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Senior Housing Properties' CEO Discusses Q2 2012 Results - Earnings Call Transcript

On our last several earnings calls, I’ve discussed our pending acquisition activity and I'm happy to report that during the last 60 days most of this backlog has closed. Looking at our acquisition activity since April 1, we have completed $227 million of acquisitions, of which $45 million represents completion of the Bell portfolio we announced last year. The weighted average yield on these $227 million of acquisitions was 8%.

We assume $64 million of mortgage debt along with these acquisitions at a weighted average interest rate of 5.6%. In fact, yesterday, we closed on the previously announced acquisition of a sale lease back of four private pay senior living communities with the new third-party private regional operator by the name of Stellar Senior Living for $37 million. The lease was underwritten at 1.2 times rental coverage based on historical results and the initial yield will be 8%.

Today, we have a $142 million of pending activity, of which $99 million represents one remaining senior living community located in (inaudible) New York from the B portfolio we announced last year. We expect all the pending acquisitions to close during the third quarter.

In addition to these acquisitions, we’re on pace to fund $30 million to $40 million of revenue producing capital improvements to our triple net lease tenants this year, which yields us 8% on amounts funded. Not including our 2011 pending activity so far in 2012, we’ve acquired our announced $225 million in new investments which put us on track to meet our expectations of acquiring $300 million to $400 million in 2012. Most of our investment opportunities continue to be small portfolios, and one-off private pay senior living communities in medical office properties.

In the Senior Housing space most investment opportunities have been with private operators and investors looking to monetize their real estate or exit the operating businesses altogether. We've been successful in acquiring individual assets and small portfolios of high-quality private pay senior living communities. And we expect to continue our growth in the same manner. We also see positive signs for acquisition opportunities in the medical office space. The Supreme Court’s recent decision should positively impact acquisition opportunities, hospital systems by allowing them to accelerate their decision making. We continue to see an increasing demand for outpatient services.

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