Senior Housing Properties Trust (SNH)

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Senior Housing Properties Trust (SNH)

Q2 2011 Earnings Call

July 28, 2011 1:00 PM ET

Executives

Timothy Bonang – VP, IR

David Hegarty – President and COO

Richard Doyle – CFO and Treasurer

Analysts

Todd Stender – Wells Fargo Securities

Jerry Doctrow – Stifel Nicolaus

Omotayo Okusanya – Jefferies & Co

Frank Morgan – RBC Capital Market

David AuBuchon – Dave AuBuchon of Baird

Daniel Cooney – KBW

Presentation

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Senior Housing Properties Trust Second Quarter Conference. At this time, all participants are in a listen-only mode. (Operator instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Mr. Tim Bonang. Please go ahead.

Timothy Bonang

Thank you and good afternoon 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. I would also note that the recording and retransmission of today’s conference call is strictly prohibited without prior written consent of Senior Housing.

Before we begin today’s call, I’d 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, July 28th, 2011. 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 regarding this reporting period.

Commencing this quarter, the Company will report normalized Funds From Operations or normalized FFO in order to be comparable with its peers. Normalized FFO represents FFO as defined by NARI and as adjusted to include percentage rent and exclude loss on early extinguishment of debt, impairment of assets and acquisition related costs.

In addition to normalized FFO, this call may contain other non-GAAP numbers. A reconciliation of normalized FFO to net income and the components to calculate AFFO, CAD or FAD can be found 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 2011 Form 10-Q to be filed with the SEC. Investors are cautioned not to place undue reliance upon any forward-looking statements.

Now, I would like to turn the call over to Dave Hegarty.

David Hegarty

Thank you, Tim, and good afternoon everyone and thank you for joining us today. As Tim stated, we are now referring to Funds From Operations or FFO as normalized FFO. We are not changing the way we have calculated FFO historically, rather we are just differentiating our definition from the NARI’s definition and using a term more comparable to industry peers.

For the second quarter of 2011, we reported normalized FFO of $0.44 per share and this compares with $0.42 per share that we reported for the same period a year ago. For the six months ended June 30, 2011, we reported

we reported normalized FFO of $0.88 per share versus $0.85 per share a year ago. Before Rick reviews the details of our financial results, let me briefly discuss some of the highlights of the quarter. As of today, we have acquired or are under agreement to acquire a total of 29 properties for approximately $361 million since April 1, 2011. To remind you, in March we acquired – we announced an agreement to acquire a 20 community senior living portfolio for $304 million. To date, we have acquired 17 of these communities for $241 million.

During the second quarter, we also acquired another senior living community in five medical office buildings for a total of $35 million. We also currently have under agreements to acquire one additional senior living community and two medical office buildings for a total purchase price of approximately $23 million.

And I will go into more detail in these acquisitions later on this call. We also had some dispositions during the quarter. We sold seven properties including four skilled nursing facilities, two medical office buildings and one assisted living community for a combined sales price of approximately $40 million. The sale of skilled nursing facilities fits with our strategy of reducing our exposure to the Medicare and Medicaid programs.

We are very pleased to report that in June we successfully entered into a new $750 million unsecured revolving credit facility. This new facility replaces our previous $550 million, which was set to mature at the end of 2011. The tremendous success in this deal is highlighted by the fact we increase the size by $200 million, achieved very favorable terms and increased lender participation. Our new facility has a four year term with the borrower’s option to extend an additional year.

The facility has an interest rate of LIBOR plus 160 basis points, which is a competitive rate against our peer group, and with 26 lenders, we have an industry leading numbers of participants in this facility. Subsequent to the quarter end in July, we completed a successful well received public offering of 11.5 million common shares and raised approximately $248 million of net proceeds. We used the proceed from this offering to repay borrowings outstanding on our credit facility and two in part fund the acquisitions I mentioned previously. The 11.5 million shares were issued that a price 10% higher than our last offering at the end of 2010 and our share price has increased favorably since the offering date.

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