Newton, MA (October 30, 2003): Senior Housing Properties Trust (NYSE: SNH) today announced its financial results for the quarter and nine months ended September 30, 2003, as follows (in thousands, except per share data):
Quarter Ended Nine Months Ended
--------------------------------------
September 30, September 30,
--------------------------------------
2003 2002 2003 2002
--------------------------------------
Total revenues $32,101 $30,377 $95,293 $89,462
Net income 10,449 13,142 32,309 35,358
Funds from operations (FFO) 20,198 20,079 62,242 58,032
Weighted average shares
outstanding 58,453 58,437 58,443 55,735
Per share data:
Net income $0.18 $0.22 $0.55 $0.63
Funds from operations (FFO) 0.35 0.34 1.06 1.04
Distributions declared 0.31 0.31 0.93 0.93
During the 2003 quarter, SNH funded $20.7 million of new investments, including a sale-leaseback for $12.3 million with Five Star Quality Care, Inc. and $8.4 million of capital improvements to existing properties.
Senior Housing Properties Trust is a real estate investment trust headquartered in Newton, MA that has investments in 145 senior housing properties located in 31 states.
Senior Housing Properties Trust
Financial Information
(in thousands, except per share amounts)
Income Statement:
Quarter Ended Nine Months Ended
September 30, September 30,
----------------- -----------------
2003 2002 2003 2002
-------- -------- -------- --------
Revenues:
Rental income $31,805 $28,244 $93,647 $83,040
FF&E reserve income (1) -- 1,843 -- 5,345
Interest and other income 296 290 1,646 1,077
-------- -------- -------- --------
Total revenues 32,101 30,377 95,293 89,462
-------- -------- -------- --------
Expenses:
Interest 9,444 6,607 25,550 20,428
Distributions on trust preferred
securities 703 703 2,109 2,109
Depreciation 9,013 7,989 26,557 23,215
General and administrative (2) 2,492 1,936 7,608 5,861
-------- -------- -------- --------
Total expenses 21,652 17,235 61,824 51,613
-------- -------- -------- --------
Income from continuing operations 10,449 13,142 33,469 37,849
Loss from discontinued operations -- -- -- (2,491)
Loss on sale of property -- -- (1,160) --
-------- -------- -------- --------
Net income $10,449 $13,142 $32,309 $35,358
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Weighted average shares
outstanding 58,453 58,437 58,443 55,735
======== ======== ======== ========
Per share data:
Income from continuing
operations $0.18 $0.22 $0.57 $0.68
======== ======== ======== ========
Net income $0.18 $0.22 $0.55 $0.63
======== ======== ======== ========
Balance Sheet: At At
September December
30, 2003 31, 2002
----------- -----------
Assets
-----------------------------------------------
Real estate properties $1,327,236 $1,238,487
Accumulated depreciation (151,256) (125,039)
----------- -----------
1,175,980 1,113,448
Mortgage receivable 6,051 --
Cash and cash equivalents 4,880 8,654
Restricted cash 10,286 12,364
Deferred financing fees, net 11,795 9,512
Other assets 19,081 14,222
----------- -----------
Total assets $1,228,073 $1,158,200
=========== ===========
Liabilities and Shareholders' Equity
-----------------------------------------------
Unsecured revolving bank credit facility $24,000 $81,000
Senior unsecured notes, net of discounts 393,571 243,746
Secured debt and capital leases 32,559 32,618
Trust preferred securities 27,394 27,394
----------- -----------
Total debt 477,524 384,758
Other liabilities 19,123 21,116
----------- -----------
Total liabilities 496,647 405,874
Shareholders' equity 731,426 752,326
----------- -----------
Total liabilities and shareholders' equity $1,228,073 $1,158,200
=========== ===========
1. One of our leases which began in January 2002 provided that a percentage of revenues at the leased properties be paid to us as additional rent, which was escrowed for future capital expenditures at the leased facilities. This lease was amended October 1, 2002. As a result of this amendment, amounts for capital expenditures are not paid to us, but are deposited into accounts owned by the tenant, Five Star, and we have security and remainder interests in these accounts and in property purchased with funding from these accounts. Accordingly, we no longer record FF&E reserve income.
2. Includes expenses incurred with respect to litigation with Marriott International and HEALTHSOUTH of $100,000 for the three months ended September 30, 2003 and $800,000 for the nine months ended September 30, 2003.
