Investor Presentation. June 2016

Transcription

1 Investor Presentation June 2016

2 Forward-Looking Statements This presentation contains forward-looking statements regarding the Company s expected future financial condition, results of operations, cash flows, funds from operations, business strategies, operating metrics, competitive positions, growth opportunities, and other matters. The words believe, expect, anticipate, intend, may, could, should, will, and other similar expressions, generally identify such forward-looking statements, which speak only as of the date of this presentation. The matters discussed in these forward-looking statements are subject to various risks, uncertainties, and other factors that could cause actual results to differ materially from those projected, anticipated, or implied in the forward-looking statements. Where, in any forward-looking statement, an expectation or belief as to future results or events is expressed, such expectation or belief is based on the current plans and expectations of Company management and expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the expectation or belief will result or be achieved or accomplished. Factors that could cause actual results or events to differ materially from those anticipated are described in Form 10-k under the heading Risk Factors. 2

3 Table Of Contents Current Highlights Company Overview Industry Fundamentals Portfolio Overview Growth Platform Financial Profile Appendix

4 Current Highlights Refinancing of Term Debt Continues Closed $100m unsecured, eleven-year note at a fixed-rate of 5.38% Actively working on ~$130m secured Bridge-to-HUD loan Closed Sale of Seven Wingate Facilities for $95m Entered into $25m mezzanine loan at a rate of 10.0% in connection with sale Sale was part of previously announced, fair-market value purchase options 1 st Quarter 2016 Results 1Q Normalized FFO/Share of $0.80 Reaffirmed 2016 Guidance Normalized FFO/Share of $2.85 to $2.95 4

5 Company Overview

6 CCP At A Glance Investment Grade Rating from All 3 Agencies 1 1.8x EBITDARM Coverage 2 42 Operator Relationships $600 Million Revolving Credit Facility 8.8% Dividend Yield 3 $120 Billion Fragmented Industry 1 of 3 Pure Play SNF REITs $330 Million Portfolio NOI Properties in 36 States (1) S&P expected issue level rating BBB-, Corporate Rating is BB+. (2) Trailing Twelve-Months as of December 31, (3) Based on May 31, 2016 closing price. (4) Based on Annualized 1Q16 NOI pro-forma for a full quarter impact from acquisitions and dispositions. 6

7 2016 Strategic Priorities Value Enhancing Acquisitions Permanent Capital Structure Portfolio Optimization & Management Expand Platform & Infrastructure Grow the portfolio by making value enhancing acquisitions Migrate quickly to a permanent capital structure with long-term debt, fixed-rates, and staggered maturities Actively manage our portfolio through redevelopment, strategic dispositions, and tenant consolidation and repositioning Continue to build out our standalone infrastructure by investing in our people, processes, systems, and tools 7

8 Cycle Of Strength: Fueling Growth And Delivering Value Significant post-acute consolidation Demographics and industry dynamics provide strong tailwind Leverage size, relationships, and expertise for growth Opportunistic redevelopment Investment Grade Modest leverage Ample liquidity Access to capital Strong dividend coverage Strong Financial Profile Large, diversified triple-net portfolio Strong rent coverage with escalators High-quality operators Reimbursement environment is stable Experienced in post-acute sector transactions Knowledge of SNF operations One of three pure-play REITs in the space Strong heritage of execution 8

9 Quality Post Acute Portfolio with Scale and Diversification Portfolio Summary & Key Operating Metrics 351 Properties ~39,000 Beds/Units 42 Operator Relationships in 36 States Projected FY16 NOI of $330 million (1) Strong portfolio rent coverage (2) 1.8x EBITDARM 1.4x EBITDAR Other key metrics 78% licensed occupancy (2) 54% Q-mix (2) ~2.0% average rent escalators No tenant >15% NOI, except SCC No state >10% NOI, except Texas Weighted average remaining lease term of 9 years Asset Mix (1) Lease Expiration Schedule (1) Specialty Hospitals & Healthcare, 3% Seniors Housing & Campus, 6% 25.0% 20.0% 15.0% 19.4% 10.0% SNFs, 9 5.0% 0.0% 2.0% 0.8% 2.0% 0.2% (1) Based on Annualized 1Q16 NOI pro-forma for a full quarter impact from acquisitions and dispositions. (2) Trailing Twelve-Months as of December 31,

