false--12-31Q1202000016101140.130.13P1YP10YP5Y0.010.0120000000002000000000829644388288022282964438828802220.02750.020050000000012000000000.010.0199600000996000000000P1Y1.001001000.010.01400000400000400000400000400000400000 0001610114 2020-01-01 2020-03-31 0001610114 2020-05-01 0001610114 2020-03-31 0001610114 2019-12-31 0001610114 2019-01-01 2019-03-31 0001610114 snr:RentalRevenueMember 2020-01-01 2020-03-31 0001610114 snr:ResidentFeesandServicesMember 2020-01-01 2020-03-31 0001610114 snr:ResidentFeesandServicesMember 2019-01-01 2019-03-31 0001610114 snr:RentalRevenueMember 2019-01-01 2019-03-31 0001610114 us-gaap:CommonStockMember 2018-12-31 0001610114 us-gaap:RetainedEarningsMember 2019-01-01 2019-03-31 0001610114 us-gaap:CommonStockMember 2019-01-01 2019-03-31 0001610114 2019-03-31 0001610114 2018-12-31 0001610114 us-gaap:AdditionalPaidInCapitalMember 2019-03-31 0001610114 us-gaap:AdditionalPaidInCapitalMember 2019-01-01 2019-03-31 0001610114 us-gaap:RetainedEarningsMember 2018-12-31 0001610114 us-gaap:RetainedEarningsMember 2019-03-31 0001610114 us-gaap:AdditionalPaidInCapitalMember 2018-12-31 0001610114 us-gaap:CommonStockMember 2019-03-31 0001610114 us-gaap:CommonStockMember 2019-12-31 0001610114 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-01-01 2020-03-31 0001610114 us-gaap:RetainedEarningsMember 2020-01-01 2020-03-31 0001610114 us-gaap:CommonStockMember 2020-01-01 2020-03-31 0001610114 us-gaap:RetainedEarningsMember 2020-03-31 0001610114 us-gaap:CommonStockMember 2020-03-31 0001610114 us-gaap:AdditionalPaidInCapitalMember 2020-01-01 2020-03-31 0001610114 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-12-31 0001610114 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-03-31 0001610114 us-gaap:AdditionalPaidInCapitalMember 2020-03-31 0001610114 us-gaap:RetainedEarningsMember 2019-12-31 0001610114 us-gaap:AdditionalPaidInCapitalMember 2019-12-31 0001610114 srt:MaximumMember snr:ManagedIndependentLivingPropertiesMember 2020-01-01 2020-03-31 0001610114 snr:ManagedIndependentLivingPropertiesMember 2020-03-31 0001610114 srt:MinimumMember snr:OtherPropertiesMember 2020-01-01 2020-03-31 0001610114 snr:OtherPropertiesMember 2020-03-31 0001610114 srt:MinimumMember snr:ManagedIndependentLivingPropertiesMember 2020-01-01 2020-03-31 0001610114 srt:MaximumMember snr:OtherPropertiesMember 2020-01-01 2020-03-31 0001610114 srt:MinimumMember snr:OtherPropertiesMember 2020-03-31 0001610114 snr:ManagedIndependentLivingPropertiesMember 2020-01-01 2020-03-31 0001610114 srt:OfficerMember us-gaap:RestrictedStockUnitsRSUMember 2020-01-01 2020-03-31 0001610114 us-gaap:DiscontinuedOperationsDisposedOfBySaleMember 2020-01-01 2020-03-31 0001610114 us-gaap:DiscontinuedOperationsDisposedOfBySaleMember 2019-01-01 2019-03-31 0001610114 us-gaap:DiscontinuedOperationsDisposedOfBySaleMember 2019-12-31 0001610114 snr:AssistedLivingAndMemoryCarePropertiesMember us-gaap:DiscontinuedOperationsDisposedOfBySaleMember 2019-10-31 0001610114 snr:TermLoanMember us-gaap:SecuredDebtMember 2020-02-10 2020-02-10 0001610114 snr:AssistedLivingAndMemoryCarePropertiesMember us-gaap:DiscontinuedOperationsDisposedOfBySaleMember 2020-02-10 2020-02-10 0001610114 us-gaap:CorporateNonSegmentMember 2019-12-31 0001610114 snr:ManagedIndependentLivingPropertiesMember 2019-12-31 0001610114 us-gaap:CorporateNonSegmentMember 2020-03-31 0001610114 snr:OtherPropertiesMember 2019-12-31 0001610114 stpr:PA us-gaap:SalesRevenueNetMember 2020-03-31 0001610114 stpr:TX