Invesque Inc. Reports First Quarter 2020 Results and Announces Transition of Majority of its Royal Portfolio to Phoenix Senior Living

TORONTO, May 13, 2020 /CNW/ - Invesque Inc. (TSX: IVQ.U and IVQ) (the "Company" or "Invesque") today announced its results for the three months ended March 31, 2020. The Company also announced the transition of a majority of the Company's communities previously operated by affiliates of Royal Senior Living ("Royal") to Phoenix Senior Living ("Phoenix"), as well as the sale of two assets in the Royal portfolio (together the "Transition").

Royal Transition to Phoenix

Invesque and Royal's relationship consisted of two portfolios where the Company was the majority owner:

• 80%/20% joint venture ("JV") on five communities consisting of four properties in South Carolina and one property in Florida (together the "Royal JV Portfolio")
• 65%/35% JV on a single asset in Eatonton, Georgia (the "Eatonton Community")

The Company and Phoenix acquired 100% of Royal's interests in the four properties located in South Carolina.  The Company and Royal sold the Hudson Manor property located in Tampa, FL, which was part of the Royal JV Portfolio, to a third party. Finally, Royal acquired the Company's 65% interest in the Eatonton Community, thereby concluding Invesque's relationship with Royal.

Phoenix is one of the fastest growing seniors housing operators in the industry and has found success in the Southeast region through a diversified portfolio in secondary and tertiary markets. Phoenix now operates 45 seniors housing communities in Georgia (19), South Carolina (13), Virginia (4), Alabama (4), Florida (2), Louisiana (2) and North Carolina (1).

The Company's relationship with Phoenix prior to the Transition consisted of two separate portfolios in Georgia, which included Hope Center Memory Care (90%/10% JV with the Company as the majority partner) and Phoenix at Albany (triple-net lease structure).

The four assets in South Carolina that were transferred to Phoenix as part of the Transition are located within Phoenix's geographical footprint, which creates synergies that are expected to enhance the performance of the Company's existing portfolio. The Company also converted the triple-net lease underlying the Phoenix at Albany asset into an operating investment via a JV structure. Phoenix acquired a 10% equity stake in the four South Carolina assets and Phoenix at Albany.  The Company now has all six properties operated by Phoenix consolidated in a 90%/10% JV structure on both the property and operations with Invesque as the majority owner.

"The transition of the South Carolina properties previously operated by Royal to Phoenix further highlights our commitment to optimize our portfolio performance with our strategic operating partners," stated Adlai Chester, Chief Investment Officer for the Company. "The transition expands Phoenix's operating footprint in South Carolina to 13 communities under management and positions them as one of the largest providers in the state. We expect the South Carolina communities to capitalize on efficiencies from other Phoenix-operated assets by leveraging referral sources, marketing strategies and staff."

First Quarter and Subsequent Highlights

• Announced a series of initiatives to preserve cash and strengthen the balance sheet.
  
  
• Suspension of the dividend for all common shareholders beginning April 1, 2020 until further notice, which will result in ~US$41 million of gross cash preservation on an annual basis.
  
  
• Corporate level cost reductions including executive compensation changes, personnel cost reductions and other G&A savings which will result in ~US$2.5 – US$3.0 million of reduced costs in fiscal year 2020.
  
  
• Deferral of non-essential capital expenditures which the Company believes will result in an additional ~US$2.5 – US$3.0 million of cash savings in fiscal year 2020.
  
  
• Named one of the 2020 Best Places to Work in Indiana by the Indiana Chamber of Commerce and Best Companies Group.
  
  
• Reported funds from operations ("FFO") of US$0.25 per common share for the three months ending March 31, 2020. The Company reported adjusted funds from operations ("AFFO") of US$0.21 per common share for the three months ending March 31, 2020.

"While I am extremely pleased with our strong first quarter results, right now we are focused on the health and safety of our residents and caregivers. We are also focused on cash preservation as we continue to navigate through truly unprecedented times. The environment is challenging for operators and we believe expenses and occupancy levels will be impacted temporarily by COVID-19. With that said, our resident and operator credit quality remain strong with April rental revenue collections of approximately 88% across our portfolio," commented Scott White, Chairman & Chief Executive Officer for the Company. "With the proactive initiatives we took, we are confident we have the appropriate balance sheet strength and liquidity to meet our obligations and support our operators should the need arise."

Financial Highlights

	Three months ended March 31,
(in thousands of U.S dollars, except per share values)	2020		2019
Revenue	$	53,891	$	29,224
Net income (loss)	$	(56,931)	$	7,205
Funds from operations ("FFO") ^(1)	$	14,007	$	12,623
Funds from operations per share	$	0.25	$	0.24
Adjusted funds from operations ("AFFO") ^(1)	$	11,317	$	10,976
Adjusted funds from operations per share	$	0.21	$	0.21

_{(1) FFO and AFFO are measures used by management to evaluate operating performance.  Please refer to the section "Non-IFRS Measures" in this press release for more information.}

Balance Sheet and Portfolio Highlights

(in thousands of U.S. dollars, except number of properties)	March 31, 2020		December 31, 2019
Total assets	$	1,567,425	$	1,630,738
Number of properties	123		124
Debt	$	1,006,181	$	1,013,475

Business Update

Since the Company's last disclosure to its investors on April 10, 2020, members of Invesque's management team have remained in close contact with the Company's operating partners to understand the current and prospective impact of COVID-19 to Invesque's properties. As of May 8, 2020, the Company has confirmed that 40 of its 108 seniors housing and skilled nursing properties have been directly impacted by COVID-19 based on positive test results for either residents or staff members. The degree to which COVID-19 has impacted each affected facility ranges widely, including five communities which have only seen employees test positive for COVID-19. Of the 40 impacted communities, 26 are subject to NNN lease agreements. Also, as of May 8, 2020, there were 560 total patients or residents with COVID-19 being treated and quarantined in Invesque communities. Only one of the Company's communities operated by Commonwealth Senior Living has observed a resident testing positive for COVID-19, and there are no currently active cases among Commonwealth's residents.

