UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
|
For the
quarterly period ended March 31, 2010
OR
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
|
Commission File Number 1-15319
SENIOR
HOUSING PROPERTIES TRUST
(Exact Name of Registrant as Specified in Its Charter)
Maryland
|
|
04-3445278
|
(State or Other Jurisdiction of Incorporation or
Organization)
|
|
(IRS Employer Identification No.)
|
400 Centre Street, Newton, Massachusetts 02458
(Address of Principal Executive Offices) (Zip Code)
617-796-8350
(Registrants Telephone Number, Including Area Code)
Indicate by check mark
whether the registrant: (1) has
filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes
x
No
o
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes
o
No
o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2
of the Exchange Act. (Check One):
Large Accelerated Filer
x
|
|
Accelerated Filer
o
|
|
|
|
Non Accelerated Filer
o
|
|
Smaller reporting company
o
|
(Do not check if a smaller reporting company)
|
|
|
Indicate by check mark
whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes
o
No
x
Number
of registrants common shares outstanding as of May 5, 2010: 127,402,807.
SENIOR HOUSING PROPERTIES TRUST
FORM 10-Q
March 31, 2010
INDEX
In this Quarterly Report on Form 10-Q,
the terms the Company, we, us and our refer to Senior Housing
Properties Trust and its consolidated subsidiaries, unless otherwise noted.
PART I.
Financial Information
Item
1. Financial Statements.
SENIOR HOUSING PROPERTIES
TRUST
CONDENSED CONSOLIDATED
BALANCE SHEETS
(amounts in thousands, except share data)
(unaudited)
|
|
March 31,
|
|
December 31,
|
|
|
|
2010
|
|
2009
|
|
ASSETS
|
|
|
|
|
|
Real estate properties:
|
|
|
|
|
|
Land
|
|
$
|
365,576
|
|
$
|
365,576
|
|
Buildings and improvements
|
|
2,958,769
|
|
2,952,407
|
|
|
|
3,324,345
|
|
3,317,983
|
|
Less accumulated depreciation
|
|
475,451
|
|
454,317
|
|
|
|
2,848,894
|
|
2,863,666
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
5,486
|
|
10,494
|
|
Restricted cash
|
|
4,643
|
|
4,222
|
|
Deferred financing fees, net
|
|
14,942
|
|
14,882
|
|
Acquired real estate leases, net
|
|
41,032
|
|
42,769
|
|
Other assets
|
|
51,025
|
|
51,893
|
|
Total assets
|
|
$
|
2,966,022
|
|
$
|
2,987,926
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY
|
|
|
|
|
|
Unsecured revolving credit facility
|
|
$
|
58,000
|
|
$
|
60,000
|
|
Senior unsecured notes due 2012 and 2015, net of
discount
|
|
322,196
|
|
322,160
|
|
Secured debt and capital leases
|
|
657,862
|
|
660,059
|
|
Accrued interest
|
|
10,836
|
|
13,693
|
|
Acquired real estate lease obligations, net
|
|
9,318
|
|
9,687
|
|
Other liabilities
|
|
22,493
|
|
21,677
|
|
Total liabilities
|
|
1,080,705
|
|
1,087,276
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity:
|
|
|
|
|
|
Common shares of beneficial interest, $0.01 par
value: 149,700,000 shares authorized, 127,402,807 and 127,377,665 shares
issued and outstanding at March 31, 2010 and December 31, 2009,
respectively
|
|
1,274
|
|
1,273
|
|
Additional paid in capital
|
|
2,227,061
|
|
2,226,474
|
|
Cumulative net income
|
|
670,017
|
|
640,033
|
|
Cumulative distributions
|
|
(1,014,967
|
)
|
(969,111
|
)
|
Unrealized gain on investments
|
|
1,932
|
|
1,981
|
|
Total shareholders equity
|
|
1,885,317
|
|
1,900,650
|
|
Total liabilities and shareholders equity
|
|
$
|
2,966,022
|
|
$
|
2,987,926
|
|
See accompanying notes.
1
SENIOR HOUSING PROPERTIES
TRUST
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(amounts in thousands, except per share data)
(unaudited)
|
|
Three Months Ended
March 31,
|
|
|
|
2010
|
|
2009
|
|
|
|
|
|
|
|
Rental income
|
|
$
|
80,447
|
|
$
|
68,377
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
Depreciation
|
|
22,289
|
|
18,389
|
|
General and administrative
|
|
5,501
|
|
4,751
|
|
Property operating expenses
|
|
4,375
|
|
2,955
|
|
Acquisition costs
|
|
35
|
|
112
|
|
Total expenses
|
|
32,200
|
|
26,207
|
|
|
|
|
|
|
|
Operating income
|
|
48,247
|
|
42,170
|
|
|
|
|
|
|
|
Interest and other income
|
|
257
|
|
208
|
|
Interest expense
|
|
(18,414
|
)
|
(10,776
|
)
|
Equity in losses of an investee
|
|
(28
|
)
|
|
|
Income before income tax expense
|
|
30,062
|
|
31,602
|
|
Income tax expense
|
|
(78
|
)
|
(69
|
)
|
Net income
|
|
$
|
29,984
|
|
$
|
31,533
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
127,380
|
|
117,853
|
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
|
Net income
|
|
$
|
0.24
|
|
$
|
0.27
|
|
See
accompanying notes
.
2
SENIOR
HOUSING PROPERTIES TRUST
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
(unaudited)
|
|
Three Months Ended
March 31,
|
|
|
|
2010
|
|
2009
|
|
Cash flows from operating activities:
|
|
|
|
|
|
Net income
|
|
$
|
29,984
|
|
$
|
31,533
|
|
Adjustments to reconcile net income to cash
provided by
operating
activities:
|
|
|
|
|
|
Depreciation
|
|
22,289
|
|
18,389
|
|
Amortization of deferred financing fees and debt
discounts
|
|
558
|
|
540
|
|
Amortization of acquired real estate leases
|
|
275
|
|
160
|
|
Equity in losses of equity investment
|
|
28
|
|
|
|
Change in assets and liabilities:
|
|
|
|
|
|
Restricted cash
|
|
(421
|
)
|
(433
|
)
|
Other assets
|
|
747
|
|
2,274
|
|
Accrued interest
|
|
(2,857
|
)
|
(2,941
|
)
|
Other liabilities
|
|
1,406
|
|
3,119
|
|
Cash provided by operating activities
|
|
52,009
|
|
52,641
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
Acquisitions
|
|
(6,362
|
)
|
(32,252
|
)
|
Investment in Affiliates Insurance Company
|
|
(20
|
)
|
|
|
Cash used for investing activities
|
|
(6,382
|
)
|
(32,252
|
)
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
Proceeds from issuance of common shares, net
|
|
|
|
96,767
|
|
Proceeds from borrowings on revolving credit
facility
|
|
30,000
|
|
32,000
|
|
Repayments of borrowings on revolving credit
facility
|
|
(32,000
|
)
|
(108,000
|
)
|
Repayment of other debt
|
|
(2,196
|
)
|
(751
|
)
|
Deferred financing fees
|
|
(583
|
)
|
(739
|
)
|
Distributions to shareholders
|
|
(45,856
|
)
|
(40,090
|
)
|
Cash used for financing activities
|
|
(50,635
|
)
|
(20,813
|
)
|
|
|
|
|
|
|
Decrease in cash and cash equivalents
|
|
(5,008
|
)
|
(424
|
)
|
Cash and cash equivalents at beginning of period
|
|
10,494
|
|
5,990
|
|
Cash and cash equivalents at end of period
|
|
$
|
5,486
|
|
$
|
5,566
|
|
|
|
|
|
|
|
Supplemental cash flow information:
|
|
|
|
|
|
Interest paid
|
|
$
|
21,271
|
|
$
|
13,717
|
|
|
|
|
|
|
|
Non-cash financing activities:
|
|
|
|
|
|
Issuance of common shares
|
|
590
|
|
28
|
|
See accompanying notes.
3
SENIOR HOUSING PROPERTIES
TRUST
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(dollar amounts in
thousands, except per share data or as otherwise stated)
Note 1. Basis of Presentation
The
accompanying condensed consolidated financial statements of Senior Housing
Properties Trust and its subsidiaries, or we, us, or our, have been prepared
without audit. Certain information and
disclosures required by U.S. generally accepted accounting principles, or GAAP,
for complete financial statements have been condensed or omitted. We believe the disclosures made are adequate
to make the information presented not misleading. However, the accompanying condensed consolidated
financial statements should be read in conjunction with the consolidated financial
statements and notes contained in our Annual Report on Form 10-K for the
year ended December 31, 2009, or our Annual Report. In the opinion of our management, all
adjustments, which include only normal recurring adjustments, considered
necessary for a fair presentation have been included. All intercompany transactions and balances
between us and our consolidated subsidiaries have been eliminated. Operating results for interim periods are not
necessarily indicative of the results that may be expected for the full
year. Reclassifications have been made
to the prior years financial statements to conform to the current years
presentation. These reclassifications
were made to separately state on our condensed consolidated statements of
income our equity in losses of an investee and income tax expense that were
previously included in general and administrative expenses. These reclassifications had no effect on net
income or shareholders equity.
Note 2. Recent Accounting
Pronouncements
In
January 2010, the Financial Accounting Standards Board, or FASB, issued an
accounting standards update requiring additional disclosures regarding fair
value measurements. The update requires entities to disclose additional
information regarding assets and liabilities that are transferred between
levels within the fair value hierarchy. The update also clarifies the level of
disaggregation at which fair value disclosures should be made and the
requirements to disclose information about the valuation techniques and inputs
used in estimating Level 2 and Level 3 fair values. The update is
effective for interim and annual reporting periods beginning after December 15,
2009 except for the requirement to separately disclose purchases, sales,
issuances and settlements in the Level 3 roll forward that becomes
effective for fiscal periods beginning after December 15, 2010.