us-gaap:SalesRevenueNetMember 2019-03-31 0001610114 stpr:CA us-gaap:SalesRevenueNetMember 2019-01-01 2019-03-31 0001610114 us-gaap:SalesRevenueNetMember 2019-03-31 0001610114 stpr:CA us-gaap:SalesRevenueNetMember 2020-03-31 0001610114 stpr:PA us-gaap:SalesRevenueNetMember 2019-03-31 0001610114 stpr:OR us-gaap:SalesRevenueNetMember 2020-01-01 2020-03-31 0001610114 stpr:TX us-gaap:SalesRevenueNetMember 2020-03-31 0001610114 stpr:PA us-gaap:SalesRevenueNetMember 2020-01-01 2020-03-31 0001610114 snr:OtherStatesMember us-gaap:SalesRevenueNetMember 2019-01-01 2019-03-31 0001610114 us-gaap:SalesRevenueNetMember 2020-01-01 2020-03-31 0001610114 snr:OtherStatesMember us-gaap:SalesRevenueNetMember 2020-01-01 2020-03-31 0001610114 stpr:TX us-gaap:SalesRevenueNetMember 2019-01-01 2019-03-31 0001610114 stpr:NC us-gaap:SalesRevenueNetMember 2019-01-01 2019-03-31 0001610114 stpr:NC us-gaap:SalesRevenueNetMember 2020-01-01 2020-03-31 0001610114 stpr:TX us-gaap:SalesRevenueNetMember 2020-01-01 2020-03-31 0001610114 stpr:OR us-gaap:SalesRevenueNetMember 2019-01-01 2019-03-31 0001610114 snr:OtherStatesMember us-gaap:SalesRevenueNetMember 2020-03-31 0001610114 stpr:CA us-gaap:SalesRevenueNetMember 2020-01-01 2020-03-31 0001610114 us-gaap:SalesRevenueNetMember 2019-01-01 2019-03-31 0001610114 stpr:NC us-gaap:SalesRevenueNetMember 2019-03-31 0001610114 stpr:CA us-gaap:SalesRevenueNetMember 2019-03-31 0001610114 stpr:FL us-gaap:SalesRevenueNetMember 2019-03-31 0001610114 us-gaap:SalesRevenueNetMember 2020-03-31 0001610114 stpr:NC us-gaap:SalesRevenueNetMember 2020-03-31 0001610114 stpr:FL us-gaap:SalesRevenueNetMember 2020-01-01 2020-03-31 0001610114 stpr:PA us-gaap:SalesRevenueNetMember 2019-01-01 2019-03-31 0001610114 stpr:OR us-gaap:SalesRevenueNetMember 2019-03-31 0001610114 snr:OtherStatesMember us-gaap:SalesRevenueNetMember 2019-03-31 0001610114 stpr:FL us-gaap:SalesRevenueNetMember 2020-03-31 0001610114 stpr:FL us-gaap:SalesRevenueNetMember 2019-01-01 2019-03-31 0001610114 stpr:OR us-gaap:SalesRevenueNetMember 2020-03-31 0001610114 snr:ResidentFeesandServicesMember snr:OtherPropertiesMember 2020-01-01 2020-03-31 0001610114 snr:ResidentFeesandServicesMember snr:ManagedIndependentLivingPropertiesMember 2020-01-01 2020-03-31 0001610114 snr:RentalRevenueMember snr:ManagedIndependentLivingPropertiesMember 2020-01-01 2020-03-31 0001610114 snr:OtherPropertiesMember 2020-01-01 2020-03-31 0001610114 snr:RentalRevenueMember snr:OtherPropertiesMember 2020-01-01 2020-03-31 0001610114 snr:IndependentLivingPropertiesMember snr:AssistedLivingAndMemoryCarePropertiesMember 2020-03-31 0001610114 snr:IndependentLivingPropertiesMember snr:ManagedIndependentLivingPropertiesMember 2020-03-31 0001610114 snr:ManagedIndependentLivingPropertiesMember 2019-01-01 2019-03-31 0001610114 snr:ResidentFeesandServicesMember snr:ManagedIndependentLivingPropertiesMember 2019-01-01 2019-03-31 0001610114 snr:RentalRevenueMember snr:ManagedIndependentLivingPropertiesMember 2019-01-01 2019-03-31 0001610114 snr:OtherPropertiesMember 2019-01-01 2019-03-31 0001610114 snr:RentalRevenueMember snr:OtherPropertiesMember 2019-01-01 2019-03-31 0001610114 snr:ResidentFeesandServicesMember snr:OtherPropertiesMember 2019-01-01 2019-03-31 0001610114 us-gaap:LeasesAcquiredInPlaceMember 2020-03-31 0001610114 us-gaap:LeasesAcquiredInPlaceMember 2019-01-01 2019-12-31 0001610114 us-gaap:LeasesAcquiredInPlaceMember 2019-12-31 0001610114 us-gaap:LeasesAcquiredInPlaceMember 2020-01-01 2020-03-31 0001610114 