Senior Housing Properties Trust (NYSE: SNH) today announced its
financial results for the quarter and nine months ended September
30, 2008, as follows: Results for the quarter ended September 30,
2008: Net income was $29.1 million, or $0.25 per share, for the
quarter ended September 30, 2008, compared to net income of $20.6
million, or $0.25 per share, for the quarter ended September 30,
2007. Net income for the quarter ended September 30, 2008, includes
a gain of $266,000, or less than $0.01 per share, relating to the
sale of three assisted living properties. Funds from operations
(FFO) for the quarter ended September 30, 2008 were $47.0 million,
or $0.41 per share. This compares to FFO for the quarter ended
September 30, 2007 of $34.1 million, or $0.41 per share. The
weighted average number of common shares outstanding totaled 114.5
million and 83.7 million for the quarters ended September 30, 2008
and 2007, respectively. Results for the nine months ended September
30, 2008: Net income for the nine months ended September 30, 2008
was $74.1 million, or $0.73 per share, compared to net income of
$58.8 million, or $0.71 per share, for the nine months ended
September 30, 2007. Net income for the nine months ended September
30, 2008 includes an impairment of assets charge of $2.9 million,
or $0.03 per share, related to one property that we intend to sell.
Net income for this period also includes a gain of $266,000, or
less than $0.01 per share, relating to the sale of three assisted
living properties. Net income for the nine months ended September
30, 2007 includes a loss of $2.0 million, or $0.02 per share,
related to the early retirement of $20.0 million of 8 5/8% senior
notes due 2012. FFO for the nine months ended September 30, 2008,
was $126.6 million, or $1.24 per share. This compares to FFO for
the nine months ended September 30, 2007 of $99.1 million, or $1.20
per share. FFO for the nine months ended September 30, 2008
includes an impairment of assets charge of $2.9 million, or $0.03
per share, related to one property that we intend to sell. FFO for
the nine months ended September 30, 2007 includes a loss of $1.8
million, or $0.02 per share, related to the early retirement of the
senior notes due 2012 described above. The weighted average number
of common shares outstanding totaled 102.0 million and 82.7 million
for the nine months ended September 30, 2008 and 2007,
respectively. A reconciliation of FFO to net income determined
according to U.S. generally accepted accounting principles, or
GAAP, is set forth below. Investing Activities and Subsequent
Events: In May 2008, we entered into a series of agreements to
acquire 48 medical office, clinic and biotech laboratory buildings
from HRPT Properties Trust for an aggregate purchase price of
approximately $565.0 million. As of today, we have acquired 29 of
these buildings and expect the closings of the remaining 19
acquisitions to occur during the next two quarters. In June 2008,
we acquired five of these medical office, clinic and biotech
laboratory buildings for approximately $83.8 million, excluding
closing costs. In July 2008, we acquired three additional medical
office and clinic properties for approximately $39.1 million,
excluding closing costs. In August 2008, we acquired 20 additional
clinics for approximately $109.9 million, excluding closing costs.
On October 31, 2008, we acquired one additional medical office
building for approximately $29.8 million, excluding closing costs.
