Senior Housing Properties Trust (NYSE: SNH) today announced its
financial results for the quarter and year ended December 31, 2008,
as follows:
Results for the quarter ended December 31, 2008:
Net income was $32.4 million, or $0.28 per share, for the
quarter ended December 31, 2008, compared to net income of $26.5
million, or $0.31 per share, for the quarter ended December 31,
2007. Net income for the quarter ended December 31, 2008, includes
an impairment of assets charge of $5.4 million, or $0.05 per share,
related to three properties. Net income for the quarter ended
December 31, 2007, includes an impairment of assets charge of $1.4
million, or $0.02 per share, related to one property.
Funds from operations (FFO) for the quarter ended December 31,
2008 was $48.9 million, or $0.43 per share. This compares to FFO
for the quarter ended December 31, 2007 of $35.2 million, or $0.42
per share. FFO for the quarters ended December 31, 2008 and 2007
adds back an impairment of assets charges of $5.4 million and $1.4
million, respectively, as described above.
The weighted average number of common shares outstanding totaled
114.5 million and 84.5 million for the quarters ended December 31,
2008 and 2007, respectively. The increase in common shares is a
result of public offerings in February and June 2008 of 6.2 million
and 19.6 million common shares, respectively.
Results for the year ended December 31, 2008:
Net income for the year ended December 31, 2008 was $106.5
million, or $1.01 per share, compared to net income of $85.3
million, or $1.03 per share, for the year ended December 31, 2007.
Net income for the year ended December 31, 2008 includes an
impairment of assets charge of $8.4 million, or $0.08 per share,
related to four properties. 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
year ended December 31, 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. Net income in 2007 also includes
an impairment of assets charge of $1.4 million, or $0.02 per share,
related to one property.
FFO for the year ended December 31, 2008, was $175.5 million, or
$1.67 per share. This compares to FFO for the year ended December
31, 2007 of $134.4 million, or $1.62 per share. FFO for the years
ended December 31, 2008 and 2007 adds back an impairment of assets
charge of $8.4 million and $1.4 million, respectively, as described
above. FFO for the year ended December 31, 2007 also 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
105.2 million and 83.2 million for the years ended December 31,
2008 and 2007, respectively. The increase in common shares is a
result of public offerings in February and June 2008 of 6.2 million
and 19.6 million common shares, respectively.
A reconciliation of income before gain on sale of properties
determined according to U.S. generally accepted accounting
principles, or GAAP, to FFO follows later in this press
release.
Investing Activities and Subsequent Events:
During 2008, we acquired 30 senior living properties with a
total of 2,507 units for approximately $379.3 million, including
closing costs, from eight unaffiliated parties. We leased these
properties to Five Star Quality Care Inc., or Five Star, for
initial rent of $30.3 million. Percentage rent, based on increases
in gross revenues at these properties, will commence in 2010. We
funded these acquisitions using cash on hand, proceeds from equity
issuances, borrowings under our revolving credit facility and by
assuming 15 mortgage loans maturing in 2017 on eight of these
properties for $50.5 million with a weighted average interest rate
of 6.5% per annum.
In May 2008, we entered into a series of agreements to acquire
48 medical office, clinic and biotech laboratory buildings from
HRPT Properties Trust, or HRP, an affiliate, for an aggregate
purchase price of approximately $565 million. During 2008, we
acquired 37 of these medical office, clinic and biotech laboratory
buildings for approximately $346.8 million, excluding closing
costs. In January 2009, we acquired one additional clinic for
approximately $19.3 million, excluding closing costs. We funded
these acquisitions using cash on hand, proceeds from equity
issuances, borrowings under our revolving credit facility and by
assuming three mortgage loans, totaling $10.8 million with a
weighted average interest rate of 7.1% per annum and a weighted
average maturity in 2018, on two properties. The remaining 10
acquisitions are scheduled to close in 2010, but we and HRP may
mutually agree to accelerate the closings of these
acquisitions.
In June 2008, we realigned three of our leases with 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. 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, but may not exceed 11.5%.
In July 2008, we sold three assisted living properties with 259
living units, which were formerly operated by NewSeasons Assisted
Living Communities, Inc., or NewSeasons, to Five Star for $21.4
million. Five Star also assumed the NewSeasons and Independence
Blue Cross lease obligations to us for the remaining seven
properties that were formerly operated by NewSeasons. 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.
In August 2008, we acquired four wellness centers for
approximately $100 million, excluding closing costs, from an
unaffiliated party. We leased these wellness centers to a
subsidiary of Life Time Fitness, Inc., for initial rent of $9.1
million, plus rent increases of 10% every five years. This lease
has a current term expiring in 2028, plus renewal options. We
funded this acquisition using cash on hand and borrowings under our
revolving credit facility.
In September 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 6.3 years. We funded this acquisition
using cash on hand and borrowings under our revolving credit
facility.
In February 2009, we issued 5.9 million common shares in a
public offering, raising net proceeds of approximately $96.8
million. We used the net proceeds from this offering to repay
borrowings outstanding on our revolving credit facility and for
general business purposes.
