Senior Housing Properties Trust (NYSE: SNH) today announced its
financial results for the quarter and nine months ended September
30, 2011.
Results for the quarter ended September 30, 2011:
Normalized funds from operations, or Normalized FFO, for the
quarter ended September 30, 2011 were $65.4 million, or $0.43 per
share. This compares to Normalized FFO for the quarter ended
September 30, 2010 of $53.5 million, or $0.42 per share.
Net income was $30.0 million, or $0.20 per share, for the
quarter ended September 30, 2011, compared to net income of $28.1
million, or $0.22 per share, for the quarter ended September 30,
2010. Net income for the quarter ended September 30, 2011 includes
a non-cash impairment of assets charge of $1.0 million, or $0.01
per share, related to one property. Net income for the quarter
ended September 30, 2010 includes a gain on sale of properties of
approximately $109,000, or less than $0.01 per share, related to
the sale of four properties in August 2010.
The weighted average number of common shares outstanding totaled
153.4 million and 127.4 million for the quarters ended September
30, 2011 and 2010, respectively.
A reconciliation of net income determined according to U.S.
generally accepted accounting principles, or GAAP, to funds from
operations, or FFO, and Normalized FFO for the quarters ended
September 30, 2011 and 2010 appears later in this press
release.
Results for the nine months ended September 30, 2011:
Normalized FFO for the nine months ended September 30, 2011 were
$190.1 million, or $1.30 per share. This compares to Normalized FFO
for the nine months ended September 30, 2010 of $161.6 million, or
$1.27 per share.
Net income was $112.8 million, or $0.77 per share, for the nine
months ended September 30, 2011, compared to net income of $82.6
million, or $0.65 per share, for the nine months ended September
30, 2010. Net income for the nine months ended September 30, 2011
includes a gain on sale of properties of approximately $21.3
million, or $0.15 per share, related to the sale of seven
properties, a loss on early extinguishment of debt of approximately
$427,000, or less than $0.01 per share, in connection with
replacing our previous $550.0 million revolving credit facility
with a new $750.0 million revolving credit facility and a non-cash
impairment of assets charge of $1.2 million, or $0.01 per share,
related to three properties. Net income for the nine months ended
September 30, 2010 includes a loss on early extinguishment of debt
of approximately $2.4 million, or $0.02 per share, related to the
redemption of all $97.5 million of our outstanding 7.875% senior
notes due 2015, a gain on sale of properties of approximately
$109,000, or less than $0.01 per share, related to the sale of four
properties in August 2010 and a non-cash impairment of assets
charge of $1.1 million, or $0.01 per share, related to five
properties.
The weighted average number of common shares outstanding totaled
145.7 million and 127.4 million for the nine months ended September
30, 2011 and 2010, respectively.
A reconciliation of net income determined according to GAAP to
FFO and Normalized FFO for the nine months ended September 30, 2011
and 2010 appears later in this press release.
Recent Investment and Sales Activities:
Since July 1, 2011, we have acquired, or we currently have under
agreements to acquire, 33 properties for an aggregate purchase
price of approximately $801.0 million, including the assumption of
approximately $207.5 million of mortgage debt and excluding closing
costs:
- In July and August 2011, we acquired
four senior living communities located in Florida with an aggregate
473 units (97 independent living units, 294 assisted living units,
63 Alzheimer’s care units and 19 skilled nursing beds) for
approximately $61.8 million, including the assumption of
approximately $25.2 million of mortgage debt and excluding closing
costs. These acquisitions were pursuant to our previously announced
March 2011 agreement to acquire 20 senior living communities for
approximately $304.0 million, including $78.2 million of mortgage
debt and excluding closing costs. To date, we have closed on the
acquisition of 18 of these communities for $258.4 million,
including the assumption of $73.3 million of mortgage debt and
excluding closing costs. Five Star Quality Care, Inc., or Five
Star, manages 13 of these communities and leases five of these 18
communities under long term agreements. The acquisition of two of
these 20 communities for an aggregate purchase price of
approximately $45.3 million, including the assumption of
approximately $4.9 million of mortgage debt and excluding closing
costs, remain pending; the closings of these two communities are
contingent upon various closing conditions; accordingly, we can
provide no assurance that we will purchase these communities.
