Senior Housing Properties Trust (SNH)

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Senior Housing Properties Trust (SNH)

Q3 2013 Earnings Call

October 29, 2013 10:00 am ET


Tim Bonang - VP, IR

David Hegarty - President & COO

Rick Doyle - Treasurer & CFO


Juan Sanabria - Bank of America

Omotayo Okusanya - Jefferies

Daniel Bernstein - Stifel Nicolaus

Michael Carroll - RBC Capital Markets



Good day and welcome to the Senior Housing Properties Trust Third Quarter 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 Vice President of Investor Relations, Mr. Tim Bonang. Please go ahead, sir.

Tim Bonang

Thank you and good morning, 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 transcription, 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, October 29, 2013. 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 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

Actual results may differ materially from those projected in any forward-looking statements. Additional information concerning factors that could cause those differences is contained on our filings with the SEC. Investors are cautioned not to place undue reliance upon any forward-looking statements.

And now, I would like to turn the call over to Dave.

David Hegarty

Thank you, Tim, and good morning everyone, and thank you for joining us on today's call. Earlier this morning we reported normalized funds from operations or normalized FFO of $0.42 per share for the third quarter of 2013. Our results this quarter were met with many positives to note. Our triple net leased assets, representing more than half of our NOI, helped steady and generated modest growth.

Our medical office building portfolio representing 30% of our NOI showed modest overall growth and managed senior living portfolio represented 15% of our NOI demonstrated particularly outstanding results. I'll analyze these segments in detail in a few minutes.

Consistent with our business strategy of owning and acquiring private pay assets and minimizing our exposure to government funded programs such as Medicare and Medicaid, we completed $101 million of private pay acquisitions since July 1st and have $27 million of additional properties under agreement to acquire.

In September, we announced the sale of our two Greater Boston inpatient rehabilitation hospitals. The only rehab hospitals we own to a third-party joint venture for $90 million. Additionally during the quarter, we sold one skilled nursing facility and are making progress in some of the other 10 senior living communities and 7 medical office buildings held-for-sale.

These actions are part of our portfolio of repositioning we announced last quarter. We continue to be well positioned today to pursue a previous private pay acquisitions while maintaining our disciplined underwriting standards and do not have a need to access to capital markets for the foreseeable future.

With all these moving parts, our board determined earlier this month to leave the dividend unchanged at $0.39 per share, which represents an attractive and secure 6.25% dividend yield as of yesterday's close.

I'll now spend some time discussing the trends you'll see in our portfolio in the acquisition environment and Rick will get into our financial performance in a few minutes.

Our triple net leased senior living properties whose results reported on a rolling 12 month basis as of June 30, 2013, continue to perform well. Overall occupancies were approximately 85% and coverage ratios were about 1.4 times. Occupancy for the trailing five quarters were essentially flat for our independent assisted living assets, while skilled nursing continued to decline. The independent living assets covered around 87.6% to 87.7%, while assisted living remained between 86.5% and 87%. Skilled nursing declined from 80.4% to 78.9% year-over-year. The skilled nursing portfolio continues to be affected by the weak operating environment and the decline in skilled nursing census along with the Medicare sequestration has put some pressure on coverage ratios.

Looking at the performance of our individual operators, Five Star Quality Care has 189 leased communities, had combined occupancy of 84.2%, and rental coverage of 1.25 times. If you exclude the 10 senior living communities held-for-sale, Five Star's aggregate occupancy would have increased 40 basis points to 84.6% and rental coverage would have increased from 1.25 times to about 1.3 times, more in line with historical coverage ratios. The four properties released to Sunrise Senior Living had occupancy of 92.9% and rental coverage of 1.9 times. The 18 properties released to Brookdale Senior Living had occupancy of 95.3% and rental coverage of 2.5 times.

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