We funded these acquisitions using cash on hand, borrowings under
our revolving credit facility and by assuming three mortgage loans
on two properties totaling $10.8 million with a weighted average
interest rate of 7.1% per annum and weighted average maturity in
2018. On June 30, 2008, we realigned three of our leases with Five
Star Quality Care, Inc., or Five Star. Lease no. 1 now includes 100
properties, including nine properties acquired during the first
quarter of 2008. This lease includes independent living
communities, assisted living communities and skilled nursing
facilities, and expires in 2022. Lease no. 2 now includes 32
properties, including independent living communities, assisted
living communities, skilled nursing facilities and two
rehabilitation hospitals, and expires in 2026. Lease no. 3 now
includes 44 properties, including 10 properties acquired during the
first quarter of 2008 and 10 properties acquired during the third
quarter of 2008 and one property acquired on November 1, 2008
described below. This lease includes independent living
communities, assisted living communities and skilled nursing
facilities and expires in 2024. The total rent payable by Five Star
to us for these properties was unchanged as a result of this lease
realignment. The increased rent payable for these three leases with
Five Star, if and as we purchase improvements to the leased
properties, will be the greater of 8.0% per annum or the 10 year
Treasury rate plus 300 basis points. On July 1, 2008, we sold three
assisted living properties with 259 living units that were formerly
operated by NewSeasons Assisted Living Communities, Inc., or
NewSeasons, to Five Star for $21.4 million and Five Star assumed
the NewSeasons and Independence Blue Cross, or IBC, lease
obligations to us for the remaining seven properties that
NewSeasons formerly operated. The rent payable by Five Star for
these seven properties is approximately $7.6 million per annum
under lease no. 4 between us and Five Star. On August 1, 2008, we
acquired, from an unaffiliated party, two senior living properties
with a total of 112 units for approximately $14.1 million,
excluding closing costs. We leased the properties to Five Star
until 2024 under our Five Star lease no. 3 described above and
increased rent under that lease by $1.1 million. Percentage rent,
based on increases in gross revenues at these properties, will
commence in 2010. We funded this acquisition using cash on hand. On
August 21, 2008, we acquired four wellness centers for
approximately $100 million, excluding closing costs, from an
unaffiliated party. We leased these wellness centers to Life Time
Fitness, Inc., for initial rent of $9.1 million, plus rent
increases of 10% every five years. This lease has a term expiring
in 2028 with renewal options thereafter. We funded this acquisition
using cash on hand and borrowings under our revolving credit
facility. On September 1, 2008, we acquired, from an unaffiliated
party, eight senior living properties with a total of 451 units for
approximately $62.1 million, excluding closing costs. We leased the
properties to Five Star until 2024 under our Five Star lease no. 3
described above and increased rent under that lease by $5.0
million. Percentage rent, based on increases in gross revenues at
these properties, will commence in 2010. We funded this acquisition
using cash on hand, borrowings under our revolving credit facility
and by assuming 15 mortgages on these eight properties totaling
$50.5 million with a weighted average interest rate of 6.54% per
annum and weighted average maturity in 2017. On September 30, 2008,
we acquired, from an unaffiliated party, one medical office
building for approximately $18.6 million, excluding closing costs.
This building is currently 100% leased to 12 tenants for an average
lease term of 6.5 years. We funded this acquisition using cash on
hand and borrowings under our revolving credit facility. On
September 15, 2008, we entered into a purchase and sale agreement
to sell one of our properties, classified as held for sale, to an
unaffiliated party for approximately $1.3 million. The sale of this
property is subject to customary contingencies. We can provide no
assurance that we will sell this property. On November 1, 2008, we
acquired, from an unaffiliated party, a senior living property with
a total of 249 units for approximately $29.0 million. We leased
this property to Five Star and added it to our Five Star lease no.
3 described above, which has a term expiring in 2024, and increased
the annual rent under this lease by $2.3 million. Percentage rent,
based on increases in gross revenues at this property, will
commence in 2010. We funded this acquisition using cash on hand and
borrowings under our revolving credit facility. Conference Call: On
Thursday, November 6, 2008, at 1:00 p.m. Eastern Time, David J.
Hegarty, President and Chief Operating Officer, and Richard A.
Doyle, Treasurer and Chief Financial Officer, will host a
conference call to discuss the results for the third quarter ended
September 30, 2008. The conference call telephone number is
888-218-8176. Participants calling from outside the United States