10 Backed By A Strong, Conservative Financial Profile Strong Cash Flows Support a Meaningful Dividend $66.6mm of 1Q16 normalized FFO supports a 8.8% dividend yield 1 at a conservative 7 payout ratio Normalized FFO Reported 1Q16 FFO of $66.6 million Reported FY15 2 FFO of $286.3 million Low Leverage & Strong Balance Sheet Conservative target leverage (4.0x 5.0x Net Debt to EBITDA), strong FCCR and Payout Ratio, and ample liquidity provide the bedrock for sustainable growth and financial flexibility Well-structured NNN Leases Cash flow is protected by NNN leases with additional structural support from master leases, cross default provisions, security deposits, and LCs Balance Sheet Net Debt / EBITDA of 4.9x (4.8x pro forma for Wingate disposition) Fixed Charge Coverage Ratio ~ 8.8x Balance Sheet $2.28/Share annualized dividend 7 payout ratio on reported 1Q16 Norm. FFO Paid 1Q16 dividend of $ Guidance 2016 Norm. FFO/Share between $2.85 and $2.95 (1) Based on May 31, 2016 closing price. (2) Including carve out of Ventas pre-spin. 10

11 Multiple Avenues for Sustainable Growth Positioned to deliver internal and external growth Stable Cash Flows Development & Redevelopment Acquisitions Average lease escalators of ~2% Limited near-term lease renewals Strong coverage July 2015 Driving growth through redevelopment, expansion, and enhancement of existing properties Strategically pursuing opportunities to invest in complementary healthcare properties Leverage size, relationships, and expertise to opportunistically consolidate a fragmented industry Capitalize on favorable demographics and policy tailwinds through local and regional operators Sourcing investments from operator relationships, existing and new Selective based on current yields and operator quality Capital Plan $600m Revolver to fund acquisitions Maintain moderate leverage and increase duration through fixed-rate debt issuances Access to multiple capital markets to support investments Investment grade ratings Target <80% payout ratio to retain cash and secure dividend 11

12 Significant External Growth Opportunity Significant opportunity to consolidate fragmented asset ownership 75% of SNFs are owned by regional and local operators Only 16% of SNFs are owned by public REITs CCP is one of the largest, publicly-traded, SNF-focused REITs Fragmented SNF Ownership 2,248 SNF Facilities vs. Market of 15,000 Public Operator Owned, $2Bn, 2% Public REIT Owned, $19Bn, 16% $103 billion 864 Not for Profit Owned, $32Bn, 26% Private, for Profit Owned, $69Bn, 56% SNFs owned outside of public REITs Omega CCP HCP (1) Welltower (2) Sabra LTC CareTrust NHI Ventas SNH Source: Company provided information and public company filings as of March 31, (1) Represents the firm s post-acute / SNF facilities. (2) Represents the firm s long-term / post-acute facilities. 12

13 Run By An Experienced Management Team Raymond J. Lewis Chief Executive Officer Lori B. Wittman EVP, Chief Financial Officer Timothy A. Doman EVP, Chief Operating Officer Kristen M. Benson EVP, General Counsel 13 Years at Ventas in roles 5 Years at Ventas in roles including 13 Years at Ventas in roles 11 Years at Ventas in roles including President and Chief Investment Officer 13 years at GE Capital Healthcare SVP Capital Markets and Investor Relations 6 Years at GGP in roles including including Chief Portfolio Officer and oversight over the Asset Management department including Associate General Counsel and Corporate Secretary 7 Years at Sidley Austin focused on and Heller in roles including Managing Director of Business Development and Executive Vice President (respectively) 8 years of leadership with NIC Senior Vice President & Treasurer Additional experience includes Big Rock Capital Partners, Heitman, Homart, Citi, and Mellon Bank Over 10 years at GE Capital Real Estate and Kemper in various senior asset management roles public company securities, mergers and acquisitions, and corporate finance including serving as Chairman Emeritus 4 Years of leadership with ASHA 13

14 Industry Fundamentals

15 Fueled by great tailwinds, the post-acute healthcare real estate market is large and highly fragmented and we re primed to participate as a consolidator.