us-gaap:BuildingAndBuildingImprovementsMember 2019-12-31 0001610114 us-gaap:BuildingAndBuildingImprovementsMember 2020-03-31 0001610114 us-gaap:FurnitureAndFixturesMember 2020-03-31 0001610114 us-gaap:LandMember 2020-03-31 0001610114 us-gaap:LandMember 2019-12-31 0001610114 us-gaap:FurnitureAndFixturesMember 2019-12-31 0001610114 snr:A2020FreddieFinancingMember us-gaap:SecuredDebtMember 2020-02-01 2020-02-29 0001610114 us-gaap:MortgagesMember 2020-03-31 0001610114 snr:IndependentLivingPropertiesMember snr:A2020FreddieFinancingMember 2020-02-29 0001610114 snr:AmendedandRestatedRevolverMember us-gaap:RevolvingCreditFacilityMember 2020-02-29 0001610114 srt:MaximumMember us-gaap:MortgagesMember snr:ManagedPropertiesMember us-gaap:LondonInterbankOfferedRateLIBORMember 2020-01-01 2020-03-31 0001610114 snr:A2020FreddieFinancingMember 2020-02-01 2020-02-29 0001610114 snr:AmendedandRestatedRevolverMember us-gaap:RevolvingCreditFacilityMember us-gaap:FederalFundsEffectiveSwapRateMember 2020-02-01 2020-02-29 0001610114 snr:FloatingRateMortgageNotesPayableMember us-gaap:MortgagesMember 2020-03-31 0001610114 snr:AmendedandRestatedRevolverMember us-gaap:RevolvingCreditFacilityMember us-gaap:PrimeRateMember 2020-02-01 2020-02-29 0001610114 snr:A2020FreddieFinancingMember 2020-02-29 0001610114 snr:A2020FreddieFinancingMember us-gaap:SecuredDebtMember us-gaap:LondonInterbankOfferedRateLIBORMember 2020-02-01 2020-02-29 0001610114 snr:FixedRateMortgageNotesPayableMember us-gaap:MortgagesMember 2020-03-31 0001610114 srt:MinimumMember us-gaap:MortgagesMember snr:ManagedPropertiesMember us-gaap:LondonInterbankOfferedRateLIBORMember 2020-01-01 2020-03-31 0001610114 snr:AmendedandRestatedRevolverMember us-gaap:RevolvingCreditFacilityMember us-gaap:LondonInterbankOfferedRateLIBORMember 2020-02-01 2020-02-29 0001610114 snr:FloatingRateMortgageNotesPayableMember us-gaap:InterestRateSwapMember us-gaap:DesignatedAsHedgingInstrumentMember us-gaap:MortgagesMember 2020-03-31 0001610114 snr:A2020FreddieFinancingMember us-gaap:SecuredDebtMember 2020-02-29 0001610114 us-gaap:MortgagesMember 2019-12-31 0001610114 snr:FixedRateMortgageNotesPayableMember us-gaap:MortgagesMember snr:ManagedPropertiesMember 2020-01-01 2020-03-31 0001610114 snr:FixedRateMortgageNotesPayableMember us-gaap:MortgagesMember snr:ManagedPropertiesMember 2020-03-31 0001610114 snr:FloatingRateMortgageNotesPayableMember us-gaap:MortgagesMember snr:ManagedPropertiesMember 2020-03-31 0001610114 snr:FixedRateMortgageNotesPayableMember us-gaap:MortgagesMember snr:ManagedPropertiesMember 2019-12-31 0001610114 snr:FloatingRateMortgageNotesPayableMember us-gaap:MortgagesMember snr:ManagedPropertiesMember 2019-12-31 0001610114 snr:FloatingRateMortgageNotesPayableMember us-gaap:MortgagesMember snr:ManagedPropertiesMember 2020-01-01 2020-03-31 0001610114 snr:FixedRateMortgageNotesPayableMember us-gaap:MortgagesMember 2019-12-31 0001610114 snr:FloatingRateMortgageNotesPayableMember us-gaap:MortgagesMember 2019-12-31 0001610114 srt:MinimumMember snr:FloatingRateMortgageNotesPayableMember us-gaap:MortgagesMember snr:ManagedPropertiesMember us-gaap:LondonInterbankOfferedRateLIBORMember 2020-01-01 2020-03-31 0001610114 srt:MaximumMember snr:FloatingRateMortgageNotesPayableMember us-gaap:MortgagesMember snr:ManagedPropertiesMember us-gaap:LondonInterbankOfferedRateLIBORMember 2020-01-01 2020-03-31 0001610114 us-gaap:InterestRateSwapMember us-gaap:CashFlowHedgingMember us-gaap:DesignatedAsHedgingInstrumentMember 