Reports Normalized FFO of $0.43 Per Share
Continuing Accretive Acquisition Strategy and Further Diversifying
Tenants While Maintaining Industry Leading Private Pay Portfolio
NEWTON, Mass.--(BUSINESS WIRE)--
Senior Housing Properties Trust (NYSE: SNH) today announced its
financial results for the quarter ended March 31, 2014.
"We are pleased with our financial results and, in particular, with our
strategic accomplishments during the first quarter," stated David
Hegarty, President and Chief Operating Officer of SNH. "The pending
acquisition of two, Class A, state-of-the-art biotech Medical Office
Buildings is clearly a highlight and demonstrates our commitment to
strengthening and diversifying our portfolio, making accretive
acquisitions that improve shareholder value, and increasing the
percentage of private pay assets."
Results for the quarter ended March 31, 2014:
Normalized funds from operations, or Normalized FFO, for the quarter
ended March 31, 2014 were $80.1 million, or $0.43 per share. This
compares to Normalized FFO for the quarter ended March 31, 2013 of $79.0
million, or $0.43 per share.
Net income was $38.6 million, or $0.21 per share, for the quarter ended
March 31, 2014, compared to net income of $35.2 million, or $0.19 per
share, for the quarter ended March 31, 2013. During the three months
ended March 31, 2014, SNH recognized: (1) a gain on sale of properties
of $156,000, or less than $0.01 per share, related to the sale of one
senior living community previously classified as held for sale; and (2)
impairment of assets charges of $721,000, or less than $0.01 per share,
to reduce the carrying value of two properties (five buildings) leased
to medical providers, medical related businesses, clinics and biotech
laboratory tenants, or MOBs, included in discontinued operations to
their aggregate estimated net sale price. Net income for the three
months ended March 31, 2013 included an impairment of assets charge of
$1.3 million, or less than $0.01 per share, to reduce the carrying value
of one of SNH's properties to its estimated net sale price.
The weighted average number of common shares outstanding were 188.2
million and 184.6 million for the quarters ended March 31, 2014 and
2013, 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 March 31, 2014 and 2013
appears later in this press release.
Recent Investment and Sales Activities:
Since January 1, 2014, SNH has acquired one property. In April 2014, SNH
acquired one MOB (one building) with 125,240 square feet for
approximately $32.7 million, including the assumption of $15.6 million
of mortgage debt and excluding closing costs. This property is known as
the Texas Center for Athletes in the expanding South Texas Medical
Center area of San Antonio, TX.
SNH currently has one property (two buildings) under agreement to be
acquired for a purchase price of approximately $1.125 billion, excluding
closing costs. In February 2014, SNH entered into an agreement to
acquire this property with 1,651,037 gross building square feet. This
recently built property is certified by the U.S. Green Building Council
as a LEED® Gold property and it is located on the waterfront in Boston's
Seaport District, Boston's fastest growing submarket. The property is
96% leased to Vertex Pharmaceuticals for an initial term ending in 2028.
The closing of this purchase is expected to occur on or about May 7,
2014.
In January 2014, SNH sold one assisted living facility with 36 units
located in Kerrville, TX for $2.4 million, excluding closing costs. As a
result, SNH recorded a gain on sale of $156,000. In April 2014, SNH sold
one MOB with 210,879 square feet located in Manchester, NH for $5.0
million, excluding closing costs.
SNH is also currently marketing for sale nine senior living communities
with 708 living units and three MOBs (six buildings) with 620,620 square
feet. The majority of the combined revenues generated from the nine
senior living communities listed for sale come from government funded
programs, such as Medicare and Medicaid. The results of operations from
the three MOBs (six buildings) listed for sale and the one MOB (one
building) sold in April 2014 are included in discontinued operations in
SNH's financial statements.
Recent Financing Activities:
In April 2014, SNH issued 15,525,000 common shares in a public offering,
raising gross proceeds of approximately $337.7 million, before
underwriting discounts and expenses. SNH used the net proceeds of this
offering (approximately $323.3 million after underwriting discounts and
before expenses) to repay borrowings outstanding under its revolving,
unsecured credit facility and the remainder will be used for general
business purposes, including the partial funding of the pending
acquisition of buildings leased to Vertex described above.
