Senior Housing Properties Trust (SNH)

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Senior Housing Properties Trust (SNH)

Bank of America Merrill Lynch 2013 Health Care Conference Call

May 15, 2013 7:20 pm ET

Executives

David J. Hegarty – President and Chief Operating Officer

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

Analysts

Hayley Spackman – Bank of America Merrill Lynch

Presentation

Hayley Spackman – Bank of America Merrill Lynch

My name is Hayley Spackman. I work with the Corporate Access team at Bank of America Merrill Lynch. It is my honor today to introduce to you Mr. David Hegarty, President and Chief Operating Officer of Senior Housing Properties Trust and Richard Doyle, Chief Financial Officer.

Senior Housing Properties Trust is a real estate investment trust that owns healthcare real estate in the U.S. including senior housing, wellness centers, medical office buildings and life science. SNH was spun out of CommonWealth REIT in 1999 as a separate publicly traded REIT. SNH offers one of the most attractive dividend yields in the healthcare REIT space at 5.4%.

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

And with that, I will turn the presentation over to David.

David J. Hegarty

Thank you, Hayley and good afternoon, everyone. Let me tell you about our company. but first I’ll tell you everything I know as of today and will give you my best answer. and actual results may differ from what I’m telling you today.

First of all, as Hayley mentioned, we are a healthcare REIT. We are the fourth largest healthcare REIT in the country. And there is pretty big gap between the first three, they are about $20 billion plus each (inaudible) compared to us at $5.3 billion. And I would say that’s actually an advantage in the case of looking at acquisitions that will have a meaningful impact to the bottom line. One of the things that we own all of our properties were very straightforward ownership structure, we don’t have joint ventures or off balance sheet investments. We are at about 400 properties that spread across 40 states with Washington D.C. We have over 600 tenants in our portfolio and we have about 32,000 beds of units of senior housing and that makes us about the 7th largest owner of senior housing in the country and about 8.6 million square feet of medical office building space.

And one of the key things about our company is that fact that 94% of our NOI come from private pay properties. We’ve concentrated on keeping the minimal exposure to government program such as medicare and medicaid, and I’ll get in to that in a little bit in a minute. And this is how the portfolio basically breaks down between the types of properties we invested in. Again about a third of it is independent living, quarter of it is assisted living, about a third of its medical office. And then we have a couple of rehab hospitals, about 10 wellness centers and 4% is, about 50 or 48 nursing homes.

And we are very geotropically diversified across the country and I’ll talk a little about that more in a minute. And the reasons why we think investing on a company would be attractive to you that’s because we have a very high quality portfolio as you’d imagine. We have to cater to the private pay consumer, so we have to buy high-end quality properties and maintain them to be very competitive in the marketplace. We have limited government exposure risk. We are diversified. We purchased them at reasonable prices so we can afford to continue to invest a lot of money into the properties to compete. obviously, the dividend is very attractive at 5.4% today and we have historically raised the dividend every year while maintaining a conservative payout ratio.

We have always maintained a strong balance sheet. we are investment grade rated at BBB minus, Baa3 and we’ve had very good access to capital raised about $925 million in the last 12 months. And we have revolving credit facility about $750 million that’s completely undrawn at the moment. So we have plenty of capacity to make investments in today’s world. And then what else – what’s very compelling to is the supply and demand dynamics for our industry. And I believe that they’re positive today and for the foreseeable future for several years out, they should be very positive and growing. As I mentioned, the key point is the fact that we are minimally exposed to government funding and with all the controversy going over with the Medicare and Medicaid programs today, we think that’s a good place to be.

Now what this chart shows is, we take position at the property itself if it’s predominantly private pay, say 90% or 80% private pay that content’s purpose is it’s private pay property. Some analysts have tried to dive in deeper and pierce through that and see if you had a direct dependency on government versus private pay.

This was an attempt made by Stifel Nicolaus, they’re dealing with – I know that have published such analysis and even in that case as you could we’re the highest of the private pay dependency or lowest on Medicare and Medicaid dependency. As I mentioned, our properties are very geographically diversified. The shaded areas of blue are our largest top 10 states of concentration. And as you’d expect there, where the population is for elderly and we’ve had very good success in those states.

Read the rest of this transcript for free on seekingalpha.com