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Senior Housing Properties Trust Announces 2013 Third Quarter Results



  Senior Housing Properties Trust Announces 2013 Third Quarter Results

Business Wire

NEWTON, Mass. -- October 29, 2013

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

Results for the quarter ended September 30, 2013:

Normalized funds from operations, or Normalized FFO, for the quarter ended
September 30, 2013 were $78.8 million, or $0.42 per share. This compares to
Normalized FFO for the quarter ended September 30, 2012 of $74.8 million, or
$0.43 per share.

Net income was $38.1 million, or $0.20 per share, for the quarter ended
September 30, 2013, compared to net income of $25.6 million, or $0.15 per
share, for the quarter ended September 30, 2012. During the three months ended
September 30, 2013, SNH recognized a loss on early extinguishment of debt of
$692,000, or less than $0.01 per share, related to the amendment of its
revolving credit facility and the prepayment of one mortgage. Also during the
three months ended September 30, 2013, SNH recognized a gain on sale of
properties of $1.1 million, or less than $0.01 per share, related to the sale
of one senior living community previously classified as held for sale. Net
income for the three months ended September 30, 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 SNH’s Federal
National Mortgage Association, or FNMA, secured term loan, a loss on lease
terminations of approximately $104,000, or less than $0.01 per share, related
to SNH’s agreement with Sunrise Senior Living, Inc., or Sunrise, to terminate
10 senior living communities SNH previously leased to Sunrise 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.

The weighted average number of common shares outstanding totaled 188.1 million
and 174.7 million for the quarters ended September 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 September 30, 2013 and 2012 appears
later in this press release.

Results for the nine months ended September 30, 2013:

Normalized FFO for the nine months ended September 30, 2013 were $236.8
million, or $1.27 per share. This compares to Normalized FFO for the nine
months ended September 30, 2012 of $220.4 million, or $1.32 per share.

Net income was $79.0 million, or $0.42 per share, for the nine months ended
September 30, 2013, compared to net income of $91.2 million, or $0.55 per
share, for the nine months ended September 30, 2012. During the nine months
ended September 30, 2013, SNH recognized a loss of 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. Also during the nine months ended September 30, 2013, SNH
recognized a gain on sale of properties of $1.1 million, or less than $0.01
per share, related to the sale of one senior living community previously
classified as held for sale and impairment of assets charges of $5.7 million,
or $0.03 per share, to reduce the carrying value of four of its senior living
communities and one property leased to medical providers, medical related
businesses, clinics and biotech laboratory tenants, or an MOB, included in
continuing operations to their estimated net sale price. Net income for the
nine months ended September 30, 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 FNMA
secured term loan, a loss on lease terminations of approximately $104,000, or
less than $0.01 per share, related to SNH’s agreement with Sunrise to
terminate 10 senior living communities SNH previously leased to Sunrise 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. During the nine months ended September 30, 2013,
SNH recognized impairment of assets charges of $27.9 million, or $0.15 per
share, to reduce the carrying value of seven of its MOBs included in
discontinued operations to their estimated net sale price.

The weighted average number of common shares outstanding totaled 186.9 million
and 166.7 million for the nine months ended September 30, 2013 and 2012,
respectively.

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

Recent Investment and Sales Activities:

Since July 1, 2013, SNH has acquired five properties for a combined purchase
price of $100.5 million, excluding closing costs:

  * In August 2013, SNH acquired a senior living community with 93 private pay
    assisted living units located in Cumming, GA, for approximately $22.0
    million, excluding closing costs. This community is 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 August 2013, SNH acquired an MOB with approximately 105,000 square
    feet located in Boston, MA for approximately $49.5 million, excluding
    closing costs. This MOB is a biotech laboratory building which is long
    term leased to PerkinElmer Health Sciences Inc.
  * 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, excluding closing costs. This community is operated in SNH’s
    TRS structure and managed by Five Star under a long term management
    agreement.
  * 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, excluding closing costs. These
    communities are operated in SNH’s TRS structure and managed by Five Star
    under a long term management agreement.

SNH also currently has four properties under agreement to be acquired for a
combined purchase price of $27.4 million, excluding closing costs.

  * In August 2013, SNH entered into an agreement to acquire one senior living
    community with 68 private pay assisted living units located in Verona, WI
    for approximately $12.0 million, excluding closing costs. SNH intends to
    acquire this community using its TRS structure and a long term management
    agreement with Five Star.
  * In October 2013, SNH entered into an agreement to acquire a portfolio of
    three MOBs with 62,826 square feet located in Orlando, FL for
    approximately $15.4 million, excluding closing costs.

In August 2013, SNH sold a skilled nursing facility with 112 living units for
$2.6 million, excluding closing costs. The majority of the revenues generated
at this property were received from government funded programs, such as
Medicare and Medicaid. SNH recorded a gain of $1.1 million from this sale.

Also in August 2013, SNH entered an agreement to sell two rehabilitation
hospitals with 364 licensed beds for $90.0 million, excluding closing costs
and subject to certain adjustments. The majority of the revenues at these
hospitals come from Medicare. SNH expects to record a gain on sale of over $30
million upon the closing of this transaction, which is currently expected to
close by mid-2014.

