Senior Housing Properties Trust Management Discusses Q1 2012 Results - Earnings Call Transcript

Senior Housing Properties Trust (SNH)

Q1 2012 Earnings Call

April 30, 2012 01:00 PM ET

Executives

Tim Bonang - VP, IR

Dave Hegarty - President, COO

Rich Doyle - CFO

Analysts

Jana Galen - Bank of America

Tayo Okusanya - Jefferies

Daniel Bernstein - Stifel Nicolaus

Todd Stender - Wells Fargo Securities

James Milam - Sandler O'Neil

Jarrell Golotti - Morgan Stanley

Derek Bower - UBS

Presentation

Operator

Good morning, and welcome to the Senior Housing Properties Trust First Quarter 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. Please go ahead, sir, the floor is yours

Tim Bonang

Thank you, and good afternoon, everyone. Joining me on today's call are David Hegarty, President and Chief Operating Officer and Rick Doyle, Treasurer and 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, 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, April 30, 2012. The Company undertakes no obligation to revise or publicly release the results of any revision to the forward-looking statements made in today's conference call other than through filings with the Securities and Exchange Commission or SEC regarding this reporting period.

In addition, this call may contain non-GAAP numbers including funds from operations, normalized funds from operations or normalized FFO. A reconciliation of normalized 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 www.snhreit.com.

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 filings with the SEC. Investors are cautioned not to place undue reliance upon any forward-looking statements.

And with that, I would like to turn the call over to Dave Hegarty.

Dave Hegarty

Thank you, Tim, and thank you all for joining us on today's call, and good afternoon to you.

For the first quarter of 2012, we reported normalized funds from operations or normalized FFO of $0.45 per share, and this compares with normalized FFO of $0.44 per share that we reported for the same period a year ago. Our first quarter results were in line with our expectations as we continued to absorb the new properties that we acquired at the end of last year.

During the quarter, we saw above-average rental rate increases on new leases, executed at our medical office buildings and also experienced modest occupancy and rate growth in our private pay senior living communities.

We still maintained the highest percentage of private pay assets in the industry, with 94% of our NOI derived from properties with the majority of revenues up in the residents or tenants private resources.

Our dividend yield continues to be very attractive at about 7% and our balance sheet remained conservative and well managed.

Recent data published by the National Investment Center for Seniors Housing & Care industry or NIC showed modest occupancy growth year-over-year and sequentially for both independent and assisted living properties during the first quarter. According to the recently quarterly NIC report, the seniors housing average occupancy rate has risen consistently during the past eight quarters and is 1.3 percentages points above its cyclical low in the first quarter 2010. They also note that construction of new senior housing inventory remained muted and construction of the share of existing inventory decline quarter-over-quarter.

All of these statistics continue to support our thesis of investing in private pay senior living communities with its potential for occupancy growth in continued merit supply. Our acquisition activity was modest during the quarter when we closed on the acquisition of nine two unit senior living community in Alabama for $11 million in February. We continue to work with several acquisitions on our agreement which we have discussed on previous earnings calls. As a recap we currently have $258 million of previously announced acquisitions on our agreement but if you close the assumption of $89 million of mortgage debt made up of four senior living commitments in South Carolina, New York and Missouri and three medical office buildings in Georgia and Hawaii.

We expect to the acquire the majorities acquisition on agreement within the next three months but these would have minimal impact on the second quarter results. One senior living community in New York which was part of the V transaction for $99 million, but $32 million of assume debt is still expected to close sometime during the second half of this year.

One medical office building acquisition for $70 million is under agreement in Hawaii and it's a property that we believe is a solid investment in long term growth opportunities. It's a 203,000 square foot building with a 500 car parking garage attached and it's located adjacent to the (inaudible) clinic and hospital which is part of an A rated Healthcare system in Hawaii.

It's a 100% occupied with a waiting list of positions now the healthcare providers. Earlier this month we terminated new agreement which we announced last quarter to acquire one medical office building in Connecticut with a 171,000 square feet, a $31.5 million. We have $71 million if new acquisitions under our agreement including the assumption of $25 million of mortgage debt. During March and April we entered into an agreement to acquire four senior living communities and two medical office buildings. The four pay senior living communities will be triple net leased to a new private operator.

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