Invesque Inc. Reports Second Quarter 2020 Results and Upcoming Transition of Property Management of Medical Office Portfolio to Jones Lang LaSalle
Toronto, Ontario, August 12, 2020 – Invesque Inc. (TSX: IVQ.U and IVQ) (the “Company” or “Invesque”) today announced its results for the three and six months ended June 30, 2020. The Company also announced the upcoming transition of property management and leasing services for the Company’s medical office buildings (“MOB”) portfolio to Jones Lang LaSalle (“JLL”).
MOB Portfolio Management Transition to JLL
The Company is pleased to announce the upcoming transition of property management and leasing services for Invesque’s MOB portfolio to JLL, a Fortune 500, industry-leading real estate services firm. JLL’s world-class platform manages over 4.6 billion square feet of commercial real estate space across the world and over 600 million square feet in the United States and Canada.
Invesque entered the MOB market with the acquisition of Mohawk Medical Properties Real Estate Investment Trust and its subsidiary, Mohawk Medical Operating Partnership (I) LP (collectively, “Mohawk REIT”) in early 2018. Since the closing of the Mohawk REIT acquisition, Mohawk Realty Advisors Ltd., and its affiliates (“Mohawk”) have provided property management and leasing services for the MOB portfolio. Today, Invesque’s MOB platform consists of 15 properties spanning approximately 578,000 square feet across seven markets in North America.
“We appreciate all the hard work and support the Mohawk team has provided us over the last two years. As we continue to focus on our 2020 asset management initiative to maximize profitability across our various business lines, we concluded that now is the right time to expand our capabilities for the MOB platform,” noted Adlai Chester, Chief Investment Officer for the Company. “By partnering with JLL, we will leverage the firm’s best-in-class practices, robust leasing platform, and breadth of real estate relationships across the globe. In addition, JLL’s capital markets group will allow Invesque to gain valuable insight into the transaction and financing markets across North America.”
JLL is proactively engaging current tenants in Invesque’s MOB portfolio as they finalize the transition plan. The transition has been a collaborative process, with all parties playing an active role in data aggregation and document transfer, to ensure a seamless transfer of property management for the MOB portfolio. The completion of the transition from Mohawk to JLL is currently anticipated to occur in the third quarter.
“We are excited about the opportunity to partner with Invesque to manage the Company’s medical office platform,” said Ron Fiell, Vice President and National Practice Lead – Property Management with JLL. “We believe that with our best-in-class property management and leading technology platforms, our dedicated team of leasing agents will be able to enhance the operations of the Invesque medical office platform.”
Second Quarter and Subsequent Highlights
- Announced a series of initiatives to preserve cash and strengthen the balance sheet.
- Suspension of the dividend for all common shareholders beginning April 1, 2020, which will result in ~US$41 million of gross cash preservation on an annual basis.
- Corporate level cost reductions, including executive compensation changes, personnel cost reductions and other G&A savings, resulting in ~US$2.5 – US$3.0 million of reduced costs in fiscal year 2020.
- Deferral of non-essential capital expenditures, which the Company believes will result in an additional ~US$2.5 – US$3.0 million of cash savings in fiscal year 2020.
- Invesque’s subsidiary management company, Commonwealth Senior Living (“Commonwealth” or “CSL”), has been certified as a Great Place to Work® by the Great Place to Work Institute for the second year in a row. The certification process considered over 950 employee surveys from across 33 locations to evaluate more the 60 elements of team members’ experiences.
- Commonwealth recognized as one of Argentum’s “Best of the Best” for its partnership with Babylon Microfarms on the roll-out of its micro-farm concept within the CSL portfolio.
- Reported funds from operations (“FFO”) of US$0.19 and US$0.44 per common share for the three- and six-months ending June 30, 2020, respectively. The Company reported adjusted funds from operations (“AFFO”) of US$0.17 and US$0.37 per common share for the three- and six-months ending June 30, 2020, respectively. Excluding the impact of COVID-19 and severance costs, FFO was US$0.21 and AFFO was US$0.19 per common share for the three-months ending June 30, 2020, respectively.