In
February, the FASB issued an update to the disclosure requirements relating to
subsequent events to exclude the requirement to disclose the date through which
an entity has evaluated subsequent events and whether that date represents the
date the financial statements were issued or available to be issued.
The
adoption of these updates does not, and is not expected to, cause any material
changes to the disclosures in our condensed consolidated financial statements.
Note 3. Real Estate Properties
At
March 31, 2010, we owned 298 properties located in 35 states and
Washington, D.C.
During
the three months ended March 31, 2010, pursuant to the terms of our
existing leases with Five Star Quality Care, Inc., or Five Star, we
purchased $6,180 of improvements made to our properties leased to Five Star,
and, as a result, the annual rent payable to us by Five Star was increased by
approximately $495.
As
of March 31, 2010, two of our properties are classified as held for
sale. These two
properties
are included in real estate properties on our condensed consolidated balance
sheets and have a net carrying value of approximately
$2,612
at March 31, 2010. These properties
are currently leased to Five Star.
In
April 2010, we acquired a medical office building located in Colorado with
14,695 rentable square feet
4
SENIOR HOUSING PROPERTIES
TRUST
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(dollar amounts in
thousands, except per share data or as otherwise stated)
for
approximately $4,450, excluding closing costs.
We funded this acquisition using cash on hand and by assuming a mortgage
loan totaling $2,458 with an interest rate of 6.73% per annum.
In
April 2010, we entered into a purchase and sale agreement to acquire a
medical office building located in Texas with approximately 55,800 rentable
square feet for approximately $12,175, excluding closing costs. We expect to fund this acquisition using cash
on hand and borrowings under our revolving credit facility, if necessary. The purchase of this property is contingent
upon completion of our diligence and other customary closing conditions; accordingly,
we can provide no assurance that we will purchase this property.
Note 4. Unrealized Gain on
Investments
On
March 31, 2010, we owned 1,000,000 common shares of HRPT Properties Trust,
or HRP, and 3,235,000 common shares of Five Star, which are carried at fair
market value in other assets on our condensed consolidated balance sheets. The
unrealized gain on investments shown on our condensed consolidated balance
sheets represents the difference between the quoted market prices of our HRP
and Five Star shares on March 31, 2010 ($7.78 and $3.05 per share,
respectively) and our weighted costs on the dates we acquired these shares
($6.50 and $2.85 per share, respectively).
Note 5. Indebtedness
We have an unsecured
revolving credit facility that matures on December 31, 2010. Our revolving credit facility permits
borrowings up to $550,000. The interest
payable for amounts drawn under the facility is LIBOR plus a premium. We can borrow, repay and reborrow until
maturity, and no principal repayment is due until maturity. The interest rate payable on borrowings under
this revolving credit facility was 1.0% and 1.3% at March 31, 2010 and
2009, respectively. In addition to
interest, we pay certain fees to maintain this credit facility and we amortize
certain set up costs. Our revolving
credit facility is available for acquisitions, working capital and general
business purposes. As of March 31, 2010 and 2009, we had $58,000 and
$181,000 outstanding under this credit facility, respectively, and $492,000 and
$369,000 available under this credit facility, respectively. Subject to certain conditions, this credit
facilitys maturity date can be extended at our option to December 31,
2011 upon payment of a fee.
Our revolving credit facility contains
financial covenants and requires us to maintain financial ratios and a minimum
net worth. We believe we were in
compliance with these covenants during the periods presented.
In April 2010, we sold
$200,000 of senior unsecured notes. The
notes require interest at a fixed rate of 6.75% per annum and are due in
2020. Net proceeds from the sale of the
notes, after underwriting discounts and other expenses, were approximately
$195,000. Interest on the notes is
payable semi-annually in arrears. No
principal payments are due until maturity.
We used a portion of the net proceeds of this offering to repay $58,000
in borrowings under our revolving credit facility and we intend to use the
remaining net proceeds of this offering to fund the redemption of our $97,500
outstanding 7.875% senior notes due 2015 and for general business purposes,
including pending and possible future acquisitions. In April 2010, we called all of the
outstanding 7.875% senior notes due 2015 for redemption on May 17, 2010. As a result of this redemption, we expect to
record losses on early extinguishment of debt of
approximately
$2,300
consisting of the debt prepayment premium and the write-off of unamortized
deferred financing fees.
Note 6. Shareholders Equity
On February 16, 2010,
we paid a $0.36 per share, or $45,856, distribution to our common shareholders
for the quarter ended December 31, 2009.
On April 1, 2010, we declared a distribution of $0.36 per share, or
$45,865, to be paid to common shareholders of record on April 15, 2010,
with respect to our results for the quarter ended March 31, 2010. We
expect to pay this distribution on or about May 14, 2010.
5
SENIOR HOUSING PROPERTIES
TRUST
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(dollar amounts in
thousands, except per share data or as otherwise stated)
Under the terms of our
business management agreement with Reit Management & Research LLC, or
RMR, on March 25, 2010 we issued 25,142 common shares in payment of an
incentive fee of approximately $557 for services rendered by RMR during 2009.
We issued these shares pursuant to an exemption from registration contained in Section 4(2) of
the Securities Act of 1933, as amended.
The
following is a reconciliation of net income to comprehensive income for the
three months ended March 31, 2010 and 2009:
|
|
Three Months Ended
March 31,
|
|
|
|
2010
|
|
2009
|
|
Net income
|
|
$
|
29,984
|
|
$
|
31,533
|
|
Other comprehensive
income:
|
|
|
|
|
|
Change in net unrealized
gain (loss) on investments
|
|
(49
|
)
|
(197
|
)
|
Comprehensive income
|
|
$
|
29,935
|
|
$
|
31,336
|
|
Note
7. Fair Value of Assets and Liabilities
The
table below presents certain of our assets and liabilities measured at fair
value at March 31, 2010 categorized by the level of inputs used in the valuation
of each asset or liability.
Description
|
|
Total
|
|
Quoted Prices in Active
Markets for Identical
Assets
(Level 1)
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
|
|
|
|
|
|
|
|
|
Assets held for sale
(1)
|
|
$
|
2,612
|
|
$
|
|
|
$
|
2,612
|
|
$
|
|
|
Investments in available for sale securities
(2)
|
|
17,647
|
|
17,647
|
|
|
|
|
|
Senior notes
(3)
|
|
332,775
|
|
|
|
332,775
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Assets held for
sale consist of two of our properties that we expect to sell that are reported
at fair value. We used offers to
purchase the properties made by third parties or comparable sales transactions
(level 2 inputs) to determine fair value of these properties. We have recorded cumulative impairments of
approximately $8,338 to these properties in order to reduce their carrying
value to fair value, or $2,612 at March 31, 2010.
(2) Our investments in
available for sale securities include our 1,000,000 common shares of HRP and
3,235,000 common shares of Five Star. The fair values of these shares are based
on quoted prices at March 31, 2010 in active markets (level 1 inputs).
(3) We estimate the
fair values of our senior notes by using an average of their bid and ask prices
(level 2 inputs). As of March 31, 2010, the carrying value of our senior
notes was $322,196.
In addition to the assets
and liabilities described in the above table, our additional financial
instruments include rents receivable,
cash and cash equivalents, restricted cash, secured and unsecured debt and
other liabilities. The fair values of these additional financial instruments
approximate their carrying values at March 31, 2010 based upon their
liquidity, short term maturity and / or variable rate pricing.
6
SENIOR HOUSING PROPERTIES
TRUST
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(dollar amounts in
thousands, except per share data or as otherwise stated)
Note 8. Segment Reporting
We
have two reportable operating segments: (i) short term and long term
residential care facilities that offer dining for residents and (ii) properties
where medical related activities occur but where residential overnight stays or
dining services are not provided, or MOBs.
Properties in the short term and long term residential care facilities
segment include independent living facilities, assisted living facilities,
skilled nursing facilities and rehabilitation hospitals. Properties in the MOB segment include medical
office, clinic and biotech laboratory buildings. The All Other category in the following
table includes amounts related to corporate business activities and the
operating results of certain properties that offer fitness, wellness and spa
services to members.