- In July 2011, we acquired a property
used for medical related services, manufacturing or research
activities, or an MOB, located in Alachua (Gainesville), FL with
32,476 square feet for $5.2 million, including the assumption of
approximately $3.7 million of mortgage debt and excluding closing
costs. This property is the last of a four biotechnology buildings
campus acquisition announced at the end of the second quarter
2011.
- In September 2011, we acquired 13 MOBs
located in eight states with 1.3 million square feet from
CommonWealth REIT for an aggregate purchase price of $167.0
million, excluding closing costs. These properties are 95% leased
to 105 tenants with a weighted average remaining lease term of
approximately 5.0 years.
- In July 2011, we agreed to acquire nine
senior living communities located in six states with an aggregate
2,226 living units (1,708 independent living units, 471 assisted
living units and 47 Alzheimer’s care units) for approximately
$478.0 million, including the assumption of approximately $164.0
million of mortgage debt and excluding closing costs. We expect
these communities to be managed by Five Star under long term
agreements. The purchases of these communities are subject to
various conditions, including regulatory and other third party
approvals. We currently expect to acquire the majority of these
communities in the fourth quarter of 2011 and the remaining
communities are expected to be acquired in 2012; however, we can
provide no assurance that we will purchase all or any of these
properties.
- In May, July and September 2011, we
entered three separate agreements to acquire one senior living
community and three MOBs for an aggregate purchase price of $43.7
million, including the assumption of approximately $9.7 million of
mortgage debt and excluding closing costs. The senior living
community is located in California and includes 57 assisted living
units, and the three MOBs are located in Indiana and Virginia and
include an aggregate of 138,606 square feet. The closings of these
acquisitions are contingent upon completion of our diligence and
other customary closing conditions; accordingly, we can provide no
assurance that we will purchase these properties.
In May 2011, we and Five Star entered into a loan agreement
under which we agreed to lend Five Star up to $80.0 million, or the
Bridge Loan, to fund Five Star’s purchase of six senior living
communities. In September 2011, Five Star completed the acquisition
of these communities. As of September 30, 2011, $48.0 million in
aggregate principal amount was outstanding and no additional
borrowings were available under this Bridge Loan. The Bridge Loan
is secured by mortgages on three of the senior living communities
that Five Star acquired and on four other senior living communities
owned by Five Star. The Bridge Loan matures on July 1, 2012
and bears interest at a rate equal to the annual rate of interest
applicable to our borrowings under our revolving credit facility,
plus 1%. We recognized interest income from this Bridge Loan of
$187 and $245, respectively, for the three and nine months ended
September 30, 2011, which is included in interest and other income
in our condensed consolidated statements of income.
Recent Financing Activities:
In July 2011, we issued 11.5 million common shares in a public
offering, raising net proceeds of approximately $247.5 million. We
used the net proceeds of this offering to repay borrowings
outstanding on our revolving credit facility and for general
business purposes, including the partial funding of the
acquisitions described above.
In October 2011, we issued 9.2 million common shares in a public
offering, raising net proceeds of approximately $184.7 million. We
used the net proceeds of this offering to repay borrowings
outstanding on our revolving credit facility.
Conference Call:
On Thursday, October 27, 2011, at 1 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 quarter and nine
months ended September 30, 2011. The conference call telephone
number is (800) 553-5275. Participants calling from outside the
United States and Canada should dial (612) 332-0725. 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
11:59 p.m. Eastern Time, Thursday, November 3, 2011. To hear the
replay, dial (320) 365-3844. The replay pass code is: 218249.
A live audio web cast of the conference call will also be
available in listen only mode on the SNH website at
www.snhreit.com. 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. The recording and retransmission in any
way of SNH’s third quarter conference call is strictly prohibited
without the prior written consent of SNH.
