Senior Housing Properties Trust (SNH)

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Senior Housing Properties Trust Inc. (SNH)

Q4 2008 Earnings Call Transcript

February 27, 2009, 10:00 pm ET

Executives

Timothy A. Bonang – Director of Investor Relations

David J. Hegarty – President & Chief Operating Officer

Richard A. Doyle – Chief Financial Officer

Analysts

Jerry Doctrow – Stifel Nicolaus

Omotayo Okusanya – UBS

Mark Biffert – Oppenheimer

Chris Haley – Wachovia Capital Markets, LLC

Bill Knickerbaucher – ING

Presentation

Operator

Good day and welcome to the Senior Housing Properties Trust fourth quarter 2008 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 Director of Investor Relations, Mr. Tim Bonang. Please go ahead sir.

Timothy Bonang

Thank you and good morning everyone. Joining me 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.

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 federal securities laws.

These forward-looking statements are based on Senior Housing's present beliefs and expectations as of today February 27, 2009. 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 regarding this reporting period. In addition, this call may contain non-GAAP numbers including funds from operations.

A reconciliation of FFO to net income as well as components to calculate AFFO, CAD or FAD are available on page 14 in Q4 supplemental operating and financial data package found on our website at www.snhreit.com.

Actual results may differ materially from those projected in these forward-looking statements. Additional information concerning factors that could cause those differences is contained in our 2008 Form 10-K to be filed with the SEC on Monday. Investors are cautioned to cause undue reliance upon any forward-looking statements. And with that I would like to turn the call over to Dave Hegarty.

David Hegarty

Thank you, Tim and good morning everyone. Thank you for joining us during this very busy reporting season.

I will try to be brief but informative. Last evening we announced our results for the fourth quarter and full year 2008. for the fourth quarter we reported funds from operations of $0.43 per share. And these results further reflect the investment of surplus equity proceeds from the June offering but do not fully reflect the impact of the new investments made during the quarter.

In spite of difficult capital markets and weak economy, 2008 was a very successful year for SNH. Revenues and FFO grew significantly and now come from a more diversified tenant base than at the start of the year. FFO per share grew by 3% to $1.67 per share, which is significant given a negative arbitrage on earnings created by the timing delay and investing all the proceeds from the equity raised in the second quarter.

We are very pleased with the results for the quarter and for the year and as well as our strong financial position we are in today. In terms of liquidity and balance sheet strength, SNH compares very favorably with not only the rest of the healthcare REIT but the whole REIT universe.

I would like to highlight a few points about the position that we are in today. Our debt ratios are at industry leading lows. At December 31, our debt represented less than 30% of our total book capital. In February 2009, we raise another net $97 million of common equity, which further reduced our debt ratios.

Only 6% of our portfolio is secured by debt. We have no near term debt maturities. Our $550 million credit facility matures in December 2011, which includes our option to extend the maturity date one year. There was $190 million outstanding after the February equity offering. We have only $259 million of debt coming due before the end of 2012 and it’s related senior unsecured notes and 16 mortgage loans.

We have availability on our revolving credit facility. We currently have $360 million available on our revolving credit facility. We are in the process of exploring Fannie Mae financing. We're currently negotiating secured financing for at least $500 million with Fannie Mae. If this is consummated, it is expected to close in the second quarter and the user proceeds will be to repay balances outstanding on the revolver and at that point we will encourage HRPT to sell us the remaining $195 million medical office building as soon as possible. And use the balance of the proceeds to find investments opportunities and possibly even prepay some debt.

Earnings maybe impacted on an interim basis depending on the timing of the receipt and deployment of that cash. In these economic times, this could be described as the good problem to have. We've enjoyed continued access to the capital markets. We were able to successfully raise equity capital on two occasions during 2008 for a total of $525 million, which has and will continue to assist us in weathering the difficult credit markets.

In fact we feel it positions us very well for being opportunistic in the acquisition environment looking forward. As perviously mentioned, subsequent to the end of the quarter, we raised a net $97 million in the common equity offering and these equity raises in the diversified investments have aided in getting our unsecured debt to investment grade with one rating agency and a positive outlook to investment grade from another agency. When the debt markets return, SNH will be well positioned to access the public debt markets.

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