|
|
For the Three Months Ended March 31, 2010
|
|
|
|
Short and
Long Term
Residential
Care Facilities
|
|
MOB
|
|
All Other
|
|
Consolidated
|
|
Rental income
|
|
$
|
57,018
|
|
$
|
19,559
|
|
$
|
3,870
|
|
$
|
80,447
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
Depreciation expense
|
|
16,461
|
|
4,906
|
|
922
|
|
22,289
|
|
General and administrative
|
|
|
|
|
|
5,501
|
|
5,501
|
|
Property operating expenses
|
|
|
|
4,375
|
|
|
|
4,375
|
|
Acquisition costs
|
|
|
|
35
|
|
|
|
35
|
|
Total expenses
|
|
16,461
|
|
9,316
|
|
6,423
|
|
32,200
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
40,557
|
|
10,243
|
|
(2,553
|
)
|
48,247
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other income
|
|
|
|
|
|
257
|
|
257
|
|
Interest expense
|
|
(10,243
|
)
|
(169
|
)
|
(8,002
|
)
|
(18,414
|
)
|
Equity in losses of an investee
|
|
|
|
|
|
(28
|
)
|
(28
|
)
|
Income (loss) before income tax expense
|
|
30,314
|
|
10,074
|
|
(10,326
|
)
|
30,062
|
|
Income tax expense
|
|
|
|
|
|
(78
|
)
|
(78
|
)
|
Net income (loss)
|
|
$
|
30,314
|
|
$
|
10,074
|
|
$
|
(10,404
|
)
|
$
|
29,984
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,959,151
|
|
$
|
733,703
|
|
$
|
273,168
|
|
$
|
2,966,022
|
|
7
SENIOR HOUSING PROPERTIES
TRUST
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(dollar amounts in
thousands, except per share data or as otherwise stated)
|
|
For the Three Months Ended March 31, 2009
|
|
|
|
Short and
Long Term
Residential
Care Facilities
|
|
MOB
|
|
All Other
|
|
Consolidated
|
|
Rental income
|
|
$
|
54,037
|
|
$
|
10,446
|
|
$
|
3,894
|
|
$
|
68,377
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
Depreciation expense
|
|
14,873
|
|
2,594
|
|
922
|
|
18,389
|
|
General and administrative
|
|
|
|
|
|
4,751
|
|
4,751
|
|
Property operating expenses
|
|
|
|
2,955
|
|
|
|
2,955
|
|
Acquisition costs
|
|
|
|
112
|
|
|
|
112
|
|
Total expenses
|
|
14,873
|
|
5,661
|
|
5,673
|
|
26,207
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
39,164
|
|
4,785
|
|
(1,779
|
)
|
42,170
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other income
|
|
|
|
|
|
208
|
|
208
|
|
Interest expense
|
|
(2,030
|
)
|
(184
|
)
|
(8,562
|
)
|
(10,776
|
)
|
Income (loss) before income tax expense
|
|
37,134
|
|
4,601
|
|
(10,133
|
)
|
31,602
|
|
Income tax expense
|
|
|
|
|
|
(69
|
)
|
(69
|
)
|
Net income (loss)
|
|
$
|
37,134
|
|
$
|
4,601
|
|
$
|
(10,202
|
)
|
$
|
31,533
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,885,213
|
|
$
|
392,770
|
|
$
|
230,559
|
|
$
|
2,508,542
|
|
Note 9. Significant Tenant
Five
Star is the lessee of 57% of our annualized rents as of March 31,
2010. The following tables present
summary financial information for Five Star for the three months ended March 31,
2010 and 2009, as reported in its Quarterly Report on Form 10-Q.
Summary Financial Information of Five Star Quality
Care, Inc.
(unaudited)
|
|
For the Three Months Ended
March 31,
|
|
|
|
2010
|
|
2009
|
|
Total revenues
|
|
$
|
310,331
|
|
$
|
293,846
|
|
Operating income
|
|
4,937
|
|
3,450
|
|
Income from continuing operations
|
|
4,306
|
|
25,053
|
|
Net income
|
|
4,085
|
|
25,372
|
|
|
|
|
|
|
|
Cash Flows
|
|
|
|
|
|
Cash provided by operating activities
|
|
15,459
|
|
21,791
|
|
Net cash (used in) provided by discontinued
operations
|
|
(221
|
)
|
1,442
|
|
Cash used in investing activities
|
|
(5,142
|
)
|
(6,170
|
)
|
Cash used in financing activities
|
|
(2,831
|
)
|
(4,775
|
)
|
Change in cash and cash equivalents
|
|
7,265
|
|
12,288
|
|
Cash and cash equivalents at beginning of period
|
|
11,299
|
|
16,138
|
|
Cash and cash equivalents at end of period
|
|
18,564
|
|
28,426
|
|
|
|
|
|
|
|
|
|
8
SENIOR HOUSING PROPERTIES
TRUST
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED)
(dollar amounts in
thousands, except per share data or as otherwise stated)
|
|
As of March 31,
|
|
Financial Position
|
|
2010
|
|
2009
|
|
Current assets
|
|
$
|
182,574
|
|
$
|
116,305
|
|
Non-current assets
|
|
230,412
|
|
298,535
|
|
Total indebtedness
|
|
98,458
|
|
129,679
|
|
Current liabilities
|
|
175,315
|
|
135,797
|
|
Non-current liabilities
|
|
93,216
|
|
167,272
|
|
Total shareholders equity
|
|
144,455
|
|
111,771
|
|
|
|
|
|
|
|
|
|
The summary financial
information of Five Star is presented to comply with applicable accounting
regulations of the SEC. References in
these financial statements to the Quarterly Report on Form 10-Q for Five
Star are included as textual references only, and the information in Five Stars
Quarterly Report is not incorporated by reference into these financial
statements.
Five
Star is our former subsidiary and both we and Five Star have management
contracts with RMR. For information
about our dealings with Five Star and RMR and about the risks which may arise
as a result of these related person transactions, please see our Annual Report,
especially the section titled Risk Factors.
Note
10. Related Person Transactions
In
connection with our property management agreement with RMR, we recognized
expenses of $549 and $294 for the three months ended March 31, 2010 and
2009, respectively. These amounts are
included in property operating expenses in our condensed consolidated financial
statements. In connection with our
business management agreement with RMR, we recognized expense of $4,218 and
$3,729 for the three months ended March 31, 2010 and 2009,
respectively. These amounts are included
in general and administrative expenses in our consolidated financial
statements.
As
of March 31, 2010, we have invested $5,154 in Affiliates Insurance
Company, or Affiliates Insurance, concurrently with RMR and other companies to
which RMR provides management services.
All of our trustees are currently serving on the board of directors of
Affiliates Insurance. At March 31,
2010, we owned approximately 14.29% of Affiliates Insurance. We expect to procure some of our insurance
from Affiliates Insurance. Although we
own less than 20% of Affiliates Insurance, we use the equity method to account
for this investment because we believe that we have significant influence over
Affiliates Insurance because each of our trustees is a director of Affiliates
Insurance. This investment is carried on
our balance sheet in other assets and had a carrying value of $4,992 and $5,000
as of March 31, 2010 and December 31, 2009, respectively. During the first quarter of 2010, we
recognized a loss of $28 related to this investment.
9
Item 2. Managements
Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion should be read in
conjunction with our condensed consolidated financial statements and notes
thereto included in this Quarterly Report on Form 10-Q and our Annual
Report on Form 10-K for the year ended December 31, 2009, or our
Annual Report.
PORTFOLIO
OVERVIEW
The
following tables present an overview of our portfolio (dollars in thousands
except per unit/square foot):
(As
of March 31, 2010)
|
|
Number of
Properties
|
|
Number of
Units/Beds or
Square Feet
|
|
Investment
Carrying Value
(1)
|
|
% of
Investment
|
|
Annualized
Current Rent
(2)
|
|
% of
Annualized
Current Rent
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Facility Type
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Independent living
communities
(3)
|
|
43
|
|
11,524
|
|
$
|
1,124,891
|
|
33.9%
|
|
$
|
111,618
|
|
33.8%
|
|
Assisted living
facilities
(3)
|
|
131
|
|
9,342
|
|
1,029,649
|
|
31.0%
|
|
94,424
|
|
28.6%
|
|
Skilled nursing
facilities
(3)
|
|
56
|
|
5,707
|
|
226,911
|
|
6.8%
|
|
20,353
|
|
6.2%
|
|
Rehabilitation
hospitals
|
|
2
|
|
364
|
|
64,130
|
|
1.9%
|
|
9,884
|
|
3.0%
|
|
Wellness centers
|
|
10
|
|
812,000
|
sq. ft.
|
180,017
|
|
5.4%
|
|
17,069
|
|
5.2%
|
|
MOBs
|
|
56
|
|
2,867,862
|
sq. ft.
|
698,747
|
|
21.0%
|
|
76,347
|
|
23.2%
|
|
Total
|
|
298
|
|
|
|
$
|
3,324,345
|
|
100.0%
|
|
$
|
329,695
|
|
100.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tenant / Operator
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Five Star (Lease
No. 1)
|
|
89
|
|
6,468
|
|
$
|
630,767
|
|
19.0%
|
|
$
|
53,895
|
|
16.3%
|
|
Five Star (Lease
No. 2)
|
|
49
|
|
6,031
|
|
505,687
|
|
15.2%
|
|
49,579
|
|
15.0%
|
|
Five Star (Lease
No. 3)
|
|
28
|
|
5,618
|
|
621,643
|
|
18.7%
|
|
61,991
|
|
18.8%
|
|
Five Star (Lease
No. 4)
|
|
26
|
|
2,720
|
|
252,103
|
|
7.6%
|
|
23,026
|
|
7.0%
|
|
Sunrise / Marriott
(4)
|
|
14
|
|
4,091
|
|
325,165
|
|
9.8%
|
|
32,507
|
|
9.9%
|
|
Brookdale
|
|
18
|
|
894
|
|
61,122
|
|
1.8%
|
|
8,349
|
|
2.5%
|
|
6 private companies
(combined)
|
|
8
|
|
1,115
|
|
49,094
|
|
1.5%
|
|
6,932
|
|
2.1%
|
|
Wellness centers
|
|
10
|
|
812,000
|
sq. ft.
|
180,017
|
|
5.4%
|
|
17,069
|
|
5.2%
|
|
Multi-tenant MOBs
|
|
56
|
|
2,867,862
|
sq. ft.
|
698,747
|
|
21.0%
|
|
76,347
|
|
23.2%
|
|
Total
|
|
298
|
|
|
|
$
|
3,324,345
|
|
100.0%
|
|
$
|
329,695
|
|
100.0%
|
|
10
Item 2.
