Newton, MA (February 12, 2003): Senior Housing Properties Trust (NYSE: SNH) today announced its financial results for the quarter and year ended December 31, 2002, as follows (in thousands, except per share data):
Quarter Ended Year Ended
December 31, December 31,
----------------- -------------------
2002 2001 2002 2001
------- ------- -------- --------
Total revenues $32,835 $73,017 $122,297 $274,644
Income from continuing
operations 14,164 6,210 52,013 18,021
Net income 14,826 5,910 50,184 17,018
Funds from operations (FFO) 20,232 12,508 78,264 45,440
Weighted average
shares outstanding 58,437 42,166 56,416 30,859
Per share data:
Income from continuing operations $0.24 $0.15 $0.92 $0.58
Net income 0.25 0.14 0.89 0.55
Funds from operations (FFO) 0.35 0.30 1.39 1.47
The character of revenues reported in the 2001 and 2002 periods displayed above are not comparable. Revenues in the 2001 periods include $57.4 million and $224.9 million, respectively, of operating revenues derived from senior housing facilities which were operated for our account. At year end 2001, SNH completed a spin off of Five Star Quality Care, Inc., its subsidiary which operated these properties, and revenues in the 2002 periods include rental income received for the properties previously operated for SNH's account as well as rents from investments made in 2002.
Senior Housing Properties Trust is a real estate investment trust headquartered in Newton, MA that owns 119 senior living properties located in 29 states.
Senior Housing Properties Trust
Financial Information
(in thousands, except per share data)
Quarter Ended Year Ended
December 31, December 31,
----------------------------------------------------------------------
2002 2001 2002 2001
Revenues:
Rental income $32,520 $14,128 $115,560 $47,430
Facilities' operations(1) - 57,439 - 224,867
FF&E reserve income(2) - - 5,345 -
Interest and other income 315 1,450 1,392 2,347
---------------------------------
Total revenues 32,835 73,017 122,297 274,644
---------------------------------
Expenses:
Interest 6,971 979 27,399 5,879
Depreciation 8,381 4,887 31,596 19,351
Facilities' operations(1) - 55,563 - 217,910
General and administrative
- Recurring 2,617 940 8,478 4,129
- Related to foreclosures
and lease terminations(1) - - - 4,167
- Five Star spin-off costs(1) - 3,732 - 3,732
---------------------------------
Total 17,969 66,101 67,473 255,168
---------------------------------
Income from continuing operations
before distributions on trust
preferred securities 14,866 6,916 54,824 19,476
Distributions on trust preferred
securities 702 706 2,811 1,455
---------------------------------
Income from continuing operations 14,164 6,210 52,013 18,021
Income (loss) from discontinued
operations(3) 662 (300) (1,829) (1,003)
---------------------------------
Net income $14,826 $5,910 $50,184 $17,018
=================================
Calculation of funds from operations
(FFO) (2)(4):
Net income $14,826 $5,910 $50,184 $17,018
Add: Depreciation expense 8,381 4,887 31,596 19,351
General and administrative
expense related to foreclosures
and lease terminations - - - 4,167
Five Star spin-off costs - 3,732 - 3,732
Non- cash items - 44 - 169
Loss (income) from discontinued
operations (662) 300 1,829 1,003
Less: Deferred percentage rent(5) 2,313 2,365 - -
FF&E reserve income - - 5,345 -
---------------------------------
FFO $20,232 $12,508 $78,264 $45,440
=================================
Weighted average shares outstanding 58,437 42,166 56,416 30,859
=================================
Per share data:
Income from continuing operations $0.24 $0.15 $0.92 $0.58
=================================
Net income $0.25 $0.14 $0.89 $0.55
=================================
FFO $0.35 $0.30 $1.39 $1.47
=================================
Balance Sheet Data: December December
31, 2002 31, 2001
----------- ---------
Assets
-------------------------------------------------
Real estate properties $1,238,487 $593,199
Accumulated depreciation (125,039) (124,252)
----------- ---------
1,113,448 468,947
Cash and cash equivalents 8,654 352,026
Restricted cash 12,364 10,201
Other assets 23,734 36,129
----------- ---------
$1,158,200 $867,303
=========== =========
Liabilities and Shareholders' Equity
-------------------------------------------------
Unsecured revolving bank credit facility $81,000 $-
Senior unsecured notes due 2012 243,746 243,607
Secured debt and capital leases 32,618 9,100
Other liabilities 21,116 12,578
Trust preferred equity securities 27,394 27,394
Shareholders' equity 752,326 574,624
----------- ---------
$1,158,200 $867,303
=========== =========
1. During 2001, SNH operated facilities for its own account through its wholly-owned subsidiary, Five Star Quality Care, Inc. On December 31, 2001, SNH spun off Five Star to SNH's shareholders and entered a lease with Five Star for these properties. These operations had been repossessed from former tenants. As a result of these repossessions and the subsequent spin off of Five Star, SNH incurred certain non-recurring general and administrative expenses during 2001, which are separately identified in the preceding financial information.