16 Population (millions) Population (millions) Rapidly Growing Demographics Drive Demand Senior population (65+) expected to grow 80% between 2010 and 2030, and 85+ cohort by over 60% Estimated that ~70% of Americans who reach age 65 will require some form of long-term care for an average of 3 years Population 85 and Over (1) Increasing Prevalence of Chronic Disease (2) Trend in Resident Activities of Daily Living (ADL) Dependence (3) 85+ Population (MMs) % of Total Population Population with Chronic Conditions (mm) % 3.7% 2.5% 1.5% 2.0% 1.8% A 2010A 2020E 2030E 2040E 2050E 5% 4% 3% 2% 0% % of U.S. Population with a Chronic Condition % 49% 48% 48% 47% 46% 2005A 2010A 2015E 2020E 2025E 2030E '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 (1) U.S. Census Bureau: 65+ in the United States: 2010, as of June Indexed to 100%. (2) RBC Capital Markets research. (3) American Health Care Association (AHCA) Reimbursement and Research Department. 16

17 Market Segmentation Facility Based Care Pre-Acute Acute Care Post-Acute Care Acuity Acute-Care Hospitals (Long-Term & General) Inpatient Rehab Facility Skilled Nursing (Transitional Care) CCP S FOCUS Cost Medical Office Buildings / Outpatient Skilled Nursing (Long-Term) Seniors Housing Memory Care (ALZ) Assisted Living HOME Independent Living Healthcare Policy Drive to Treat Patients in Low Cost Settings 17

18 Need-Based Care Where SNFs Are The Lowest Cost Providers Payors are focused on driving seniors to skilled nursing facilities (SNFs) for a lower cost than alternative inpatient settings SNFs provide comprehensive delivery of post-acute care at a lower cost, operate with fewer physical plant requirements, and are more efficiently designed to deliver care SNFs typically employ less staff than long-term acute care hospitals and inpatient rehabilitation facilities Acute Care Hospital Medicare Discharge Destination (1) Payors Driving Seniors to SNFs Lower Cost Setting of Care (2) Comparison of per Case Rates Skilled Nursing Facilities Inpatient Rehab Facilities Long-Term Acute Care 2 No Post Acute Care IPF LTACH Tracheotomy with Vent $10,051 $26,051 $115,463 Respiratory with Vent 7,897 26,051 74,689 17% 4% 3% 55% Hospice IRF Home Health SNF Joint Replacement 6,165 17,135 67,104 Hip Fracture 10,618 18,487 44,633 Stroke 8,905 34,196 31,496 Average $8,727 $24,384 $66,677 (1) MedPAC Data Book, June (2) MedPAC. 18

19 Reimbursement Environment Is Steady Government projected to continue commitment to funding both Medicare and Medicaid programs for SNFs Medicare and Medicaid expenditures for SNFs expected to grow 84% from 2011 to 2021 SNFs represent a small percentage of total Medicare and Medicaid expenditures Limits on new nursing home construction (CONs and Construction Moratoriums) Medicaid SNF reimbursement environment in CCP s top states expected to be stable Medicare Advantage Penetration Rates (1) Decreasing SNF Supply (2) Proposed FY17 Medicare Reimbursement Rate 15,726 87% 84% 8 78% 77% 76% 75% 73% 72% 70% 69% 13% 16% 19% 22% 23% 24% 25% 27% 28% 30% ,684 15,679 15,673 15,665 15,668 15,650 15, Medicare Advantage Traditional Medicare (1) Kaiser Family Foundation, Medicare Advantage and Traditional Medicare: Is the Balance Tipping?, October (2) Company provided information and the American Health Care Association (AHCA). Note: Represents certified skilled nursing facilities as of March of the indicated year. 19

20 Healthcare Environment in Transition SNF Environment Today Steady / rising reimbursement rates Stable political environment Still mostly Fee-for-Service but more alternative payment model pilots starting Older physical stock, but limited new construction Changing physical plant configuration Increasing focus on quality outcomes and data Healthcare Environment is Transitioning Long-Term Healthcare Landscape Accelerating demographics Increased insured population Increased Managed Medicare & Medicaid; Managed Care administering Gov t programs Value-based payments focused on quality & efficiency Focus on delivering care in the lowest-cost appropriate setting Horizontal and vertical consolidation Experienced Management Team with Pro-Active Portfolio Management the Key to Aligning with Best Operators 20

21 Portfolio Overview

22 Well-developed partnerships with quality regional and local skilled operators are a vital component to our success we will grow through a diversified cash flowing portfolio of post-acute properties with NNN leases and strong rent coverage.