Managements Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Tenant Operating
Statistics
(5)
|
|
Rent
Coverage
|
|
Occupancy
|
|
Annualized Rental Income per
Living Unit, Bed or Square Foot
(6)
|
|
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
2010
|
|
2009
|
|
Five Star (Lease
No. 1)
|
|
1.28x
|
|
1.21x
|
|
86%
|
|
88%
|
|
$
|
8,333
|
|
$
|
7,691
|
|
Five Star (Lease
No. 2)
(7)
|
|
1.30x
|
|
1.33x
|
|
82%
|
|
84%
|
|
$
|
7,005
|
|
$
|
6,922
|
|
Five Star (Lease
No. 3)
|
|
1.51x
|
|
1.58x
|
|
89%
|
|
92%
|
|
$
|
11,034
|
|
$
|
10,716
|
|
Five Star (Lease
No. 4)
|
|
1.05x
|
|
1.29x
|
|
85%
|
|
88%
|
|
$
|
8,465
|
|
$
|
8,548
|
|
Sunrise / Marriott
(4)
|
|
1.39x
|
|
1.47x
|
|
89%
|
|
91%
|
|
$
|
7,946
|
|
$
|
8,199
|
|
Brookdale
|
|
2.11x
|
|
2.11x
|
|
91%
|
|
93%
|
|
$
|
9,339
|
|
$
|
8,949
|
|
6 private companies
(combined)
|
|
1.94x
|
|
1.96x
|
|
84%
|
|
84%
|
|
$
|
6,217
|
|
$
|
6,133
|
|
Wellness centers
(8)
|
|
2.27x
|
|
2.34x
|
|
100%
|
|
100%
|
|
NA
|
|
NA
|
|
Multi-tenant MOBs
(9)
|
|
NA
|
|
NA
|
|
96%
|
|
99%
|
|
$
|
27
|
|
$
|
25
|
|
|
|
Short
and Long Term Residential Care Facilities
Percentage of Operating Revenue Sources
|
|
|
|
Private
Pay
(10)
|
|
Medicare
|
|
Medicaid
|
|
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Five Star (Lease
No. 1)
|
|
61%
|
|
58%
|
|
14%
|
|
15%
|
|
25%
|
|
27%
|
|
Five Star (Lease
No. 2)
|
|
52%
|
|
52%
|
|
32%
|
|
32%
|
|
16%
|
|
16%
|
|
Five Star (Lease
No. 3)
|
|
87%
|
|
88%
|
|
12%
|
|
12%
|
|
1%
|
|
|
|
Five Star (Lease
No. 4)
|
|
67%
|
|
69%
|
|
14%
|
|
13%
|
|
19%
|
|
18%
|
|
Sunrise / Marriott
(4)
|
|
71%
|
|
66%
|
|
25%
|
|
30%
|
|
4%
|
|
4%
|
|
Brookdale
|
|
100%
|
|
99%
|
|
|
|
|
|
|
|
1%
|
|
6 private companies
(combined)
|
|
23%
|
|
26%
|
|
24%
|
|
23%
|
|
53%
|
|
51%
|
|
(1)
|
Amounts are before
depreciation, but after impairment write downs, if any.
|
(2)
|
Annualized rent is as
of March 31, 2010.
|
(3)
|
Properties are
categorized by the type of living units / beds which constitute a majority of
the living units / beds at the property.
|
(4)
|
Marriott
International, Inc., or Marriott, guarantees this lease.
|
(5)
|
All tenant operating data presented are based upon
the operating results provided by our tenants for the 12 months ended
December 31, 2009 and 2008, or the most recent prior period for which
tenant operating results are available to us. Rent coverage is calculated as
operating cash flow from our tenants operations of our properties, before subordinated
charges, divided by minimum rents payable to us. We have not independently
verified our tenants operating data. The table excludes data for periods
prior to our ownership of some of these properties.
|
(6)
|
Represents annualized rent by lease divided by the
number of living units, beds or square feet leased at March 31, 2010 and
2009.
|
(7)
|
Annualized rental income per living unit, bed or
square foot excludes the two rehabilitation hospitals because these
properties have extensive clinic space for services to both overnight
patients and patients who receive treatment and do not stay overnight, and
these properties are not comparable to residential senior living properties.
|
(8)
|
Annualized rental income per living unit, bed or
square foot excludes the wellness centers because these properties have
extensive indoor and outdoor recreation space which is not comparable to
properties where rent is based on interior space only.
|
(9)
|
Our medical office, clinic and biotech laboratory
buildings, or MOBs, leases include both triple net leases where, in addition
to paying fixed rents, the tenants assume the obligation to operate and
maintain the properties at their expense, and net and modified gross leases
where we are responsible to operate and maintain the properties and we charge
tenants for some or all of the property operating costs. A small percentage
of our MOB leases are so-called full-service leases where we receive fixed
rent from our tenants and no reimbursement for our property operating costs.
|
(10)
|
Private pay excludes revenues from the Medicare and
Medicaid programs.
|
11
Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations (continued)
The following tables set
forth information regarding our lease expirations as of March 31, 2010
(dollars in thousands):
|
|
Annualized Rent
|
|
Percent of
Total
|
|
Cumulative
Percentage
of
Annualized
|
|
Year
|
|
Short and Long
Term Residential
Care Facilities
|
|
MOBs
|
|
Wellness
Centers
|
|
Total
|
|
Annualized
Current Rent
Expiring
|
|
Current
Rent
Expiring
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
$
|
1,373
|
|
$
|
1,833
|
|
$
|
|
|
$
|
3,206
|
|
1.0%
|
|
1.0%
|
|
2011
|
|
|
|
2,146
|
|
|
|
2,146
|
|
0.7%
|
|
1.7%
|
|
2012
|
|
|
|
5,999
|
|
|
|
5,999
|
|
1.8%
|
|
3.5%
|
|
2013
|
|
32,507
|
|
3,691
|
|
|
|
36,198
|
|
11.0%
|
|
14.5%
|
|
2014
|
|
|
|
3,114
|
|
|
|
3,114
|
|
0.9%
|
|
15.4%
|
|
2015
|
|
2,065
|
|
6,081
|
|
|
|
8,146
|
|
2.5%
|
|
17.9%
|
|
2016
|
|
2,895
|
|
6,604
|
|
|
|
9,499
|
|
2.9%
|
|
20.8%
|
|
2017
|
|
31,375
|
|
1,715
|
|
|
|
33,090
|
|
10.0%
|
|
30.8%
|
|
2018
|
|
|
|
1,898
|
|
|
|
1,898
|
|
0.6%
|
|
31.4%
|
|
2019 and after
|
|
166,064
|
|
43,266
|
|
17,069
|
|
226,399
|
|
68.6%
|
|
100.0%
|
|
Total
|
|
$
|
236,279
|
|
$
|
76,347
|
|
$
|
17,069
|
|
$
|
329,695
|
|
100.0%
|
|
|
|
Average remaining lease term for all properties
(weighted by rent): 12.5 years
|
|
Number of Tenants
|
|
|
|
Cumulative
|
|
Year
|
|
Short and
Long Term
Residential
Care Facilities
|
|
MOBs
|
|
Wellness
Centers
|
|
Total
|
|
Percent of
Total Number
of Tenants
Expiring
|
|
Percentage
of Number
of Tenants
Expiring
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
1
|
|
23
|
|
|
|
24
|
|
11.0%
|
|
11.0%
|
|
2011
|
|
|
|
24
|
|
|
|
24
|
|
11.0%
|
|
22.0%
|
|
2012
|
|
|
|
38
|
|
|
|
38
|
|
17.4%
|
|
39.4%
|
|
2013
|
|
1
|
|
20
|
|
|
|
21
|
|
9.6%
|
|
49.0%
|
|
2014
|
|
|
|
25
|
|
|
|
25
|
|
11.4%
|
|
60.4%
|
|
2015
|
|
2
|
|
23
|
|
|
|
25
|
|
11.4%
|
|
71.8%
|
|
2016
|
|
2
|
|
17
|
|
|
|
19
|
|
8.7%
|
|
80.5%
|
|
2017
|
|
2
|
|
14
|
|
|
|
16
|
|
7.3%
|
|
87.8%
|
|
2018
|
|
|
|
6
|
|
|
|
6
|
|
2.7%
|
|
90.5%
|
|
2019 and after
|
|
4
|
|
15
|
|
2
|
|
21
|
|
9.5%
|
|
100.0%
|
|
Total
|
|
12
|
|
205
|
|
2
|
|
219
|
|
100.0%
|
|
|
|
12
Item 2. Managements
Discussion and Analysis of Financial Condition and Results of Operations
(continued)
Number of Living Units or Beds or Square Feet with Leases Expiring
Year
|
|
Short and
Long Term
Residential
Care
Facilities
(Units/Beds)
|
|
Percent
of Total
Living
Units or
Beds
Expiring
|
|
Cumulative
Percentage
of Total
Living
Units or
Beds
Expiring
|
|
MOBs
(Square
Feet)
|
|
Wellness
Centers
(Square
Feet)
|
|
Total
Square
Feet
|
|
Percent
of Total
Square
Feet
Expiring
|
|
Cumulative
Percent of
Total
Square
Feet
Expiring
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
140
|
|
0.5%
|
|
0.5%
|
|
47,897
|
|
|
|
47,897
|
|
1.3%
|
|
1.3%
|
|
2011
|
|
|
|
0.0%
|
|
0.5%
|
|
65,702
|
|
|
|
65,702
|
|
1.8%
|
|
3.1%
|
|
2012
|
|
|
|
0.0%
|
|
0.5%
|
|
288,084
|
|
|
|
288,084
|
|
8.0%
|
|
11.1%
|
|
2013
|
|
4,091
|
|
15.2%
|
|
15.7%
|
|
143,974
|
|
|
|
143,974
|
|
4.0%
|
|
15.1%
|
|
2014
|
|
|
|
0.0%
|
|
15.7%
|
|
105,884
|
|
|
|
105,884
|
|
3.0%
|
|
18.1%
|
|
2015
|
|
283
|
|
1.1%
|
|
16.8%
|
|
261,693
|
|
|
|
261,693
|
|
7.3%
|
|
25.4%
|
|
2016
|
|
517
|
|
1.9%
|
|
18.7%
|
|
319,831
|
|
|
|
319,831
|
|
8.9%
|
|
34.3%
|
|
2017
|
|
3,614
|
|
13.4%
|
|
32.1%
|
|
47,866
|
|
|
|
47,866
|
|
1.3%
|
|
35.6%
|
|
2018
|
|
|
|
0.0%
|
|
32.1%
|
|
55,775
|
|
|
|
55,775
|
|
1.6%
|
|
37.2%
|
|
2019 and after
|
|
18,292
|
|
67.9%
|
|
100.0%
|
|
1,437,823
|
|
812,000
|
|
2,249,823
|
|
62.8%
|
|
100.0%
|
|
Total
|
|
26,937
|
|
100.0%
|
|
|
|
2,774,529
|
|
812,000
|
|
3,586,529
|
|
100.0%
|
|
|
|
RESULTS
OF OPERATIONS
Three Months Ended March 31,
2010 Compared to Three Months Ended March 31, 2009:
|
|
2010
|
|
2009
|
|
Change
|
|
% Change
|
|
|
|
(dollars in thousands, except per share amounts)
|
|
|
|
Rental income
|
|
$
|
80,447
|
|
$
|
68,377
|
|
$
|
12,070
|
|
17.7%
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
22,289
|
|
18,389
|
|
3,900
|
|
21.2%
|
|
General and administrative
|
|
5,501
|
|
4,751
|
|
750
|
|
15.8%
|
|
Property operating expenses
|
|
4,375
|
|
2,955
|
|
1,420
|
|
48.1%
|
|
Acquisition costs
|
|
35
|
|
112
|
|
(77
|
)
|
(68.8)%
|
|
Total expenses
|
|
32,200
|
|
26,207
|
|
5,993
|
|
22.9%
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
48,247
|
|
42,170
|
|
6,077
|
|
14.4%
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other income
|
|
257
|
|
208
|
|
49
|
|
23.6%
|
|
Interest expense
|
|
(18,414
|
)
|
(10,776
|
)
|
(7,638
|
)
|
(70.9)%
|
|
Equity in losses of an investee
|
|
(28
|
)
|
|
|
(28
|
)
