Chiron Swings to Profit as Property Sales Lift Results
Second-quarter revenue rose 4.7% to $39.7 million as senior housing entered the mix.
Chiron Real Estate (XRN), the healthcare-property owner, swung to a second-quarter profit as a major asset sale lifted net income, while underlying earnings declined. Net income attributable to common stockholders was $63.3 million, or $4.78 a share, compared with a loss of $0.8 million, or $0.06 a share, a year earlier. The latest period included a $71.9 million gain on property sales, up from $0.2 million.
The quarter marked an acceleration in Chiron’s portfolio repositioning, with the company entering senior housing and reducing consolidated ownership of inpatient-rehabilitation properties. Revenue increased 4.4% sequentially from an implied $38.1 million in the first quarter.
Underlying earnings moved lower for a second consecutive comparison. Funds from operations fell to $12.7 million, or $0.88 a share and unit, from $14.3 million, or $0.98, a year earlier and an implied $14.1 million in the first quarter. Core FFO declined to $15.1 million, or $1.04, from $16.6 million, or $1.14, a year earlier.
The revenue mix shifted toward senior housing after Chiron acquired The Landing and The Riviera for $249 million. The 292-home portfolio contributed $1.8 million of resident fees and services, while rental revenue declined 2.2% to $37.1 million. Chiron expected the properties to produce a stabilized yield on cost above 7% and a double-digit unlevered internal rate of return.
Higher costs absorbed much of the revenue growth. Operating expenses increased 22.1% to $10.0 million, leaving net operating income essentially flat at $29.8 million and reducing NOI to about 75.0% of revenue from 78.6%. Adjusted EBITDAre held near $26.1 million, while its margin narrowed to about 65.7% from 68.6%.
Chiron also sold seven inpatient-rehabilitation facilities for $217 million at a 7.3% exit cash capitalization rate, retaining a 15% joint-venture interest. The transaction helped reduce leverage to 39.9% of gross assets at June 30 from 44.7% at March 31. Consolidated debt stood at $633.1 million, and the company had $245.5 million of credit-facility capacity as of Aug. 4.
Leasing at the new senior-housing properties continued after quarter-end. Occupancy at The Landing rose to 96% at July 31 from 93% at June 30, while The Riviera increased to 26% from 23%. The gains left Chiron’s next phase dependent on converting that occupancy growth into stronger property-level earnings.