Case study
How SpreadSpace reads senior living filings
Senior living operators and the healthcare REITs that own their communities report resident fees, occupancy and net operating income in their own ways. This case study follows their 10-K and 10-Q filings through SpreadSpace, from the segment note to adjusted NOI, with every figure traced to its page.
Senior living is a small industry with a vocabulary of its own. A community reports resident fees rather than rent and occupancy rather than a leased percentage, and it measures itself by net operating income sorted by the kind of community it is. The operators who run the communities file one way, the real estate investment trusts that own the buildings file another, and a lender or an investor usually reads both.
SpreadSpace reads these filings as the companies print them. This case study follows a senior living 10-K and 10-Q through SpreadSpace, from the segment note to adjusted NOI, and ends with what the analyst still decides.
Two kinds of filer, one set of communities
A senior living community is run by an operator and often owned by someone else. The operator files as a company whose revenue is resident fees and services and whose largest cost is the expense of running the community. A healthcare real estate investment trust files as the owner, and its filing sorts the same communities by the structure it holds them under. In a senior housing operating portfolio the trust records the resident fees and the operating expenses through a manager. Under a triple-net lease it records rent and the operator carries the costs. Outpatient medical buildings and skilled nursing facilities sit in segments of their own.
Both kinds of filer measure a community by net operating income, and both define it themselves. The trust reports NOI by segment in its segment note and reconciles it to net income. The operator reconciles net income or net loss to community NOI in its management discussion. Same-store or same-community NOI, cash NOI and adjusted NOI print beside them under the company's own names, and funds from operations prints in the management discussion with its per-share rows.
The rest of the filing describes the communities. Occupancy and average revenue per unit print by property type. Properties print by state with their units and licensed beds. The debt note lays out each borrowing with its rate and its maturity. A trust that also lends to operators prints its mortgage notes by year of origination, and an operator that leases its communities prints its lease liabilities by year.
What the analyst finds on the spread
Upload the 10-K or the 10-Q and the statements land on the spread as the filing prints them, with the notes tables and the management discussion tables beside them. Each figure opens the filing at the line it came from, so a reviewer checks any number against the page without leaving the spread.
The segment note arrives with the segments the company reports, senior housing operating, triple-net and outpatient medical among them, and with the reconciliation from segment NOI to net income the company printed beneath it. An operator's reconciliation from net loss to community NOI arrives the same way.
Same-store and same-community NOI, cash NOI, adjusted NOI and EBITDAre appear under the names the company gave them. Funds from operations comes in from the management discussion, with Nareit FFO, normalized or adjusted FFO and funds available for distribution each on its own row and the per-share figures beside them.
| Table | What it holds |
|---|---|
| Segment NOI | Each segment, with the reconciliation to net income |
| Same-store and same-community NOI | The company's own series, under its own name |
| Funds from operations | Nareit FFO, normalized or adjusted FFO and funds available for distribution, with the per-share rows |
| Units and occupancy | Occupancy and average revenue per unit by property type |
| Properties by state | Property counts, units and licensed beds |
| Debt | Each borrowing with its rate and maturity, and the maturity schedule by year |
| Notes receivable | Mortgage and other notes by year of origination |
| Leases | An operator's lease liabilities by year |
Adjusted NOI, with each adjustment beside its line
A senior living company defines its own NOI, and the spread keeps the company's figure and the analyst's apart. The NOI the company reports stays the company's, as printed, with its reconciliation beside it.
Adjusted NOI is the analyst's. Add back or deduct what your firm's policy calls for, depreciation and amortization, interest expense and income taxes among the usual add-backs, and any line the statements print. The card shows each adjustment on its own row beside the line it came from, with adjusted NOI and its margin beneath, and every row opens the statement at its line.
Save the adjustments as your firm's policy and apply them to the next filing. Adjusted NOI carries into debt service coverage when the loan calls for it.
Periods and peers line up
A 10-Q prints the quarter beside the same quarter of the prior year and the year to date beside its comparative, and the spread keeps those columns as the filing states them. Upload each quarter as it arrives and the 10-K when the year closes, and the statements and the notes tables line up period by period with their pages behind them.
Map the statements to your firm's chart of accounts and every operator and trust under review reads in the same presentation, with the reported lines a click away. Line up the peers your team follows and read each company's NOI, occupancy and FFO by the name its own filing uses. Chart them, and every bar and point opens the figure behind it.
What the analyst still decides
SpreadSpace reads the filing. The analyst decides what to make of it. Whether the memo rests on the NOI the company reports or on the adjusted NOI the analyst built is a judgment the spread keeps in view, since both stand on the card with their sources. Which adjustments belong in your firm's policy and which belong to one loan are yours to settle.
The same holds for the company's own measures. A same-store pool is the company's definition of same-store, and the spread presents it under that name rather than restating it. A reviewer who asks where any figure came from opens the filing at that line.
Bring a senior living filer your team covers
Upload the latest 10-K and 10-Q of an operator or a healthcare trust your team analyzes. Follow segment NOI from the note into adjusted NOI, open the occupancy table at its page, and see whether a second reviewer can do the same. To walk through a filing with the SpreadSpace team, talk to us.