2019-12-31 0001610114 us-gaap:InterestRateSwapMember us-gaap:CashFlowHedgingMember us-gaap:DesignatedAsHedgingInstrumentMember 2020-03-31 0001610114 us-gaap:InterestRateSwapMember us-gaap:CashFlowHedgingMember us-gaap:DesignatedAsHedgingInstrumentMember 2019-05-31 0001610114 us-gaap:InterestRateSwapMember us-gaap:DesignatedAsHedgingInstrumentMember us-gaap:InterestExpenseMember 2020-01-01 2020-03-31 0001610114 us-gaap:FairValueInputsLevel2Member us-gaap:EstimateOfFairValueFairValueDisclosureMember 2020-03-31 0001610114 us-gaap:FairValueInputsLevel1Member us-gaap:EstimateOfFairValueFairValueDisclosureMember 2020-03-31 0001610114 us-gaap:FairValueInputsLevel1Member us-gaap:CarryingReportedAmountFairValueDisclosureMember 2020-03-31 0001610114 us-gaap:FairValueInputsLevel3Member us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:LineOfCreditMember 2020-03-31 0001610114 us-gaap:FairValueInputsLevel3Member us-gaap:CarryingReportedAmountFairValueDisclosureMember us-gaap:MortgagesMember 2020-03-31 0001610114 us-gaap:FairValueInputsLevel3Member us-gaap:CarryingReportedAmountFairValueDisclosureMember us-gaap:LineOfCreditMember 2019-12-31 0001610114 us-gaap:FairValueInputsLevel3Member us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:MortgagesMember 2019-12-31 0001610114 us-gaap:FairValueInputsLevel1Member us-gaap:EstimateOfFairValueFairValueDisclosureMember 2019-12-31 0001610114 us-gaap:FairValueInputsLevel2Member us-gaap:CarryingReportedAmountFairValueDisclosureMember 2020-03-31 0001610114 us-gaap:FairValueInputsLevel3Member us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:MortgagesMember 2020-03-31 0001610114 us-gaap:FairValueInputsLevel2Member us-gaap:EstimateOfFairValueFairValueDisclosureMember 2019-12-31 0001610114 us-gaap:FairValueInputsLevel3Member us-gaap:CarryingReportedAmountFairValueDisclosureMember us-gaap:LineOfCreditMember 2020-03-31 0001610114 us-gaap:FairValueInputsLevel3Member us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:LineOfCreditMember 2019-12-31 0001610114 us-gaap:FairValueInputsLevel1Member us-gaap:CarryingReportedAmountFairValueDisclosureMember 2019-12-31 0001610114 us-gaap:FairValueInputsLevel2Member us-gaap:CarryingReportedAmountFairValueDisclosureMember 2019-12-31 0001610114 us-gaap:FairValueInputsLevel3Member us-gaap:CarryingReportedAmountFairValueDisclosureMember us-gaap:MortgagesMember 2019-12-31 0001610114 us-gaap:DomesticCountryMember 2020-03-31 0001610114 us-gaap:StateAndLocalJurisdictionMember 2020-03-31 0001610114 2019-01-01 2019-12-31 0001610114 2020-01-01 2020-01-31 0001610114 srt:MaximumMember 2019-01-01 2019-01-01 0001610114 snr:FormerManagerMember 2020-01-01 2020-01-31 0001610114 2019-01-01 0001610114 us-gaap:StockOptionMember 2020-01-01 2020-03-31 0001610114 snr:OnOrAfterDecember312020Member 2020-01-01 2020-03-31 0001610114 us-gaap:StockOptionMember 2019-01-01 2019-03-31 0001610114 srt:MinimumMember 2019-01-01 2019-01-01 0001610114 srt:MaximumMember 2020-01-01 2020-03-31 0001610114 snr:WatermarkMember snr:TripleNetLeasePropertiesMember 2020-03-31 0001610114 snr:WatermarkMember snr:AdditionalCapitalImprovementsMember snr:TripleNetLeasePropertiesMember 2020-01-01 2020-03-31 0001610114 srt:MinimumMember 2020-01-01 2020-03-31 0001610114 us-gaap:SubsequentEventMember 2020-05-04 2020-05-04 snr:segment iso4217:USD xbrli:shares xbrli:shares snr:state iso4217:USD xbrli:pure snr:Property
Common stock, par value $0.01 per share: 82,880,222 shares outstanding as of May 1, 2020.