|
|
|
Income before income tax expense
|
|
30,062
|
|
31,602
|
|
(1,540
|
)
|
(4.9)%
|
|
Income tax expense
|
|
(78
|
)
|
(69
|
)
|
9
|
|
13.0%
|
|
Net income
|
|
$
|
29,984
|
|
$
|
31,533
|
|
$
|
(1,549
|
)
|
(4.9)%
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
127,380
|
|
117,853
|
|
9,527
|
|
8.1%
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share
|
|
$
|
0.24
|
|
$
|
0.27
|
|
$
|
(0.03
|
)
|
(11.1)%
|
|
13
Item 2. Managements
Discussion and Analysis of Financial Condition and Results of Operations
(continued)
Rental income.
Rental
income increased because of rents earned from our property acquisitions since January 1,
2009, including $19.6 million of rental income for the three months ended March 31,
2010 due to our acquisitions of MOBs since June 2008. The increase in rental income is partially
offset by a reduction in rental income resulting from the sale of four
properties in 2009.
Total expenses.
Depreciation expense for the period increased because of our property
acquisitions since January 1, 2009.
General and administrative expenses also increased in the first quarter
of 2010 principally due to our acquisitions since January 1, 2009. The
increase in property operating expenses for the quarter ended March 31,
2010 is the result of our acquisition of MOBs since January 1, 2009 and
principally includes expenses related to real estate taxes, utilities,
insurance, cleaning costs and property management fees paid to Reit Management &
Research LLC, or RMR.
Interest expense.
Interest
expense increased because of interest payments on our $512.9 million Federal
National Mortgage Association, or FNMA, mortgage financing entered in August 2009
with a weighted average interest rate of 6.59% at the time of issuance, the
amortization of $13.3 million of deferred financing fees incurred in connection
with this mortgage financing, offset by lesser amounts outstanding under our
revolving credit facility at lower interest rates. Our weighted average balance outstanding and
interest rate under our revolving credit facility was $59.2 million and 1.0%,
and $216.2 million and 1.3%, for the three months ended March 31, 2010 and
2009, respectively.
Net income.
Net income decreased because of the changes
in revenues and expenses described above. Net income per share decreased due to
the effect of an increase in our weighted average number of shares outstanding
resulting from our issuances of common shares in February and September 2009
offset by the net changes in revenues and expenses described above.
LIQUIDITY AND CAPITAL RESOURCES
Our principal source of
funds to pay operating expenses, debt service and distributions to shareholders
is rental income from our properties. We
believe that our operating cash flow will be sufficient to meet our operating
expenses and debt service and pay distributions on our shares for the
foreseeable future. Our future cash
flows from operating activities will depend primarily upon our ability to:
·
maintain or improve the
occupancy of, and the current rent rates at, our MOB properties;
·
control operating cost
increases at our MOB properties; and
·
purchase additional
properties of any type which produce cash flows in excess of our cost of
acquisition capital and property operating expenses.
Our
Operating Liquidity and Resources
We generally receive minimum rents monthly or
quarterly from our tenants and we receive percentage rents from our residential
facility tenants monthly, quarterly or annually. During the three months ended March 31,
2010, we generated $52.0 million of cash from operations and at March 31,
2010, we had $5.5 million of cash and cash equivalents.
Our Investment and Financing Liquidity and Resources
At March 31, 2010, we had $5.5 million of cash and cash
equivalents and $492.0 million available under our revolving credit
facility. We expect to use cash
balances, borrowings under our revolving credit facility and net proceeds of
offerings of equity or debt securities to fund future working
14
Item 2.
Managements Discussion and Analysis of Financial Condition and Results
of Operations (continued)
capital
requirements, property acquisitions and expenditures related to the repair,
maintenance or renovation of our properties.
In order
to fund acquisitions and to accommodate cash needs that may result from timing
differences between our receipts of rents and our need or desire to pay
operating expenses and distributions to our shareholders, we maintain a
revolving credit facility with a group of institutional lenders. This revolving credit facility permits us to
borrow up to $550.0 million. Borrowings
under our revolving credit facility are unsecured. We may borrow, repay and reborrow funds until
maturity, and no principal repayment is due until maturity. We pay interest on borrowings under the
revolving credit facility at LIBOR plus a premium. This facility matures in December 2010. Subject to certain conditions, this credit
facilitys maturity date can be extended at our option to December 31,
2011 upon our payment of a fee. We
continue to monitor market conditions for comparable revolving credit
facilities and other financing alternatives.
At March 31, 2010, the weighted average interest rate payable on
our revolving credit facility was 1.03%.
As of March 31, 2010, we had $58.0 million outstanding under this
credit facility and as of May 5, 2010, we had zero amounts outstanding
under this credit facility.
When
significant amounts are outstanding under our revolving credit facility or as
the maturity dates of our revolving credit facility and term debts approach, we
will explore alternatives for the repayment of amounts due. Such alternatives may include incurring
additional debt and issuing new equity securities. We have an effective shelf registration
statement that allows us to issue public securities on an expedited basis, but
it does not assure that there will be buyers for such securities.
During the three months ended March 31, 2010, we purchased $6.2
million of improvements made to our properties that are leased to Five Star
Quality Care, Inc., or Five Star.
We used cash on hand to fund these purchases. As a result of these purchases, the annual
rent payable to us by Five Star increased by approximately $495,000.
In April 2010, we acquired a medical office building located in
Colorado with 14,695 rentable square feet for approximately $4.5 million,
excluding closing costs. We funded this
acquisition using cash on hand and by assuming a mortgage loan totaling $2.5
million with an interest rate of 6.73% per annum.
In April 2010, we entered into a purchase and sale agreement to
acquire a medical office building located in Texas with approximately 55,800
rentable square feet for approximately $12.2 million, excluding closing
costs. We expect to fund this
acquisition using cash on hand and borrowings under our revolving credit
facility, if necessary. The purchase of
this property is contingent upon completion of our diligence and other
customary closing conditions; accordingly we can provide no assurance that we
will purchase this property.
In
April 2010, we sold $200.0 million of senior unsecured notes. The notes require interest at a fixed rate of
6.75% per annum and are due in 2020. Net
proceeds from the sale of the notes, after underwriting discounts and other
expenses, were approximately $195.0 million.
Interest on the notes is payable semi-annually in arrears. No principal payments are due until
maturity. We used a portion of the net
proceeds of this offering to repay $58.0 million in borrowings under our
revolving credit facility and we intend to use the remaining net proceeds of
this offering to fund the redemption of our $97.5 million outstanding 7.875%
senior notes due 2015 and for general business purposes, including pending and
possible future acquisitions. In April 2010,
we called all of the outstanding 7.875% senior notes due 2015 for redemption on
May 17, 2010.
While
we believe we will have access to various types of financings, including debt
or equity, to fund our future acquisitions and to pay our debts and other
obligations, there can be no assurance that we will be able to complete any
debt or equity offerings or that our cost of any future financings will be
15
Item 2. Managements
Discussion and Analysis of Financial Condition and Results of Operations
(continued)
reasonable. Also, the current market conditions have led
to increased credit spreads which, if they continue, may result in increased
interest costs when we renew our revolving credit facility. These interest cost increases could have a
material and adverse impact on our results of operations and financial
condition.
