Senior Housing Properties Trust Announces 2013 Second Quarter Results

  Senior Housing Properties Trust Announces 2013 Second Quarter Results

Business Wire

NEWTON, Mass. -- July 30, 2013

Senior Housing Properties Trust (NYSE: SNH) today announced its financial
results for the quarter and six months ended June 30, 2013.

Results for the quarter ended June 30, 2013:

Normalized funds from operations, or Normalized FFO, for the quarter ended
June 30, 2013 were $79.1 million, or $0.42 per share. This compares to
Normalized FFO for the quarter ended June 30, 2012 of $73.2 million, or $0.45
per share.

Net income was $5.6 million, or $0.03 per share, for the quarter ended June
30, 2013, compared to net income of $33.3 million, or $0.20 per share, for the
quarter ended June 30, 2012. During the three months ended June 30, 2013, we
recognized a loss of $105,000, or less than $0.01 per share, related to the
early extinguishment of four mortgage debts. During the quarter ended June 30,
2013, we decided to market for sale 10 senior living communities and seven
properties leased to medical providers, medical related businesses, clinics
and biotech laboratory tenants, or MOBs. The 10 senior living communities are
included in our continuing operations and we recognized non-cash impairment of
assets charges of $4.4 million, or $0.02 per share, to reduce the carrying
value of four of these senior living communities to their aggregate estimated
net sale price during the three months ended June 30, 2013. The seven MOBs
have been reclassified to discontinued operations and we recognized non-cash
impairment of assets charges of $27.9 million, or $0.15 per share, to reduce
the carrying value of these seven MOBs to their aggregate estimated net sale
price during the three months ended June 30, 2013.

The weighted average number of common shares outstanding totaled 188.1 million
and 162.7 million for the quarters ended June 30, 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 June 30, 2013 and 2012 appears later in
this press release.

Results for the six months ended June 30, 2013:

Normalized FFO for the six months ended June 30, 2013 were $158.0 million, or
$0.85 per share. This compares to Normalized FFO for the six months ended June
30, 2012 of $145.8 million, or $0.90 per share.

Net income was $40.8 million, or $0.22 per share, for the six months ended
June 30, 2013, compared to net income of $65.6 million, or $0.40 per share,
for the six months ended June 30, 2012. During the six months ended June 30,
2013, we recognized a loss of $105,000, or less than $0.01 per share, related
to the early extinguishment of four mortgage debts. We recognized non-cash
impairment of assets charges of $5.7 million, or $0.03 per share, to reduce
the carrying value of four of our senior living communities and one MOB
included in continuing operations to their aggregate estimated net sale price
during the six months ended June 30, 2013. Net income for the six months ended
June 30, 2012 includes a non-cash 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. During the six months
ended June 30, 2013, we recognized non-cash impairment of assets charges of
$27.9 million, or $0.15 per share, to reduce the carrying value of seven of
our MOBs included in discontinued operations to their aggregate estimated net
sale price.

The weighted average number of common shares outstanding totaled 186.4 million
and 162.7 million for the six months ended June 30, 2013 and 2012,
respectively.

A reconciliation of net income determined according to GAAP to FFO and
Normalized FFO for the six months ended June 30, 2013 and 2012 appears later
in this press release.

Recent Investment and Sales Activities:

Since April 1, 2013, we have entered into agreements to acquire five
properties for a combined purchase price of $100.6 million, excluding closing
costs:

  *In April 2013, we entered into an agreement to acquire one senior living
    community with 93 private pay assisted living units located in Cumming,
    GA, for approximately $22.0 million, excluding closing costs. We intend to
    acquire this community using a taxable REIT subsidiary, or TRS, structure
    and we expect to enter into a long term management agreement with Five
    Star Quality Care, Inc., or Five Star, to manage this community for our
    account.
  *In July 2013, we entered into an agreement to acquire one senior living
    community with 60 private pay assisted living units located in Jefferson
    City, TN for approximately $10.0 million, excluding closing costs. We
    intend to acquire this community using a TRS structure and we expect to
    enter into a long term management agreement with Five Star to manage this
    community for our account.
  *In July 2013, we entered into an agreement to acquire 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, excluding
    closing costs. We intend to acquire this community using a TRS structure
    and we expect to enter into a long term management agreement with Five
    Star to manage this community for our account.
  *Also in July 2013, we entered into an agreement to acquire an MOB with
    approximately 105,000 square feet located in Boston, MA for approximately
    $49.5 million, excluding closing costs. This MOB is a “state of the art”
    biotech laboratory building which will be long term leased to an
    investment grade rated tenant.

The closings of the acquisitions listed above are contingent upon completion
of our diligence and other customary closing conditions; accordingly, we can
provide no assurance that we will purchase these properties.