In April 2014, SNH sold $400 million of 3.25% senior unsecured notes due
2019 and $250 million of 4.75% senior unsecured notes due 2024, raising
net proceeds of approximately $644.9 million after underwriting
discounts and before expenses. SNH plans to use the net proceeds of this
offering for general business purposes, including partially funding the
pending acquisition described above.
Simultaneous with entering the agreement to acquire the MOB property in
Boston, MA described above, SNH received a term loan commitment for $800
million from Jefferies Finance, LLC and Wells Fargo Bank, N.A. The term
loan will have an interest rate of LIBOR plus 140 basis points, can be
repaid in part or whole at any time without penalty and will mature five
years from closing. SNH currently intends to utilize approximately $350
million of the commitment and may not draw the balance. This term loan
is expected to be syndicated to a group of lenders, and the term loan is
expected to close during the second quarter of 2014.
Conference Call:
On Friday, May 2, 2014, at 1:00 p.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 ended March 31, 2014. The conference call
telephone number is (800) 230-1085. Participants calling from outside
the United States and Canada should dial (612) 332-0107. 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, Friday, May 9, 2014. To hear the replay, dial (320)
365-3844. The replay pass code is: 325139.
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
first quarter conference call are strictly prohibited without the prior
written consent of SNH.
Supplemental Data:
A copy of SNH's First Quarter 2014 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 374
properties (400 buildings) located in 40 states and Washington, D.C. as
of March 31, 2014. 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 ENTERED INTO AN AGREEMENT TO
ACQUIRE A LARGE MOB LOCATED IN BOSTON. THIS TRANSACTION IS SUBJECT TO
VARIOUS CLOSING CONDITIONS. THESE CONDITIONS MAY NOT BE MET. AS A
RESULT, THIS TRANSACTION MAY NOT OCCUR OR MAY BE DELAYED OR ITS TERMS
MAY CHANGE;
-
THIS PRESS RELEASE DESCRIBES CERTAIN EXPECTED TERMS OF AN $800 MILLION
TERM LOAN ON WHICH SNH EXPECTS TO DRAW APPROXIMATELY $350 MILLION IN
CONNECTION WITH THE ACQUISITION OF THE BOSTON MOB. THE COMMITMENTS
WHICH WE RECEIVED FOR THE TERM LOAN ARE SUBJECT TO VARIOUS CONDITIONS,
INCLUDING MUTUALLY SATISFACTORY DOCUMENTATION. THERE CAN BE NO
ASSURANCE THAT ALL THE CONDITIONS WILL BE SATISFIED, THAT THE TERMS OF
THE TERM LOAN WILL NOT CHANGE, OR THAT THE TERM LOAN WILL BE AVAILABLE
TO US TIMELY OR AT ALL. WE ARE NOT COMMITTED TO INCUR THE ENTIRE TERM
LOAN OR ANY PORTION THEREOF, AND MAY UTILIZE OTHER DEBT OR EQUITY
FINANCING FOR ALL OR A PORTION OF THE ACQUISITION;
-
THIS PRESS RELEASE STATES THAT THE INTEREST RATE UNDER THE TERM LOAN
WILL BE LIBOR PLUS 140 BASIS POINTS. THIS INTEREST RATE IS BASED ON
OUR CURRENT DEBT RATINGS AND THE INTEREST RATE MAY BE HIGHER OR LOWER
THAN LIBOR PLUS 140 BASIS POINTS IN THE FUTURE DEPENDING ON OUR FUTURE
DEBT RATINGS. THIS INTEREST RATE IS ALSO SUBJECT TO CONTRACTUAL
PROVISIONS THAT MIGHT ADJUST THE LENDERS' YIELD TO MARKET CONDITIONS
AT THE TIME OF SYNDICATION; AND
-
THIS PRESS RELEASE STATES THAT SNH HAS NINE SENIOR LIVING COMMUNITIES
AND THREE 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 SNH'S 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
CONSOLIDATED STATEMENTS OF INCOME
(amounts in thousands, except per share data)
(unaudited)
|
|
Income Statement:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
March 31,
|
|
|
|
|
|
2014
|
|
|
|
2013
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
Rental income
|
|
|
|
$
|
112,055
|
|
|
|
|
$
|
111,852
|
|
|
Residents fees and services
|
|
|
|
|
79,442
|
|
|
|
|
|
75,056
|
|
|
Total revenues
|
|
|
|
|
191,497
|
|
|
|
|
|
186,908
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Property operating expenses
|
|
|
|
|
77,802
|
|
|
|
|
|
73,679
|
|
|
Depreciation
|
|
|
|
|
38,355
|
|
|
|