On April 1,
2010, we declared a quarterly distribution of $0.36 per common share, or $45.9
million, to our common shareholders for the quarter ended March 31,
2010. This distribution will be paid to
shareholders on or about May 14, 2010, using cash on hand and borrowings
under our revolving credit facility.
As of May 5, 2010, we have no off balance sheet
arrangements, commercial paper, derivatives, swaps, hedges, joint ventures or
partnerships,
other than interest rate caps in connection with our
FNMA mortgage loan. We have no off balance sheet arrangements.
Debt
Covenants
Our principal debt obligations at March 31, 2010,
were our unsecured revolving credit facility, two public issues of unsecured
senior notes totaling $322.5 million and $643.0 million of mortgages secured by
61 of our properties. Our unsecured
senior notes are governed by an indenture.
The indenture for our unsecured senior notes and related supplements and
our revolving credit facility contain a number of covenants which restrict our
ability to incur debts, including debts secured by mortgages on our properties
in excess of calculated amounts, require us to maintain a minimum net worth,
restrict our ability to make distributions under certain circumstances and
generally require us to maintain certain other financial ratios. As of March 31,
2010, we believe we were in compliance with all of the covenants under our
indenture and related supplements, our revolving credit facility and our other
debt obligations.
None of our indenture and
related supplements, our revolving credit facility or our other debt
obligations contain provisions for acceleration which could be triggered by our
debt ratings. However, in certain
circumstances, our revolving credit facility uses our senior debt rating to
determine the fees and the interest rate payable.
Our
public debt indenture and related supplements contain cross default provisions
to any other debts of at least $10.0 million or, with respect to certain notes
under such indenture and supplements, higher amounts. Similarly, our revolving credit facility
contains a cross default provision to any other debts of $25.0 million or more
that are recourse debts and to any other debts of $75.0 million or more that
are non-recourse debts. Any termination
of our business management agreement with RMR would cause a default under our
revolving credit facility, if not approved by a majority of our lenders.
Related Person Transactions
Five
Star is our largest tenant and it is our former subsidiary. We beneficially own more than 9% of Five Stars
common shares. RMR provides management
services to both us and Five Star. Five
Star pays us rent based on minimum annual rent amounts plus percentage rent
based on increases in gross revenues at certain properties. As of March 31, 2010, we leased 190
senior living communities and two rehabilitation hospitals to Five Star. During the three months ended March 31,
2010, we purchased $6.2 million of improvements made to our properties that are
leased to Five Star. We used cash on
hand to fund this purchase. As a result
of this purchase, the annual rent payable to us by Five Star increased by
approximately $495,000. Five Stars
total minimum annual rent payable to us under those leases as of March 31,
2010 was $184.9 million, excluding percentage rent based on increases in gross
revenues at certain properties.
Additional information
regarding our leases with Five Star appears in Item 1 of our Annual Report
under the captions Business Tenants and Business Lease Terms.
16
Item 2. Managements
Discussion and Analysis of Financial Condition and Results of Operations
(continued)
RMR continues to provide
both business and property management services to us under a business
management agreement and a property management agreement, each as amended in
January, 2010. Under the terms of our
business management agreement with RMR, on March 25, 2010, we issued
25,142 common shares to RMR in payment of an incentive fee for services
rendered by RMR during 2009. During the
three months ended March 31, 2010, we invested an additional $20,182 in
Affiliates Insurance Company, or Affiliates Insurance, concurrently with RMR
and other companies to which RMR provides management services.
For more information about
our related person transactions, including our dealings with Five Star,
Affiliates Insurance, RMR, our Managing Trustees and their affiliates and about
the risks which may arise as a result of these and other related person
transactions, please see our Annual Report and our other filings made with the
Securities and Exchange Commission, or SEC, and in particular, the sections
captioned Risk Factors and Managements Discussion and Analysis of Financial
Condition and Results of Operations Related Person Transactions in the
Annual Report and the section captioned Related Person Transactions and
Company Review of Such Transactions in our Proxy Statement dated February 22,
2010 relating to our 2010 Annual Meeting of Shareholders and Item 1.01 in our
Current Report on Form 8-K filed with the SEC on January 13, 2010.
Impact of Government
Reimbursement
Approximately 87% of
our current annual rents at our senior living properties come from properties
where approximately 80% or more of the operating revenues are derived from
residents who pay from their own private resources. The remaining 13% of our
rents at our senior living properties come from properties where the revenues
are heavily dependent upon Medicare and Medicaid programs. The operations of
these senior living properties currently produce sufficient cash flow to
support our rent. However, as discussed in Item 1 of our Annual Report under
the caption, Business Government Regulation and Reimbursement, we expect
that Medicare and Medicaid rates paid to our tenants may not increase in
amounts sufficient to pay our tenants increased operating costs, or that they
may even decline. Also, the hospitals we lease to Five Star are heavily
dependent upon Medicare revenues.
The Patient Protection and Affordable
Care Act, or PPACA, enacted in March, 2010, contains insurance changes, payment
changes and healthcare delivery systems changes intended to expand access to
health insurance coverage and reduce the growth of healthcare expenditures
while simultaneously maintaining or improving the quality of healthcare. It is unclear how or if these somewhat contradictory
goals can be achieved. Under PPACA,
beginning in fiscal year 2012, the Medicare skilled nursing facility, or SNF,
and inpatient rehabilitation facility, or IRF, market basket adjustments for
inflation will be reduced by a productivity adjustment that may result in
payment rates for a fiscal year being less than for the preceding fiscal year.
PPACA also reduces the Medicare IRF market basket adjustment for inflation by
0.25% for fiscal year 2010, effective for discharges between April 1, 2010
and September 30, 2010. Future IRF Medicare market basket
adjustments will also be reduced, by 0.25% for fiscal year 2011, by amounts
ranging from 0.1% to 0.3% for fiscal years 2012 through 2016, and by 0.75% for
fiscal years 2017 through 2019. PPACA
also establishes an Independent Payment Advisory Board to submit legislative
proposals to Congress and take other actions with a goal of reducing Medicare
spending growth and includes various other provisions affecting Medicare and
Medicaid providers, including enforcement reforms and increased funding for
Medicare and Medicaid program integrity and fraud and abuse control
initiatives.
We are unable to predict the impact on
our tenants of the productivity adjustments or other PPACA provisions on future
Medicare rates for SNFs and IRFs or the insurance, payment and healthcare
delivery systems changes contained in and to be developed pursuant to PPACA.
The changes
17
Item 2. Managements
Discussion and Analysis of Financial Condition and Results of Operations
(continued)
implemented or to be implemented under PPACA
could result in the failure of Medicare, Medicaid or private payment
reimbursement rates to cover our tenants increasing costs or other
circumstances that could have a material adverse effect on our tenants
abilities to pay rent to us.
Item 3. Quantitative and Qualitative Disclosures
About Market Risk.
We
are exposed to risks associated with market changes in interest rates. We manage our exposure to this market risk by
monitoring available financing alternatives.
Our strategy to manage exposure to changes in interest rates is
unchanged since December 31, 2009. Other than as described below, we do
not foresee any significant changes in our exposure to fluctuations in interest
rates or in how we manage this exposure in the future.
At
March 31, 2010, our outstanding fixed rate debt included the following
(dollars in thousands):
Debt
(1)
|
|
Principal
Balance
|
|
Annual
Interest
Rate
|
|
Annual
Interest
Expense
|
|
Maturity
|
|
Interest
Payments Due
|
|
Unsecured
senior notes
|
|
$
|
225,000
|
|
|
8.625%
|
|
$
|
19,406
|
|
2012
|
|
Semi-Annually
|
|
Unsecured
senior notes
(2)
|
|
97,500
|
|
|
7.875%
|
|
7,678
|
|
2015
|
|
Semi-Annually
|
|
Mortgages
(3)
|
|
306,195
|
|
|
6.71%
|
|
20,546
|
|
2019
|
|
Monthly
|
|
Mortgages
|
|
49,186
|
|
|
6.54%
|
|
3,217
|
|
2017
|
|
Monthly
|
|
Mortgages
|
|
32,646
|
|
|
6.97%
|
|
2,275
|
|
2012
|
|
Monthly
|
|
Mortgage
|
|
14,686
|
|
|
6.91%
|
|
1,015
|
|
2013
|
|
Monthly
|
|
Mortgages
|
|
11,385
|
|
|
6.11%
|
|
696
|
|
2013
|
|
Monthly
|
|
Mortgage
|
|
4,364
|
|
|
6.50%
|
|
284
|
|
2013
|
|
Monthly
|
|
Mortgage
|
|
3,903
|
|
|
7.31%
|
|
285
|
|
2022
|
|
Monthly
|
|
Mortgage
|
|
1,909
|
|
|
7.85%
|
|
150
|
|
2022
|
|
Monthly
|
|
Bonds
|
|
14,700
|
|
|
5.875%
|
|
864
|
|
2027
|
|
Semi-Annually
|
|
|
|
$
|
761,474
|
|
|
|
|
$
|
56,416
|
|
|
|
|
|
(1)
Excludes $200.0 million principal balance of our
6.75% senior notes due 2020 issued by us on April 9, 2010.
(2)
In April 2010, we called all of these notes for
redemption on May 17, 2010, utilizing a portion of the net proceeds from
our issuance of the 6.75% senior notes due 2020 described in Note 1 above.
(3)
Consists of fixed rate portion of our FNMA loan.
No principal payments are due under our unsecured
notes or bonds until maturity. Our mortgages require principal and interest
payments through maturity pursuant to amortization schedules. Because these
debts bear interest at a fixed rate, changes in market interest rates during
the term of these debts will not affect our operating results. If these debts are refinanced at interest
rates which are 10% higher or lower than shown above, our per annum interest
cost would increase or decrease by approximately $5.6 million.
