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Five Star Quality Care's CEO Discusses Q3 2011 Results - Earnings Call Transcript

Stocks in this article: FVE

According to the American Senior Housing Association, Five Star is now the sixth largest operator of Senior Housing in the United States. Take into account the 31 communities in almost 3,000 units we own, Five Star is now one of the top 50 senior housing owners as well.

Let me now update you the status of our recent acquisitions, leasing agreements and management contracts. First, the acquisition in six private pay senior living communities we agree to purchase in Indiana from Basic American for $123 million is now complete.

On July 1, we acquired one community and on September 29, we acquired three communities with a total of 541 units for $82.4 million. We assumed $90 million of mortgage debt along with this acquisition.

To remind you, these are relatively new high-end properties with all private pay residents. So we have no government related reimbursement issues. About half of these communities have land available for expansion. We will begin to explore possible expansion opportunities at these communities in 2012.

Of one of the six properties, Five Star acquired a private duty home health agency in Indiana and we expect the licensing to be completed in the fourth quarter. We see this as a potential growth opportunity for Five Star.

Next, in mid-July we began to lease from Senior Housing Properties Trust, a senior living community in Florida with 96 units, and also begin to manage four communities. These five communities are all part of the 20 community portfolio located in the Southeast, we have a 2,000 units that Senior Housing is purchasing from Bell Living, which was announced back in March.

To remind you, of the 20 communities Five Star expects to be managing 15 communities and leasing five. As of September 30, 2011 we operated 19 of the 20 communities and we expect to begin managing the remaining community sometime in 2011, or the first half of 2012. Under the management contract with Senior Housing, Five Star has paid 3% of revenues and will also have the opportunity to earn a 35% incentive fee based on the net cash flows generated after Senior Housing has reached a prior year return.

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