By Business Wire, September 23, 2013, 08:10:00 AM EDT
Further Aligning Interests of RMR with SNH Shareholders While
Maintaining Low Cost Structure; Recommending Annual Election of All
Trustees; Terminating "Poison Pill"
NEWTON, Mass.--(BUSINESS WIRE)--
Senior Housing Properties Trust (NYSE:SNH) today announced the
restructuring of its management agreement with Reit Management &
Research LLC (RMR) and significant governance enhancements.
Restructuring of Management Agreement with RMR.
SNH and RMR have agreed to restructure their business management
agreement as follows:
The base business management fees paid by SNH to RMR, which are
included in SNH's "G&A" expenses, are currently calculated at the
annual rate of approximately 0.5% of the gross historical cost of
SNH's real estate assets. Beginning in 2014, these fees will be
calculated on the basis of the lower of: (i) gross historical cost of
SNH's real estate assets or (ii) SNH's total market capitalization.
Market capitalization will include the market value of SNH's common
shares, plus the liquidation preference of preferred shares and the
principal amount of debt. The market value of SNH's common shares will
be calculated based on the average shares outstanding multiplied by
the average closing share price during the period in which the fees
are earned. Accordingly, SNH's fees paid to RMR may decline when the
market value of SNH's common shares declines.
All of the base business management fees currently paid by SNH to RMR
are paid in cash. Beginning in 2014, 10% of the base business
management fees will be paid in common shares of SNH. The amount of
SNH common shares granted as part of the base business management fee
will be calculated based on the average closing share price during the
period in which the fees are earned. Accordingly, RMR's common share
ownership of SNH is expected to increase over time.
Annual incentive fees payable by SNH to RMR included in SNH's "G&A"
expenses are currently calculated based upon increases in funds from
operations (FFO) per share and are paid in common shares of SNH which
vest immediately. Beginning in 2014, the incentive fees which may be
earned by RMR will be calculated based upon total returns realized by
SNH common shareholders (i.e., share price appreciation plus
dividends) in excess of benchmarks. The benchmarks will be set by the
Compensation Committee of SNH's Board (which is comprised solely of
Independent Trustees) and will be disclosed in SNH's annual meeting
proxy statements. Incentive fees will be paid in common shares of SNH
which will vest over a multiyear period and will be subject to a "claw
back" in the event of certain material restatements of financial
results. Accordingly, the incentive fees payable to RMR are expected
to have a direct relationship to total returns realized by SNH common
Recommending Annual Election of All Trustees.
The SNH Board of Trustees has determined to recommend to shareholders
that SNH's Declaration of Trust be amended to permit the annual election
of all Trustees. SNH's Trustees currently serve staggered, three year
terms. The proposed amendment to SNH's Declaration of Trust will be
presented to SNH's shareholders at SNH's next annual shareholders'
meeting in the spring of 2014. If this amendment is approved by SNH's
shareholders, all Trustees will thereafter be elected for one year terms.
Terminating "Poison Pill".
The SNH Board of Trustees has determined not to extend SNH's
shareholders' rights plan (the "poison pill") when it expires on April
SNH's Independent Trustees issued the following joint statement
regarding today's announcements:
"Historically, SNH's Board and management have focused on providing high
quality management services to SNH at or below average costs. The
changes announced today are intended to further align RMR's financial
incentives with the returns realized by shareholders and enhance the
Company's governance, while allowing SNH to continue receiving high
quality management services at or below average costs. The SNH Board is
also currently considering additional governance enhancements which may
be announced during the next several months."
Senior Housing Properties Trust is a real estate investment trust (REIT)
that primarily owns healthcare properties located throughout the United
States. SNH is headquartered in Newton, MA.
WARNING CONCERNING FORWARD LOOKING STATEMENTS
THIS PRESS RELEASE CONTAINS STATEMENTS THAT CONSTITUTE FORWARD LOOKING
STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995 AND OTHER SECURITIES LAWS. ALSO, WHENEVER SNH USES
WORDS SUCH AS "BELIEVE", "EXPECT", "ANTICIPATE", "INTEND", "PLAN",
"ESTIMATE" OR SIMILAR EXPRESSIONS, SNH IS MAKING FORWARD LOOKING
STATEMENTS. THESE FORWARD LOOKING STATEMENTS ARE BASED UPON SNH'S
PRESENT INTENT, BELIEFS AND EXPECTATIONS, BUT FORWARD LOOKING STATEMENTS
ARE NOT GUARANTEED TO OCCUR AND MAY NOT OCCUR. ACTUAL RESULTS MAY DIFFER
MATERIALLY FROM THOSE CONTAINED IN OR IMPLIED BY THESE FORWARD LOOKING
STATEMENTS AS A RESULT OF VARIOUS FACTORS. FOR EXAMPLE:
THIS PRESS RELEASE STATES THAT FUTURE INCENTIVE FEES PAYABLE TO RMR
ARE EXPECTED TO HAVE A DIRECT RELATIONSHIP TO TOTAL RETURNS REALIZED
BY SNH'S COMMON SHAREHOLDERS. AN IMPLICATION OF THIS STATEMENT MAY BE
THAT SHAREHOLDERS WILL RECEIVE INCREASED TOTAL RETURNS. IN FACT,
FUTURE TOTAL RETURNS REALIZED BY SHAREHOLDERS WILL BE IMPACTED BY MANY
FACTORS, INCLUDING SOME BEYOND SNH'S AND RMR'S CONTROL. FOR EXAMPLE,
THE TOTAL RETURNS REALIZED BY SHAREHOLDERS ARE DEPENDENT UPON THE
CHANGES IN THE TRADING PRICE OF SNH SHARES WHICH MAY REFLECT CHANGES
IN INTEREST RATES, THE EXPECTATION OF FUTURE INTEREST RATE CHANGES OR
OTHER GENERAL MARKET CONDITIONS. ACCORDINGLY, THERE CAN BE NO
ASSURANCE THAT THE CHANGES IN THE METHOD OF CALCULATING THE INCENTIVE
FEES PAID BY SNH TO RMR WILL INCREASE THE TOTAL RETURNS REALIZED BY
SNH COMMON SHAREHOLDERS.
