Invesque Inc. Reports Third Quarter 2022 Results
Toronto, Ontario, November 8, 2022 – Invesque Inc. (TSX: IVQ.U and IVQ) (the “Company”) today announced its results for the three and nine months ended September 30, 2022.
Third Quarter 2022 and Subsequent Highlights
- The Company continued to execute on its previously announced disposition strategy in the third quarter of 2022, committed to becoming primarily focused on private-pay seniors housing assets. To date this year, the Company has sold US$218 million of assets. In the third quarter, the Company announced the following sale transactions:
- On July 26, 2022, closed on the sale of a medical office building in Orlando, Florida for US$9.85 million. The sale price reflected the high quality of the underlying real estate equal to nearly US$300 per rentable square foot(1) and a 7.2% capitalization rate(2) on trailing net operating income (“NOI”).
- On July 28, 2022, closed on the sale of the majority of its medical office buildings in Canada for US$73.6 million. The pricing was equal to US$207 per rentable square foot(1) and represented a 5.0% capitalization rate(2) on trailing NOI.
- On August 30, 2022, closed on the sale of two skilled nursing facilities in Nebraska to the former operator, Hillcrest Health Services. The US$25 million sale price reflected the high quality of the underlying real estate and represented a price per bed of US$168 thousand(3) which compares favorably to the average price per bed for skilled nursing facilities.
- Subsequent to quarter end, the Company continued to execute on its strategic plan to sell its remaining medical office buildings.
- On October 28, 2022, the Company signed an agreement to sell Brantford Medical Center in Brantford, ON, for approximately US$5.8 million, which transaction is expected to close in November.
- Potential purchasers for the three remaining medical office buildings in the US are being identified, and sale transactions are likely to occur in the first half of 2023.
- Reported funds from operations (“FFO”) of US$0.12 and US$0.30 per common share for the three and nine months ending September 30, 2022. The Company reported adjusted funds from operations (“AFFO”) of US$0.11 and US$0.29 per common share for the three and nine months ending September 30, 2022.
“I am very pleased with the sale transactions we’ve completed over the last 18 months and continue to be excited about where we are headed.” said Scott White, Chairman & Chief Executive Officer of the Company. “Our efforts are now focused on our private pay seniors housing portfolio. We continue to see occupancy and overall financial improvements across our Commonwealth and other senior housing portfolios, and we expect that to continue in the fourth quarter and into 2023.”
1. Price per rentable square foot is a non-GAAP supplementary financial measure. This metric is computed by dividing the transactional sale price of the asset by the rentable square footage of the property.
2. The capitalization rate on transactions is a non-GAAP supplementary financial measures. This metric is an implied percentage, computed by dividing the trailing 12-month net operating income of the property by the transactional sale price of the asset.
3. Price per bed is a non-GAAP supplementary financial measure. This metric is computed by dividing the transaction sale price of the asset by the number of rentable beds of the property.
|Three months ended September 30,||Nine months ended September 30,|
|(in thousands of U.S dollars, except per share values)||2022||2021||2022||2021|
|Net Income (loss)||($13,503)||($5,082)||($17,845)||($6,782)|
|FFO per share||$0.12||$0.10||$0.30||$0.37|
|AFFO per share||$0.11||$0.08||$0.29||$0.35|
(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, 2022||December 31, 2021|
|Number of properties||77(1)||102(2)|
(1) Excludes four medical office buildings held for sale as of September 30, 2022.
(2) Excludes one asset held for sale as of December 31, 2021.
Investor Conference Call
A conference call hosted by the Company’s senior management team will be held on November 9, 2022, at 10:00 AM EST. The telephone numbers for the conference call are Local: (647) 794-4605, or Toll-Free: (888) 204-4368. The passcode for the conference call is 7563760. 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) 764-8677, or Toll Free: (888) 390-0541. The Passcode for the taped replay is 578410#.
The Company 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. The Company currently capitalizes on this opportunity by investing in a portfolio of income-generating properties across the health care spectrum. The Company’s portfolio includes investments in independent living, assisted living, memory care, skilled nursing, transitional care, and medical office properties, which are operated under long-term leases and joint venture arrangements with industry-leading operating partners. The Company’s portfolio also includes investments in owner-occupied seniors housing properties in which the Company owns the real estate and provides management services through Commonwealth Senior Living, LLC, a Delaware limited liability company (“Commonwealth”).