Changes in market interest rates affect the fair
value of our fixed rate debt obligations; increases in market interest rates
decrease the fair value of our fixed rate debt, while decreases in market
interest rates increase the fair value of our fixed rate debt. Based on the balances outstanding at March 31,
2010, and discounted cash flow analysis through the maturity date of our fixed
rate debt obligations, a hypothetical immediate 10% change in interest rates
would change the fair value of those obligations by approximately $24.5
million.
18
Item 3. Quantitative
and Qualitative Disclosures About Market Risk (continued)
We are generally allowed to make prepayments of our
unsecured senior notes, in whole or in part, at par plus a premium, as defined.
For example, in April 2010, we called all of our outstanding 7.875% senior
notes due 2015 for redemption on May 17, 2010. Our mortgages generally contain provisions
that allow us to make repayment at par plus premiums which is generally
designed to preserve a stated yield to the mortgage holder. Also, as we have
previously done on occasion, we occasionally have the opportunity to purchase
our outstanding debt by open market purchases. These prepayment rights and
purchases may afford us the opportunity to mitigate the risks arising from
changes in interest rates.
Our
unsecured revolving credit facility accrues interest at floating rates and
matures in December 2010. Subject
to certain conditions, we can extend the maturity for one year upon payment of
a fee. At March 31, 2010, we had
$58.0 million outstanding and $492.0 million available for borrowing under our
revolving credit facility. At May 5, 2010, we had zero amounts outstanding
and $550.0 million available for borrowing under our
revolving credit facility. We may make repayments and drawings under our
revolving credit facility at any time without penalty. We borrow in U.S. dollars and borrowings
under our revolving credit facility accrue interest at LIBOR plus a
spread. Accordingly, we are vulnerable
to changes in U.S. dollar based short term rates, specifically LIBOR. In addition, upon renewal or refinancing of
our revolving credit facility, we are vulnerable to increases in credit spreads
due to market conditions. A change in
interest rates would not affect the value of our floating rate debt but would
affect our operating results. For
example, the interest rate payable on our outstanding revolving indebtedness of
$58.0 million at March 31, 2010, was 1.03%. The following table presents the impact a 10%
change in interest rates would have on our annual floating rate interest
expense at March 31, 2010 (dollars in thousands):
|
|
Impact of Changes in Interest Rates
|
|
|
|
Interest Rate
|
|
Outstanding
Debt
|
|
Total Interest
Expense Per
Year
|
|
At March 31, 2010
|
|
1.03%
|
|
$
|
58,000
|
|
$
|
597
|
|
10% reduction
|
|
0.93%
|
|
58,000
|
|
539
|
|
10% increase
|
|
1.13%
|
|
58,000
|
|
655
|
|
|
|
|
|
|
|
|
|
|
|
The
foregoing table shows the impact of an immediate change in floating interest
rates. If interest rates were to change
gradually over time, the impact would be spread over time. Our exposure to fluctuations in floating
interest rates will increase or decrease in the future with increases or
decreases in the outstanding amount under our revolving credit facility or
other floating rate debt. The following table
presents the impact a 10% change in interest rates would have on our annual
floating rate interest expense at March 31, 2010 if we had fully drawn our
revolving credit facility (dollars in thousands):
|
|
Impact of Changes in Interest Rates
|
|
|
|
Interest Rate
|
|
Outstanding
Debt
|
|
Total Interest
Expense Per
Year
|
|
At March 31, 2010
|
|
1.03%
|
|
$
|
550,000
|
|
$
|
5,665
|
|
10% reduction
|
|
0.93%
|
|
550,000
|
|
5,115
|
|
10% increase
|
|
1.13%
|
|
550,000
|
|
6,215
|
|
|
|
|
|
|
|
|
|
|
|
On
August 4, 2009, we closed a FNMA mortgage financing for approximately
$512.9 million. A part of this borrowing
is at a fixed interest rate ($307.7 million) and a part is at a floating rate
($205.2 million) calculated as a spread above LIBOR. A change in market interest rates will not
change the value of the floating rate part of this loan but will change the interest
expense on the floating rate part of this
19
Item 3. Quantitative
and Qualitative Disclosures About Market Risk (continued)
loan. For example, at March 31, 2010, our
effective weighted average annual interest rate payable on the outstanding
variable amount of this loan was 6.37%.
If interest rates increase by 10% of current rates, the impact upon us
would be to change the value of this obligation and change our interest expense
as shown in the following table:
|
|
Impact of Changes in Interest Rates
|
|
|
|
Interest
Rate
(1)
|
|
Outstanding
Debt
|
|
Total Interest
Expense Per
Year
|
|
At March 31, 2010
|
|
6.37%
|
|
$
|
204,057
|
|
$
|
12,998
|
|
10% reduction
|
|
6.35%
|
|
204,057
|
|
12,958
|
|
10% increase
|
|
6.40%
|
|
204,057
|
|
13,060
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Our variable rate at March 31, 2010 consists of the one month LIBOR
rate of 0.25% at March 31, 2010 plus a premium that remains constant. This table assumes a 10% interest rate change
on the one month LIBOR rate.
Also, we have arranged with FNMA to cap, or limit,
the interest rate increases which will impact the interest expense we will pay
on the floating rate part of this loan.
The net effect of this arrangement is that the maximum annual effective
interest rate on the full amount of this loan we may be required to pay is
7.79%.
We
also have the option to prepay our FNMA obligations in order to mitigate the
risks of refinancing or for other reasons.
The fixed rate portion of this loan may be prepaid during the first 96
months of the loan term subject to our paying a standard make whole premium and
thereafter for a declining fixed percent premium of the amount prepaid which is
reduced to zero in the last six months of this ten year loan. The floating rate portion may be prepaid
after one year for a fixed premium percent of the amount prepaid which is also
reduced to zero in the last six months of this ten year loan. We may exercise these prepayment options to
mitigate the risks inherent in this FNMA loan arising from changes in interest
rates.
Item 4. Controls and
Procedures.
As of the end of the period
covered by this report, our management carried out an evaluation, under the
supervision and with the participation of our Managing Trustees, President and
Chief Operating Officer and Treasurer and Chief Financial Officer, of the
effectiveness of our disclosure controls and procedures pursuant to the
Securities Exchange Act of 1934, as amended, Rules 13a-15 and 15d-15. Based upon that evaluation, our Managing
Trustees, President and Chief Operating Officer and Treasurer and Chief
Financial Officer concluded that our disclosure controls and procedures are
effective.
There have been no changes
in our internal control over financial reporting during the quarter ended March 31,
2010 that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
20
WARNING CONCERNING FORWARD LOOKING STATEMENTS
THIS QUARTERLY REPORT ON FORM 10-Q CONTAINS
STATEMENTS AND IMPLICATIONS WHICH CONSTITUTE 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. FORWARD LOOKING STATEMENTS IN
THIS REPORT RELATE TO VARIOUS ASPECTS OF OUR BUSINESS, INCLUDING
:
·
OUR ABILITY TO PURCHASE OR
SELL PROPERTIES,
·
OUR ABILITY TO RAISE DEBT OR
EQUITY CAPITAL,
·
OUR ABILITY TO PAY INTEREST
AND DEBT PRINCIPAL AND MAKE DISTRIBUTIONS, AND PAY THE AMOUNT OF ANY SUCH
DISTRIBUTIONS,
·
OUR ABILITY TO RETAIN OUR
EXISTING TENANTS AND MAINTAIN CURRENT RENTAL RATES,
·
OUR POLICIES AND PLANS
REGARDING INVESTMENTS AND FINANCINGS,
·
OUR ABILITY TO RENEW OR
REFINANCE OUR REVOLVING CREDIT FACILITY,
·
OUR TAX STATUS AS A REAL
ESTATE INVESTMENT TRUST, OR REIT,
·
OUR BELIEF THAT FIVE STAR,
OUR FORMER SUBSIDIARY, WHICH IS RESPONSIBLE FOR 57% OF OUR CURRENT ANNUALIZED
RENTS, HAS ADEQUATE FINANCIAL RESOURCES AND LIQUIDITY TO MEET ITS OBLIGATIONS
TO US,
·
OUR EXPECTATION THAT WE WILL
BENEFIT FINANCIALLY BY PARTICIPATING IN THE INSURANCE COMPANY WITH RMR AND
COMPANIES TO WHICH RMR PROVIDES MANAGEMENT SERVICES, AND
·
OTHER MATTERS.
OUR
ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE CONTAINED IN OR IMPLIED BY
OUR FORWARD LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS. FACTORS THAT COULD HAVE A MATERIAL ADVERSE
EFFECT ON OUR FORWARD LOOKING STATEMENTS AND UPON OUR BUSINESS, RESULTS OF OPERATIONS,
FINANCIAL CONDITION, FUNDS FROM OPERATIONS, CASH AVAILABLE FOR DISTRIBUTION,
CASH FLOWS, LIQUIDITY AND PROSPECTS INCLUDE, BUT ARE NOT LIMITED TO:
·
THE IMPACT OF CHANGES IN THE
ECONOMY AND THE CAPITAL MARKETS ON US AND OUR TENANTS,
·
ACTUAL AND POTENTIAL
CONFLICTS OF INTEREST WITH OUR MANAGING TRUSTEES, FIVE STAR AND RMR AND ITS
RELATED ENTITIES AND CLIENTS,
·
COMPLIANCE WITH, AND CHANGES
TO, FEDERAL, STATE AND LOCAL LAWS AND REGULATIONS, ACCOUNTING RULES, TAX RATES
AND SIMILAR MATTERS,
·
LIMITATIONS IMPOSED ON OUR
BUSINESS AND OUR ABILITY TO SATISFY COMPLEX RULES IN ORDER FOR US TO QUALIFY AS
A REIT FOR U.S. FEDERAL INCOME TAX PURPOSES, AND
·
COMPETITION WITHIN THE
HEALTHCARE AND REAL ESTATE INDUSTRIES.