“The environment continues to be challenging for operators as the world continues to struggle with the current public health pandemic. With that said, I am pleased with our results during the second quarter with rental collections trending higher throughout the quarter,” commented Scott White, Chairman & Chief Executive Officer for the Company. “We are encouraged by the trends we are seeing within our Commonwealth portfolio in June and July with an increase in inquiries and potential move-ins.”
|Three months ended June 30,||Six months ended June 30,|
|(in thousands of U.S dollars, except per share values)||2020||2019||2020||2019|
|Funds from operations (“FFO”) (1)||$10,453||$10,445||$24,483||$23,341|
|Funds from operations per share||$0.19||$0.19||$0.44||$0.44|
|Adjusted funds from operations (“AFFO”) (1)||$9,380||$9,918||$20,697||$20,894|
|Adjusted funds from operations per share||$0.17||$0.18||$0.37||$0.39|
(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)||June 30, 2020||December 31, 2019|
|Number of properties||121||124|
Rental Revenue Collections
|(all figures shown are rounded)||April 2020||May 2020||June 2020||July 2020|
|Senior Housing Owner Occupied Portfolio||99%||99%||99%||99%|
|Medical Office Portfolio||96%||93%||93%||93%|
|Triple-Net Lease (“NNN”) Portfolio||73%||85%||85%||85%|
Note: All figures above represent actual rental revenue received as a percent of total rental revenue due as per original contracts.
Rent Deferral Updates
The Company granted one NNN operator a rent deferral of 25% for the month of May, which is currently being paid to Invesque in equal monthly installments from June 2020 through May 2021.
In addition, the Company provided Symphony Care Network (“SymCare”) a rent deferral of 50% for the month of April and a rent deferral of 25% for the months of May, June, July, and August. Invesque’s management team is in active discussions with SymCare in light of the impact of the COVID-19 pandemic on SymCare’s operations. The Company intends to reach a solution that maximizes value for Invesque, while placing the SymCare portfolio in a position to succeed during the pandemic and over the long-term.
Invesque’s management team has remained in close contact with the Company’s operating partners to understand the current and prospective impact of COVID-19 to Invesque’s properties. As of August 7, 2020, the Company has confirmed that 70 of its 106 seniors housing and skilled nursing properties have been impacted by COVID-19 based on positive test results for either residents or staff members over the last few months. Of the 70 impacted communities, 39 are subject to NNN lease agreements. However, as of August 7, 2020, there were only 29 total patients or residents with COVID-19 being treated and quarantined in Invesque communities. The current rate of incidences in the Company’s portfolio is significantly below peak activity observed across the portfolio in mid-May and has been substantially similar since the first week of July. The cases currently being observed in the Company’s skilled nursing facilities are generally direct admissions of COVID-19 patients from hospitals to improve capacity in local health systems and are being cared for in dedicated COVID-19 units.
“The COVID-19 pandemic has impacted every operator within our portfolio in one way or another,” commented Scott White, Chief Executive Officer for the Company. “Most of the impact in our portfolio was observed during the months when cases were escalating throughout the U.S. and Canada in April and May. While we continue to see sporadic incidences of COVID-19 in our portfolio, the number of active cases observed each week continues to moderate. Now our operators, and the industry, will focus on reaching out to families who need the services our communities provide to enhance occupancy back to pre-COVID-19 levels.”
Investor Conference Call
A conference call hosted by the Company’s senior management team will be held August 13, 2020 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: 8672199. 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 8672199.
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 transition of property management and leasing services for Invesque’s MOB portfolio to JLL, the Company’s rent deferrals and certain expected cash savings as a result of cost reductions and capital expenditure deferrals. 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 the transition of property management and leasing services for Invesque’s MOB portfolio to JLL is not effected as currently expected, that the Company experiences higher rental deferrals than currently anticipated and that the Company’s expected cash savings are not achieved. 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 transition of property management and leasing services for Invesque’s MOB portfolio to JLL will be effected as currently expected, that benefits will be realized as a result of such transition, that the Company’s currently anticipated rental deferrals do not change materially and that there are no unexpected capital expenditures required or other costs that offset the expected cash savings. 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. 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. The Company has already experienced negative impacts on its financial results due to the pandemic and is not able to fully quantify the impact that the COVID-19 pandemic will have on the Company’s financial results during 2020, but expect that the pandemic could 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, 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 our communities, the volume of COVID-19 patients cared for across our portfolio, rent deferral rates, and the impact of government actions on the seniors housing industry and broader economy, including through existing and future stimulus efforts. The forward-looking statements contained in this document are expressly qualified by this cautionary statement.
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 six months ended June 30, 2020, please refer to the Financial Measures section of the June 30, 2020 MD&A available on the Company’s website and on SEDAR at www.sedar.com.
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