This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements relate to, among other things, the operating performance of New Senior Investment Group Inc.’s (“New Senior,” the “Company,” “we,” “us” or “our”) investments, the stability of our earnings, and our financing needs. Forward-looking statements are generally identifiable by use of forward-looking terminology such as “may,” “will,” “would,” “should,” “potential,” “intend,” “expect,” “plan,” “endeavor,” “seek,” “anticipate,” “estimate,” “believe,” “could,” “project,” “predict,” “continue” or other similar words or expressions. Forward-looking statements are based on certain assumptions, discuss future expectations, describe future plans and strategies, contain projections of results of operations or of financial condition or state other forward-looking information. Our ability to predict results or the actual outcome of future plans or strategies is inherently uncertain. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements. These forward-looking statements involve risks, uncertainties and other factors that may cause our actual results in future periods to differ materially from forecasted results. Factors which could have a material adverse effect on our operations and future prospects include, but are not limited to:
the duration and scope of the novel coronavirus (“COVID-19”) global pandemic, its impact on occupancy rates and on the Company’s operations and the operations of its operators/tenant; actions that local, state and the federal government take in response to the pandemic, including the introduction of public health measures and other regulations that could affect the operations of our properties; the effects of the health and safety measures adopted by us and our operators/tenant related to the pandemic; increased operational costs as a result of health and safety measures related to COVID-19, and the overall impact of COVID-19 on our business, results of operations, financial condition and liquidity, as well as on the price of our common stock;
our ability to manage our liquidity and sustain distributions to our stockholders, particularly in light of the cash shortfall described in our risk factors under “Part II, Item 1A”. and under “Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources”;
concentration risk with respect to Holiday Retirement (“Holiday”), which, for the three months ended March 31, 2020, accounted for 94.3% of total net operating income (“NOI”) from continuing operations;
the ability of our property managers and tenant to maintain the financial strength and liquidity necessary to satisfy their respective obligations and liabilities to us and third parties, particularly in light of the impacts of the COVID-19 pandemic on their businesses;
our ability to sell properties on favorable terms and to realize the anticipated benefits from any such dispositions, including as a result a reduction of real estate value related to the COVID-19 pandemic;
changes in economic conditions generally and the real estate, senior housing and bond markets specifically, including general economic uncertainty as a result of the COVID-19 pandemic and a worsening of global economic conditions or low levels of economic growth;
our stock price performance and any disruption or lack of access to the capital markets or other sources of financing, including as a result of factors influenced by the COVID-19 pandemic;
the impact of any current or future legal proceedings and regulatory investigations and inquiries on us or our operators;
our reliance on our operators for timely delivery of accurate property-level financial results; and
Although we believe that the expectations reflected in any forward-looking statements contained herein are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. The factors noted above could cause our actual results to differ significantly from those indicated by any forward-looking statement
Readers are cautioned not to place undue reliance on any of these forward-looking statements, which reflect our management’s views only as of the date of this Quarterly Report on Form 10-Q, and to consider carefully the factors discussed in “Part II, Item 1A. “Risk Factors” of this Quarterly Report on Form 10-Q and “Part I, Item 1A. “Risk Factors” of our 2019 Annual Report on Form 10-K in evaluating these forward-looking statements. We are under no duty to update any of the forward-looking statements after the date of this report to conform these statements to actual results.
Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. Additional information about the Company may be found elsewhere in this Quarterly Report on Form 10-Q and the Company’s other public filings, which are available without charge through the Securities and Exchange Commission’s (“SEC”) website at www.sec.gov.
Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the three months ended March 31, 2020 and 2019
Note 5. Real Estate Investments
Note 6. Receivables and Other Assets, Net
Note 7. Debt, Net
Note 9. Accrued Expenses and Other Liabilities
Note 12. Redeemable Preferred Stock, Equity and Earnings Per Share
Redeemable preferred stock, $0.01 par value with $100 liquidation preference, 400,000 shares authorized, issued and outstanding as of both March 31, 2020 and December 31, 2019
Preferred stock, $0.01 par value, 99,600,000 shares (excluding 400,000 shares of redeemable preferred stock) authorized, none issued or outstanding as of both March 31, 2020 and December 31, 2019
Common stock, $0.01 par value, 2,000,000,000 shares authorized, 82,880,222 and 82,964,438 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively
Basic earnings per common share (“EPS”) is calculated by dividing net income (loss) attributable to common stockholders by the weighted average number of shares of common stock outstanding. The outstanding shares used to calculate the weighted average basic shares exclude 493,599 and 800,381 restricted stock awards, net of forfeitures, as of March 31, 2020 and 2019, respectively, as those shares were issued but were not vested and therefore, not considered outstanding for purposes of computing basic income (loss) per share. Diluted EPS is computed by dividing net income (loss) attributable to common stockholders 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.