|
|
37,703
|
|
|
General and administrative
|
|
|
|
|
8,290
|
|
|
|
|
|
8,648
|
|
|
Acquisition related costs
|
|
|
|
|
122
|
|
|
|
|
|
1,903
|
|
|
Impairment of assets
|
|
|
|
|
-
|
|
|
|
|
|
1,304
|
|
|
Total expenses
|
|
|
|
|
124,569
|
|
|
|
|
|
123,237
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
|
|
66,928
|
|
|
|
|
|
63,671
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other income
|
|
|
|
|
105
|
|
|
|
|
|
173
|
|
|
Interest expense
|
|
|
|
|
(28,900
|
)
|
|
|
|
|
(29,564
|
)
|
|
Income from continuing operations before income tax expense and
equity in earnings of an investee
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38,133
|
|
|
|
|
|
34,280
|
|
|
Income tax expense
|
|
|
|
|
(191
|
)
|
|
|
|
|
(140
|
)
|
|
Equity in (losses) / earnings of an investee
|
|
|
|
|
(97
|
)
|
|
|
|
|
76
|
|
|
Income from continuing operations
|
|
|
|
|
37,845
|
|
|
|
|
|
34,216
|
|
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations
|
|
|
|
|
1,300
|
|
|
|
|
|
1,019
|
|
|
Impairment of assets from discontinued operations
|
|
|
|
|
(721
|
)
|
|
|
|
|
-
|
|
|
Income before gain on sale of properties
|
|
|
|
|
38,424
|
|
|
|
|
|
35,235
|
|
|
Gain on sale of properties
|
|
|
|
|
156
|
|
|
|
|
|
-
|
|
|
Net income
|
|
|
|
$
|
38,580
|
|
|
|
|
$
|
35,235
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
|
|
188,176
|
|
|
|
|
|
184,605
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations per share
|
|
|
|
|
0.21
|
|
|
|
|
|
0.18
|
|
|
Income from discontinued operations per share
|
|
|
|
|
0.00
|
|
|
|
|
|
0.01
|
|
|
Net income per share
|
|
|
|
$
|
0.21
|
|
|
|
|
$
|
0.19
|
|
|
|
|
|
|
|
|
|
|
|
|
SENIOR HOUSING PROPERTIES TRUST
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 March 31,
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
$
|
38,580
|
|
|
|
|
$
|
35,235
|
|
Depreciation expense from continuing operations
|
|
|
|
|
|
|
38,355
|
|
|
|
|
|
37,703
|
|
Depreciation expense from discontinued operations
|
|
|
|
|
|
|
-
|
|
|
|
|
|
599
|
|
Gain on sale of properties
|
|
|
|
|
|
|
(156
|
)
|
|
|
|
|
-
|
|
Impairment of assets
|
|
|
|
|
|
|
-
|
|
|
|
|
|
1,304
|
|
Impairment of assets from discontinued operations
|
|
|
|
|
|
|
721
|
|
|
|
|
|
-
|
|
FFO
|
|
|
|
|
|
|
77,500
|
|
|
|
|
|
74,841
|
|
Estimated business management incentive fees
|
|
|
|
(2
|
)
|
|
|
-
|
|
|
|
|
|
75
|
|
Acquisition related costs from continuing operations
|
|
|
|
|
|
|
122
|
|
|
|
|
|
1,903
|
|
Percentage rent adjustment
|
|
|
|
(3
|
)
|
|
|
2,500
|
|
|
|
|
|
2,200
|
|
Normalized FFO
|
|
|
|
|
|
$
|
80,122
|
|
|
|
|
$
|
79,019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
|
|
|
|
188,176
|
|
|
|
|
|
184,605
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FFO per share
|
|
|
|
|
|
$
|
0.41
|
|
|
|
|
$
|
0.41
|
|
Normalized FFO per share
|
|
|
|
|
|
$
|
0.43
|
|
|
|
|
$
|
0.43
|
(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 SNH. 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 excludes
acquisition related costs, gain or loss on early extinguishment of debt,
gain or loss on lease terminations, estimated business management
incentive fees 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
with other REITs. FFO and Normalized FFO are among the factors
considered by SNH's Board of Trustees when determining the amount of
distributions to shareholders. Other factors include, but are not
limited to, requirements to maintain its status as a REIT, limitations
in its revolving credit facility agreement, term loan agreement, if any,
and public debt covenants, the availability of debt and equity capital,
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
SNH's needs. These measures should be considered in conjunction with net
income, operating income and cash flow from operating activities as
presented in SNH's Consolidated Statements of Income and Comprehensive
Income and Consolidated Statements of Cash Flows. Other REITs and real
estate companies may calculate FFO and Normalized FFO differently than
SNH does.
