Senior Housing Properties Trust (NYSE: SNH) today announced its
financial results for the quarter and year ended December 31,
2012.
Results for the quarter ended December 31, 2012:
Normalized funds from operations, or Normalized FFO, for the
quarter ended December 31, 2012 were $75.5 million, or $0.43 per
share. This compares to Normalized FFO for the quarter ended
December, 2011 of $67.9 million, or $0.42 per share.
Net income was $44.6 million, or $0.25 per share, for the
quarter ended December 31, 2012, compared to net income of $38.6
million, or $0.24 per share, for the quarter ended December 31,
2011. Net income for the quarter ended December 31, 2012 includes a
gain on lease terminations of approximately $479,000, or less than
$0.01 per share, related to our agreement with subsidiaries of
Sunrise Senior Living, Inc., or Sunrise, to terminate early our
leases of 10 senior living communities that were scheduled to
expire in December 2013. Net income for the quarter ended December
31, 2011 includes a non-cash impairment of assets charge of
$796,000, or less than $0.01 per share, related to one property
then being offered for sale.
The weighted average number of common shares outstanding totaled
176.6 million and 160.9 million for the quarters ended December 31,
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
December 31, 2012 and 2011 appears later in this press release.
Results for the year ended December 31, 2012:
Normalized FFO for the year ended December 31, 2012 were $295.9
million, or $1.75 per share. This compares to Normalized FFO for
the year ended December 31, 2011 of $258.0 million, or $1.73 per
share.
Net income was $135.9 million, or $0.80 per share, for the year
ended December 31, 2012, compared to net income of $151.4 million,
or $1.01 per share, for the year ended December 31, 2011. Net
income for the year ended December 31, 2012 includes a loss on
early extinguishment of debt of $6.3 million, or $0.04 per share,
related to the prepayment of a portion of the outstanding principal
balance of our Federal National Mortgage Association, or FNMA,
secured term loan, a non-cash impairment of assets charge of
approximately $3.1 million, or $0.02 per share, related to one
property, a gain on lease terminations of approximately $375,000,
or less than $0.01 per share, related to our agreement with Sunrise
to terminate early our leases of 10 senior living communities that
were scheduled to expire in December 2013, and a loss on sale of
properties of approximately $101,000, or less than $0.01 per share,
related to the sale of one property in July 2012. Net income for
the year ended December 31, 2011 includes a gain on sale of
properties of approximately $21.3 million, or $0.14 per share,
related to the sale of seven properties in the second quarter of
2011, non-cash impairment of assets charges of approximately $2.0
million, or $0.01 per share, related to four properties and 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 in June 2011.
The weighted average number of common shares outstanding totaled
169.2 million and 149.6 million for the years ended December 31,
2012 and 2011, respectively.
A reconciliation of net income determined according to GAAP to
FFO and Normalized FFO for the years ended December 31, 2012 and
2011 appears later in this press release.
Recent Investment and Sales Activities:
Since October 1, 2012, we have acquired 11 properties for total
purchase prices of approximately $145.2 million, including the
assumption of approximately $21.9 million of mortgage debt and
excluding closing costs:
- In November 2012, we acquired a
previously disclosed property leased to medical providers, medical
related businesses, clinics and biotech laboratory tenants, or an
MOB, with 33,796 square feet located in Tennessee for approximately
$9.2 million, excluding closing costs. Upon acquisition, this
property was 100% leased to six tenants for weighted (by rents)
average lease terms of 6.0 years.
- In December 2012, we acquired a
previously disclosed senior living community located in Tennessee
with 90 living units for approximately $11.5 million, 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, pursuant to a long term management
agreement.
- In December 2012, we acquired a senior
living community located in Texas with 78 living units for
approximately $9.0 million, excluding closing costs. All the
residents at this community currently pay for occupancy and
services with private resources. Five Star manages this community
for our TRS pursuant to a long term management agreement.
- In December 2012, we acquired a
previously disclosed MOB with 76,637 square feet located in
Minnesota for approximately $15.1 million, including the assumption
of approximately $9.6 million of mortgage debt and excluding
closing costs. Upon acquisition, this property was 100% leased to
10 tenants for weighted (by rents) average lease terms of 7.8
years.
