Senior Housing Properties Trust (SNH)
UBS Healthcare Services Conference Transcript
February 8, 2012 2:30 PM ET
Dave Hegarty – President and COO
Rick Doyle – Chief Financial Officer
Derek Bower – UBS Investment Bank
Derek Bower – UBS Investment Bank
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Thank you, Derek, and good afternoon, everyone. And thank you for coming to hear our story about Senior Housing Properties Trust. First, I’ll caveat everything that, I’ll tell everything I can today to the best of my knowledge, and we are probably about a week or so away from our earnings, so I am limited to how much I can comment on today.
I don’t know how many know Senior Housing Properties Trust or SNH is the healthcare REIT, that’s very diversified by geography tenant and product. We are the fourth largest healthcare REIT today. We have $4.9 billion of an investment portfolio and that’s on a costs basis, we have 373 properties right across 38 states, plus Washington, DC, and approximately 560 different tenants in those properties.
We are among, I believe the top seven owners of Senior Housing, private pay Senior Housing real estate that about 30,700 units, and at some point million square feet of medical office, building space. We are also one of the top owners of medical office space in the country.
About 94% of our net operating income come from private pay properties, as oppose to nursing homes, our rehab hospitals, or other government dependent type properties. I believe that’s the lowest amongst the healthcare REIT that have investments in this space.
Also one thing that’s unique about us too that we own a 100% fee interest in our properties that in the healthcare spectrum. I think that’s also pretty unique amongst the healthcare REITs that we especially have no ground leases, joint ventures or other types of joint situations.
There are many reasons to invest in our company. We have a proven track record of consistently strong financial performance and now we’ve been able to do that by maintaining a conservative financial approach to our investing, every -- since the beginning of time of our company we have also underwritten our investments based on existing and historical performance of the properties. We don’t do underwrite based on performed results. And we’ve also try to prudently finance some by maintaining a strong balance sheet.
Company has invest grade Baa3 and BBB- by the rating agencies. We’re also very manageable debt maturities and we’ve had access, great access to the capital markets. All of this has allowed us to raise our dividend for the last 10 years and maintain a very modest 85% or so payout ratio of funds from operations.
In 2011, we raised over a $1 billion in capital markets transactions through a combination of couple debt offerings and couple of equity offerings. Also in June of this past year, we did a new $750 million unsecured revolving credit facility and that’s an attractive pricing at LIBOR plus 160 and it matures in 2015, plus we have an extension for another year after that.
So we have plenty of capital available to make investments, so we try to make them wisely and our differ portfolio itself has been characterized it by say it’s predominantly private assets with limited exposure to government reimbursement.
They are very geographically diversified and also by asset type and tenant, and high -- we have quality assets with low historical investment basis whether you look at it on a per unit square foot or per bed costs, looking into some of these details in a bit.
And also fundamentally, we believe we are in a great spot at this time for the next several years. The demographic trends are increasing growing stronger with about an average of 2% to 3% growth rate in the age cohorts that we are targeting for medical office that might be 65 years and up, whereas in Senior Housing it’s pretty much 75 and up for an age group.
And meanwhile the supply of new inventory is still very limited coming online that’s generally 1% to 1.5% growth in inventory per year. So, I think, the several years we’re in a pretty sweet spot for investing in the Senior Housing space.
As I mentioned, we’re in 38 states in Washington, DC, very geographically diversified, as you expect the biggest dollar invested would be Florida, Texas, California, and the Mid Atlantic region, as well as Wisconsin with a number of medical office building we’ve acquired, as well as the senior living presents that we had for many years.
These are our representative tenants that we do business with, very high-end quality tenant portfolio, Brookdale, Five Star and Sunrise Senior Living our three major senior living operators that we do business with. And then in the biotech area which is part of our medical office portfolio we have Scripts, Quest Diagnostics and Abbott Lab.
In the healthcare systems we have good amount of investments with Aurora Health Care, an A rated healthcare system in Wisconsin. Reliant Medical Group, which is firmly known as Fallon Healthcare. Fallon clinics based in the Central Massachusetts area.