SNH Senior Housing Properties Trust

Senior Housing Properties Trust (NYSE: SNH) today announced its financial results for the quarter and year ended December 31, 2013.

Results for the quarter ended December 31, 2013:

Normalized funds from operations, or Normalized FFO, for the quarter ended December 31, 2013 were $80.5 million, or $0.43 per share. This compares to Normalized FFO for the quarter ended December 31, 2012 of $75.5 million, or $0.43 per share.

Net income was $72.2 million, or $0.38 per share, for the quarter ended December 31, 2013, compared to net income of $44.6 million, or $0.25 per share, for the quarter ended December 31, 2012. During the three months ended December 31, 2013 SNH recognized: a gain on sale of properties of $36.3 million, or $0.19 per share, related to the sale of two rehabilitation hospitals previously classified as held for sale; and impairment of assets charges of $12.0 million, or $0.06 per share, to reduce the carrying value of four senior living communities and two properties (two buildings) leased to medical providers, medical related businesses, clinics and biotech laboratory tenants, or MOBs, included in discontinued operations to their aggregate estimated net sale price. Net income for the three months ended December 31, 2012 includes a gain on lease terminations of approximately $479,000, or less than $0.01 per share, related to SNH’s agreement with Sunrise Senior Living, Inc., or Sunrise, to terminate leases for 10 senior living communities SNH previously leased to Sunrise.

The weighted average number of common shares outstanding totaled 188.2 million and 176.6 million for the quarters ended December 31, 2013 and 2012, 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, 2013 and 2012 appears later in this press release.

Results for the year ended December 31, 2013:

Normalized FFO for the year ended December 31, 2013 were $317.4 million, or $1.69 per share. This compares to Normalized FFO for the year ended December 31, 2012 of $295.9 million, or $1.75 per share.

Net income was $151.2 million, or $0.81 per share, for the year ended December 31, 2013, compared to net income of $135.9 million, or $0.80 per share, for the year ended December 31, 2012. During the year ended December 31, 2013 SNH recognized: a loss on early extinguishment of debt of $797,000, or less than $0.01 per share, related to the amendment of its revolving credit facility and the prepayment of mortgages encumbering five properties; a gain on sale of properties of $37.4 million, or $0.20 per share, related to the sale of two rehabilitation hospitals and one senior living community previously classified as held for sale; and impairment of assets charges of $45.6 million, or $0.24 per share, to reduce the carrying value of four senior living communities, one MOB included in continuing operations and four MOBs (seven buildings) included in discontinued operations to their estimated net sale price. Net income for the year ended December 31, 2012 includes: an impairment of asset charge of $3.1 million, or $0.02 per share, to reduce the carrying value of one MOB included in continuing operations to its estimated net sale price; 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 SNH’s Federal National Mortgage Association secured term loan; a gain on lease terminations of approximately $375,000, or less than $0.01 per share, related to SNH’s agreement with Sunrise to terminate leases for 10 senior living communities SNH previously leased to Sunrise; 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 2012.

The weighted average number of common shares outstanding totaled 187.3 million and 169.2 million for the years ended December 31, 2013 and 2012, respectively.

A reconciliation of net income determined according to GAAP to FFO and Normalized FFO for the years ended December 31, 2013 and 2012 appears later in this press release.

Recent Investment and Sales Activities:

Since October 1, 2013, SNH has acquired seven properties in five transactions for a combined purchase price of $56.4 million, excluding closing costs:

• In October 2013, SNH acquired two senior living communities with 153 private pay assisted living units located in Canton and Ellijay, GA for a total of approximately $19.1 million. These communities are operated in SNH’s taxable REIT subsidiary, or TRS, structure and managed by Five Star Quality Care, Inc., or Five Star, under a long term management agreement;
• Also in October 2013, SNH acquired a senior living community with 60 private pay assisted living units located in Jefferson City, TN for approximately $9.9 million. This community is operated in SNH’s TRS structure and managed by Five Star under a long term management agreement;
• In November 2013, SNH acquired a senior living community with 68 private pay assisted living units located in Verona, WI for approximately $12.0 million. This community is operated in SNH’s TRS structure and managed by Five Star under a long term management agreement; and
• In December 2013, SNH acquired a portfolio of three MOBs (three buildings) with 62,826 square feet located in Orlando, FL for approximately $15.4 million.