2. One of SNH's leases which began in January 2002 provides that a percentage of revenues at the leased properties be escrowed for future capital expenditures at the leased properties. Effective October 1, 2002, SNH entered into an agreement to amend the lease pursuant to which its tenant, Five Star, retains title to the FF&E escrow accounts while SNH has security and remainder interests in the escrow accounts. Accordingly, effective October 1, 2002, revenues and net income recorded by SNH no longer include FF&E reserve income. In order to facilitate comparison of FFO with historical results, the historical FFO presentation for the year ended December 31, 2002, eliminates FF&E reserve income.
3. During the fourth quarter of 2002, SNH sold a property which had been closed by one of its tenants earlier in the year. The sold property was combined in one lease with other properties operated by the same tenant. Under the terms of the lease, the rent payable on the combined lease was reduced by 10% of the net proceeds received by SNH from the sale. In the second quarter of 2002 SNH classified this property as an asset held for sale and recorded a loss from discontinued operations, which included historical depreciation expense as well as an impairment loss write-down of $2.5 million. The sales proceeds received by SNH in the fourth quarter of 2002 exceeded the net book value of the property at the time of the sale, resulting in income from discontinued operations. For the 2001 periods, amounts were reclassified from depreciation expense and facilities' operations revenues and expenses to the loss from discontinued operations.
4. SNH computes FFO as shown in the calculation above. SNH considers FFO to be an appropriate measure of performance for a REIT, along with net income and cash flow from operating, investing and financing activities because it provides investors with an indication of a REIT's operating performance and its ability to incur and service debt, make capital expenditures, pay distributions and fund other cash needs. 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 SNH's Board of Trustees in determining the amount of distributions to shareholders.
5. The Securities and Exchange Commission Staff Accounting Bulletin No. 101 generally requires SNH to recognize percentage rental income received for the first, second and third quarters in the fourth quarter. Although recognition of revenue was deferred until the fourth quarter of each year presented for purposes of calculating net income, the calculations of FFO included these amounts during the first three quarters.
Senior Housing Properties Trust
Additional Data
The following additional data is intended to respond
to frequently asked questions (dollars in thousands)
Current % of
Annual Current
# of # of % of Rent Annual
Properties Units/ Investment Investment Revenues Rent
Beds Revenues
----------------------------------------------------------------------
Facility Type
---------------
Independent
living
communities(1) 54 12,253 $1,003,884 81.1% $100,530 82.1%
Skilled nursing
facilities 60 6,016 186,834 15.1% 12,928 10.6%
Hospitals 2 364 43,553 3.5% 8,700 7.1%
Assisted living
facilities 3 196 4,216 0.3% 236 0.2%
-------------------------------------------------------
Total 119 18,829 $1,238,487 100.0% $122,394 100.0%
=======================================================
Tenant/Operator
---------------
Five
Star/Marriott 31 7,476 $614,598 49.6% $63,000 51.5%
Marriott Senior
Living
Services 14 4,030 325,472 26.3% 31,245 25.5%
HEALTHSOUTH 2 364 43,553 3.5% 8,700 7.1%
Five Star
Quality Care
Lease #1 54 4,952 141,383 11.4% 6,923 5.7%
Five Star
Quality Care
Lease #2 9 747 63,814 5.2% 6,285 5.1%
Genesis Health
Ventures 1 156 13,007 1.0% 1,496 1.2%
Integrated
Health
Services 1 140 15,598 1.3% 1,200 1.0%
5 private
companies
(combined) 7 964 21,062 1.7% 3,545 2.9%
-------------------------------------------------------
Total 119 18,829 $1,238,487 100.0% $122,394 100.0%
=======================================================
Rent Coverage (2)
------------
Year To Last Three
Date Months
Tenant/Operator ------------
---------------
Five
Star/Marriott 1.1x 1.1x
Marriott Senior
Living
Services 1.4x 1.3x
HEALTHSOUTH 3.9x 4.5x
Five Star
Quality Care
Lease #1 2.8x 2.8x
Five Star
Quality Care
Lease #2 1.3x 1.2x
Genesis Health
Ventures 1.8x 1.8x
Integrated
Health
Services 1.9x 1.7x
5 private
companies
(combined) 2.1x 1.6x
Total Portfolio Tenant Operating Statistics (weighted average by rent)
----------------------------------------------------------------------
Rent % Private
Occupancy Coverage Pay % Medicare % Medicaid
-----------------------------------------------------
Year to date(2) 88.3% 1.5x 75% 14% 11%
Last three
months(2) 88.0% 1.5x 76% 13% 12%
(1) Properties where the majority of units are independent living apartments are classified as independent living communities.
(2) Rent coverage is calculated as operating cash flow from SNH's tenants' facility operations, before subordinated charges and capital expenditure reserves, divided by rent payable to SNH. All tenant operating statistics are calculated based upon the periods ended December 31, 2002 operating results or the most recent tenant operating results available to SNH.