Dilutive share equivalents and options were excluded for the three months ended March 31, 2020 and 2019 as their inclusion would have been anti-dilutive given our loss position.
Equity awards vested
Dividends declared - equity awards ($0.13 per share)
Dividends declared on redeemable preferred stock
Equity at March 31, 2020
Equity at March 31, 2019
Non-cash straight-line rental revenue
Net cash provided by (used in) investing activities - discontinued operations (A)
Taxes paid related to net settlement of equity-based compensation awards
Payment of restricted stock dividend
Net cash provided by (used in) financing activities - discontinued operations (B)
(A) For the three months ended March 31, 2020, amount consists primarily of net proceeds from the AL/MC Portfolio Disposition. Refer to “Note 3 - Discontinued Operations” for details.
(B) For the three months ended March 31, 2020, amount consists primarily of repayments of debt in conjunction with the AL/MC Portfolio Disposition. Refer to “Note 3 - Discontinued Operations” for details.
Restricted cash consists of (i) amounts held by lender in tax, insurance, replacement reserve and other escrow accounts and (ii) security deposits; amounts relating to continuing operations are included in “Receivables and other assets, net” in our Consolidated Balance Sheets.
New Senior is a REIT primarily focused on investing in private pay senior housing properties. As of March 31, 2020, we owned a diversified portfolio of 103 primarily private pay senior housing properties located across 36 states. We are listed on the New York Stock Exchange (“NYSE”) under the symbol “SNR” and are headquartered in New York, New York.
We operate in two reportable segments: (1) Managed Independent Living (“IL”) Properties, and (2) Other Properties.
Managed IL Properties – We own 102 properties managed by Holiday, FHC Property Management LLC (together with its subsidiaries, “Merrill Gardens”), and Grace Management, Inc. (“Grace”) (collectively, the “Property Managers”), under Property Management Agreements (collectively, the “Property Management Agreements”). Under the Property Management Agreements, the Property Managers are responsible for the day-to-day operations of our senior housing properties and are entitled to a management fee in accordance with the terms of the Property Management Agreements. Our Property Management Agreements have initial five-year or ten-year terms, with successive, automatic one-year renewal periods. We generally pay management fees of 4.5% to 5% of effective gross income pursuant to our Property Management Agreements and, in some cases, the Property Managers are eligible to earn an incentive fee based on operating performance.
Other Properties – We own one CCRC and lease this property to Watermark Retirement Communities, Inc. (“Watermark”), a healthcare operating company under a triple net lease agreement. In a triple net lease arrangement, the lessee agrees to operate and maintain the property at its own expense, including maintenance, utilities, taxes, insurance, repairs, capital improvements and the payroll expense of property-level employees. Our triple net lease agreement has an initial term of 15 years and includes a renewal option and annual rent increases ranging from 2.75% to 3.25%.
We were formed as a Delaware limited liability company on May 17, 2012 as a wholly owned subsidiary of Drive Shack Inc., formerly Newcastle Investment Corp. (“Drive Shack”). On November 6, 2014, we were spun-off from Drive Shack and our shares of common stock were publicly listed on the NYSE.
The accompanying consolidated financial statements are prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP’’) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. The consolidated financial statements include the accounts of New Senior and its consolidated subsidiaries. All significant intercompany transactions and balances have been eliminated. We consolidate those entities in which we have control over significant operating, financial and investing decisions of the entity. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These consolidated financial statements should be read in conjunction with our consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the SEC.
Certain prior period amounts have been reclassified to conform to the current period’s presentation, primarily related to classification of certain properties as discontinued operations.
The two-class method determines EPS for each class of common stock and participating securities according to dividends declared (or accumulated) and their respective participation rights in undistributed earnings. Non-vested share-based payment awards that contain non-forfeitable rights to dividends are participating securities and, therefore are included in the computation of basic EPS pursuant to the two-class method. During the three months ended March 31, 2020, we issued 233,974 unvested restricted stock units to officers and employees with certain participating rights (“Participating RSUs”).
Diluted earnings per share of common stock is calculated by including the effect of dilutive securities. Participating RSUs are included in the computation of diluted EPS by using the more dilutive of the two-class method or treasury stock method. Any anti-dilutive securities are excluded from the calculation. During periods of loss, there is no allocation required under the two-class method since the participating securities do not have a contractual obligation to fund losses.
Refer to our significant accounting policies disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019 for other significant accounting policies.
