for the third consecutive year
- Reported funds from operations (“FFO”) of US$0.09 per common share for the three-months ending March 31, 2021. The Company reported adjusted funds from operations (“AFFO”) of US$0.10 per common share for the three-months ending March 31, 2021
“While the operating environment continued to remain under stress during the early half of the first quarter, there appears to be a light at the end of the tunnel given the successful vaccination initiative across North America. As of today, almost our entire portfolio in the United States has cycled through multiple phases of the vaccine,” commented Scott White, Chairman & Chief Executive Officer for the Company. “Our team has been very proactive in 2021 to strengthen and streamline our portfolio. The asset sales and operator transitions will go a long way to setting us up for long-term strength and success. From an operating performance perspective, the numbers are beginning to speak for themselves. In March of 2021, Commonwealth Senior Living recorded its biggest move-in month in its almost 20-year history. I am more optimistic than ever that the industry and the Company are at the cusp of a secular tailwind and will continue to recover over the long-term.”
|Three months ended March 31,|
|(in thousands of U.S dollars, except per share values)||2021||2020|
|Net Income (loss)||$1,800||($56,931)|
|Funds from operations (“FFO”) (1)||$5,032||$14,007|
|FFO per share||$0.09||$0.25|
|Adjusted funds from operations (“AFFO”) (1)||$5,677||$11,317|
|AFFO per share||$0.10||$0.21|
(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)||March 31, 2021||December 31, 2020|
|Number of properties||121(1)||121(1)|
(1) Includes all Company assets operated by SymCare as of March 31, 2021 and December 31, 2020, including Chesterton and assets that are contemplated to be sold and/or transitioned under the non-binding MOU between the Company and SymCare. Includes assets contemplated to be sold to Inspirit. Excludes other assets held for sale as of March 31, 2021 and December 31, 2020.
COVID-19 and Vaccination Update
Invesque’s management team has remained in close contact with the Company’s operating partners regarding the impact of COVID-19. As of May 7, 2021, there were only five patients or residents with COVID-19 being treated and quarantined in the Company’s communities. The current rate of incidence in the Company’s portfolio is a fraction of the peak activity observed in mid-May 2020 and has remained at this consistently low level since the last week of March 2021.
Additionally, substantially all of Invesque’s seniors housing and skilled nursing facilities in the United States have completed multiple rounds of vaccine clinics. The operators of the Company’s facilities in the United States and Canada which have not been eligible for vaccine clinics have been proactive and facilitated access to vaccinations for their residents and patients as they become available throughout the applicable states and provinces.
Charles “Chuck” Herman, Lead Independent Director, and Donna Brandin, Chair of the Audit Committee, have resigned from the Company’s Board of Directors (“Board”), effective today, to pursue personal interests and other business opportunities.
In connection with Mr. Herman’s and Ms. Brandin’s resignation from the Board, the size of the board was temporarily reduced from seven members to five members. The Company has engaged Ferguson Partners, a national executive search firm, to identify qualified and independent Board members.
“I would like to thank Chuck and Donna for their insight and thoughtful contributions to Invesque. Their perspectives from an operational and financial perspective have helped the Company right-size, stabilize and proactively respond to the rapidly evolving operating environment,” commented Scott White, Chairman & Chief Executive Officer for the Company. “We are grateful for their contributions and we wish them both success in their future endeavors.”
Annual General Meeting (“AGM”)
The Company will hold its AGM of the holders of common shares (“Shareholders”) on August 10, 2021. Shareholders of record at the close of business on June 30, 2021 will be entitled to vote at the AGM.
In light of the COVID-19 outbreak, the AGM will be held in a virtual format. All Shareholders are advised to refer to the Management Information Circular (“MIC”) of the Company for final details regarding the AGM.
Investor Conference Call
A conference call hosted by the Company’s senior management team will be held on May 13, 2021 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: 7994599. The conference will also be available via webcast at https://www.invesque.com/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: 7994599.
Invesque is a North American health care real estate company with an investment thesis focused on the premise that an aging demographic in North America will continue to utilize health care services in growing proportion to the overall economy. Invesque currently capitalizes on this opportunity by investing in a highly diversified portfolio of income generating properties across the health care spectrum. Invesque’s portfolio includes investments in independent living, assisted living, memory care, skilled nursing, transitional care, and medical office properties, which are operated primarily under long-term leases and joint venture arrangements with industry leading operating partners. Invesque’s portfolio also includes investments in owner-occupied seniors housing properties in which Invesque owns the real estate and provides management services through its subsidiary management company, Commonwealth Senior Living. For more information, please visit www.invesque.com.
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 the restructuring of the Company’s relationship with SymCare pursuant to the MOU, information with respect to the sale of four communities to Inspirit, and any information with respect to the recovery of the industry. 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. 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 with respect to the recovery of the industry, the completion of the transactions contemplated in the MOU, and the sale of four communities to Inspirit described in this press release. 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, including that the industry will not recover from the pandemic, that the transactions contemplated in the MOU with SymCare, and/or that the sale of four communities to Inspirit will not be completed for various reasons, including as a result of the non-binding nature of certain of these transactions or the failure to satisfy the conditions in respect to these transactions. 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.
In addition, the Company is subject to the risk and uncertainties related to the COVID-19 pandemic. In particular, a novel strain of coronavirus causing the disease known as COVID-19 has spread throughout the world, including across the United States and Canada, causing the World Health Organization to declare the COVID-19 outbreak a pandemic in March 2020. To contain the spread and impact of the pandemic, authorities throughout the United States and Canada have implemented measures such as travel bans and restrictions, stay-at-home orders, social distancing guidelines and limitations on other business activity. The pandemic has resulted in a significant economic downturn in the United States, Canada and globally, and has also led to disruptions and volatility in capital markets. These trends are likely to continue. The Company experienced negative impacts on its financial results due to the COVID-19 pandemic during 2020, including as a result of decreased occupancy, delays in collections from tenants, and increased operating expenses. The Company announced on April 10, 2020 that it has suspended the dividend for all common shares beginning from April 1, 2020 until further notice. The Company expects that the pandemic could continue to have a material adverse effect on its results of operations, financial position, and/or cash flows, particularly if negative economic and public health conditions in the United States and Canada persist for a significant period of time. The ultimate impact of the pandemic on the Company’s financial results will depend on future developments, which are highly uncertain and cannot be predicted with confidence. This includes, among other factors, the duration and severity of the pandemic as well as negative economic conditions arising therefrom, the impact of the pandemic on occupancy rates in the Company’s communities both in the short-term and the long-term as a result of any negative stigma associated with the seniors housing industry as a result of the pandemic, the volume of COVID-19 positive patients cared for across our portfolio, and the impact of government actions on the seniors housing industry and broader economy, including through existing and future stimulus efforts. The impact of COVID-19 has been partially offset to date by certain government stimulus programs which have helped to offset COVID-19 related expenses and compensate for lost revenues, but the Company is not able to provide assurance that such programs may continue to be available in the future. There can be no assurance that forward-looking statements will prove to be accurate as actual outcomes and results may differ materially from those expressed in these forward-looking statements. Readers are cautioned not to place undue reliance on any such forward-looking statements, which are given as of the date hereof, and to not use such forward-looking statements for anything other than the intended purpose. Further, except as expressly required by applicable law, the Company assumes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
The Company reports its financial results in accordance with International Financial Reporting Standards (“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 ended March 31, 2021, please refer to the Financial Measures section of the March 31, 2021 MD&A available on the Company’s website and on SEDAR at www.sedar.com.
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