Senior Housing Properties Trust (



Q3 2011 Earnings Call

October 27, 2011 1:00 pm ET


Timothy A. Bonang – Vice President Investor Relations

David J. Hegarty – President & Chief Operating Officer

Richard A. Doyle, Jr. – Chief Financial Officer & Treasurer


Jana Galen – Bank of America Merrill Lynch

Todd Stender – Wells Fargo Securities

Jerry Doctrow – Stifel Nicolaus

[Jarrell Golotti] – Morgan Stanley

Frank Morgan – RBC Capital Markets



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Welcome to the Senior Housing Properties Trust third quarter 2011 financial results conference call. This call is being recorded. At this time for opening remarks and introductions, I would like to turn the call over to the Vice President of Investor Relations, Mr. Tim Bonang.

Timothy A. Bonang

Joining on today’s call are David Hegarty, President and Chief Operating Officer and Rick Doyle, Chief Financial Officer. Today’s call includes a presentation by management followed by a question and answer session. I would also note that the recording and retransmission of today’s conference call is strictly prohibited without prior written consent of Senior Housing.

Before we begin today’s call I would like to state that today’s conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. These forward-looking statements are based on Senior Housing’s present beliefs and expectations as of today, October 27, 2011. The company undertakes no obligation to revise or publically release the results of any revisions to the forward-looking statements made in today’s conference call other through filings with the Securities & Exchange Commission or SEC regarding this reporting period.

In addition, this call may contain non-GAAP numbers including funds from operations or FFO. A reconciliation of FFO to net income and the components to calculate AFFO, CAD, or FAD are available in our supplemental operating and financial data package found on our website at

. Actual results may differ materially from those projected in any forward-looking statements.

Additional information concerning factors that could cause those differences is contained in our Form 10Q to be filed with the SEC. Investors are cautioned not to place undue reliance on any forward-looking statements. Now, I’d like to turn the call over to Dave Hegarty.

David J. Hegarty

I’m happy to report another active quarter for Senior Housing Properties Trust. One in which we increased the dividend and positioned ourselves for continued long term dividend growth. For the third quarter 2011 we reported normalized funds from operations, or normalized FFO of $0.43 per share, and this compares with $0.42 per share that we reported for the same period a year ago. And for the nine months ended September 30, 2011 we reported normalized FFO of $1.30 per share versus a $1.27 per share a year ago.

Now, let me review some of the highlights for the quarter. In October, our board of trustees raised the quarterly dividend payment by $0.01 per share to $0.38 per share. On an annualized basis we’re paying $1.52 per share. This represents an 88% payout ratio of our third quarter’s normalized FFO. The dividend was increased based on the growth opportunities in the pipeline and our board’s confidence in the company’s cash flows.

As Tim just stated, in our supplemental we provide the components to calculate funds available for distribution or FAD and we believe if you were to calculate our payout ratio on a FAD basis, it would be in the low 90% range. The dividend is our highest priority and we’ve always maintained sufficient cash flows to sustain the dividend and prudently grow it over time. Currently our dividend is an attractive yield for investors at about 6.8% per annum.

We continue to be active on the acquisition front. We have announced over $1 billion of acquisitions this year and since the beginning of third quarter we have acquired or are under agreement to acquire 33 properties in the private pay senior living and medical office spaces for an aggregate purchase price of over $800 million. During the quarter we acquired 18 of the 33 properties for $234 million.

Let me review the status of our acquisitions announced to date. Back in March of this year we announce we were acquiring a portfolio of 20 senior living communities located in the south east from Bell Senior Living for $304 million. We split up this portfolio by leasing five communities to Five Star Quality Care and by leasing the other 15 communities to our taxable REIT subsidiary or TRS, and hiring a manager to operate those properties. At the end of the second quarter 14 properties had been acquired, four of which were properties leased to Five Star and the other 10 leased to our TRS.

Moving into the third quarter in late July, we acquired three senior living communities and in early August we acquired an additional senior living community, all located in Florida with a total of 473 units for $62 million including the assumption of $25 million of mortgage debt. Now three of those four communities are being leased to our TRS and the fourth is being leased to Five Star. We expect to acquire the remaining two managed communities for approximately $45 million by the end of the first half of 2012. The closings of these properties have been held up by various closing conditions and third-party approvals including HUD. We’re excited to have these 20 communities become part of our portfolio and look forward to their full contribution beginning in 2012.

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