- In December 2012, we acquired two MOBs
with a total of 62,418 square feet located in Colorado for a
combined purchase price of approximately $16.4 million, excluding
closing costs. Upon acquisition, these properties were 96% leased
to 10 tenants for weighted (by rents) average lease terms of 5.7
years.
- In December 2012, we acquired two MOBs
with a total of 80,216 square feet located in Texas for a combined
purchase price of approximately $23.6 million, excluding closing
costs. Upon acquisition, these properties were 91.7% leased to 16
tenants for weighted (by rents) average lease terms of 5.2
years.
- In January 2013, we acquired a
previously disclosed senior living community located in Washington
State with 150 living units for approximately $22.4 million,
including the assumption of approximately $12.3 million of mortgage
debt and excluding closing costs. All the residents at this
community currently pay for occupancy and services with private
resources. We leased this property to subsidiaries of Stellar
Senior Living, LLC, a privately owned senior living operating
company.
- In February 2013, we acquired two MOBs
with a total of 144,900 square feet located in Washington State for
a combined purchase price of approximately $38.0 million, excluding
closing costs. Upon acquisition, these properties were 100% leased
to Seattle Genetics, Inc. for 5.4 years.
In January 2013, we entered into an agreement to acquire one MOB
for approximately $14.6 million, excluding closing costs. The MOB
is located in Mississippi and includes 71,824 square feet. 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.
We are also currently marketing for sale a senior living
community located in Pennsylvania which we classified as held for
sale as of December 31, 2012.
In December 2012, we terminated a previously disclosed agreement
to acquire a senior living community located in Mississippi with
197 living units for approximately $25.2 million. We terminated
this agreement based upon our diligence findings.
Other Recent Developments:
In May 2012, we entered into an operations transfer agreement,
or the Operations Transfer Agreement, with Sunrise and Five Star
related to 10 senior living communities that we were then leasing
to Sunrise. The Operations Transfer Agreement provides that we and
Sunrise would accelerate the December 31, 2013 termination date of
these Sunrise leases, that we would lease the 10 communities to our
TRS and that Five Star would manage the communities pursuant to
long term management agreements. The leases for all of the 10
senior living communities were terminated prior to December 31,
2012. We have now entered into management agreements with Five Star
with respect to all 10 of these communities.
Recent Financing Activities:
In October 2012, we repaid a mortgage loan encumbering one of
our properties that had a principal balance of $4.2 million, an
interest rate of 6.5% and a maturity date in January 2013.
In January 2013, we issued 11,500,000 common shares in a public
offering, raising gross proceeds of approximately $273.7 million,
before underwriting discounts and expenses. We used the net
proceeds (approximately $262.1 million) of this offering to repay
borrowings outstanding under our revolving credit facility and for
general business purposes, including funding in part acquisitions
of properties described above and possible future acquisitions.
Conference Call:
On Friday, February 15, 2013, 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 year ended December 31, 2012. The conference call telephone
number is (800) 553-0288. Participants calling from outside the
United States and Canada should dial (612) 332-0530. 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, Friday, February 22, 2013. To hear the
replay, dial (320) 365-3844. The replay pass code is: 279891.
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 fourth quarter conference call is strictly prohibited
without the prior written consent of SNH.
Supplemental Data:
A copy of SNH’s Fourth 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 392
properties located in 40 states and Washington, D.C. as of December
31, 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.
WARNING CONCERNING
FORWARD LOOKING STATEMENTS
THIS PRESS RELEASE CONTAINS STATEMENTS THAT 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.
ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE CONTAINED IN OR
IMPLIED BY THESE FORWARD LOOKING STATEMENTS AS A RESULT OF VARIOUS
FACTORS. FOR EXAMPLE:
- THIS PRESS RELEASE STATES THAT WE HAVE
ENTERED INTO AN AGREEMENT TO ACQUIRE A MOB. THIS TRANSACTION IS
SUBJECT TO VARIOUS TERMS AND CONDITIONS TYPICAL OF COMMERCIAL REAL
ESTATE TRANSACTIONS. THESE TERMS AND CONDITIONS MAY NOT BE MET. AS
A RESULT, THIS TRANSACTION MAY NOT OCCUR OR MAY BE DELAYED OR ITS
TERMS MAY CHANGE; AND
- THIS PRESS RELEASE STATES THAT WE HAVE
ONE PROPERTY CLASSIFIED AS HELD FOR SALE. WE MAY NOT BE ABLE TO
SELL THIS PROPERTY ON TERMS ACCEPTABLE TO US OR OTHERWISE.
