Senior Housing Properties Trust (NYSE: SNH) today announced its
financial results for the quarter and six months ended June 30,
2012.
Results for the quarter ended June 30, 2012:
Normalized funds from operations, or Normalized FFO, for the
quarter ended June 30, 2012 were $73.2 million, or $0.45 per share.
This compares to Normalized FFO for the quarter ended June 30, 2011
of $62.6 million, or $0.44 per share.
Net income was $33.3 million, or $0.20 per share, for the
quarter ended June 30, 2012, compared to net income of $51.0
million, or $0.36 per share, for the quarter ended June 30, 2011.
Net income for the quarter ended June 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 in the second
quarter of 2011 and 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.
The weighted average number of common shares outstanding totaled
162.7 million and 141.9 million for the quarters ended June 30,
2012 and 2011, 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 June
30, 2012 and 2011 appears later in this press release.
Results for the six months ended June 30, 2012:
Normalized funds from operations, or Normalized FFO, for the six
months ended June 30, 2012 were $145.6 million, or $0.90 per share.
This compares to Normalized FFO for the six months ended June 30,
2011 of $124.7 million, or $0.88 per share.
Net income was $65.6 million, or $0.40 per share, for the six
months ended June 30, 2012, compared to net income of $82.8
million, or $0.58 per share, for the six months ended June 30,
2011. Net income for the six months ended June 30, 2012 includes a
non-cash impairment of assets charge of approximately $3.1 million,
or $0.02 per share, related to one property. Net income for the six
months ended June 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 in the second quarter of 2011, a loss on
early extinguishment of debt of approximately $427,000, or less
than $0.01 per share, in connection with replacing our revolving
credit facility and a non-cash impairment of assets charge of
approximately $166,000, or less than $0.01 per share, related to
two properties.
The weighted average number of common shares outstanding totaled
162.7 million and 141.9 million for the six months ended June 30,
2012 and 2011, respectively.
A reconciliation of net income determined according to GAAP to
FFO and Normalized FFO for the six months ended June 30, 2012 and
2011 appears later in this press release.
Recent Investment and Sales Activities:
Since April 1, 2012, we have acquired, or we currently have
agreements to acquire, 16 properties for total purchase prices of
approximately $368.9 million, including the assumption of
approximately $122.8 million of mortgage debt and excluding closing
costs:
- In May 2012, we acquired a previously
disclosed senior living community located in South Carolina with 59
assisted living units for approximately $8.1 million, including the
assumption of approximately $4.8 million of mortgage debt and
excluding closing costs. All the residents at this community
currently pay for occupancy and services with private resources. A
subsidiary of Five Star Quality Care, Inc., which, together with
its subsidiaries, we refer to as Five Star, manages this community
for our taxable REIT subsidiary, or TRS, under a long term
contract.
- In May 2012, we acquired a previously
disclosed property leased to medical providers, medical related
businesses, clinics and biotech laboratory tenants, or an MOB, with
28,440 square feet located in Georgia for approximately $8.6
million, excluding closing costs. Upon acquisition, this property
was 100.0% leased to six tenants for weighted (by rents) average
lease terms of 5.3 years.
- In May 2012, we acquired another
previously disclosed MOB with 111,538 square feet located in
Georgia for approximately $23.1 million, excluding closing costs.
Upon acquisition, this property was 100.0% leased to The Emory
Clinic, Inc. for approximately 9.5 years.
- In June 2012, we acquired a previously
disclosed MOB with 204,429 square feet located in Hawaii for
approximately $70.5 million, including the assumption of
approximately $52.0 million of mortgage debt and excluding closing
costs. Upon acquisition, this property was 99.5% leased to 18
tenants for weighted (by rents) average lease terms of 4.1
years.
- In June 2012, we acquired another
previously disclosed MOB with 92,180 square feet located in
Maryland for approximately $18.3 million, excluding closing costs.
Upon acquisition, this property was 98.0% leased to eight tenants
for weighted (by rents) average lease terms of 6.0 years.
- In July 2012, we acquired a previously
disclosed senior living community located in South Carolina with
232 living units for approximately $37.3 million, excluding closing
costs. Substantially all the residents at this community currently
pay for occupancy and services with private resources. A subsidiary
of Five Star manages this community for our TRS under a long term
contract.
- In July 2012, we acquired one MOB with
63,082 square feet located in Texas for approximately $16.8
million, excluding closing costs. Upon acquisition, this property
was 100% leased to 11 tenants for weighted (by rents) average lease
terms of 6.9 years.