Supplemental Data:
A copy of SNH’s Third Quarter 2011 Supplemental Operating and
Financial Data is available for download from the SNH website,
www.snhreit.com. SNH’s website is not incorporated as part of this
press release.
SNH is a real estate investment trust, or REIT,
that owns 357 properties located in 37 states and Washington, D.C.
as of September 30, 2011. SNH is headquartered in Newton, MA.
Financial Information
(in thousands, except per share data)
(unaudited)
Income Statement:
Quarter Ended
September 30, Nine Months Ended September 30,
2011 2010
2011
2010 Revenues: Rental income $ 102,546 $
80,961 $ 300,527 $ 242,173 Residents fees and services
10,731 - 11,575 -
Total revenues 113,277 80,961 312,102 242,173 Expenses:
Depreciation 28,824 22,505 82,120 67,139 Property operating
expenses 19,754 4,599 40,572 13,138 General and administrative
6,608 5,545 19,618 16,439 Acquisition related costs 2,620 286 6,547
725 Impairment of assets 1,028 -
1,194 1,095 Total expenses 58,834
32,935 150,051 98,536
Operating income 54,443 48,026 162,051 143,637
Interest and other income 462 203 971 703 Interest expense (24,730
) (20,226 ) (70,837 ) (59,155 ) Loss on early extinguishment of
debt - - (427 ) (2,433 ) Gain on sale of properties - 109 21,315
109 Equity in earnings (losses) of an investee 28
35 111 (17 ) Income before
income tax expense 30,203 28,147 113,184 82,844 Income tax expense
(207 ) (69 ) (365 ) (223 ) Net income $
29,996 $ 28,078 $ 112,819 $ 82,621
Weighted average shares outstanding 153,385
127,423 145,745 127,404
Net income per share $ 0.20 $ 0.22 $ 0.77
$ 0.65
Financial Information
(continued)
(in thousands, except per share data)
(unaudited)
Balance Sheet:
At September 30, 2011 At
December 31, 2010
Assets Real estate properties $
4,294,821 $ 3,761,712 Less accumulated depreciation 603,309
538,872 3,691,512 3,222,840 Cash and cash equivalents 26,845
10,866 Restricted cash 7,169 4,994 Deferred financing fees, net
22,844 16,262 Acquired real estate leases, net 98,840 63,593 Loan
receivable 48,000 - Other assets 108,103 74,101 Total
assets $ 4,003,313 $ 3,392,656 Commitments and Contingencies
Liabilities and Shareholders’ Equity Unsecured
revolving credit facility $ 210,000 $ 128,000 Senior unsecured
notes, net of discount 670,849 422,880 Secured debt and capital
leases 723,928 654,010 Accrued interest 15,933 14,993 Assumed real
estate lease obligations, net 18,853 18,239 Other liabilities
54,226 26,557 Total liabilities 1,693,789 1,264,679
Shareholders’ equity 2,309,524 2,127,977 Total
liabilities and shareholders’ equity $ 4,003,313 $ 3,392,656
Funds from Operations and Normalized
Funds from Operations
(in thousands, except per share data)
(unaudited)
Calculation of Funds from Operations
(FFO) and Normalized FFO (1):
Quarter Ended September
30, Nine Months Ended September 30,
2011 2010
2011 2010 Net
income $ 29,996 $ 28,078 $ 112,819 $ 82,621 Depreciation expense
28,824 22,505 82,120 67,139 Gain on sale of properties -
(109 ) (21,315 ) (109 ) FFO 58,820 50,474
173,624 149,651 Acquisition related costs 2,620 286 6,547 725 Loss
on early extinguishment of debt - - 427 2,433 Impairment of assets
1,028 - 1,194 1,095 Percentage rent (2) 2,900 2,700
8,300 7,700 Normalized FFO $
65,368 $ 53,460 $ 190,092 $ 161,604
Weighted average shares outstanding 153,385 127,423
145,745 127,404 FFO per
share $ 0.38 $ 0.40 $ 1.19 $ 1.17 Normalized
FFO per share $ 0.43 $ 0.42 $ 1.30 $ 1.27
Distributions declared per share $ 0.38 $ 0.37 $ 1.12
$ 1.09
(1) We compute FFO and Normalized FFO as
shown above. FFO is computed on the basis defined by The National
Association of Real Estate Investment Trusts, or NAREIT, which is
net income, computed in accordance with GAAP, excluding gain or