and Canada should dial 913-312-6681. No pass code is necessary to
access the call from either number. Participants should dial in
about 15 minutes prior to the scheduled start of the call. A replay
of the conference call will be available through 4:00 p.m. Eastern
Time, Thursday, November 13, 2008. To hear the replay, dial
719-457-0820. The replay pass code is 1834954. A live audio web
cast of the conference call will also be available in listen only
mode on the SNH web site. Participants wanting to access the
webcast should visit the web site about five minutes before the
call. The archived webcast will be available for replay on the SNH
web site for about one week after the call. Supplemental Data: A
copy of SNH�s Third Quarter 2008 Supplemental Operating and
Financial Data is available for download from the SNH website,
www.snhreit.com. Senior Housing Properties Trust is a real estate
investment trust, or REIT, that owns 263 properties located in 34
states. SNH is headquartered in Newton, Massachusetts. Senior
Housing Properties Trust Financial Information (in thousands,
except per share data) � Income Statement: Quarter Ended September
30, Nine Months Ended September 30, 2008 � 2007 2008 � 2007
Revenues: Rental income $58,897 $44,653 $160,560 $133,361 Interest
and other income 776 571 2,056 1,577 Total revenues 59,673 45,224
162,616 134,938 Expenses: Property operating expenses 1,024 - 1,124
- Interest 9,606 9,223 28,934 28,276 Depreciation 15,859 11,821
43,235 35,120 General and administrative 4,303 3,567 12,506 10,732
Impairment of assets (1) - - 2,940 - Loss on early extinguishment
of debt(2) - - - 2,026 Total expenses 30,792 24,611 88,739 76,154 �
Income before gain on sale of properties 28,881 20,613 73,877
58,784 Gain on sale of properties 266 - 266 - Net income $29,147
$20,613 $74,143 $58,784 � Weighted average shares outstanding
114,492 83,659 102,004 82,718 Per share data: Income before gain on
sale of properties $0.25 $0.25 $0.72 $0.71 Net income $0.25 $0.25
$0.73 $0.71 Balance Sheet: � At September 30, 2008 At December 31,
2007 Assets Real estate properties $2,645,268 $1,940,347 Less
accumulated depreciation 364,366 323,891 2,280,902 1,616,456 Cash
and cash equivalents 7,191 43,521 Restricted cash 4,443 3,642
Deferred financing fees, net 5,098 5,974 Acquired real estate
leases, net 23,691 2,387 Other assets 27,717 29,914 Total assets
$2,349,042 $1,701,894 Liabilities and Shareholders� Equity �
Unsecured revolving credit facility $93,000 $ - Senior unsecured
notes, net of discount 321,981 321,873 Secured debt and capital
leases 152,112 104,979 Total debt 567,093 426,852 Acquired real
estate lease obligations, net 7,075 4,216 Other liabilities 32,254
21,416 Total liabilities 606,422 452,484 Shareholders� equity
1,742,620 1,249,410 Total liabilities and shareholders� equity
$2,349,042 $1,701,894 (1) During the nine months ended September
30, 2008, we recognized an impairment of assets charge of $2.9
million related to one property that we intend to sell. (2) In
January 2007, we purchased and retired $20.0 million of our 8 5/8%
senior notes due 2012, and we paid a premium of $1.8 million and
wrote off $276,000 of deferred financing fees and unamortized
discount related to these senior notes. Senior Housing Properties
Trust Funds from Operations (in thousands, except per share data) �
Calculation of Funds from Operations (FFO) (1): Quarter Ended
September 30, Nine Months Ended September 30, 2008 � 2007 2008 �
2007 Income before gain on sale of properties $28,881 $20,613
$73,877 $58,784 Add: Depreciation expense 15,859 11,821 43,235
35,120 Impairment of assets (2) - - 2,940 - Loss on early
extinguishment of debt - - - 2,026 Deferred percentage rent (3)
2,300 1,700 6,550 4,961 Less: Loss on early extinguishment of debt
settled in cash (4) - - - (1,750) FFO $47,040 $34,134 $126,602
$99,141 � Weighted average shares outstanding 114,492 83,659
102,004 82,718 � FFO per share $0.41 $0.41 $1.24 $1.20
Distributions declared $0.35 $0.35 $1.05 $1.03 (1) We compute FFO
as shown in the calculation above. This calculation begins with
income before gain on sale of properties or, if that amount is the
same as net income, with net income, which we believe is the
closest U.S. generally accepted accounting principles, or GAAP,
measure of our performance. Our calculation of FFO differs from the
National Association of Real Estate Investment Trusts, or NAREIT,
definition of FFO because we include deferred percentage rent in
FFO as discussed in Note (3) below, and we exclude loss on early
extinguishment of debt not settled in cash from FFO. We consider
FFO to be an appropriate measure of performance for a real estate
investment trust, or REIT, along with net income and cash flow from
operating, investing and financing activities. We believe that FFO
provides useful information to investors because by excluding the
effects of certain historical costs, such as depreciation expense
and gain or loss on sale of properties, FFO can facilitate a
comparison of our current operating performance with our past
operating performance and of operating performances among REITs.
