Analysts were determined to hear how Senior Housing Properties Trust (NYSE: SNH), a real estate investment trust (REIT) that primarily invests in senior housing properties, would raise its stock prices during its quarterly earnings conference call Wednesday.
Overall, the financial news was good, but SNH has struggled to see its stock value rise recently. Since its one-year high, SNH’s stock has plummeted 30.34%. Yet, revenue was up 17.7% in the quarter that ended on Sept. 30 compared to the same quarter in 2014.
For the third quarter, normalized funds from operations (FFO) slightly beat analyst expectations, reaching $111.4 million, or $0.47 per basic and diluted share. This was a jump from the same quarter a year prior, when FFO was $89.6 million, or $0.44 per basic and diluted share, as a result of strong performance in the REIT’s managed senior living communities and acquisitions from 2014.
Richard Doyle, treasurer and chief financial officer of SNH, tried to quell concerns from analysts over declines in occupancy and a formal position on raising the stock price. Most questions were aimed at the disconnect of the REIT’s performance and its stock price, and executives were unable to answer analysts’ calls for a formal stock buyback plan.
“I can’t understand why you’re not going out and selling a whole bunch of properties and buying back the stock at a substantial discount,” UBS analyst Ross Nussbaum said.
Doyle noted that the REIT was considering that option, but was “not in a position to announce anything just yet.” The company has previously stated it is looking into unloading several skilled nursing assets.
When pressed about a slight occupancy decline across its triple net leased senior housing communities, Doyle marginalized the exposure.
“Everything is on the margin,” Doyle said. “We had a couple properties with a drop in occupancy due to new competition opening up nearby or a change in the executive director. About half had an increase, half had a decrease. Net occupancy is down, but it’s a bunch of small things and just a couple properties.”
However, Doyle also revealed that occupancy in some memory care communities was down to around 60%. The company was also firm that it would not be making further acquisitions amid a “crazy acquisition” environment.
SNH’s attitude on acquisitions mirrors that of other REITs in the industry. Welltower Inc. (NYSE: HCN) reported record-high FFO for the third quarter, but sky-high prices and low cap rates have sidelined the REIT on major deals. Both LTC Properties Inc. (NYSE: LTC) and Omega Healthcare Investors (NYSE: OHI) indicated they’ll be more conservative on deals moving forward, as well.
Written by Amy Baxter