loss on sale of properties, plus real estate depreciation and
amortization. Our calculation of Normalized FFO differs from
NAREIT’s definition of FFO because we include percentage rent and
exclude loss on early extinguishment of debt, impairment of assets
and acquisition related costs. We consider FFO and Normalized FFO
to be appropriate measures of performance for a REIT, along with
net income and cash flow from operating, investing and financing
activities. We believe that FFO and Normalized FFO provide useful
information to investors because by excluding the effects of
certain historical amounts, such as depreciation expense, FFO and
Normalized FFO can facilitate a comparison of operating
performances between periods. FFO and Normalized FFO are among the
factors considered by our Board of Trustees when determining the
amount of distributions to shareholders. Other 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 capital requirements and operating
performance. These measures do not represent cash generated by
operating activities in accordance with GAAP and should not be
considered as alternatives to net income or cash flow from
operating activities determined in accordance with GAAP as
indicators of our financial performance or liquidity, nor are these
measures necessarily indicative of sufficient cash flow to fund all
of our needs. We believe that this data may facilitate an
understanding of our consolidated historical operating results.
These measures should be considered in conjunction with net income
and cash flow from operating activities as presented in our
Condensed Consolidated Statements of Income. Other REITs and real
estate companies may calculate FFO and Normalized FFO differently
than we do.
(2) Our percentage rents are generally
determined on an annual basis. We defer recognition of percentage
rental income we receive during the first, second and third
quarters until the fourth quarter when all contingencies related to
percentage rents are satisfied. Although recognition of this
revenue is deferred until the fourth quarter, our Normalized FFO
calculation for the first three quarters includes estimated amounts
of percentage rents with respect to those periods. The fourth
quarter calculation of Normalized FFO excludes percentage rents we
presented for the first three quarters.
WARNING CONCERNING
FORWARD LOOKING STATEMENTS
THIS PRESS RELEASE CONTAINS STATEMENTS WHICH CONSTITUTE FORWARD
LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995 AND OTHER SECURITIES LAWS. 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. OUR
ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE CONTAINED IN OR
IMPLIED BY OUR FORWARD LOOKING STATEMENTS AS A RESULT OF VARIOUS
FACTORS, INCLUDING SOME THAT ARE BEYOND OUR CONTROL. FOR
EXAMPLE:
- OUR PENDING ACQUISITIONS OF SENIOR
LIVING COMMUNITIES AND MOBS AND CERTAIN RELATED MANAGEMENT
ARRANGEMENTS ARE CONTINGENT UPON VARIOUS CLOSING CONDITIONS,
INCLUDING IN SOME CASES, OUR COMPLETION OF DILIGENCE AND / OR
REGULATORY, LENDER OR OTHER THIRD PARTY APPROVALS. ACCORDINGLY,
SOME OR ALL OF THESE PURCHASES AND ANY RELATED MANAGEMENT
ARRANGEMENTS MAY BE DELAYED OR MAY NOT OCCUR.
THE INFORMATION CONTAINED IN OUR FILINGS WITH THE SECURITIES AND
EXCHANGE COMMISSION, OR THE SEC, INCLUDING UNDER “RISK FACTORS” IN
OUR PERIODIC REPORTS, OR INCORPORATED THEREIN, IDENTIFIES OTHER
IMPORTANT FACTORS THAT COULD CAUSE OUR ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THOSE STATED IN OR IMPLIED BY OUR FORWARD LOOKING
STATEMENTS. OUR FILINGS WITH THE SEC ARE AVAILABLE ON THE SEC’S
WEBSITE AT WWW.SEC.GOV.
YOU SHOULD NOT PLACE UNDUE RELIANCE UPON OUR 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.
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