On January 1, 2020, we adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). This standard requires a company to recognize an impairment allowance equal to its current estimate of all contractual cash flows that it does not expect to collect from financial assets measured at amortized cost. The adoption of this standard did not have a material impact on our consolidated financial statements as our entire balance of receivables relates to lease agreements with our residents and tenant, which are specifically excluded from this standard.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). This ASU provides optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference London Inter-Bank Rate (“LIBOR”) or another rate that is expected to be discontinued. Companies can adopt ASU 2020-04 anytime during the effective period of March 12, 2020 through December 31, 2022. We are assessing the impact this guidance may have on our consolidated financial statements.
On October 31, 2019, we entered into a Purchase and Sale Agreement (the “Sale Agreement”) to sell a portfolio of 28 assisted living/memory care (“AL/MC”) properties for a gross sale price of $385.0 million (the “AL/MC Portfolio Disposition”). The portfolio represented a separate reportable segment at the time and the sale represented a strategic shift that would have a major effect on our operations and financial results. As a result, we classified the assets and liabilities associated with the operations of the 28 AL/MC properties as discontinued operations in our consolidated financial statements.
On February 10, 2020, we completed the AL/MC Portfolio Disposition and recognized a gain on sale of $20.0 million, which is included in “Discontinued operations, net” in our Consolidated Statements of Operations. In conjunction with the sale, we repaid $260.2 million of debt specifically attributable to the properties included in the disposition and recognized a loss on extinguishment of debt of $3.6 million, comprising of $2.5 million in prepayment penalties and $1.1 million in the write-off of unamortized deferred financing costs, which is included in “Loss from discontinued operations” in our Consolidated Statements of Operations.
As of December 31, 2019, the assets and liabilities associated with discontinued operations were as follows:
For the three months ended March 31, 2020 and 2019, the results of operations associated with discontinued operations are as follows:
We operate in two reportable business segments, Managed IL Properties and Other Properties. Our Managed IL Properties segment includes 102 IL properties throughout the United States managed by Holiday, Merrill Gardens and Grace under Property Management Agreements. Our Other Properties segment includes one CCRC property, which is currently leased to a healthcare operating company under a triple net lease agreement that obligates the tenant to pay all property-related expenses, including maintenance, utilities, taxes, insurance, repairs, capital improvements and the payroll expense of property-level employees. It also includes the operations of two managed AL/MC properties we previously owned during the three months ended March 31, 2019 and sold in the second quarter of 2019.
Depreciation and amortization, interest expense, acquisition, transaction and integration expense, termination fee, management fees and incentive compensation to affiliate, general and administrative expense, loss on extinguishment of debt, impairment of real estate, other expense (income), gain (loss) on sale of real estate, gain on lease termination, litigation proceeds, net, income tax expense (benefit) and discontinued operations, net are not allocated to individual segments for purposes of assessing segment performance. There are no intersegment sales.
Includes $363.5 million of assets classified as discontinued operations for the year ended December 31, 2019. The remaining balance primarily consists of corporate cash which is not directly attributable to our reportable business segments.
The following table summarizes our real estate investments:
Depreciation expense was $17.4 million and $16.9 million for the three months ended March 31, 2020 and 2019, respectively.
Amortization expense was $0.1 million and $0.1 million for the three months ended March 31, 2020 and 2019, respectively.
We evaluate long-lived assets, primarily consisting of our real estate investments, for impairment indicators. In performing this evaluation, market conditions and our current intentions with respect to holding or disposing of the asset are considered. Where indicators of impairment are present, we evaluate whether the sum of the expected future undiscounted cash flows is less than book value. Based on our assessment, no charges were necessary for the three months ended March 31, 2020 and 2019.
Represents amounts held by lenders in tax, insurance, replacement reserve and other escrow accounts that are related to mortgage notes collateralized by New Senior’s properties.
Rental revenue from our triple net lease property is recognized on a straight-line basis over the applicable term of the lease when collectability of substantially all rents is probable. Recognizing rental revenue on a straight-line basis typically results in recognizing revenue in excess of cash amounts contractually due from our tenants during the first half of the lease term, creating a straight-line rent receivable.
We assess the collectability of straight-line rent receivables on an ongoing basis. This assessment is based on several qualitative and quantitative factors, including and as appropriate, the payment history of the triple net lease tenant, the tenant’s ability to satisfy its lease obligations, the value of the underlying collateral or deposit, if any, and current economic conditions. If our evaluation of these factors indicates it is not probable that we will collect substantially all rents, any lease income is limited to the lesser of the lease income reflected on a straight-line basis or cash collected.
The following table sets forth future contracted minimum lease payments from the tenant within the Other Properties segment, excluding contingent payment escalations, as of March 31, 2020:
Floating Rate (B)(C)(D)
Mar 2022- Mar 2030
1M LIBOR + 2.00% to 1M LIBOR + 2.75%
The totals are reported net of deferred financing costs of $18.5 million and $13.1 million as of March 31, 2020 and December 31, 2019, respectively.
