Senior Housing Properties Trust Announces 2012 Second Quarter Results

  Senior Housing Properties Trust Announces 2012 Second Quarter Results

Business Wire

NEWTON, Mass. -- August 01, 2012

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        35,986        844             71,554        844     
and services
Total revenues         146,972         101,162           292,045         199,714
                                                                       
Expenses:
Depreciation           35,230          26,935            68,607          53,296
Property
operating              40,734          11,302            80,068          21,735
expenses
General and            8,068           6,793             15,753          12,949
administrative
Acquisition            1,829           2,814             2,517           3,927
related costs
Impairment of         -             -               3,071         166     
assets
Total expenses        85,861        47,844          170,016       92,073  
                                                                       
Operating              61,111          53,318            122,029         107,641
income
                                                                       
Interest and           227             244               709             476
other income
Interest               (28,120 )       (23,361 )         (57,009 )       (46,107 )
expense
Loss on early
extinguishment         -               (427    )         -               (427    )
of debt
Gain on sale           -               21,315            -               21,315
of properties
Equity in
earnings of an        76            46              121           83      
investee
Income before
income tax             33,294          51,135            65,850          82,981
expense
Income tax            (43     )      (87     )        (247    )      (158    )
expense
Net income           $ 33,251       $ 51,048         $ 65,603       $ 82,823  
                                                                       
Weighted
average shares        162,670       141,869         162,659       141,862 
outstanding
                                                                       
Net income per       $ 0.20         $ 0.36           $ 0.40         $ 0.58    
share



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         100,619                100,235
other intangible assets, net
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                                       $ 360,000           $ -
credit
facility ^(2)
Senior
unsecured                                         741,412             965,770
notes, net of
discount ^(3)
Secured debt
and capital                                       863,516             861,615
leases ^(3)
Accrued                                           13,315              22,281
interest
Assumed real
estate lease                                      15,091              17,778
obligations,
net
Other                                            57,059             42,998
liabilities
Total                                             2,050,393           1,910,442
liabilities
Shareholders’                                    2,416,159          2,472,606
equity
Total
liabilities
and                                             $ 4,466,552         $ 4,383,048
shareholders’
equity

                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
    (1)   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.
                
                In July 2012, we repaid all $360.0 million outstanding under
        (2)     our revolving credit facility using proceeds from our July
                2012 equity and debt offerings.
                
                In July 2012, we sold $350.0 million of 5.625% senior
                unsecured notes due 2042. We intend to use a portion of the
        (3)     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               35,230            26,935                68,607            53,296
expense
Gain on sale               -                 (21,315 )             -                 (21,315 )
of properties
Impairment of             -                -                   3,071            166     
assets
FFO                        68,481            56,668                137,281           114,970
Acquisition                1,829             2,814                 2,517             3,927
related costs
Loss on early
extinguishment             -                 427                   -                 427
of debt
Percentage                2,900            2,700               5,800            5,400   
rent ^(2)
Normalized FFO           $ 73,210          $ 62,609             $ 145,598         $ 124,724 
                                                                                   
Weighted
average shares            162,670          141,869             162,659          141,862 
outstanding
                                                                                   
FFO per share            $ 0.42            $ 0.40               $ 0.84            $ 0.81    
Normalized FFO           $ 0.45            $ 0.44               $ 0.90            $ 0.88    
per share
Distributions
declared per             $ 0.38            $ 0.37               $ 0.76            $ 0.74    
share

                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.
    (1)   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.
                
                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
        (2)     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.

Contact:

Senior Housing Properties Trust
Timothy A. Bonang, 617-796-8234
Vice President, Investor Relations
or
Elisabeth Heiss, 617-796-8234
Manager, Investor Relations
www.snhreit.com