SNH also currently has one property under agreement to be acquired for a purchase price of approximately $1.125 billion, excluding closing costs:

• In February 2014, SNH entered into an agreement to acquire one MOB (two buildings) with 1,651,037 gross building square feet located in Boston, MA for approximately $1.125 billion. This MOB is certified by the U.S. Green Building Council as two class A, leadership in energy and environmental design, or LEED®, gold, newly-built biotech buildings located on the waterfront in the Seaport District, Boston’s fastest growing submarket.

In December 2013, SNH sold two rehabilitation hospitals with 364 licensed beds located in Braintree and Woburn, MA for $90.0 million, excluding closing costs. The majority of the revenues at these hospitals come from Medicare. SNH recorded a gain of $36.3 million from this sale.

In January 2014, SNH sold one assisted living facility with 36 units located in Kerrville, TX for $2.4 million, excluding closing costs.

SNH is also currently marketing for sale nine senior living communities with 708 living units and four MOBs (seven buildings) with 831,499 square feet. The majority of the combined revenues generated from the nine senior living communities listed for sale come from government funded programs, such as Medicare and Medicaid. The results of operations from the four MOBs (seven buildings) listed for sale are included in discontinued operations in SNH’s financial statements.

Recent Financing Activities:

Simultaneous with entering the agreement to acquire the one MOB (two buildings) in Boston, MA noted above, SNH received a term loan commitment for $800 million from Jefferies Finance, LLC and Wells Fargo Bank, N.A. The term loan will have an interest rate of LIBOR plus 140 basis points, can be repaid in part or whole at any time without penalty and will mature five years from closing. Prior to closing the acquisition of these buildings, the term loan is expected to be syndicated to a group of lenders, and the term loan is expected to close simultaneous with the closing of this acquisition.

Conference Call:

On Wednesday, February 26, 2014, at 1:00 p.m. Eastern Time, David J. Hegarty, President and Chief Operating Officer, and Richard A. Doyle, Chief Financial Officer, will host a conference call to discuss the financial results for the quarter and year ended December 31, 2013. The conference call telephone number is (877) 531-2986. Participants calling from outside the United States and Canada should dial (651) 224-7472. 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, March 5, 2014. To hear the replay, dial (320) 365-3844. The replay pass code is: 318032.

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 transcription, recording and retransmission in any way of SNH’s fourth quarter conference call are strictly prohibited without the prior written consent of SNH.

Supplemental Data:

A copy of SNH’s Fourth Quarter 2013 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 (401 buildings) located in 40 states and Washington, D.C. as of December 31, 2013. SNH is headquartered in Newton, MA.

Please see the pages attached hereto for a more detailed statement of SNH’s 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 SNH USES WORDS SUCH AS “BELIEVE”, “EXPECT”, “ANTICIPATE”, “INTEND”, “PLAN”, “ESTIMATE” OR SIMILAR EXPRESSIONS, SNH IS MAKING FORWARD LOOKING STATEMENTS. THESE FORWARD LOOKING STATEMENTS ARE BASED UPON SNH’S 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 SNH HAS ENTERED INTO AN AGREEMENT TO ACQUIRE ONE PROPERTY. THIS TRANSACTION IS SUBJECT TO VARIOUS TERMS AND CONDITIONS TYPICAL OF COMMERCIAL REAL ESTATE TRANSACTIONS FOR A PROPERTY OF THIS TYPE. SUCH TERMS AND CONDITIONS MAY NOT BE MET. AS A RESULT, THIS TRANSACTION MAY NOT OCCUR OR MAY BE DELAYED OR ITS TERMS MAY CHANGE;
• THIS PRESS RELEASE DESCRIBES CERTAIN EXPECTED TERMS OF AN $800 MILLION TERM LOAN WHICH SNH MAY INCUR IN CONNECTION WITH THE ACQUISITION OF TWO BIOTECH MEDICAL OFFICE BUILDINGS. THE COMMITMENTS WHICH WE RECEIVED FOR THE TERM LOAN ARE SUBJECT TO VARIOUS CONDITIONS, INCLUDING MUTUALLY SATISFACTORY DOCUMENTATION. THERE CAN BE NO ASSURANCE THAT ALL THE CONDITIONS WILL BE SATISFIED, THAT THE TERMS OF THE TERM LOAN WILL NOT CHANGE, OR THAT THE TERM LOAN WILL BE AVAILABLE TO US TIMELY OR AT ALL. WE ARE NOT COMMITTED TO INCUR THE ENTIRE TERM LOAN OR ANY PORTION THEREOF, AND MAY UTILIZE OTHER DEBT OR EQUITY FINANCING FOR ALL OR A PORTION OF THE ACQUISITION;
• THIS PRESS RELEASE STATES THAT THE INTEREST RATE UNDER THE TERM LOAN WILL BE LIBOR PLUS 140 BASIS POINTS. THIS INTEREST RATE IS BASED ON OUR CURRENT DEBT RATINGS AND THE INTEREST RATE MAY BE HIGHER OR LOWER THAN LIBOR PLUS 140 BASIS POINTS IN THE FUTURE DEPENDING ON OUR FUTURE DEBT RATINGS. THIS INTEREST RATE IS ALSO SUBJECT TO CONTRACTUAL PROVISIONS THAT WOULD ADJUST THE LENDERS' YIELD TO MARKET CONDITIONS AT THE TIME OF SYNDICATION; AND
• THIS PRESS RELEASE STATES THAT SNH HAS NINE SENIOR LIVING COMMUNITIES AND FOUR MOBS CURRENTLY LISTED FOR SALE. SNH MAY NOT BE ABLE TO SELL THESE PROPERTIES ON ACCEPTABLE TERMS, AND THE SALES OF ANY OR ALL OF THESE PROPERTIES MAY NOT OCCUR.

