Five Star Quality Care Sees Q2 Earnings Drag, Plans to Sell 11 Communities

Senior living operator Five Star Quality Care (NYSE: FVE) announced second quarter earnings today lagging the previous-year period as well as plans to sell off 11 communities. Income from continuing operations fell 49% to $2.7 million or $0.06 per diluted share, compared with $5.3 million or $0.10 per diluted share in the second quarter last year.

The company, originally formed as a spinoff from Senior Housing Properties Trust, operates more than 260 senior living communities nationwide and announced upon stating earnings that it will sell 11 communities that receive a majority of revenue from Medicaid and Medicare.

Ten of the communities for sale are being leased from Senior Housing Properties Trust and comprise seven skilled nursing facilities and three assisted living communities. The communities for sale include 721 units in total. The community is offering for sale one additional assisted living community comprising 32 units.

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“We believe we will sell all of them,” company executives said on a conference call in announcing earnings Monday. “The majority will probably take place next year.”

Five Star Quality Care saw sales increase 9% year over year to $351.9 million for the quarter ended June 30.

Income from continuing operations for the second quarter of 2012 included a gain on settlement due to litigation with Sunrise Senior Living of $1.9 million, or $0.04 per basic and diluted share.

Net income for the quarter was $825,000 or $0.02 per basic and diluted share, compared to $4.6 million or $0.09 per basic and diluted share for the same quarter in 2012. The company stated net income from the second quarter included a loss from discontinued operations of $1.8 million.

Occupancy at Five Star’s owned and leased senior living communities for the second quarter of 2013 was 85.5% compared to 86.0% for the same period in 2012, and compared to an industry average of 89% according to data from the National Investment Center for the Seniors Housing & Care Industry.

“We’re pleased with the progress we’re making so far,” said Scott Herzig, chief operating officer. “From where we stand, it’s certainly going in the right direction.”

Editor’s note: A previous version of this article incorrectly stated in paragraph 3 that 10 of the properties for sale were owned by Health Care REIT. The properties are being leased from Senior Housing Properties Trust. SHN regrets the error. 

Written by Elizabeth Ecker

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