THE INFORMATION CONTAINED IN OUR FILINGS WITH THE SECURITIES AND
EXCHANGE COMMISSION, OR SEC, INCLUDING UNDER THE CAPTION “RISK
FACTORS” IN OUR PERIODIC REPORTS, OR INCORPORATED THEREIN,
IDENTIFIES OTHER IMPORTANT FACTORS THAT COULD CAUSE DIFFERENCES
FROM 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.
Financial Information
(amounts appearing in the table below are
in thousands, except per share data)
(unaudited)
Income Statement:
Quarter
EndedDecember 31,
Year
EndedDecember 31,
2012
2011
2012
2011
Revenues: Rental income $124,039 $120,327 $460,811 $422,166
Residents fees and services 70,125 16,276 184,031
27,851 Total revenues 194,164 136,603 644,842 450,017
Expenses: Depreciation 36,969 31,145 141,456 113,265
Property operating expenses 73,388 27,079 201,263 68,967 General
and administrative 7,411 6,528 31,517 26,041 Acquisition related
costs 2,580 5,692 9,394 12,239 Impairment of assets - 796
3,071 1,990 Total expenses 120,348
71,240 386,701 222,502 Operating income
73,816 65,363 258,141 227,515 Interest and other income 160
581 1,117 1,451 Interest expense (29,814 ) (27,425 ) (117,240 )
(98,262 ) Loss on early extinguishment of debt (1) - - (6,349 )
(427 ) Gain on lease terminations (2) 479 - 375 - (Loss) gain on
sale of properties (3) - - (101 ) 21,315 Equity in earnings of an
investee 80 28 316 139 Income before
income tax expense 44,721 38,547 136,259 151,731 Income tax
(expense) benefit (85 ) 52 (375 ) (312 ) Net income $44,636
$38,599 $135,884 $151,419
Weighted average shares outstanding 176,554 160,946
169,176 149,577 Net income per share $0.25
$0.24 $0.80 $1.01
(1) In August 2012, we prepaid approximately $199.2 million of
the outstanding principal balance of our FNMA secured term loan. As
a result of this prepayment, we recorded a loss on early
extinguishment of debt of approximately $6.3 million consisting of
a debt prepayment premium, legal fees and the write off of
unamortized deferred financing fees. In June 2011, we recorded a
loss on early extinguishment of debt of approximately $427,000 in
connection with replacing our revolving credit facility.
(2) In May 2012, we entered an agreement with Sunrise for early
terminations of leases for 10 senior living communities which were
previously scheduled to terminate on December 31, 2013; the leases
for all of the 10 communities were terminated prior to December 31,
2012, and resulted in a gain on lease terminations.
(3) In July 2012, we sold one MOB for approximately $1.1 million
and recognized a loss on sale of approximately $101,000. During the
second quarter of 2011, we sold seven properties for total sales
prices of approximately $39.5 million and recognized a gain on sale
of approximately $21.3 million.
Financial Information
(continued)
(dollars appearing in the table below are
in thousands)
(unaudited)
Balance Sheet:
At December 31, 2012 At December 31, 2011
Assets
Real estate properties $5,183,307 $4,721,591 Less accumulated
depreciation 750,903 630,261 4,432,404 4,091,330 Cash and cash
equivalents 42,382 23,560 Restricted cash 9,432 7,128 Deferred
financing fees, net 29,410 25,434 Acquired real estate leases and
other intangible assets, net 115,837 100,235 Loan receivable (1) -
38,000 Other assets 118,537 97,361 Total assets $4,748,002
$4,383,048 Commitments and Contingencies
Liabilities and
Shareholders’ Equity
Unsecured revolving credit facility $190,000 $ - Senior unsecured
notes, net of discount 1,092,053 965,770 Secured debt and capital
leases 724,477 861,615 Accrued interest 15,757 22,281 Assumed real
estate lease obligations, net 13,692 17,778 Other liabilities
65,455 42,998 Total liabilities 2,101,434 1,910,442 Shareholders’
equity 2,646,568 2,472,606 Total liabilities and shareholders’
equity $4,748,002 $4,383,048
(1) In May 2011, we entered a Bridge Loan agreement with Five
Star 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. As of December 31, 2011, Five Star had repaid
$42.0 million, and 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.