- In July 2012, we acquired another MOB
with 52,858 square feet located in Florida for approximately $7.7
million, excluding closing costs. Upon acquisition, this property
was 80% leased to 18 tenants for weighted (by rents) average lease
terms of 2.5 years.
- On July 31, 2012, we acquired four
previously disclosed senior living communities located in Colorado,
Idaho and Washington with a total of 511 living units for total
purchase prices of approximately $36.5 million, including the
assumption of approximately $6.9 million of mortgage debt and
excluding closing costs. We leased these properties to Stellar
Senior Living, LLC, a third party operator, for initial rent of
approximately $2.9 million per year. Percentage rent, based on
increases in gross revenues at these properties, will commence in
2014.
- We have previously disclosed agreements
to acquire three properties which have not yet closed, including
two senior living communities and one MOB for total purchase prices
of approximately $126.7 million, including the assumption of
approximately $49.4 million of mortgage debt and excluding closing
costs. The two senior living communities are located in Missouri
and New York and include a total of 397 living units, and the MOB
is located in Massachusetts and includes 35,000 square feet. The
closings of these acquisitions are contingent upon customary
closing conditions; accordingly, we can provide no assurance that
we will purchase these properties.
- In July 2012, we entered an agreement
to acquire one MOB for approximately $15.3 million, including the
assumption of approximately $9.7 million of mortgage debt and
excluding closing costs. The MOB is located in Minnesota and
includes a total of 76,637 square feet. This acquisition has not
yet closed. The closing of this acquisition 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 July 2012, we sold one MOB located in Massachusetts for a
sale price of approximately $1.1 million. We are also currently
marketing for sale a senior living community located in
Pennsylvania which is classified as held for sale as of June 30,
2012.
Recent Financing Activities:
In July 2012, we issued 13,800,000 common shares for $21.75 /
share in a public offering, raising net proceeds of approximately
$287.1 million after expenses. We used the net proceeds of this
offering to repay borrowings outstanding under our revolving credit
facility.
In July 2012, we sold $350.0 million of 5.625% senior unsecured
notes due 2042, raising net proceeds of approximately $338.8
million after expenses. We used a part of the net proceeds of this
offering to repay borrowings outstanding under our revolving credit
facility and we intend to apply the remaining net proceeds from
this offering to prepay the variable portion of our Federal
National Mortgage Association, or FNMA, secured term loan, which
had an interest rate of 6.38% at June 30, 2012 and a maturity date
in September 2019, and for general business purposes, which may
include funding possible future acquisitions of properties.
During the second quarter of 2012, we repaid 18 mortgage loans
with a weighted average interest rate of 6.88% encumbering 18 of
our properties for approximately $35.7 million that had maturity
dates in June, July and September 2012.
In May 2011, we and Five Star entered into a loan agreement, or
the Bridge Loan, under which we agreed to lend Five Star up to
$80.0 million to fund a portion of Five Star’s purchase of a
portfolio of six senior living communities. This loan was due in
July 2012. In April 2012, Five Star repaid the $38.0 million which
was then outstanding under this Bridge Loan, resulting in the
termination of the Bridge Loan.
Other Recent Developments:
In May 2012, we entered into an operations transfer agreement,
or the Operations Transfer Agreement, with Sunrise Senior Living,
Inc., or Sunrise, and Five Star related to 10 senior living
communities that we currently lease to Sunrise. The Operations
Transfer Agreement provides that we and Sunrise will accelerate the
December 31, 2013 termination date of these Sunrise leases, that we
will lease the 10 communities to our TRSs and that Five Star will
manage the communities pursuant to long term contracts. The
Operations Transfer Agreement provides that these transactions will
occur when we and Five Star have obtained required regulatory
approvals to operate the 10 communities. Because of the required
regulatory approval processes, we expect the transition of the 10
communities’ operations to occur on various dates during the
remainder of 2012. Pursuant to the Operations Transfer Agreement,
we paid Sunrise $1.0 million to purchase the inventory and certain
improvements owned by Sunrise at these communities.
Conference Call:
On Wednesday, August 1, 2012, at 1:00 p.m. Eastern Time, David
J. Hegarty, President and Chief Operating Officer, and Richard A.
Doyle, Treasurer and Chief Financial Officer, will host a
conference call to discuss the financial results for the quarter
and six months ended June 30, 2012. The conference call telephone
number is (800) 553-0318. Participants calling from outside the
United States and Canada should dial (612) 332-0228. 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, Wednesday, August 8, 2012. To hear the
replay, dial (320) 365-3844. The replay pass code is: 252613.
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 second quarter conference call is strictly prohibited
without the prior written consent of SNH.