Senior Housing Properties Trust
Other Data
(dollars in thousands, except per share amounts)
Calculation of Funds From Operations (FFO)(1):
Quarter Ended Nine Months Ended
September 30, September 30,
----------------- -----------------
2003 2002 2003 2002
-------- -------- -------- --------
Income from continuing operations $10,449 $13,142 $33,469 $37,849
Add: Depreciation expense 9,013 7,989 26,557 23,215
Deferred percentage rent(2) 736 791 2,216 2,313
Less: FF&E reserve income -- (1,843) -- (5,345)
-------- -------- -------- --------
FFO $20,198 $20,079 $62,242 $58,032
======== ======== ======== ========
Weighted average shares outstanding 58,453 58,437 58,443 55,735
======== ======== ======== ========
FFO per share $0.35 $0.34 $1.06 $1.04
======== ======== ======== ========
Distributions declared $0.31 $0.31 $0.93 $0.93
======== ======== ======== ========
Leverage Ratios:
At At
September 30, December 31,
2003 2002
-------------- ------------
Total debt / Total assets 38.9% 33.2%
Total debt / Real estate properties before
depreciation 36.0% 31.1%
Total debt / Total book capitalization 39.5% 33.8%
Secured debt / Total debt 6.8% 8.5%
Secured debt / Total assets 2.7% 2.8%
Variable rate debt / Total debt 6.9% 23.4%
Coverage Ratios:
Quarter Ended Nine Months Ended
September 30, September 30,
----------------- -----------------
2003 2002 2003 2002
-------- -------- -------- --------
Income from continuing operations $10,449 $13,142 $33,469 37,849
Deferred percentage rent 736 791 2,216 2,313
Interest expense 9,444 6,607 25,550 20,428
Trust preferred distributions 703 703 2,109 2,109
Depreciation expense 9,013 7,989 26,557 23,215
-------- -------- -------- --------
EBITDA(3) $30,345 $29,232 $89,901 $85,914
======== ======== ======== ========
EBITDA / Interest expense 3.2x 4.4x 3.5x 4.2x
======== ======== ======== ========
EBITDA / Interest expense + trust
preferred distributions 3.0x 4.0x 3.3x 3.8x
======== ======== ======== ========
(1) We compute FFO as shown in the calculation above. Our calculation of FFO differs from the NAREIT definition of FFO because we include deferred percentage rent as discussed in Note 2 below. Also, in order to facilitate comparison of FFO with historical results, the historical FFO presentation for the three and nine months ended September 30, 2002, eliminates FF&E reserve income (see Note 1 on page 2). We consider FFO to be an appropriate measure of performance for a REIT, along with net income and cash flow from operating, investing and financing activities. We believe that FFO provides useful information to investors because by excluding the effects of certain historical costs, such as depreciation, expense, and gain or losses on sale of properties, FFO can facilitate comparison of current operating performance amount REITs. FFO does not represent cash generated by operating activities in accordance with generally accepted accounting principles, or GAAP, and should not be considered an alternative to net income or cash flow from operating activities as a measure of financial performance or liquidity. FFO is one important factor considered by our board of trustees in determining the amount of distributions to shareholders. Other important factors include, but are not limited to, requirements to maintain our status as a REIT, limitations in our revolving bank credit facility and public debt covenants, the availability of debt and equity capital to us and our expectation of our future performance.
(2) We recognize percentage rental income received for the first, second and third quarters in the fourth quarter. Although recognition of revenue is deferred until the fourth quarter for purposes of calculating net income, the calculation of FFO includes estimated amounts with respect to periods shown.
(3) We compute EBITDA as income from continuing operations plus interest expense, distributions on trust preferred securities, depreciation expense and deferred percentage rent. We consider EBITDA to be an appropriate measure of performance for a REIT, along with net income and cash flow from operating, investing and financing activities. EBITDA does not represent cash generated by operating activities in accordance with generally accepted accounting principles, or GAAP, and should not be considered an alternative to net income or cash flow from operating activities as a measure of financial performance or liquidity.