SNH is also currently marketing for sale 10 senior living communities with 744
living units and seven MOBs with 831,499 square feet. The majority of the
combined revenues generated from the 10 senior living communities listed for
sale come from government funded programs, such as Medicare and Medicaid. The
results of operations from the seven MOBs listed for sale are now included in
discontinued operations in SNH’s financial statements.

Recent Financing Activities:

In September 2013, SNH amended its $750 million unsecured revolving credit
facility. As a result of the amendment, the interest rate paid on borrowings
under the facility was reduced from LIBOR plus a premium of 160 basis points
to LIBOR plus a premium of 130 basis points, and the facility fee was reduced
from 35 basis points to 30 basis points per annum on the total amount of
lending commitments (both the interest rate premium and the facility fee are
subject to adjustment based upon changes to SNH’s credit ratings). Also, the
stated maturity date of the facility was extended from June 24, 2015 to
January 15, 2018; and, subject to the payment of an extension fee and meeting
certain other conditions, SNH also obtained an option to further extend the
maturity date by an additional one year. The revolving credit facility
agreement continues to include a feature under which maximum borrowings under
the facility may be increased to up to $1.5 billion in certain circumstances.

In September 2013, SNH repaid a mortgage note that encumbered two of its
properties which had an aggregate principal balance of approximately $13.6
million, a weighted average interest rate of 6.9% and a maturity date later in
2013.

Conference Call:

On Tuesday, October 29, 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 nine months ended September 30, 2013. The conference call
telephone number is (877) 209-9919. Participants calling from outside the
United States and Canada should dial (612) 332-0637. 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, November 5,
2013. To hear the replay, dial (320) 365-3844. The replay pass code is:
305211.

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

Supplemental Data:

A copy of SNH’s Third 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 396 properties
located in 40 states and Washington, D.C. as of September 30, 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 AGREED TO SELL ITS TWO
    REHABILITATION HOSPITALS FOR $90 MILLION, THAT IT EXPECTS TO RECORD A GAIN
    FROM THIS SALE OF OVER $30 MILLION AND THAT IT EXPECTS THIS SALE MAY BE
    COMPLETED BY MID-2014. THE SALE OF THESE HOSPITALS IS SUBJECT TO HEALTH
    REGULATORY APPROVALS AND OTHER CONDITIONS TYPICAL OF THESE TYPES OF
    TRANSACTIONS. SNH HAS NO CONTROL OVER THE REQUIRED REGULATORY APPROVAL
    PROCESSES OR OVER CERTAIN OTHER CONDITIONS APPLICABLE TO THIS SALE, THESE
    APPROVALS MAY NOT BE OBTAINED AND THE CONDITIONS MAY NOT BE SATISFIED.
    ACCORDINGLY, THE PROPOSED SALE MAY BE DELAYED, IT MAY NOT OCCUR OR ITS
    TERMS MAY CHANGE, AND SNH MAY NOT RECEIVE THE SALE PROCEEDS, THE GAIN ON
    SALE MAY BE LESS THAN $30 MILLION OR THE TRANSACTION MAY RESULT IN
    RECORDING A LOSS ON SALE INSTEAD OF A GAIN ON SALE;
  * THIS PRESS RELEASE STATES THAT SNH EXPECTS TO ENTER INTO A LONG TERM
    MANAGEMENT AGREEMENT WITH FIVE STAR TO MANAGE ONE ADDITIONAL SENIOR LIVING
    COMMUNITY IT HAS AGREED TO ACQUIRE. HOWEVER, THERE CAN BE NO ASSURANCE
    THAT SNH WILL ACQUIRE THIS COMMUNITY OR THAT SNH AND FIVE STAR WILL ENTER
    INTO ANY ADDITIONAL MANAGEMENT AGREEMENTS;
  * THIS PRESS RELEASE STATES THAT SNH HAS ENTERED INTO AGREEMENTS TO ACQUIRE
    FOUR PROPERTIES. THESE TRANSACTIONS ARE SUBJECT TO VARIOUS TERMS AND
    CONDITIONS TYPICAL OF COMMERCIAL REAL ESTATE TRANSACTIONS FOR PROPERTIES
    OF THESE TYPES. SUCH TERMS AND CONDITIONS MAY NOT BE MET. AS A RESULT,
    THESE TRANSACTIONS MAY NOT OCCUR OR MAY BE DELAYED OR THEIR TERMS MAY
    CHANGE; AND
  * THIS PRESS RELEASE STATES THAT SNH HAS 10 SENIOR LIVING COMMUNITIES AND
    SEVEN 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 ITS 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

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(amounts in thousands, except per share data)

(unaudited)
 
Income Statement:
                     Three Months Ended              Nine Months Ended
                                                    