In June2013, we terminated a previously disclosed agreement to acquire a MOB
located in Cherry Hill, NJ with approximately 54,000 square feet which had a
contract purchase price of approximately $21.5 million. We terminated this
agreement based upon our diligence findings.

We are also currently marketing for sale 11 senior living communities with 856
living units which are included in continuing operations and classified as
held for sale as of June 30, 2013. Seven of these 11 properties with 578
living units are skilled nursing facilities, or SNFs, and the remaining four
properties with 278 living units are assisted living communities. In
aggregate, these communities receive a majority of their revenues from
Medicare/Medicaid reimbursements. The aggregate net book value (after
impairment) of these 11 communities was $15.5 million as of June 30, 2013. In
addition, all of these communities are leased to Five Star and our rents from
Five Star will be reduced if and as these sales occur, as determined pursuant
to our leases with Five Star. We are in the process of offering these
communities for sale, but we can provide no assurance that sales of these
communities will occur. One of these communities, a SNF with 112 living units,
is currently under agreement to be sold for $2.6 million, excluding closing
costs. We expect the sale of this SNF to occur before the end of 2013, but
completion of this sale is subject to customary closing conditions and we can
provide no assurance that a sale of this SNF will occur before the end of
2013, or will be completed at all or that the terms for the sale will not
change.

We are also marketing for sale seven MOBs with 831,499 square feet which are
included in discontinued operations and classified as held for sale as of June
30, 2013. These seven MOBs were 99.3% occupied for a weighted (by rents)
average lease term of 1.0 years as of June 30, 2013, and they generated
annualized NOI of $6.8 million based on the three months ended June 30, 2013.
The aggregate net book value (after impairment) of these seven MOBs was $27.1
million as of June 30, 2013. We are in the process of offering these MOBs for
sale, but we can provide no assurance that sales of these MOBs will occur.

Recent Financing Activities:

In June 2013, we repaid mortgage notes that encumbered four of our properties
which had an aggregate principal balance of approximately $10.5 million, a
weighted average interest rate of 6.1% and maturity dates later in 2013.

Conference Call:

On Tuesday, July 30, 2013, at 10:00 a.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 six months ended June 30, 2013. The conference call telephone
number is (877) 209-9920. Participants calling from outside the United States
and Canada should dial (612) 332-0636. 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, Tuesday, August 6, 2013. To hear
the replay, dial (320) 365-3844. The replay pass code is: 296743.

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 second quarter conference call are strictly prohibited
without the prior written consent of SNH.

Supplemental Data:

A copy of SNH’s Second 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 395 properties
located in 40 states and Washington, D.C. as of June 30, 2013. 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 EXPECT TO ENTER INTO LONG TERM
    MANAGEMENT AGREEMENTS WITH FIVE STAR TO MANAGE THE FOUR ADDITIONAL SENIOR
    LIVING COMMUNITIES WE HAVE AGREED TO ACQUIRE. HOWEVER, THERE CAN BE NO
    ASSURANCE THAT WE WILL ACQUIRE THESE COMMUNITIES OR THAT WE AND FIVE STAR
    WILL ENTER INTO ANY ADDITIONAL MANAGEMENT AGREEMENTS,
  *THIS PRESS RELEASE STATES THAT WE HAVE ENTERED INTO AGREEMENTS TO ACQUIRE
    FIVE PROPERTIES. THESE TRANSACTIONS ARE SUBJECT TO VARIOUS TERMS AND
    CONDITIONS TYPICAL OF COMMERCIAL REAL ESTATE TRANSACTIONS FOR PROPERTIES
    OF THEIR TYPE. THEIR TERMS AND CONDITIONS MAY NOT BE MET. AS A RESULT,
    THESE TRANSACTIONS MAY NOT OCCUR OR MAY BE DELAYED OR THEIR TERMS MAY
    CHANGE;
  *THIS PRESS RELEASE STATES THAT WE HAVE EIGHTEEN PROPERTIES CLASSIFIED AS
    HELD FOR SALE AS OF JUNE 2013. WE MAY NOT BE ABLE TO SELL THESE PROPERTIES
    ON TERMS ACCEPTABLE TO US OR OTHERWISE, AND THE SALE OF ANY OR ALL OF
    THESE PROPERTIES MAY NOT OCCUR; AND
  *THIS PRESS RELEASE STATES THAT WE HAVE ONE SNF UNDER AGREEMENT TO BE SOLD
    FOR $2.6 MILLION AND THAT THE SALE IS EXPECTED TO CLOSE BEFORE THE END OF
    2013. THIS SALE AGREEMENT IS SUBJECT TO CUSTOMARY CLOSING CONDITIONS AND
    WE CAN PROVIDE NO ASSURANCE THAT THE SALE WILL BE COMPLETED BEFORE THE END
    OF 2013 OR WILL BE COMPLETED AT ALL, OR THAT THE TERMS OF THE SALE WILL
    NOT CHANGE.