THE INFORMATION CONTAINED IN SNH’S FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION, OR SEC, INCLUDING UNDER THE CAPTION “RISK FACTORS” IN ITS PERIODIC REPORTS, OR INCORPORATED THEREIN, IDENTIFIES OTHER IMPORTANT FACTORS THAT COULD CAUSE DIFFERENCES FROM SNH’S FORWARD LOOKING STATEMENTS. SNH’S FILINGS WITH THE SEC ARE AVAILABLE ON THE SEC’S WEBSITE AT WWW.SEC.GOV.

YOU SHOULD NOT PLACE UNDUE RELIANCE UPON SNH’S FORWARD LOOKING STATEMENTS.

EXCEPT AS REQUIRED BY LAW, SNH DOES NOT INTEND TO UPDATE OR CHANGE ANY FORWARD LOOKING STATEMENTS AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.

 

SENIOR HOUSING PROPERTIES TRUST

CONSOLIDATED STATEMENTS OF INCOME

(amounts in thousands, except per share data)

(unaudited)

 

Income Statement:

 

 

     

 

Quarter Ended December 31, Year Ended December 31, 2013     2012 2013     2012 Revenues: Rental income $ 122,912 $ 121,578 $ 459,380 $ 450,769 Residents fees and services   77,424   70,125   302,058   184,031 Total revenues 200,336 191,703 761,438 634,800   Expenses: Property operating expenses 76,985 72,584 299,878 197,696 Depreciation 38,554 36,369 153,026 139,042 General and administrative 8,042 7,411 32,657 31,517 Acquisition related costs 788 2,580 3,378 9,394 Impairment of assets   2,314   -   7,989   3,071 Total expenses   126,683   118,944   496,928   380,720   Operating income 73,653 72,759 264,510 254,080   Interest and other income 99 160 711 1,117 Interest expense (29,284) (29,814) (117,819) (117,240) Loss on early extinguishment of debt - - (797) (6,349) Gain on lease terminations - 479 - 375 Gain (loss) on sale of properties   36,251   -   37,392   (101) Income from continuing operations before income tax expense 80,719 43,584 183,997 131,882 and equity in earnings of an investee Income tax expense (195) (85) (600) (375) Equity in earnings of an investee   115   80   334   316 Income from continuing operations   80,639   43,579   183,731   131,823 Discontinued operations: Income from discontinued operations 1,281 1,057 5,043 4,061 Loss on asset impairment from discontinued operations   (9,714)   -   (37,610)   - Net income $ 72,206 $ 44,636 $ 151,164 $ 135,884   Weighted average shares outstanding   188,168   176,554   187,251   169,176   Income from continuing operations per share $ 0.43 $ 0.25 $ 0.98 $ 0.78 (Loss) income from discontinued operations per share   (0.05)   0.00   (0.17)   0.02 Net income per share $ 0.38 $ 0.25 $ 0.81 $ 0.80    