This press release (this “Press Release”) contains certain forward-looking information and/or statements (“forward-looking statements”), that reflect and are provided for the purpose of presenting information about management’s current expectations and plans relating to the future, including, without limitation, statements regarding the Company’s utilization of proceeds of dispositions and statements regarding the closing of the sale of certain of the Company’s medical office buildings. Forward-looking information is typically identified by terms such as “anticipate,” “believe,” “continue,” “expect,” “expectations,” “look,” “may,” “plan,” “project,” “should,” “will,” and other similar expressions that do not relate solely to historical matters and suggest future outcomes or events. Readers should not place undue reliance on forward-looking statements and are cautioned that forward-looking statements may not be appropriate for other purposes. Forward-looking statements in this Press Release are based on current beliefs, expectations, and certain assumptions of the Company’s management, including that any conditions relating to the sale of the Company’s medical office buildings will be satisfied or waived and such transactions will be completed when currently expected. Forward-looking statements in this Press Release are subject to significant known and unknown risks, uncertainties, and other factors that are beyond the Company’s ability to predict or control, including the risk that the sale of one or more of the Company’s medical office buildings will not close due to the inability to satisfy closing conditions, and may cause actual results or events to differ materially from those expressed or implied by such statements and, accordingly, should not be read as guarantees of future performance or results and will not necessarily be accurate indications of whether or not such results will be achieved. The Company’s actual results may differ as a result of various factors, including without limitation, the negative impact of COVID-19 pandemic on the Company’s business and the business of operators/tenants, including without limitation, uncertainty regarding the duration and severity thereof and negative economic conditions arising therefrom, uncertainty regarding implementation and impact of existing and future stimulus and other Covid-19 relief legislation, laws, orders, and guidance throughout the United States and Canada may be available to operators/tenants to offset the costs and conditions related thereto, and the extent to which support may terminate upon termination of any federally declared public health emergency, the negative effect of travel bans and restrictions, stay-at-home orders, social distancing guidelines, limitations on other business activities, staffing shortages, increased costs, and the impact on occupancy rates in our communities in connection therewith, rent deferral rates, the ability of operators/tenants to comply with infection control and vaccine protocols, and the long-term impact of vaccines on facility infection rates; the status of the economy; the status of capital markets, including, without limitation, availability and cost of capital; issues facing the health care industry, including, without limitation, compliance with, and changes to, regulations and payment policies, responding to government investigations and settlements and operators’/tenants’ ability to cost effectively obtaining and maintaining adequate liability and other insurance; the risk that the Company’s operators/tenants and borrowers may become subject to bankruptcy or insolvency proceedings; changes in financing terms; competition throughout the health care and senior housing industries; the operating results or financial condition of operators/tenants, including, without limitation, their ability to pay rent and repay loans, the Company’s ability to transition, buy, or sell properties with profitable results as and when anticipated, and occupancy levels; the effect of other factors affecting the Company’s business and facilities outside of the Company’s or operators’/tenants control, including without limitation, natural disasters, other health crises or pandemics, governmental action, particularly in the healthcare industry, protests, strikes, and shortages in supply chains, as well as the risks described in the Company’s current annual information form and management’s discussion and analysis, available on SEDAR at www.sedar.com, which risks may be dependent on market factors and not entirely within the Company’s control. Although management believes that it has a reasonable basis for the expectations reflected in these forward-looking statements, actual results may differ from those suggested by the forward-looking statements for various reasons. These forward-looking statements reflect current expectations of the Company as of the date of this Press Release and speak only as of the date of this Press Release. The Company does not undertake any obligation to publicly update or revise any forward-looking statements except as may be required by applicable law.
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 not to 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. Forward-looking statements contained in this Press Release are expressly qualified by this cautionary statement.
The Company reports its financial results in accordance with International Financial Reporting Standard (“IFRS”). Included in this Press Release are certain non-IFRS financial measures as supplemental indicators used by the Company’s 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 the Company’s 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, please refer to the Financial Measures section of the September 30, 2022, MD&A available on the Company’s website and on SEDAR at www.sedar.com, which information is incorporated herein by reference, and the full reconciliation to which are included below.
|Three months ended September 30,||Nine months ended September 30,|
|Net loss from continuing operations for the period||$(12,449)||$(4,180)||$(16,017)||$(6,633)|
|Change in fair value of investment properties||13,966||11,626||35,433||9,550|
|Property taxes accounted for under IFRIC 21||(2,827)||(2,253)||2,824||3,952|
|Depreciation and amortization expense||3,838||4,700||11,315||18,068|
|Amortization of tenant inducements||61||75||182||225|
|Accretion expense and amortization of non-cash adjustments to the 2016 Convertible Debentures||635||–||2,204||–|
|Change in fair value of financial instruments||(6,463)||(1,922)||(23,150)||(7,582)|
|Change in fair value of contingent consideration||–||(192)||–||1,005|
|Loss on sale of property, plant and equipment||3,670||(40)||3,009||(54)|
|Deferred income tax recovery||–||–||(1,127)||–|
|Allowance for credit losses on loans and interest receivable||6,752||(19)||7,222||666|
|Change in non-controlling interest liability in respect of the above||(38)||(105)||60||(345)|
|Adjustments for equity accounted entities||(295)||(2,567)||(5,428)||416|
|FFO from continuing operations||$6,850||$5,123||$16,527||$19,268|
|FFO from discontinued operations||(125)||520||560||1,482|
|Weighted average number of shares, including fully vested deferred shares: Basic||56,626,021||56,363,180||56,684,212||56,278,776|
|Funds from operations per share||$0.12||$0.10||$0.30||$0.37|
|Three months ended September 30,||Nine months ended September 30,|
|Cash flows provided by (used in) operating activities||$6,168||$3,386||$14,287||$11,318|
|Change in non-cash working capital||(719)||2,097||2,074||6,944|
|Less: interest expense (1)||(9,655)||(10,331)||(29,116)||(34,050)|
|Less: change in non-controlling interest liability||(72)||225||(448)||271|
|Plus: loss from joint ventures||221||1,569||4,146||(100)|
|Plus: interest paid||11,412||11,193||31,483||36,007|
|Less: interest received||(144)||(153)||(414)||(523)|
|Plus: debt extinguishment costs||(10)||213||584||945|
|Plus: transaction costs for business combination||–||–||–||–|
|Plus: non-cash portion of non-controlling interest expense||(42)||(108)||49||(490)|
|Plus: adjustments for equity accounted entities||(286)||(1,576)||(4,373)||1,280|
|Plus: deferred share incentive plan compensation||63||(918)||376||620|
|Plus: write-off of deferred financing costs from refinancing||–||–||–||–|
|Less: capital maintenance reserve||(729)||(831)||(2,188)||(2,493)|
|Weighted average number of shares, including fully vested deferred shares: Basic||56,626,021||56,363,180||56,684,212||56,235,874|
|Funds from operations per share||$0.11||$0.08||$0.29||$0.35|