Supplemental Data:
A copy of SNH’s Second Quarter 2012 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 owned 375
properties located in 39 states and Washington, D.C. as of June 30,
2012. SNH is headquartered in Newton, MA.
Please see the pages attached hereto for a more detailed
statement of our operating results and financial condition.
Financial Information
(amounts in thousands, except per share
data)
(unaudited)
Income Statement:
Quarter Ended June
30,
Six Months Ended
June 30,
2012
2011
2012
2011
Revenues: Rental income $ 110,986 $ 100,318 $ 220,491 $
198,870 Residents fees and services 35,986 844
71,554 844 Total revenues
146,972 101,162 292,045 199,714 Expenses: Depreciation
35,230 26,935 68,607 53,296 Property operating expenses 40,734
11,302 80,068 21,735 General and administrative 8,068 6,793 15,753
12,949 Acquisition related costs 1,829 2,814 2,517 3,927 Impairment
of assets - - 3,071
166 Total expenses 85,861 47,844
170,016 92,073 Operating
income 61,111 53,318 122,029 107,641 Interest and other
income 227 244 709 476 Interest expense (28,120 ) (23,361 ) (57,009
) (46,107 ) Loss on early extinguishment of debt - (427 ) - (427 )
Gain on sale of properties - 21,315 - 21,315 Equity in earnings of
an investee 76 46 121
83 Income before income tax expense 33,294 51,135
65,850 82,981 Income tax expense (43 ) (87 )
(247 ) (158 ) Net income $ 33,251 $ 51,048 $
65,603 $ 82,823 Weighted average shares
outstanding 162,670 141,869
162,659 141,862 Net income per share $
0.20 $ 0.36 $ 0.40 $ 0.58
Financial Information
(continued)
(dollars in thousands)
(unaudited)
Balance Sheet: At June 30, 2012
At December 31, 2011
Assets
Real estate properties $4,866,390 $4,721,591 Less accumulated
depreciation 688,407 630,261 4,177,983 4,091,330 Cash and cash
equivalents 20,405 23,560 Restricted cash 10,044 7,128 Deferred
financing fees, net 23,479 25,434 Acquired real estate leases and
other intangible assets, net 100,619 100,235 Loan receivable (1) -
38,000 Other assets 134,022 97,361 Total assets $4,466,552
$4,383,048 Commitments and Contingencies
Liabilities and
Shareholders’ Equity
Unsecured revolving credit facility (2) $ 360,000 $ - Senior
unsecured notes, net of discount (3) 741,412 965,770 Secured debt
and capital leases (3) 863,516 861,615 Accrued interest 13,315
22,281 Assumed real estate lease obligations, net 15,091 17,778
Other liabilities 57,059 42,998 Total liabilities
2,050,393 1,910,442 Shareholders’ equity 2,416,159
2,472,606 Total liabilities and shareholders’ equity $ 4,466,552 $
4,383,048 (1) In May
2011, we and Five Star entered into a Bridge Loan under which we
agreed to lend Five Star up to $80.0 million to fund a portion of
Five Star’s purchase of a portfolio of six senior living
communities. In April 2012, Five Star repaid the $38.0 million
which was then outstanding under this Bridge Loan, resulting in the
termination of the Bridge Loan. (2) In July 2012, we repaid
all $360.0 million outstanding under our revolving credit facility
using proceeds from our July 2012 equity and debt offerings.
(3) In July 2012, we sold $350.0 million of 5.625% senior unsecured
notes due 2042. We intend to use a portion of the net proceeds from
this offering to prepay the variable portion of our FNMA secured
term loan, which had an interest rate of 6.38% at June 30, 2012 and
a maturity date in September 2019.