23 Strong Operating Partnerships CCP Owned % of EBITDARM Size of Operator Operator Highlights Operator States Properties Beds NOI (1) Coverage (2) Properties LA, TX 37 4,655 17% 1.6x 100+ AL, GA, IN, KY, NC, OH, PA, TN, VA 49 5,697 15% 1.4x 100+ CO, ID, OR, WA 28 2, x 42 IN 24 1,995 5% 1.9x 35 CA, FL, IN, MD, MN, MO, NC, VA, WI 20 2,386 5% 1.7x 100+ Next Five 59 7,863 19% 1.7x Top ,433 73% 1.6x Number of operator relationships: 42 CCP s existing tenants operate ~2,000 properties throughout the U.S. No operator comprises more than 15% of NOI, except SCC Top 10 operators make up ~73% of NOI ROFO/ROFR/ Last Look with 6 of top 10 Repeat transactions with 7 of top 10 since 2011 Top , x (1) Based on Annualized 1Q16 Property NOI pro-forma for a full quarter impact from acquisitions and dispositions. (2) Trailing Twelve-Months as of December 31,

24 Large National Footprint 351 Properties 42 Operator Relationships 36 States ~39,000 Beds Average Remaining Lease Term: ~9 yrs Nursing Home Specialty Hospital & Healthcare Seniors Housing & Campus 24

25 Diversified Portfolio by Geography State Diversification by NOI 1 State Diversification by Beds Oregon 6% Washington 4% 0.2% 2% 3% 2% 2% Indiana 8% New York 5% Ohio 3% % 2% 2% Massachusetts 8% North Carolina 3% Oregon 4% 3% 0.3% 2% Wisconsin 5% 2% 3% Indiana 8% 2% Ohio 4% 2% 2% New York 4% 2% 2% Massachusetts 10% North Carolina 4% 0.2% 0.4% Texas 22% Kentucky 8% Texas 19% Kentucky 8% Louisiana 5% Missouri 4% of NOI generated 7 from CON states 2 of Beds in 73% CON states 2 (1) Based on Annualized 1Q16 NOI pro-forma for a full quarter impact from acquisitions and dispositions. (2) National Conference of State Legislatures (NCSL). Includes namesake CON programs and variations thereof, including building moratoriums. 25

26 Growth Platform

27 We have the foresight, resources, and flexibility to grow internally and externally with a sharp focus on doing what s best for our operators and investors.

28 Driving Portfolio Growth Development & Redevelopment Active pipeline of over 19 approved projects aggregating ~$121.0 million at yields of 7% 9% Proactively working with existing operators to identify additional redevelopment opportunities Accretive investments improve portfolio, drive operator profitability, and extend lease terms 4 Categories Of Redevelopment Expansions Adding units and amenities to existing property, typically combined with an upgrade of existing building Conversions Converting units to serve a different market better (e.g., converting long-term care to transitional care / rehab) Repositioning Comprehensive renovation of most or all spaces in a property Replacement / New Development Creating new property from the ground up utilizing existing assets (e.g. licensed beds) A Variety Of Options That Create Value For CCP And Our Existing Customers Rent paid by customers earns CCP a spread on its cost of capital Projects typically provide double digit cashon-cash returns for customers, creating value for the operator Provides access to capital for customers to finance improvements Allows CCP to directly invest in and upgrade its portfolio while earning a return 28

29 Great Relationships Great Relationships Feed An Active Feed Acquisition An Pipeline Active Acquisition Pipeline Operator Evaluation Criteria Balance operator quality and rent/yield coverage criteria High quality of care / strong clinical track record Strong alignment with hospital systems and can prosper in the ACO/Bundled payment environment Well-positioned with Managed Care Organizations Solid partners that are transparent and proactive when facing issues Appropriate size and scale of company Regional or local market focus Closed $25m mezzanine loan with existing relationship Wingate in 2Q16 Mezzanine loan on four of seven assets sold as part of previously announced, fair-market value purchase options 10.0% interest only loan with a term of four years $800+ Million Pipeline SNF-focused investments with a mix of existing and new customers Selectively invest with quality operators at accretive yields States include OH, WI, MI, KY, CA, and AZ, among others 29

30 One of the most important strategic relationships that we have at Senior Care Centers is our partnership with CCP. Working with trusted partners such as CCP a firm not only solely focused on, and a real expert in, the post-acute space, but also one that aligns well with our values-driven business principles has allowed Senior Care Centers to experience a tremendous amount of growth in a very short period of time. Mark McKenzie, President, Senior Care Centers

31 Financial Profile

32 CCP is committed to growing cash flow, ensuring that we can increase our dividend; an important component in delivering longterm, consistent returns to shareholders while still maintaining liquidity to act swiftly when opportunities arise.