Funds from Operations and Normalized
Funds from Operations
(amounts appearing in the table below are
in thousands, except per share data)
(unaudited)
Calculation of Funds from Operations
(FFO) and Normalized FFO (1):
Quarter
EndedDecember 31,
Year
EndedDecember 31,
2012
2011
2012
2011
Net income $44,636 $38,599 $135,884 $151,419 Depreciation expense
36,969 31,145 141,456 113,265 Loss (gain) on sale of properties (2)
- - 101 (21,315 ) Impairment of assets - 796 3,071
1,990
FFO
81,605 70,540 280,512 245,359 Acquisition related costs 2,580 5,692
9,394 12,239 Loss on early extinguishment of debt (3) - - 6,349 427
Gain on lease terminations (4) (479 ) - (375 ) - Percentage rent
(5) (8,200 ) (8,300 ) - - Normalized FFO $75,506
$67,932 $295,880 $258,025
Weighted average shares outstanding 176,554 160,946
169,176 149,577 FFO per share $0.46
$0.44 $1.66 $1.64 Normalized FFO per share
$0.43 $0.42 $1.75 $1.73 Distributions
declared per share $0.39 $0.38 $1.54 $1.50
(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 real estate assets, plus real
estate depreciation and amortization, as well as other adjustments
currently not applicable to us. Our calculation of Normalized FFO
differs from NAREIT’s definition of FFO because we include
estimated percentage rent in the period to which we estimate that
it relates rather than when it is recognized as income in
accordance with GAAP and exclude acquisition related costs, loss on
early extinguishment of debt, gain on lease terminations and loss
on impairment of intangible assets, if any. We consider FFO and
Normalized FFO to be appropriate measures of operating performance
for a REIT, along with net income, operating income and cash flow
from operating 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 may facilitate a comparison of our
operating performance 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
agreement and public debt covenants, the availability of debt and
equity capital to us, our expectation of our future capital
requirements and operating performance and our expected needs and
availability of cash to pay our obligations. 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 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
Consolidated Statements of Income and Comprehensive Income and
Consolidated Statements of Cash Flows. Other REITs and real estate
companies may calculate FFO and Normalized FFO differently than we
do.
(2) In July 2012, we sold one MOB for approximately $1.1 million
and recognized a loss on sale of approximately $101,000. During the
second quarter of 2011, we sold seven properties for total sales
prices of approximately $39.5 million and recognized a gain on sale
of approximately $21.3 million.
(3) In August 2012, we prepaid approximately $199.2 million of
the outstanding principal balance of our FNMA secured term loan. As
a result of this prepayment, we recorded a loss on early
extinguishment of debt of approximately $6.3 million consisting of
a debt prepayment premium, legal fees and the write off of
unamortized deferred financing fees.
(4) In May 2012, we entered an agreement with Sunrise for early
terminations of leases for 10 senior living communities which were
previously scheduled to terminate on December 31, 2013; the leases
for all of the 10 communities were terminated prior to December 31,
2012, and resulted in a gain on lease terminations.
(5) In calculating net income in accordance with GAAP, we
recognize percentage rental income received for the first, second
and third quarters in the fourth quarter, which is when all
contingencies are met and the income is earned. Although we defer
recognition of this revenue until the fourth quarter for purposes
of calculating net income, we include estimated amounts of
percentage rent in our calculation of Normalized FFO for each
quarter of the year, and the fourth quarter Normalized FFO
calculation excludes the amounts included during the first three
quarters. During the fourth quarters of 2012 and 2011, we
recognized $10.5 million and $11.3 million of percentage rent for
the years ended December 31, 2012 and 2011, respectively. During
the third quarter of 2012, we recognized $350,000 of percentage
rent as a result of the September 1, 2012 lease terminations of
three senior living communities formerly leased to Sunrise.
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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