Senior Housing Properties Trust Management Presents At Bank Of America Merrill Lynch 2012 Health Care Conference (Transcript)

Senior Housing Properties Trust (SNH)

Bank of America Merrill Lynch 2012 Health Care Conference

May 15, 2012 7:20 PM ET

Executives

Jana Galan – Bank of America

David Hegarty – President and COO

Richard Doyle – CFO

Presentation

Jana Galan

Good afternoon. My name is Jana Galan. I’m the Bank of America Healthcare Lead Analyst. And today I’m honored to introduce to you Mr. David Hegarty, President and Chief Operating Officer of Senior Housing Properties Trust, and Mr. Richard Doyle, Chief Financial Officer and Treasurer.

Senior Housing Properties Trust is a real-estate investment trust that owns healthcare real-estate in the US including Senior Housing, wellness centers, medical office buildings and life science. SNH was spun out of Commonwealth REIT in 1999 of the separate publicly traded REIT. SNH offers one of the highest dividend yields in the healthcare REIT space, currently at about 7%. And the portfolio is made up of approximately 94% private pay tenant assets.

Mr. David Hegarty has been President and COO since Senior Housing Properties Trust was founded in 1999. He oversees all of SNH’s property acquisition and distribution activities. And prior to this role, David had held numerous positions with affiliates of SNH since 1987.

With that, I’ll turn the presentation over.

David Hegarty

Thank you Jana, and good afternoon. And thank you to Merrill, BOA Merrill Lynch for the invitation to present here. So, first I’ll tell you everything I can tell you. As our expecting of play-outs and acquisitions and so on our future events but obviously the result maybe a little bit different than what I expect today. And this chart-off describes our EBITDA and normalized function operations which are concepts particular to the REIT industry and earnings and dividend distributions and so on.

Our company, obviously we’re healthcare REIT and we are a diversified REIT, geography – tenant mix and product that we invest in. We’re at $5 billion of portfolio today, which makes a support life at Healthcare REIT. And this is actually the big-three that are pretty much around $20 billion and assets with a pretty big difference between the next tier which we believe is an advantage in many cases because of the opportunities we see to invest in would be different. And we’re not really competing as the same large portfolio as they do. And we’re able to do a couple hundred million dollars a year. Our investment set are able to move the needle for our bottom line.

Another thing that differentiates us is that we own everything 100%. We don’t have any joint-ventures so we don’t have ground leases. So, we’re pure fee ownership interest in our assets. We’re at 300 A3 properties across 40 states plus Washington DC, over 560 different tenants at this time. And at about 31,300 beds or units of single living where amongst the top 10, probably about the sixth or seventh largest owner today of senior living assets and about 8 million square feet of medical office building space which makes also a major player in the medical office area.

And I think one thing that differentiates us from all healthcare REITs is that, we’re at about 94% of our net operating income comes from private pay properties, which insulates us from a significant amount of the reductions and discussions about Medicare and Medicaid cutbacks.

This is the portfolio today based on its investment assets. As you can see Independent Living is about 35% of our portfolio, Assisted Living is about a quarter, and a multi-tenant medical office building about 30% of our portfolio. And now we have – and in the small portfolio, wellness centers, two rehab hospitals and portfolio of nursing homes that represent about 4% of our NOI, our investment value rather.

And geographically as you would expect, California is the largest segment with most in Southern California, where we just recently bought one at Walnut Creek in Senior Living Community. And Florida Texas in the mid-Atlantic we have significant projects.

And several of the reasons why we think that you would have an interest in investing in our company, one, is the quality of the portfolio. Again, as I mentioned, predominantly private pay, so we have limited exposure to incumbent reimbursement risk. And that’s particularly planning out now. We haven’t bought government dependant nursing home or other type healthcare facility for the past 10 years. So, we have been waiting for this day, when government reimbursement would get tighter and tighter. And I don’t think that’s going to go away any time soon.

And then, we’re currently diversified our properties across the country and by tenant and asset mix. Another thing we’d like to point out is that we buy properties at what we believe are rational prices, which inflates us from cyclical period like we just went through with the recession. And we’ll get into that a little bit more. We’re going to talk about the prices we have paid for our portfolio.

We offer a secure dividend yield today we’re probably a little over 70% given the current market pricing. And we’ve had a history of consistently raising the dividend while maintaining conservative payout ratio. So, we can continue to maintain the current risk dividend as well as several opportunities to raise it.

We’ve always maintained a very strong lowly levered balance sheet. And we’re investment grade rate by Moody’s and S&P so we have access to good low cost of debt. And we have hedge fund access to capital. Over the past year, we raised over $1 billion in capital market’s activity, half debt, half equity about. And we have a $750 million unsecured line of credit available to us to draw – to make acquisitions and to grow.

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