Substantially all of these loans have LIBOR caps that range between 3.38% and 3.75% as of March 31, 2020.
Includes $100.0 million of borrowings outstanding under our Revolver as of March 31, 2020.
As of March 31, 2020, $350.0 million of total floating rate debt has been hedged using an interest rate swap, which is carried at fair value. See “Note 8 - Derivative Instruments” for more information.
The carrying value of the collateral relating to the floating rate and fixed rate debt was $1.2 billion and $0.5 billion, respectively, as of both March 31, 2020, and December 31, 2019.
Our debt agreements contain various customary financial and other covenants, in some cases including a debt service coverage ratio and project yield, as defined in the agreements. We are in compliance with the covenants in our debt agreements as of March 31, 2020.
In February 2020, in conjunction with the AL/MC Portfolio Disposition, we obtained mortgage financing in the aggregate amount of $270.0 million from KeyBank and assigned to Federal Home Loan Mortgage Corporation (the “2020 Freddie Financing”). The 2020 Freddie Financing is secured by 14 of our managed IL properties, matures on March 1, 2030, and bears interest at an adjustable rate, adjusted monthly, equal to the sum of the one month LIBOR index rate plus 2.12%. Concurrently on the same date, we used the funds from the 2020 Freddie Financing and proceeds from the AL/MC Portfolio Disposition to prepay an aggregate of $368.1 million of secured loans. We recognized a loss on extinguishment of debt of $5.9 million, comprising of $4.5 million in prepayment penalties and $1.4 million in the write-off of unamortized deferred financing costs, and is recorded in “Loss on extinguishment of debt” on our Consolidated Statements of Operations. We incurred a total of $3.3 million in deferred financing costs, which have been capitalized and are being amortized over the life of the loan and the related amortization is included in “Interest expense” in our Consolidated Statements of Operations.
In addition, in February 2020, we also amended and restated our secured revolving credit facility in the amount of $125.0 million (the “Revolver”) and extended its maturity from December 2021 to February 9, 2024. The amendment allows the Revolver to be increased with lender consent to a maximum aggregate amount of $500.0 million, of which (i) up to 10% may be used for the issuance of letters of credit, and (ii) up to 10% may be drawn by us in the form of swing loans. The Revolver bears an interest rate of, at our option, (i) the sum of LIBOR plus 2.0% or, in the case of a swing line loan, (ii) the greater of (a) the fluctuating annual rate of interest announced from time to time by KeyBank as its “prime rate,” plus 1.0% (b) 1.5% above the effective federal funds rate and (c) the sum of LIBOR for a one-month interest period plus 2.0%. The Revolver is secured by nine of our IL properties and the pledge of the equity interests of certain of our wholly owned subsidiaries. We continue to pay a fee for unused amounts of the Revolver under certain circumstances, which was not material for the three months ended March 31, 2020.
Our objectives in using interest rate derivatives are to add stability to interest expense and to manage our exposure to interest rate movements.
In May 2019, we entered into a $350.0 million notional interest rate swap with a maturity of May 2022 that effectively converts LIBOR-based floating rate debt to fixed rate debt, thus reducing the impact of interest-rate changes on future interest expense. The interest rate swap was designated and qualified as a cash flow hedge with the change in fair value included in the assessment of hedge effectiveness deferred as a component of other comprehensive income (“OCI”), and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings.
As of March 31, 2020 and December 31, 2019, our interest rate swap liability of $14.7 million and $5.9 million, respectively, was recorded in “Accrued expenses and other liabilities” in our Consolidated Balance Sheets. For the three months ended March 31, 2020, $0.5 million of loss was reclassified from accumulated other comprehensive income (loss) into earnings and was recorded in “Interest expense” in our Consolidated Statements of Operations. As of March 31, 2020, approximately $5.5 million of our swap liability, which is included in accumulated other comprehensive income (loss), is expected to be reclassified into earnings in the next 12 months.
As of March 31, 2020 and December 31, 2019, our interest rate cap assets were recorded in “Receivables and other assets, net” in our Consolidated Balance Sheets. Fair value losses recognized for the three months ended March 31, 2020 were not material and fair value losses recognized for the three months ended March 31, 2019 were $0.5 million. These amounts are included in “Other expense” in our Consolidated Statements of Operations and “Other non-cash expense” in our Consolidated Statements of Cash Flows.
Due to property managers
The carrying amounts and fair values of our financial instruments were as follows:
Interest rate caps (B)(D)
Mortgage debt (C)