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.


SENIOR HOUSING PROPERTIES TRUST
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(amounts in thousands, except per share data)
(unaudited)

Income Statement:                                             
                         Three Months Ended          Six Months Ended
                                                 
                         June 30,                    June 30,
                          2013        2012        2013        2012    
Revenues:
  Rental income          $ 112,297     $ 108,407     $ 224,150     $ 215,435
  Residents fees and      74,631      35,986      149,687     71,554  
  services
     Total revenues        186,928       144,393       373,837       286,989
                                                                   
Expenses:
  Property operating       74,484        39,818        148,163       78,304
  expenses
  Depreciation             38,296        34,624        75,999        67,397
  General and              8,168         8,068         16,816        15,753
  administrative
  Acquisition related      292           1,829         2,187         2,694
  costs
  Impairment of assets    4,371       -           5,675       3,071   
     Total expenses       125,611     84,339      248,840     167,219 
                                                                   
Operating income           61,317        60,054        124,997       119,770
                                                                   
Interest and other         397           227           570           709
income
Interest expense           (29,567 )     (28,120 )     (59,131 )     (57,009 )
Loss on early              (105    )     -             (105    )     -
extinguishment of debt
Equity in earnings of     79          76          155         121     
an investee
Income before income       32,121        32,237        66,486        63,591
tax expense
Income tax expense        (140    )    (43     )    (280    )    (247    )
Income from continuing     31,981        32,194        66,206        63,344
operations
Discontinued
operations:
     Income from
     discontinued          1,513         1,057         2,523         2,259
     operations
     Impairment of
     assets from          (27,896 )    -           (27,896 )    -       
     discontinued
     operations
Net income               $ 5,598      $ 33,251     $ 40,833     $ 65,603  
                                                                   
Weighted average          188,081     162,670     186,350     162,659 
shares outstanding
                                                                   
Income from continuing   $ 0.17        $ 0.20        $ 0.36        $ 0.39
operations per share
(Loss) income from
discontinued              (0.14   )    -           (0.14   )    0.01    
operations per share
Net income per share     $ 0.03       $ 0.20       $ 0.22       $ 0.40    
                                                                             


SENIOR HOUSING PROPERTIES TRUST
CONDENSED 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 June 30,  Six Months Ended June 30,
                              2013      2012        2013         2012
                                                                    
Net income                  $  5,598     $ 33,251    $  40,833      $  65,603
Depreciation expense from      38,296      34,624       75,999         67,397
continuing operations
Depreciation expense from      199         606          799            1,210
discontinued operations
Impairment of assets           4,371       -            5,675          3,071
Impairment of assets from     27,896     -           27,896        -
discontinued operations
       FFO                     76,360      68,481       151,202        137,281
Acquisition related costs
from continuing                292         1,829        2,187          2,694
operations
Loss on early                  105         -            105            -
extinguishment of debt
Percentage rent               2,300      2,900       4,500         5,800
adjustment ^(2)
       Normalized FFO       $  79,057    $ 73,210    $  157,994     $  145,775
                                                                    
Weighted average shares       188,081    162,670     186,350       162,659
outstanding
                                                                    
FFO per share               $  0.41      $ 0.42      $  0.81        $  0.84
Normalized FFO per share    $  0.42      $ 0.45      $  0.85        $  0.90
Distributions declared      $  0.39      $ 0.38      $  0.78        $  0.76
per share
                                                                       

(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, gain or loss on early extinguishment of debt, gain
or loss 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 real estate investment trust, or 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 and between us and other REITs. 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 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 we do.

(2) 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 these estimated amounts in our
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:
                                               At June 30,  At December 31,
                                                  2013           2012
ASSETS
Real estate properties                           $ 5,201,745   $   5,183,307
Less accumulated depreciation                     811,182        750,903
                                                   4,390,563       4,432,404
Cash and cash equivalents                          37,336          42,382
Restricted cash                                    12,405          9,432
Deferred financing fees, net                       27,221          29,410
Acquired real estate leases and other              111,924         115,837
intangible assets, net
Other assets                                      169,182        118,537
Total assets                                     $ 4,748,631   $   4,748,002
                                                               
LIABILITIES AND SHAREHOLDERS’ EQUITY
Unsecured revolving credit facility              $ 30,000      $   190,000
Senior unsecured notes, net of discount            1,092,695       1,092,053
Secured debt and capital leases                    720,231         724,477
Accrued interest                                   15,694          15,757
Assumed real estate lease obligations, net         14,165          13,692
Other liabilities                                 63,629         65,455
                Total liabilities                  1,936,414       2,101,434
Shareholders’ equity                              2,812,217      2,646,568
Total liabilities and shareholders’ equity       $ 4,748,631   $   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.

Contact:

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