Conference Call:
On Friday, February 27, 2009, at 10:00 a.m. Eastern Time, David
J. Hegarty, President and Chief Operating Officer, and Richard A.
Doyle, Chief Financial Officer, will host a conference call to
discuss the results for the fourth quarter and year ended December
31, 2008. The conference call telephone number is 800-273-4998.
Participants calling from outside the United States and Canada
should dial 913-981-5583. 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 1:00 p.m. Eastern Time,
Friday, March 6, 2009. To hear the replay, dial 719-457-0820. The
replay pass code is 2442261.
A live audio web cast of the conference call will also be
available in listen only mode on the SNH website. Participants
wanting to access the webcast should visit the website about five
minutes before the call. The archived webcast will be available for
replay on the SNH website for about one week after the call.
Supplemental Data:
A copy of SNH�s Fourth 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 272 properties located in 34 states and
Washington, D.C. SNH is headquartered in Newton, Massachusetts.
Senior Housing Properties
Trust
Financial Information
(in thousands, except per share
data)
�
Income Statement:
Quarter Ended December 31, Year Ended December
31, 2008 �
2007 2008
�
2007 Revenues: Rental income $72,619 $52,591
$233,210 $185,952 Interest and other income 302 493 2,327 2,070
Total revenues 72,921 53,084 235,537 188,022 Expenses: Property
operating expenses 1,668 - 2,792 - Interest 11,219 9,479 40,154
37,755 Depreciation 17,596 12,264 60,831 47,384 General and
administrative 4,631 3,422 17,136 14,154 Impairment of assets (1)
5,439 1,400 8,379 1,400 Loss on early extinguishment of debt(2) - -
- 2,026 Total expenses 40,553 26,565 129,292 102,719 � Income
before gain on sale of properties 32,368 26,519 106,245 85,303 Gain
on sale of properties - - 266 - Net income $32,368 $26,519 $106,511
$85,303 � Weighted average shares outstanding 114,533 84,505
105,153 83,168 Per share data: Income before gain on sale of
properties $0.28 $0.31 $1.01 $1.03 Net income $0.28 $0.31 $1.01
$1.03
Balance Sheet:
� At December 31, 2008 At December 31, 2007
Assets
Real estate properties $2,807,256 $1,940,347 Less accumulated
depreciation 381,339 323,891 2,425,917 1,616,456 Cash and cash
equivalents 5,990 43,521 Restricted cash 4,344 3,642 Deferred
financing fees, net 5,068 5,974 Acquired real estate leases, net
30,546 2,387 Other assets 25,009 29,914 Total assets $2,496,874
$1,701,894
Liabilities and Shareholders� Equity
Unsecured revolving credit facility $257,000 $ - Senior unsecured
notes, net of discount 322,017 321,873 Secured debt and capital
leases 151,416 104,979 Total debt 730,433 426,852 Acquired real
estate lease obligations, net 7,974 4,216 Other liabilities 27,109
21,416 Total liabilities 765,516 452,484 Shareholders� equity
1,731,358 1,249,410 Total liabilities and shareholders� equity
$2,496,874 $1,701,894
(1) During the quarters ended December 31, 2008 and 2007, we
recognized an impairment of assets charge of $5.4 million related
to three properties and $1.4 million related to one property,
respectively. During the years ended December 31, 2008 and 2007, we
recognized an impairment of assets charge of $8.4 million related
to four properties and $1.4 million related to one property,
respectively.
(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 December 31, Year Ended December
31, 2008 �
2007 2008
�
2007 Income before gain on sale of properties
$32,368 $26,519 $106,245 $85,303 Add: Depreciation expense 17,596
12,264 60,831 47,384 Impairment of assets (2) 5,439 1,400 8,379
1,400 Loss on early extinguishment of debt - - - 2,026 Less:
Deferred percentage rent (3) (6,550) (4,961) - - Loss on early
extinguishment of debt settled in cash (4) - - - (1,750) FFO
$48,853 $35,222 $175,455 $134,363 � Weighted average shares
outstanding 114,533 84,505 105,153 83,168 � FFO per share $0.43
$0.42 $1.67 $1.62 Distributions declared $0.35 $0.35 $1.40 $1.38
(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 measure of our performance based on
U.S. generally accepted accounting principles, or GAAP. 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 quarters ended December 31, 2008 and 2007, we
recognized an impairment of assets charge of $5.4 million related
to three properties and $1.4 million related to one property,
respectively. During the years ended December 31, 2008 and 2007, we
recognized an impairment of assets charge of $8.4 million related
to four properties and $1.4 million related to one property,
respectively.
(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 year ended December 31, 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. AS A RESULT OF ANY FAILURE OF
THESE CONDITIONS, SOME OF THE PROPERTIES MAY NOT BE PURCHASED OR
SOME OF THESE PURCHASES MAY BE ACCELERATED OR DELAYED.
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 CHANGE 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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