"The global COVID-19 pandemic has created a challenging operating environment for our partners," commented Scott White, Chairman & Chief Executive Officer for the Company. "Our operating partners have had to adapt to constantly changing protocols around personal protective equipment, resident admission, and family communication and visitation. The Invesque team's primary focus continues to be strategizing with our operators, sharing best practices, and helping gain access to resources where possible. We are proud to support our operating partners through these unprecedented challenges."

Investor Conference Call

A conference call hosted by the Company's senior management team will be held May 14, 2020 at 10:00 AM ET. The telephone numbers for the conference call are: Local: [phone] or Toll Free: [phone]. The passcode for the conference call is: 8798197. The conference will also be available via webcast at https://www.invesque.com/company-presentations/. Please log on at least 15 minutes before the call commences. The telephone numbers to listen to the call after it is completed (taped replay) are: Local: [phone] or Toll Free: [phone]. The Passcode for the taped replay is 8798197.

About Invesque

Invesque is a North American health care real estate company with an investment thesis focused on the premise that an aging demographic in North America will continue to utilize health care services in growing proportion to the overall economy. Invesque currently capitalizes on this opportunity by investing in a highly diversified portfolio of income generating properties across the health care spectrum.  Invesque's portfolio includes investments in independent living, assisted living, memory care, skilled nursing, transitional care and medical office properties, which are operated primarily under long-term leases and joint venture arrangements with industry leading operating partners. Invesque's portfolio also includes investments in owner-occupied seniors housing properties in which Invesque owns the real estate and provides management services through its subsidiary management company, Commonwealth Senior Living. For more information, please visit www.invesque.com.

Forward-Looking Information

This press release contains forward-looking information that reflects the current expectations of management about the future results and opportunities for the Company, including without limitation information with respect to expected synergies and efficiencies for four communities located in South Carolina resulting from the Transition. Forward-looking statements generally can be identified by words such as "outlook", "objective", "may", "will", "expect", "intend", "estimate", "anticipate", "believe", "should", "plans", "project", or "continue" or similar expressions suggesting future outcomes or events. By their nature, forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond the Company's control, including without limitation the risk that the Transition and, in particular, the transition of properties to Phoenix from Royal are not effected as currently expected. Although the Company believes that the expectations in its forward-looking statements are reasonable, its forward-looking statements have been based on factors and assumptions concerning future events which may prove to be inaccurate. Those factors and assumptions are based upon currently available information, including the assumption that the assets subject to the Transition will be transitioned to Phoenix as currently expected and that synergies will be realized as a result of the Transition as a result of Phoenix's operating footprint in South Carolina. Such statements are subject to known and unknown risks, uncertainties and other factors that could influence actual results or events and cause actual results or events to differ materially from those stated, anticipated or implied in the forward-looking statements. Accordingly, readers are cautioned not to place undue reliance on the forward-looking statements. Additional risks, uncertainties, material assumptions and other factors that could affect actual results are discussed in the Company's public disclosure documents available at www.sedar.com, including in the risk factors described in the Company's current annual information form. In addition, the Company is subject to the risk and uncertainties related to the COVID-19 pandemic. In particular, a novel strain of coronavirus causing the disease known as COVID-19 has spread throughout the world, including across the United States and Canada, causing the World Health Organization to declare the COVID-19 outbreak a pandemic in March 2020. In an attempt to contain the spread and impact of the pandemic, authorities throughout the United States and Canada have implemented measures such as travel bans and restrictions, stay-at-home orders, social distancing guidelines and limitations on other business activity. The pandemic has resulted in a significant economic downturn in the United States, Canada and globally, and has also led to disruptions and volatility in capital markets. The Company is not able to fully quantify the impact that the COVID-19 pandemic will have on the Company's financial results during 2020, but expect that the pandemic could have a material adverse effect on its results of operations, financial position and/or cash flows, particularly if negative economic and public health conditions in the United States and Canada persist for a significant period of time. The ultimate impact of the pandemic on the Company's financial results will depend on, among other factors, the duration and severity of the pandemic as well as negative economic conditions arising therefrom, the impact of the pandemic on occupancy rates in our communities, the volume of COVID-19 patients cared for across our portfolio, and the impact of government actions on the seniors housing industry and broader economy, including through existing and future stimulus efforts. The forward-looking statements contained in this document are expressly qualified by this cautionary statement.

Non-IFRS Measures

The Company reports its financial results in accordance with International Financial Reporting Standard ("IFRS"). Included in this news release are certain non-IFRS financial measures as supplemental indicators used by management to track the Company's performance. These non-IFRS measures are NOI, FFO and AFFO. The Company believes that these non-IFRS financial measures provide useful information to both management and investors in measuring the financial performance and financial condition of the Company. These measures do not have a standardized meaning prescribed by IFRS and, therefore, may not be comparable to similar measures presented by other companies, nor should they be construed as an alternative to other financial measures determined in accordance with IFRS. For a full definition of these measures and a reconciliation to net profit for the three months ended March 31, 2020, please refer to the Financial Measures section of the March 31, 2020 MD&A available on the Company's website and on SEDAR at www.sedar.com.

SOURCE Invesque Inc.

1-317-643-4017, [email protected]

Related Links

http://invesque.com/