FFO does not represent cash generated by operating activities in
accordance with GAAP and should not be considered an alternative to
net income or cash flow from operating activities as a measure of
financial performance or liquidity. FFO is one important factor
considered by our board of trustees in determining the amount of
our distributions to shareholders. Other important factors include,
but are not limited to, requirements to maintain our status as a
REIT, limitations in our revolving credit facility and public debt
covenants, the availability of debt and equity capital to us and
our expectation of our future performance. (2) During the nine
months ended September 30, 2008, we recognized an impairment of
assets charge of $2.9 million related to one property that we
intend to sell. (3) Our percentage rents are generally calculated
on an annual basis. We recognize percentage rental income received
during the first, second and third quarters in the fourth quarter
when all contingencies related to percentage rents are satisfied.
Although recognition of revenue is deferred until the fourth
quarter, our FFO calculation for the first three quarters includes
estimated amounts of deferred percentage rents with respect to
those periods. The fourth quarter calculation of FFO excludes the
amounts recognized during the first three quarters. (4) FFO for the
nine months ended September 30, 2007 includes a $1.8 million loss
for the cash premium paid relating to our early retirement of $20.0
million of our 8 5/8% senior notes due 2012. WARNING CONCERNING
FORWARD LOOKING STATEMENTS THIS PRESS RELEASE CONTAINS FORWARD
LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995 AND OTHER FEDERAL SECURITIES LAWS.
ALSO, WHENEVER WE USE WORDS SUCH AS �BELIEVE�, �EXPECT�,
�ANTICIPATE�, �INTEND�, �PLAN�, �ESTIMATE� OR SIMILAR EXPRESSIONS,
WE ARE MAKING FORWARD LOOKING STATEMENTS. THESE FORWARD LOOKING
STATEMENTS ARE BASED UPON OUR PRESENT INTENT, BELIEFS OR
EXPECTATIONS, BUT FORWARD LOOKING STATEMENTS ARE NOT GUARANTEED TO
OCCUR AND MAY NOT OCCUR. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM
THOSE CONTAINED IN OR IMPLIED BY OUR FORWARD LOOKING STATEMENTS AS
A RESULT OF VARIOUS FACTORS. FOR EXAMPLE: THIS PRESS RELEASE STATES
THAT WE HAVE AGREED TO PURCHASE MEDICAL OFFICE, CLINIC AND BIOTECH
LABORATORY BUILDINGS. OUR OBLIGATIONS TO COMPLETE THE CURRENTLY
PENDING PURCHASES IS SUBJECT TO VARIOUS CONDITIONS TYPICAL OF LARGE
COMMERCIAL REAL ESTATE PURCHASES, INCLUDING, WITH RESPECT TO
CERTAIN PROPERTIES, OBTAINING THIRD PARTY CONSENTS. ALSO, WE HAVE
FINANCING CONTINGENCIES RELATING TO CERTAIN PROPERTIES. AS A RESULT
OF ANY FAILURE OF THESE CONDITIONS, SOME OF THE PROPERTIES MAY NOT
BE PURCHASED, THE PURCHASE PRICES PAYABLE BY US MAY BE CHANGED OR
SOME OF THESE PURCHASES MAY BE ACCELERATED OR DELAYED. THIS PRESS
RELEASE STATES THAT WE HAVE ENTERED INTO A PURCHASE AND SALE
AGREEMENT FOR ONE PROPERTTY THAT IS CLASSIFIED AS HELD FOR SALE ON
OUR CONSOLIDATED BALANCE SHEET. WE MAY NOT PROCEED WITH THIS SALE
DUE TO MARKET CONDITIONS, FAILURE TO SATISFY CONTINGENCIES OR OTHER
REASONS. AS A RESULT, THIS PROPOSED SALE MAY NOT OCCUR. OTHER
IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THOSE IN OUR FORWARD LOOKING STATEMENTS ARE
DESCRIBED MORE FULLY UNDER �ITEM 1A. RISK FACTORS� IN OUR ANNUAL
REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2007. YOU
SHOULD NOT PLACE UNDUE RELIANCE UPON FORWARD LOOKING STATEMENTS.
EXCEPT AS MAY BE REQUIRED BY APPLICABLE LAW, WE UNDERTAKE NO
OBLIGATION TO UPDATE OR REVISE ANY FORWARD LOOKING STATEMENTS AS A
RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE. A Maryland
Real Estate Investment Trust with transferable shares of beneficial
interest listed on the New York Stock Exchange. No shareholder,
Trustee or officer is personally liable for any act or obligation
of the Trust.
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