THIS PRESS RELEASE IMPLIES THAT SNH'S HISTORICAL AND FUTURE G&A COSTS
HAVE BEEN, AND WILL BE, AT OR BELOW THE AVERAGE OF SUCH COSTS AMONG
ITS PEER GROUP. CALCULATING THE RELATIVE COSTS OF G&A SERVICES CAN BE
DONE IN MANY DIFFERENT WAYS; FOR EXAMPLE, IN ACTUAL DOLLAR AMOUNTS, AS
A PERCENTAGE OF ASSETS VALUED AT COST OR BOOK VALUES, AS A PERCENTAGE
OF BOOK OR MARKET EQUITY VALUES, AS A PERCENTAGE OF REVENUES, OR
OTHERWISE. SNH BELIEVES THAT ITS STATEMENTS ARE BASED UPON CUSTOMARY
CALCULATIONS USED IN THE REIT INDUSTRY TO COMPARE G&A COSTS BASED ON
FINANCIAL STATEMENT METRICS. HOWEVER, DEPENDING UPON HOW RELATIVE G&A
COSTS ARE CALCULATED, IT MAY BE POSSIBLE TO ARGUE THAT SNH'S
HISTORICAL AND FUTURE G&A COSTS ARE NOT, AND WILL NOT BE, AT OR BELOW
THIS PRESS RELEASE STATES THAT SNH'S BOARD HAS DETERMINED TO RECOMMEND
TO SHAREHOLDERS THAT SNH'S DECLARATION OF TRUST BE AMENDED TO PROVIDE
THAT ALL TRUSTEES BE ELECTED TO SERVE FOR ONE YEAR TERMS. THIS
AMENDMENT MAY NOT BE APPROVED BY SNH'S SHAREHOLDERS. ALSO, ALTHOUGH
SNH'S BOARD HAS NO CURRENT INTENTION TO DO SO, SNH'S BOARD MAY
DETERMINE IN THE FUTURE NOT TO PROCEED WITH A PROPOSAL TO SHAREHOLDERS
TO PROVIDE THAT ALL TRUSTEES BE ELECTED TO SERVE FOR ONE YEAR TERMS.
THIS PRESS RELEASE STATES THAT SNH'S BOARD HAS DETERMINED NOT TO
EXTEND SNH'S SHAREHOLDER'S RIGHTS PLAN (THE "POISON PILL") WHEN IT
EXPIRES ON APRIL 10, 2014. UNDER APPLICABLE LAW, THE SNH BOARD HAS THE
POWER TO CREATE, AMEND, EXTEND OR TERMINATE A SHAREHOLDERS' RIGHTS
PLAN. ALTHOUGH SNH'S BOARD HAS NO CURRENT INTENTION TO DO SO, SNH'S
BOARD MAY DETERMINE IN THE FUTURE TO EXTEND THE EXPIRATION OF THE PLAN
OR TO ADOPT A NEW SHAREHOLDERS' RIGHTS PLAN AFTER THE CURRENT PLAN
THIS PRESS RELEASE STATES THAT SNH IS CURRENTLY CONSIDERING OTHER
ENHANCEMENTS TO GOVERNANCE THAT MAY BE ANNOUNCED IN THE NEXT SEVERAL
MONTHS. THE SNH BOARD MAY DECIDE TO MAKE NO FURTHER GOVERNANCE
ENHANCEMENTS OR ANY ADDITIONAL ENHANCEMENTS MAY BE DELAYED UNTIL
BEYOND THE NEXT SEVERAL MONTHS.
FOR THESE REASONS, AMONG OTHERS, INVESTORS ARE CAUTIONED NOT TO PLACE
UNDUE RELIANCE UPON ANY FORWARD LOOKING STATEMENTS IN THIS PRESS RELEASE.
EXCEPT AS REQUIRED BY LAW, SNH DOES NOT INTEND TO UNDERTAKE ANY
OBLIGATION TO UPDATE ANY FORWARD LOOKING STATEMENT IN THIS PRESS RELEASE
AS A RESULT OF FUTURE EVENTS, NEW INFORMATION WHICH MAY COME TO SNH'S
ATTENTION OR OTHERWISE.
A Maryland Real Estate Trust with transferable shares of beneficial
interest listed on the New York Stock Exchange.
Trustee or officer is personally liable for any act or obligation of the
Source: Senior Housing Properties Trust