Senior Housing Properties Trust
Other Data
The following additional data is intended to respond
to frequently asked questions (dollars in thousands)
At September 30, 2003
% of
Current Current
Annual Annual
% of Rent Rent
# of # of Invest- Reven- Reven-
Properties Units/Beds Investment ment ues ues
------------------------------------------------------
Facility Type
----------------
Independent
living
communities(1) 37 10,435 $874,081 65.6% $88,033 66.5%
Assisted living
facilities 42 2,594 177,868 13.3% 18,046 13.6%
Skilled nursing
facilities 64 6,745 237,786 17.8% 17,570 13.3%
Hospitals 2 364 43,553 3.3% 8,700 6.6%
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Total 145 20,138 $1,333,288 100.0%$132,349 100.0%
======================================================
Tenant/Operator
----------------
Five
Star/Sunrise
(2) 31 7,465 $618,653 46.4% $63,209 47.7%
Marriott/Sunrise
(2) 14 4,030 325,473 24.4% 31,182 23.6%
HEALTHSOUTH 2 364 43,553 3.3% 8,700 6.6%
Alterra
Healthcare (3) 23 1,076 67,131 5.0% 7,499 5.7%
Five Star #1 54 5,009 147,245 11.0% 7,516 5.7%
Five Star #2 13 1,054 82,898 6.2% 8,180 6.2%
Genesis Health
Ventures 1 156 13,007 1.0% 1,496 1.1%
5 private
companies
(combined) 7 984 35,328 2.7% 4,567 3.4%
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Total 145 20,138 $1,333,288 100.0%$132,349 100.0%
======================================================
Quarter Ended September 30,
----------------------------------------------------------------------
Tenant Operating Statistics (4)
Percentage of Operating
Revenue Sources
---------------------------------
Rent Occupancy Private Medicare Medicaid
Coverage Pay
------------------------------------------------------
2003 2002 2003 2002 2003 2002 2003 2002 2003 2002
------------------------------------------------------
Five
Star/Sunrise
(2)(5) 1.0x 1.1x 89% 90% 86% 87% 10% 10% 4% 3%
Marriott/Sunrise
(2) 1.3x 1.3x 87% 89% 82% 83% 13% 13% 5% 4%
HEALTHSOUTH(6) NA NA NA NA NA NA NA NA NA NA
Alterra
Healthcare(7) 1.5x 1.5x 83% 84% 99% 98% 0% 0% 1% 2%
Five Star #1 2.8x 2.5x 89% 92% 21% 22% 20% 20% 59% 58%
Five Star #2(7) 1.1x 1.3x 87% 89% 100% 100% 0% 0% 0% 0%
Genesis Health
Ventures 1.6x 2.2x 97% 98% 25% 25% 31% 37% 44% 38%
5 private
companies
(combined) 1.9x 2.4x 85% 88% 23% 22% 19% 20% 58% 58%
Nine Months Ended September 30,
----------------------------------------------------------------------
Tenant Operating Statistics(4)
Percentage of Operating
Revenue Sources
---------------------------------
Rent Occupancy Private Medicare Medicaid
Coverage Pay
------------------------------------------------------
2003 2002 2003 2002 2003 2002 2003 2002 2003 2002
------------------------------------------------------
Five
Star/Sunrise
(2)(5) 1.0x 1.1x 90% 90% 86% 86% 10% 10% 4% 4%
Marriott/Sunrise
(2) 1.3x 1.4x 87% 88% 82% 84% 13% 13% 5% 3%
HEALTHSOUTH(6) NA NA NA NA NA NA NA NA NA NA
Alterra
Healthcare(7) 1.5x 1.5x 83% 84% 98% 99% 0% 0% 2% 1%
Five Star #1 2.7x 2.4x 90% 91% 21% 22% 20% 20% 59% 58%
Five Star #2(7) 1.2x 1.3x 87% 88% 100% 100% 0% 0% 0% 0%
Genesis Health
Ventures 1.3x 1.8x 97% 96% 23% 26% 34% 40% 43% 34%
5 private
companies
(combined) 2.0x 2.2x 87% 87% 23% 23% 19% 22% 58% 55%
(1) Properties where the majority of units are independent living apartments are classified as independent living communities.
(2) On March 28, 2003, Marriott International, Inc. sold its senior living division, Marriott Senior Living Services, Inc. ("MSLS"), to Sunrise Assisted Living, Inc. ("Sunrise"). Effective on that date, Sunrise became the manager of the 31 properties leased to Five Star Quality Care, Inc. ("Five Star") and the tenant and manager of the 14 properties leased to MSLS. Marriott International continues to guarantee the lease for the 14 properties.
(3) Includes owned real estate and a $6,051 loan secured by a first mortgage on five assisted living properties.
(4) All tenant operating statistics presented are based upon the operating results provided by our tenants for the indicated periods ending September 30 or the most recent prior period tenant operating results available to us from our tenants. Rent coverage is calculated as operating cash flow from our tenants' facility operations, before subordinated charges and capital expenditure reserves, divided by rent payable to us. We have not independently verified our tenants' operating data.
(5) Rent coverage is after non-subordinated management fees of $4.3 million and $4.1 million and $12.8 million and $12.9 million in the quarter and nine months ended September 30, 2003 and 2002, respectively.
(6) In March 2003, HEALTHSOUTH issued a press release stating that its historical financial information should not be relied upon. Because we have reason to doubt the financial information we have from HEALTHSOUTH we do not disclose any lease coverage information for this tenant.
(7) Includes data for periods prior to our ownership of the concerned properties.