Funds from
Operations and Normalized Funds from Operations
(amounts in thousands, except per share
data)
(unaudited)
Calculation of Funds from Operations
(FFO) and Normalized FFO(1):
Quarter Ended June
30,
Six Months Ended
June 30,
2012
2011
2012
2011
Net income $ 33,251 $ 51,048 $ 65,603 $ 82,823 Depreciation expense
35,230 26,935 68,607 53,296 Gain on sale of properties - (21,315 )
- (21,315 ) Impairment of assets - -
3,071 166 FFO 68,481 56,668 137,281 114,970
Acquisition related costs 1,829 2,814 2,517 3,927 Loss on early
extinguishment of debt - 427 - 427 Percentage rent (2) 2,900
2,700 5,800 5,400 Normalized FFO
$ 73,210 $ 62,609 $ 145,598 $ 124,724 Weighted
average shares outstanding 162,670 141,869
162,659 141,862 FFO per share $ 0.42 $
0.40 $ 0.84 $ 0.81 Normalized FFO per share $ 0.45 $
0.44 $ 0.90 $ 0.88 Distributions declared per share $
0.38 $ 0.37 $ 0.76 $ 0.74
(1)
We calculate FFO and Normalized FFO as
shown above. FFO is calculated on the basis defined by The National
Association of Real Estate Investment Trusts, or NAREIT, which is
net income, calculated in accordance with GAAP, excluding any gain
or loss on sale of properties and impairment of assets, 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 acquisition related costs and loss on
early extinguishment of debt, if any. We consider FFO and
Normalized FFO to be appropriate measures of performance for a
REIT, along with net income, operating 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 our
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. FFO
and Normalized FFO do not represent cash generated by operating
activities in accordance with GAAP and should not be considered as
alternatives to net income, operating income or cash flow from
operating activities, determined in accordance with GAAP or 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 FFO and Normalized FFO may facilitate
an understanding of our consolidated historical operating results.
These measures should be considered in conjunction with net income,
operating income and cash flow from operating activities as
presented in our Condensed Consolidated Statements of Income and
Comprehensive Income and Condensed Consolidated Statements of Cash
Flows. Other REITs and real estate companies may calculate FFO and
Normalized FFO differently than us.
(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. When we calculate our Normalized FFO
for the fourth quarter, we exclude 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. 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.
OUR ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE CONTAINED IN
OUR FORWARD LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS. FOR
EXAMPLE:
- OUR PENDING ACQUISITIONS AND SALES OF
SENIOR LIVING COMMUNITIES AND MOBS ARE CONTINGENT UPON VARIOUS
CONDITIONS, INCLUDING IN SOME CASES, COMPLETION OF DILIGENCE AND /
OR REGULATORY, LENDER OR OTHER THIRD PARTY APPROVALS. ACCORDINGLY,
SOME OR ALL OF THESE PURCHASES AND SALES MAY BE DELAYED OR MAY NOT
OCCUR,
- THIS PRESS RELEASE STATES THAT WE
EXPECT TO USE A PART OF THE NET PROCEEDS OF OUR RECENT DEBT
OFFERING TO PREPAY THE VARIABLE PORTION OF OUR FNMA SECURED TERM
LOAN. WE MAY ELECT TO DELAY THE PREPAYMENT OF, OR ELECT NOT TO
PREPAY, ANY OR ALL OF SUCH MORTGAGE LOAN. ACCORDINGLY, THIS
MORTGAGE LOAN MAY NOT BE PAID PRIOR TO ITS MATURITY DATE IN
SEPTEMBER 2019.
- THIS PRESS RELEASE STATES THAT WE
EXPECT THE SUNRISE LEASE TERMINATIONS, THE NEW TRS LEASES AND THE
FIVE STAR MANAGEMENT AGREEMENTS REGARDING CERTAIN 10 COMMUNITIES TO
BE COMPLETED DURING THE REMAINDER OF 2012. ALL OF THE COMMUNITIES
DISCUSSED IN THIS PRESS RELEASE ARE OWNED BY US FREE AND CLEAR OF
MORTGAGE DEBTS AND NO LENDER APPROVALS WILL BE REQUIRED FOR THE
LEASE TERMINATIONS, THE NEW TRS LEASES OR THE NEW MANAGEMENT
AGREEMENTS. HOWEVER, THE TRANSFERS OF OPERATING CONTROL OF THESE 10
COMMUNITIES ARE SUBJECT TO HEALTH REGULATORY APPROVALS IN THE
STATES WHERE THESE COMMUNITIES ARE LOCATED AS WELL AS SOME
APPROVALS FROM CERTAIN THIRD PARTY PAYORS FOR RESIDENT SERVICES. WE
CANNOT CONTROL THE RESULTS OR TIMING OF THESE APPROVAL PROCESSES.
ACCORDINGLY, SOME OF THESE APPROVALS MAY BE DELAYED OR MAY NOT
OCCUR AND THE CANCELLATION OF THE SUNRISE LEASES AND TRANSFER OF
OPERATIONS TO OUR TRSs MAY BE DELAYED OR MAY NOT OCCUR.
THE INFORMATION CONTAINED IN OUR FILINGS WITH THE SECURITIES AND
EXCHANGE COMMISSION, 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 OUR FORWARD LOOKING STATEMENTS. OUR FILINGS
WITH THE SECURITIES AND EXCHANGE COMMISSION ARE AVAILABLE AT 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.
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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