Senior Housing Properties Trust (SNH)

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Senior Housing Properties Trust (SNH)

Q4 2012 Earnings Call

February 15, 2013 1:00 pm ET

Executives

Tim Bonang – Vice President, Investor Relations

David Hegarty – President, Chief Operating Officer

Rick Doyle – Treasurer, Chief Financial Officer

Analysts

James Milam – Sandler O’Neill

Michael Carroll – RBC Capital Markets

Jana Galen – Bank of America Merrill Lynch

Dan Bernstein – Stifel Nicolaus

Presentation

Operator

Good day and welcome to the Senior Housing Properties Trust Fourth Quarter and Year End Results Conference Call. At this time, all lines are in a listen-only mode. And today’s call is being recording. For opening introductions, I would like to turn the call over to Vice President of Investor Relations, Mr. Tim Bonang. Please go ahead.

Tim Bonang

Thank you and good afternoon, everyone. Joining us today in this call are David Hegarty, President and Chief Operating Office, 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 the 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 upon Senior Housing’s present beliefs and expectations as of today, February 15, 2013.

The company undertakes no obligation to revise or publicly release the results of any revisions 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 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 on 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.

Now, I would like to turn the call over to Dave Hegarty.

David Hegarty

Thank you, Tim, and thank you all for joining us on today’s call. Earlier today, we reported normalized funds from operations or normalized FFO of $0.43 per share for the fourth quarter and $1.75 per share for the full year. Rick will discuss these results in further detail later on in this call.

The fourth quarter marked the close of a very dynamic and successful year. In 2012, we took a high-quality portfolio and made it better as evidenced by the further diversification across geography, tenant and asset mix. Our focus was on acquiring medical office buildings affiliated with major healthcare operators and high-quality senior living communities in grown markets that were added to our taxable REIT subsidiaries, or TRS.

During 2012, we acquired approximately $450 million from senior living and medical office buildings. The 24 properties we acquired are spread across 15 states and have a weighted average cap rate of 8% based on our estimated annual net operating income or NOI. In addition, this year we added a seasoned private operator in the northwest for our triple-net leased senior living communities located in that region.

During the year, we diversified our portfolio by increasing our TRS NOI from 4% to 12% during the quarter compared to last year. We also expanded our investments in medical office buildings during the year. During the year, we welcomed 45 new tenants growing our total number of tenants by 8%. This was accomplished by purchasing assets at rational prices. Overall, we purchased 13 MOBs with a weighted average cap rate of 8.3% and purchased 11 private pay senior living communities at a weighted average cap rate of 7.7%.

During 2012, we raised the divided for the 11th consecutive year and did so well maintaining a conservative payout ratio. We will look to maintain this positive record going forward and believe our growth through acquisitions will help achieve normalized FFO growth per share to allow us to grow our already attractive dividend, while maintaining a conservative payout ratio.

During the year or during 2012, we stayed true to our conservative financial history and strengthened our balance sheet. We ended the year with debt as 43% of total book capital and we have no near term debt maturities. 82% of our debt matures in 2016 and beyond and 44% of our debt matures in 2020 and beyond. Our investment grade credit rating of Baa3 was recently reaffirmed by Moody's with a stable outlook, where they noted that they view positively SNH's focus on private pay sub-segments in healthcare real estate market and our execution of a disciplined growth strategy.

Our excess to capital has never been stronger. In 2012, we raised approximately $650 million in capital markets transactions. Subsequent to year-end at January, we sold 11.5 million common shares, raising net proceeds of approximately $262 million and this offering was upsized modestly in the phase of overwhelming investor demand. I would note that yesterday our stock price closed at 52-week high of $24.72 per share and this transaction put us in a strong position to pay down our revolving credit facility in full, finance our recent acquisitions and positions us to be able to maximize acquisition opportunities in 2013.

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