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Senior Housing Properties Trust (SNH)
Q2 2010 Earnings Call
August 02, 2010 01:00 p.m. ET
Tim Bonang - VP, IR
David Hegarty - President & CEO
Rick Doyle - CFO
Kevin Ellich - RBC Capital Markets
Jerry Doctrow - Stifel, Nicolaus
Omotayo Okusanya - Jefferies & Co
Previous Statements by SNH
» Senior Housing Properties Trust Q1 2010 Earnings Call Transcript
» Senior Housing Properties Trust Q4 2009 Earnings Call Transcript
» Senior Housing Properties Trust Inc. Q4 2008 Earnings Call Transcript
Thank you and good afternoon everyone. Joining me on today's call are David Hegarty, President and Chief Operating Officer and Richard Doyle, Chief Financial Officer.
Today's conference is the presentation by management followed by a question and answer session. I would also note that the recording and transmission of today's conference call is strictly prohibited without prior written consent of SNH.
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, August 2, 2010. 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 funds from Operations or FFO. A reconciliation of FFO to net income, as well as components to calculate AFFO, CAD or SAD are available on pages 11 and 14 in our Q2 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 Q2 2010 Form 10-Q to be filed with the SEC later today. Investors are cautioned to not place undue reliance on any forward-looking statements.
And with that, I would like to turn the call over to Dave Hegarty.
Thank you Tim, and good afternoon everyone, and thank you for joining us. We have a lot of positive news to report today the company had an excellent quarter and is in solid financial condition. We also feel optimistic about the investment opportunities going forward maybe the most significant news is to report that our senior, our unsecured senior bonds were just upgraded; investment grade is past Thursday by Moody's Investor services.
As stated in their press release, "this grading action reflects the substantial progress made by senior housing in terms of growth and diversity as well as its maintenance of consistently sound credit metrics".
By design over the past two years, we have diversified our real estate investment portfolio primarily through the addition of medical office buildings. As expanded the size of our real estate investment portfolio to approximately $3.5 billion while maintaining our historically conservative balance sheet. As many of you know our unsecured bonds are already considered investment grade rate are Standard & Poor's.
The second quarter of 2010, we reported $0.42 per share funds from operations which is consistent with consensus expectation. We con to have a high cash balance in bulk capacity on our $550 million revolving credit facility with no near-term debt maturities. As usual, the company has a solid balance sheet, excellent liquidity, a well performing portfolio and is consistently evaluating growth opportunities.
During the quarter, we closed on two medical office building mentioned in our last earnings call that totaled $16.6 million, and we funded $9.6 million of capital improvement to expansion at our senior living properties, and are optimistic that we will have ample investment opportunities to consider in the second half of 2010. We've had excellent access to capital as evidenced by the $200 million debt issuance we did in April. We have plenty of capacity to invest.
Before I get into the details of our portfolio, the acquisition volume and the outlook, Rick will review our result for the quarter.
Thank you, Dave and good afternoon everyone. Rental income for the second quarter increased by $11 million to $81 million, or 15% compared to the second quarter of 2009. General and administrative expense increased $357,000 or 7% to $5.4 million which is one of the lowest healthcare REIT industry at 6.7% of revenues.
Depreciation expense increased by $3.7 million or 20% to $22 million compared to the second quarter of 2009. Year-over-year quarterly increase and rental, G&A and depreciation expense reflects properties acquired since April 2009 partially offset by the sale of four properties in 2009.
Property operating expenses increased by $925,000 to $4 million primarily due to acquisitions of several medical office building since April 2009. In most cases, these operating expenses are recovered from the tenant. Percentage rent revenue from our senior living tenants for the second quarter of 2010 increased 4.2% to $2.5 million versus the second quarter of 2009.
Interest expense for the second quarter of 2010 was $9.8 million higher versus 2009 period, due to the interest in amortization of deferred financing fees relating to our agency debt with Fannie Mae, that closed in projects 2009 offset by lesser amount outstanding under our revolving credit facility.