21
FOR
EXAMPLE:
·
FIVE STAR MAY EXPERIENCE FINANCIAL
DIFFICULTIES AS A RESULT OF A NUMBER OF FACTORS, INCLUDING, BUT NOT LIMITED TO:
·
CHANGES IN MEDICARE AND
MEDICAID PAYMENTS WHICH COULD RESULT IN A REDUCTION OF RATES OR A FAILURE OF
THESE RATES TO MATCH FIVE STARS COST INCREASES,
·
CHANGES IN REGULATIONS
EFFECTING ITS OPERATIONS,
·
CHANGES IN THE ECONOMY
GENERALLY OR GOVERNMENTAL POLICIES WHICH REDUCE THE DEMAND FOR THE SERVICES
FIVE STAR OFFERS,
·
INCREASES IN INSURANCE AND
TORT LIABILITY COSTS, AND
·
INEFFECTIVE INTEGRATION OF
NEW ACQUISITIONS.
·
IF FIVE STARS OPERATIONS BECOME
UNPROFITABLE, FIVE STAR MAY BECOME UNABLE TO PAY OUR RENTS,
·
OUR OTHER TENANTS MAY EXPERIENCE LOSSES
AND BECOME UNABLE TO PAY OUR RENTS,
·
OUR PARTICIPATION IN AFFILIATES INSURANCE
INVOLVES POTENTIAL FINANCIAL RISKS AND REWARDS TYPICAL OF ANY START UP BUSINESS
VENTURE AS WELL AS OTHER FINANCIAL RISKS AND REWARDS SPECIFIC TO INSURANCE
COMPANIES. AMONG THE RISKS THAT ARE
SPECIFIC TO INSURANCE COMPANIES IS THE RISK THAT AFFILIATES INSURANCE MAY NOT
BE ABLE TO ADEQUATELY PAY CLAIMS. TO THE
EXTENT WE PURCHASE INSURANCE FROM AFFILIATES INSURANCE IN THE FUTURE AND AFFILIATES
INSURANCE IS UNABLE TO FINANCE CLAIMS, WE COULD BE UNDERINSURED AND FACE
INCREASED COSTS FOR CLAIMS THAT MIGHT OTHERWISE HAVE BEEN FUNDED IF INSURANCE
WAS PURCHASED FROM FINANCIALLY MORE SECURE INSURERS. ACCORDINGLY, OUR EXPECTED FINANCIAL BENEFITS
FROM OUR INITIAL OR FUTURE INVESTMENTS IN AFFILIATES INSURANCE MAY BE
DELAYED OR MAY NOT OCCUR AND AFFILIATES INSURANCE MAY REQUIRE A
LARGER INVESTMENT THAN WE EXPECT,
·
IF THE AVAILABILITY OF
DEBT CAPITAL BECOMES RESTRICTED, WE MAY BE UNABLE TO RENEW, REFINANCE OR
REPAY OUR REVOLVING CREDIT FACILITY OR OUR OTHER DEBT OBLIGATIONS WHEN THEY
BECOME DUE OR ON TERMS WHICH ARE AS FAVORABLE AS WE NOW HAVE,
·
OUR ABILITY TO MAKE FUTURE DISTRIBUTIONS
DEPENDS UPON A NUMBER OF FACTORS, INCLUDING OUR FUTURE EARNINGS. WE MAY BE UNABLE TO MAINTAIN OUR CURRENT
RATE OF DISTRIBUTIONS AND FUTURE DISTRIBUTIONS MAY BE SUSPENDED OR PAID AT
A LESSER RATE THAN THE DISTRIBUTIONS WE NOW PAY,
·
OUR ABILITY TO GROW OUR BUSINESS AND INCREASE
OUR DISTRIBUTIONS DEPENDS IN LARGE PART UPON OUR ABILITY TO BUY PROPERTIES
AND LEASE THEM FOR RENTS WHICH EXCEED OUR CAPITAL COSTS. WE MAY BE UNABLE TO IDENTIFY PROPERTIES
THAT WE WANT TO ACQUIRE OR TO NEGOTIATE ACCEPTABLE PURCHASE PRICES, ACQUISITION
FINANCING OR LEASE TERMS FOR NEW PROPERTIES,
·
SOME OF OUR TENANTS MAY NOT RENEW
EXPIRING LEASES, AND WE MAY BE UNABLE TO LOCATE NEW TENANTS TO MAINTAIN
THE HISTORICAL OCCUPANCY RATES OF, OR RENTS FROM, OUR PROPERTIES,
22
·
RENTS THAT WE CAN CHARGE AT OUR PROPERTIES MAY DECLINE,
·
WE HAVE ENTERED INTO AN AGREEMENT TO PURCHASE
ONE MEDICAL OFFICE BUILDING. OUR
OBLIGATION TO COMPLETE THIS CURRENTLY PENDING ACQUISITION IS SUBJECT TO VARIOUS
CONDITIONS TYPICAL OF COMMERCIAL REAL ESTATE ACQUISITIONS. AS A RESULT OF ANY FAILURE OF THESE
CONDITIONS, WE MAY NOT ACQUIRE THIS PROPERTY, AND
·
OTHER RISKS MAY ADVERSELY IMPACT US, AS
DESCRIBED MORE FULLY IN OUR ANNUAL REPORT UNDER ITEM 1A. RISK FACTORS.
THESE
RESULTS COULD OCCUR DUE TO MANY DIFFERENT CIRCUMSTANCES, SOME OF WHICH ARE
BEYOND OUR CONTROL, SUCH AS THE APPLICATION AND INTERPRETATION OF RECENTLY
PASSED OR NEW LAWS AFFECTING OUR BUSINESS, NATURAL DISASTERS OR CHANGES IN OUR
MANAGERS OR TENANTS REVENUES OR COSTS, OR CHANGES IN CAPITAL MARKETS OR THE ECONOMY
GENERALLY.
THE INFORMATION CONTAINED
ELSEWHERE IN OUR ANNUAL REPORT AND SUBSEQUENT DOCUMENTS FILED WITH THE SEC
IDENTIFIES OTHER IMPORTANT FACTORS THAT COULD CAUSE DIFFERENCES FROM OUR
FORWARD LOOKING STATEMENTS.
YOU
SHOULD NOT PLACE UNDUE RELIANCE UPON FORWARD LOOKING STATEMENTS.
EXCEPT AS REQUIRED BY LAW, WE DO NOT INTEND TO UPDATE OR
CHANGE ANY FORWARD LOOKING STATEMENTS AS A RESULT OF NEW INFORMATION, FUTURE
EVENTS OR OTHERWISE.
STATEMENT
CONCERNING LIMITED LIABILITY
THE AMENDED
AND RESTATED DECLARATION OF TRUST ESTABLISHING SENIOR HOUSING PROPERTIES TRUST,
DATED SEPTEMBER 20, 1999, AS AMENDED AND SUPPLEMENTED, AS FILED WITH THE STATE
DEPARTMENT OF ASSESSMENTS AND TAXATION OF MARYLAND, PROVIDES THAT NO TRUSTEE,
OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF SENIOR HOUSING PROPERTIES TRUST
SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY
OBLIGATION OF, OR CLAIM AGAINST, SENIOR HOUSING PROPERTIES TRUST. ALL PERSONS DEALING WITH SENIOR HOUSING
PROPERTIES TRUST IN ANY WAY SHALL LOOK ONLY TO THE ASSETS OF SENIOR HOUSING
PROPERTIES TRUST FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY
OBLIGATION.
23
PART II.
Other Information
Item 2. Unregistered Sales of
Equity Securities and Use of Proceeds.
As
further described in our Annual Report, RMR provides management services to
us. Under the terms of our business management agreement with RMR, on March 25,
2010, we issued 25,142 common shares to RMR in payment of an incentive fee for
services rendered by RMR during 2009. We issued these shares pursuant to
an exemption from registration contained in Section 4(2) of the Securities
Act of 1933, as amended.
Item 6. Exhibits.
4.1
Supplemental
Indenture No. 4, dated as of April 9, 2010, between the Company and
U.S. Bank National Association, relating to 6.75% Senior Notes due 2020,
including Form thereof.
(Filed
herewith)
12.1
Computation of
Ratio of Earnings to Fixed Charges.
(Filed herewith)
31.1
Rule 13a-14(a) Certification.
(Filed herewith)
31.2
Rule 13a-14(a) Certification.
(Filed herewith)
31.3
Rule 13a-14(a) Certification.
(Filed herewith)
31.4
Rule 13a-14(a) Certification.
(Filed herewith)
32.1
Section 1350 Certification.
(Furnished herewith)
24
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
|
SENIOR
HOUSING PROPERTIES TRUST
|
|
|
|
|
|
By:
|
/s/
David J. Hegarty
|
|
|
David
J. Hegarty
|
|
|
President
and Chief Operating Officer
|
|
|
Dated:
May 5, 2010
|
|
|
|
|
|
|
|
By:
|
/s/
Richard A. Doyle
|
|
|
Richard
A. Doyle
|
|
|
Treasurer
and Chief Financial Officer
|
|
|
(principal
financial and accounting officer)
|
|
|
Dated:
May 5, 2010
|
25
Senior Housing Properties (NASDAQ:SNH)
Historical Stock Chart
From Jun 2024 to Jul 2024
Senior Housing Properties (NASDAQ:SNH)
Historical Stock Chart
From Jul 2023 to Jul 2024