(2) Amounts represent estimated incentive fees under SNH's business
management agreement payable in common shares after the end of each
calendar year calculated: (i) prior to 2014 based upon increases in
annual Normalized FFO per share, as defined, and (ii) beginning in 2014
based on common share total return. In calculating net income in
accordance with GAAP, SNH recognizes estimated business management
incentive fee expense each quarter. Although SNH recognizes this expense
each quarter for purposes of calculating net income, SNH does not
include these amounts in the calculation of Normalized FFO until the
fourth quarter, which is when the actual expense amount for the year is
determined. Adjustments were made to prior period amounts to conform to
current period Normalized FFO calculation.
(3) 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
|
December 31,
|
|
|
|
|
|
2014
|
|
|
|
2013
|
|
ASSETS
|
|
|
|
|
|
|
|
Real estate properties
|
|
$
|
5,283,335
|
|
|
|
|
$
|
5,263,625
|
|
|
Less accumulated depreciation
|
|
|
(873,157
|
)
|
|
|
|
|
(840,760
|
)
|
|
|
|
|
|
|
4,410,178
|
|
|
|
|
|
4,422,865
|
|
|
Cash and cash equivalents
|
|
|
32,967
|
|
|
|
|
|
39,233
|
|
|
Restricted cash
|
|
|
10,502
|
|
|
|
|
|
12,514
|
|
|
Deferred financing fees, net
|
|
|
26,810
|
|
|
|
|
|
27,975
|
|
|
Acquired real estate leases and other intangible assets, net
|
|
|
96,469
|
|
|
|
|
|
103,494
|
|
|
Other assets
|
|
|
201,742
|
|
|
|
|
|
158,585
|
|
|
Total assets
|
|
$
|
4,778,668
|
|
|
|
|
$
|
4,764,666
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
Unsecured revolving credit facility
|
|
$
|
145,000
|
|
|
|
|
$
|
100,000
|
|
|
Senior unsecured notes, net of discount
|
|
|
1,093,658
|
|
|
|
|
|
1,093,337
|
|
|
Secured debt and capital leases
|
|
|
695,668
|
|
|
|
|
|
699,427
|
|
|
Accrued interest
|
|
|
21,899
|
|
|
|
|
|
15,839
|
|
|
Assumed real estate lease obligations, net
|
|
|
11,773
|
|
|
|
|
|
12,528
|
|
|
Other liabilities
|
|
|
69,952
|
|
|
|
|
|
66,546
|
|
|
Total liabilities
|
|
|
2,037,950
|
|
|
|
|
|
1,987,677
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders' equity
|
|
|
2,740,718
|
|
|
|
|
|
2,776,989
|
|
|
Total liabilities and shareholders' equity
|
|
$
|
4,778,668
|
|
|
|
|
$
|
4,764,666
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
Senior Housing Properties Trust
Kimberly Brown, 617-796-8237
Director,
Investor Relations
www.snhreit.com
Source: Senior Housing Properties Trust
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