                     September 30,                   September 30,
                     2013           2012             2013           2012
Revenues:             
Rental income        $ 112,319      $ 113,756        $ 336,468      $ 329,191
Residents fees         74,946         42,352           224,634        113,906
and services
Total revenues         187,265        156,108          561,102        443,097
                                                                       
Expenses:
Property
operating              74,729         46,805           222,893        125,109
expenses
Depreciation           38,473         35,276           114,472        102,673
General and            7,798          8,352            24,615         24,106
administrative
Acquisition            396            4,297            2,590          6,814
related costs
Impairment of          -              -                5,675          3,071
assets
Total expenses         121,396        94,730           370,245        261,773
                                                                       
Operating              65,869         61,378           190,857        181,324
income
                                                                       
Interest and           42             248              612            957
other income
Interest               (29,405)       (30,417)         (88,536)       (87,426)
expense
Loss on early
extinguishment         (692)          (6,349)          (797)          (6,349)
of debt
Loss on lease          -              (104)            -              (104)
terminations
Gain (Loss) on
sale of                1,141          (101)            1,141          (101)
properties
Equity in
earnings of an         64             115              219            236
investee
Income before
income tax             37,019         24,770           103,496        88,537
expense
Income tax             (125)          (43)             (405)          (290)
expense
Income from
continuing             36,894         24,727           103,091        88,247
operations
Discontinued
operations:
Income from
discontinued           1,231          919              3,762          3,001
operations
Impairment of
assets from            -              -                (27,896)       -
discontinued
operations
Net income           $ 38,125       $ 25,646         $ 78,957       $ 91,248
                                                                       
Other
comprehensive
income:
Change in net
unrealized             (2,166)        7,499            2,195          8,416
(loss) / gain
on investments
Share of
comprehensive          13             35               (68)           31
income of an
investee
Comprehensive        $ 35,972       $ 33,180         $ 81,084       $ 99,695
income
                                                                       
Weighted
average shares         188,102        174,690          186,942        166,698
outstanding
                                                                       
Income from
continuing             0.20           0.14             0.55           0.53
operations per
share
Income (loss)
from
discontinued           0.00           0.01             (0.13)         0.02
operations per
share
Net income per       $ 0.20         $ 0.15           $ 0.42         $ 0.55
share
                                                                       

 
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):
                                                      
                     Three Months Ended                Nine Months Ended
                     September 30,                     September 30,
                     2013              2012            2013          2012
Net income           $  38,125         $ 25,646        $ 78,957      $ 91,248
Depreciation
expense from            38,473           35,276          114,472       102,673
continuing
operations
Depreciation
expense from            -                604             799           1,815
discontinued
operations
(Gain) loss on
sale of                 (1,141)          101             (1,141)       101
properties
Impairment of           -                -               5,675         3,071
assets
Impairment of
assets from             -                -               27,896        -
discontinued
operations
FFO                     75,457           61,627          226,658       198,908
Acquisition
related costs           396              4,297           2,590         6,814
from continuing
operations
Loss on early
extinguishment          692              6,349           797           6,349
of debt
Loss on lease           -                104                           104
terminations
Percentage rent         2,300            2,400           6,800         8,200
adjustment^(2)
Normalized FFO       $  78,845         $ 74,777        $ 236,845     $ 220,375
                                                                        
Weighted
average shares          188,102          174,690         186,942       166,698
outstanding
                                                                        
FFO per share        $  0.40           $ 0.35          $ 1.21        $ 1.19
Normalized FFO       $  0.42           $ 0.43          $ 1.27        $ 1.32
per share
Distributions
declared per         $  0.39           $ 0.39          $ 1.17        $ 1.15
share
                                                                        

(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 them. 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
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. 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
between them and 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 and public debt covenants, the
availability of debt and equity capital to them, 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 its needs. SNH
believes that FFO and Normalized FFO may facilitate an understanding of its
historical operating results. These measures should be considered in
conjunction with net income, operating income and cash flow from operating
activities as presented in its 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 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:
                                                                 
                                                September 30,     December 31,
                                                2013              2012
ASSETS
Real estate properties                             5,197,999         5,019,615
Less accumulated depreciation                      (808,264)         (714,687)
                                                   4,389,735         4,304,928
Cash and cash equivalents                          52,258            42,382
Restricted cash                                    10,046            9,432
Deferred financing fees, net                       29,063            29,410
Acquired real estate leases and other              105,705           113,986
intangible assets, net
Other assets                                       220,523           247,864
Total assets                                    $  4,807,330      $  4,748,002
                                                                      
LIABILITIES AND SHAREHOLDERS’ EQUITY
Unsecured revolving credit facility             $  125,000        $  190,000
Senior unsecured notes, net of discount            1,093,016         1,092,053
Secured debt and capital leases                    703,058           724,477
Accrued interest                                   21,763            15,757
Assumed real estate lease obligations,             13,299            13,482
net
Other liabilities                                  74,751            65,665
Total liabilities                                  2,030,887         2,101,434
                                                                      
Total shareholders’ equity                         2,776,443         2,646,568
Total liabilities and shareholders’             $  4,807,330      $  4,748,002
equity
                                                                      

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
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