Senior Housing Properties Trust (SNH)

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Senior Housing Properties Trust (SNH)

Acquisition of Two Biotech Medical Office Buildings in Boston’s Seaport District Conference Call

February 11, 2014 10:00 AM ET


Timothy A. BonangVice President-Investor Relations

David J. Hegarty – President and Chief Operating Officer

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


Todd J. Stender – Wells Fargo Securities, LLC

Michael Carroll – RBC Capital Markets LLC

Daniel M. Bernstein – Stifel, Nicolaus & Co., Inc.

Haendel E. St. Juste – Morgan Stanley & Co. LLC

Omotayo Okusanya – Jefferies & Company

Juan C. Sanabria – Merrill Lynch, Pierce, Fenner & Smith, Inc.

Nick Yulico – UBS Securities LLC

Ross Nussbaum – UBS Securities LLC



Good day and welcome to the Senior Housing Properties Trust 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.

Timothy A. Bonang

Good morning, everyone. And thank you for joining us on such short notice to discuss the acquisition we announced yesterday and also for your patience as we got everyone on the call. Joining 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 on Senior Housing's present beliefs and expectations as of today, February 11, 2014. The company undertakes no obligation to revise or publicly release the results of any revision for 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.

Now, I would like to turn the call over to Dave, who will begin the slide three.

David J. Hegarty

Thank you Tim, and good morning everyone and thank you for joining us on today’s call. Yesterday afternoon we announced that SNH has agreed to acquire two Class A biotech buildings in Boston’s fastest growing submarket, the Seaport District, also referred to as the Innovation District or Fan Pier. The acquisition is expected to be a new accretive to SNH shareholders and 96% of the rentable square footage is a 15-year triple net leased to a strong credit tenant, Vertex Pharmaceuticals.

Vertex has been a public company since 1991 as stated on the NASDAQ. This was a transformative acquisition to SNH’s portfolio as it significantly increases our MOB exposure. The purchase price is $1.125 billion and the yield to SNH is expected to exceed 7% per annum. We anticipate closing this transaction in the first half of 2014.

Now please turn to Slide 4, which highlights the property details. The property consists of two 15-storey newly constructed buildings with a total of 1.65 million gross square feet. There is over 1.13 million rentable square feet. And as I just mentioned 96% is triple net leased biotech lab and office space to Vertex. The lab’s research space is steady and features intensive HVAC, plumbing and redundant electricity to meet the needs of the biotech industry. The properties also include approximately 50,000 square feet on street level retail space, which will have amenities such as dining, banking and day care.

Finally, there is approximately 390,000 square feet and subterranean parking for 740 vehicles on three levels. The buildings were constructed in accordance with LEED Gold standards and they feature a high-end building systems and finishes.

Please turn to Slide 5, I hear that most of you have a building at 11 Fan Pier Boulevard, although we can see it on the slide, it’s important to note that the two buildings are connected by a glass sky bridge on the fifth and sixth levels. This is not only an attractive feature but also has obvious practical benefits in connecting the workforce.

Please turn to Slide 6, here is a closer view of the other building which is 50 Northern Avenue. For those of you who are familiar with the Boston area, you will notice that to the left of this building sits the John Joseph Moakley United. States Courthouse.

Turning to Slide 7, which details the location. Over the past several years, the Seaport District which includes the Innovation District in Fan Pier has become Boston’s fastest growing submarket and one of the nation’s top real estate investment opportunities. Billions of dollars of public investment in infrastructure for more than a decade have made the area photograph of growth and development. With the completion of the Back Bay several years ago and investment in public transportation, the area enjoys seamless and easy access from the Financial District and surrounding areas of Boston. The Seaport District is now thriving as one of the most attractive places to live, work and dine.

There has been positive net absorptions and leasing velocity, and rents have increased more than 30% in the past year. The ultimate validation of these flats has been the relocation to the Seaport District by some of Boston’s highest quality tenants that have moved from the Financial District and Back Bay. These include Fidelity, State Street Bank and PricewaterhouseCoopers coming in the field. In addition, the Seaport is now home to several technology companies and relocated from Cambridge and other parts of Greater Boston area.

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