Senior Housing Properties Trust (SNH)

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Senior Housing Properties Trust (SNH)

Q3 2012 Earnings Conference Call

October 29, 2012, 1:00 pm ET

Executives

Tim Bonang – VP, IR

Rick Doyle – Treasurer, CFO

David Hegarty – President, COO

Analysts

Michael Carroll – RBC Capital Markets

Robert Mains – Stifel Nicolaus

Tayo Okusanya – Jefferies

James Milam – Sandler O'Neill

Jana Galen – Bank of America Merrill Lynch

Presentation

Operator

Good day and welcome to the Senior Housing Properties Trust third quarter 2012 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 afternoon, everyone. Joining me on today's call are David Hegarty, President and Chief Operating Office, 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 recording and retransmission of today's conference call is strictly prohibited without prior written consent of Senior Housing.

Before we being, 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, October 29, 2012. The company undertakes no obligation to revise or publicly release the results with 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.

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 on our 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 filings with the SEC. Investors are cautioned not to place undue reliance on any forward-looking statements.

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

David Hegarty

Thank you, Tim, and good afternoon, everyone, and thank you all for joining us today on our third quarter earnings call.

First and foremost, we at SNH hope that each of you and your families are safe and as far from any harm from the hurricane.

I am pleased to report that another active and positive quarter for the company, one of which we increased the dividend and positioned ourselves for continued long-term cash flow and dividend growth.

Over the last decade, we have been consistent in executing our strategy of growing our exposure to private pay real estate by exclusively investing in private pay senior living communities and medical office buildings.

Today, 94% of our portfolio's NOI is derived from real estate where the predominant revenue source is private pay. With uncertainties surrounding the fiscal cliff and the long-term viability of Medicare, we feel that we are in the best position in the healthcare REIT space within any additional Medicare cuts.

Our Senior Housing portfolio and medical office buildings are clearly among the best in their respective industries. We do not discuss this often, but Senior Housing Properties Trust is an ENERGY STAR partner with the US Department of Environmental Protection Agency and is focused on being a partner to reduce global warming.

For the third quarter, we reported normalized funds from operations or FFO $0.43 per share. Subsequent to quarter end, our Board of Trustees increased their quarterly distribution by $0.01 per share to $0.39 per share which represents a 7.2% yield based on Friday's closing stock prices.

Year-to-date, 2012 we have acquired or entered into agreements to acquire $450 million of senior living and medical office properties, $304 million of that being acquisition opportunities that came about during 2012.

We stated at the beginning of this year that we expect we'll acquire $300 million to $400 million of properties. At the end of the quarter, we had achieved that goal. Since July 1st, we have closed on $225 million of acquisitions comprised of seven senior living communities with over 1100 units and three medical office buildings containing approximately 150,000 square feet. All of the activity we closed on during the quarter was previously announced.

We recently entered into agreements to acquire three senior living communities located in three states: Mississippi, Tennessee and Washington with 437 units for $59 million. Two of the senior living communities was leased to our TRS and the other will be triple-net leased to a privately owned senior living operator.

We also recently entered into an agreement to acquire a Class A multi-tenant medical office building located in Tennessee for $9.2 million containing 34,000 square feet.

Including the pending acquisition of the medical office building in Minnesota we announced last quarter for $15 million, we have a total of $34 million of pending acquisitions, which we expect will close by the end of the year.

As we have said in the past, we continue to evaluate individual assets and small portfolios in the senior living and medical office space and are seeing new opportunities from sellers looking to close on transactions before year end.

We are uniquely positioned when compared to the (inaudible) healthcare REITs that we can pursue and win smaller accretive acquisition opportunities that help to grow our portfolio and cash flows.

Read the rest of this transcript for free on seekingalpha.com