SENIOR HOUSING PROPERTIES TRUST

CONSOLIDATED STATEMENTS OF 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 December 31, Year Ended December 31, 2013       2012 2013       2012   Net income $ 72,206 $ 44,636 $ 151,164 $ 135,884 Depreciation expense from continuing operations 38,554 36,369 153,026 139,042 Depreciation expense from discontinued operations - 600 799 2,414 (Gain) loss on sale of properties (36,251) - (37,392) 101 Impairment of assets from continuing operations 2,314 - 7,989 3,071 Impairment of assets from discontinued operations   9,714   -   37,610   - FFO 86,537 81,605 313,196 280,512 Acquisition related costs 788 2,580 3,378 9,394 Loss on early extinguishment of debt - - 797 6,349 Gain on lease terminations - (479) - (375) Percentage rent adjustment (2)   (6,800)   (8,200)   -   - Normalized FFO $ 80,525 $ 75,506 $ 317,371 $ 295,880   Weighted average shares outstanding   188,168   176,554   187,251   169,176   FFO per share $ 0.46 $ 0.46 $ 1.67 $ 1.66 Normalized FFO per share $ 0.43 $ 0.43 $ 1.69 $ 1.75  

(1) SNH calculates 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 certain other adjustments currently not applicable to these calculations. SNH’s calculation of Normalized FFO differs from NAREIT’s definition of FFO because SNH’s includes estimated percentage rent in the period to which it estimates that it relates rather than when it is recognized as income in accordance with GAAP and excludes acquisition related costs, gain or loss on early extinguishment of debt, gain or loss on lease terminations and loss on impairment of intangible assets, if any. SNH considers FFO and Normalized FFO to be appropriate measures of operating performance for a real estate investment trust, or REIT, along with net income, operating income and cash flow from operating activities. SNH believes 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 its operating performance between periods and with other REITs. FFO and Normalized FFO are among the factors considered by SNH’s Board of Trustees when determining the amount of distributions to its shareholders. Other factors include, but are not limited to, requirements to maintain its status as a REIT, limitations in its revolving credit facility agreement, term loan agreement, if any, and public debt covenants, the availability of debt and equity capital, SNH’s expectation of its future capital requirements and operating performance and its expected needs and availability of cash to pay its 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 SNH’s financial performance or liquidity, nor are these measures necessarily indicative of sufficient cash flow to fund all of SNH’s needs. These measures should be considered in conjunction with net income, operating income and cash flow from operating activities as presented in SNH’s 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 SNH does.

(2) In calculating net income in accordance with GAAP, SNH recognizes 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 SNH defers recognition of this revenue until the fourth quarter for purposes of calculating net income, it includes these estimated amounts in its calculation of Normalized FFO for each quarter of the year. The fourth quarter Normalized FFO calculation excludes the amounts recognized during the first three quarters.

 

SENIOR HOUSING PROPERTIES TRUST

CONDENSED CONSOLIDATED BALANCE SHEETS

(amounts in thousands)

(unaudited)

 

Balance Sheet:

                December 31, December 31, 2013 2012

ASSETS

Real estate properties

$ 5,263,625 $ 5,019,615 Less accumulated depreciation   (840,760)   (714,687) 4,422,865 4,304,928 Cash and cash equivalents 39,233 42,382 Restricted cash 12,514 9,432 Deferred financing fees, net 27,975 29,410 Acquired real estate leases and other intangible assets, net 103,494 113,986 Other assets   158,585   247,864 Total assets $ 4,764,666 $ 4,748,002  

LIABILITIES AND SHAREHOLDERS’ EQUITY

Unsecured revolving credit facility $ 100,000 $ 190,000 Senior unsecured notes, net of discount 1,093,337 1,092,053 Secured debt and capital leases 699,427 724,477 Accrued interest 15,839 15,757 Assumed real estate lease obligations, net 12,528 13,482 Other liabilities   66,546   65,665 Total liabilities 1,987,677 2,101,434  

Total shareholders’ equity

  2,776,989   2,646,568 Total liabilities and shareholders’ equity $ 4,764,666 $ 4,748,002  

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.

Senior Housing Properties TrustTimothy A. Bonang, 617-796-8237Vice President, Investor Relations,orKimberly Brown, 617-796-8237Director, Investor Relationswww.snhreit.com