33 Q Financial Results Revenues & Expenses Q Total Revenue of $84.5m Q Adjusted Pro Forma EBITDA of $77.8m Interest Expense of $10.1m Leverage & Liquidity Net Debt to EBITDA of 4.9x (4.8x pro forma for Wingate disposition) $450m+ of available borrowing capacity under revolver as of March 31, 2016 FFO & Dividends Norm. FFO for Q was $66.6m or $0.80 per share Issued, and paid, Q dividend of $0.57 per share for annualized dividend of $2.28 per share Same-Store Q Cash NOI increased 2.6% over Q excluding previously announced tenant transition, decreased 1. including tenant transition 33

34 2016 Guidance Assumptions & Range Earnings Guidance 2016 Norm. FFO/Share range of $2.85 to $ NAREIT FFO/Share range of $2.80 to $ Norm. FAD/Share range of $2.74 to $2.84 Investments Identified investments and redevelopment of $51.0m at an average yield of 9.0% Dispositions $120.0m of identified dispositions at average yield of ~8.5% in first half of FY 2016 Capital Plan No additional equity raises planned for 2016 Refinancing of $1.2bn of debt (inclusive of already completed transactions) at average rate of 3.9% Portfolio Optimization Net effect from contractual escalations of positive $7.5m $10.0m negative impact from additional portfolio activities including potential transitions, lease modifications, and/or additional dispositions and $8.0m negative impact from identified tenant transition G&A Expenses Corporate G&A of $27.0m for

35 Appendix

36 Board Of Directors & Corporate Governance Board of Directors Name Position Experience Douglas Crocker II Chairman Managing Partner of DC Partners LLC Ronald G. Geary Director President of Res-Care, Inc. (formerly NASDAQ: RSCR) Raymond J. Lewis Director CEO of CCP; Former President of Ventas John S. Gates, Jr. Director CEO of PortaeCo, LLC, Co-founded CenterPoint Properties (formerly NYSE: CNT) Jeffrey A. Malehorn Director President and CEO of World Business Chicago; GE Capital Dale A. Reiss Director Managing Director of Artemis Advisors, LLC; STAR, TPC, CYS John L. Workman Director CEO of Omnicare (formerly NYSE: OCR) Committed to best practices in corporate governance No staggered board (directors elected annually) Board has extensive experience in healthcare, real estate, and finance; independent chairman with extensive REIT experience Fully independent Audit, Compensation, and Nominating Committees No shareholder rights plan 36

37 Reconciliation of Non-GAAP Financial Metrics 37

38 Reconciliation of Non-GAAP Financial Metrics (Cont d) 38

39 Reconciliation of Non-GAAP Financial Metrics (Cont d) NON-GAAP FINANCIAL MEASURES RECONCILIATION Net Debt to Adjusted Pro Forma EBITDA The following information considers the pro forma effect on net income of CCP s investments and dispositions that were completed during the three months ended March 31, 2016, as if the transactions had been consummated as of the beginning of the period. The following table illustrates net debt to pro forma earnings before interest, taxes, depreciation and amortization, impairment on real estate investments and associated goodwill, excluding stock-based compensation, merger-related expenses and deal costs, loss on real estate disposition, transition services fee expense and interest and other income ( Adjusted Pro Forma EBITDA ) (dollars in thousands): Net income $ 29,783 Pro forma adjustments for investments and dispositions 88 Pro forma net income $ 29,871 Add back: Interest 10,067 Income tax expense 421 Depreciation and amortization 28,641 Impairment on real estate investments and associated goodwill 5,499 Stock-based compensation 1,679 Merger-related expenses and deal costs 1,160 Loss on real estate dispositions 120 Transition services fee expense 602 Interest and other income (305) Adjusted Pro Forma EBITDA $ 77,755 Adjusted Pro Forma EBITDA annualized $ 311,020 As of March 31, 2016: Debt $ 1,530,112 Unamortized debt issuance costs 17,888 Cash (12,548) Net debt (adjusted for unamortized debt issuance costs) $ 1,535,452 Net debt to Adjusted Pro Forma EBITDA 4.9x 39

40