-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BCBOMfi0O6celx9cUSXJR0iTQ44xJL0JAqpTCEu4MulMVmotW4u1U3fUbrZHy3CG OhJsGzxBYfgO3jtPXmA7nA== 0000908737-05-000758.txt : 20051031 0000908737-05-000758.hdr.sgml : 20051031 20051031120025 ACCESSION NUMBER: 0000908737-05-000758 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20051031 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20051031 DATE AS OF CHANGE: 20051031 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SENIOR HOUSING PROPERTIES TRUST CENTRAL INDEX KEY: 0001075415 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 043445278 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-15319 FILM NUMBER: 051165432 BUSINESS ADDRESS: STREET 1: 400 CENTRE STREET CITY: NEWTON STATE: MA ZIP: 02458 BUSINESS PHONE: 6173323990 8-K 1 snh8k.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported): October 31, 2005

 

SENIOR HOUSING PROPERTIES TRUST

 

 

Maryland

001-15319

04-3445278

(State of organization)

(Commission file number)

(I.R.S. Employer Identification Number)

                    

                    

400 Centre Street, Newton, Massachusetts 02458

 

 

617-796-8350

 

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 


 

 

 

ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

 

On October 31, 2005, Senior Housing Properties Trust, or the Company, issued a press release setting forth the Company’s results of operations and financial condition for the quarter and nine months ended September 30, 2005 and also provided certain supplemental operating and financial data for the quarter and nine months ended September 30, 2005. Copies of the Company’s press release and supplemental operating and financial data are furnished as Exhibits 99.1 and 99.2 hereto, respectively.

 

ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.

 

(c)

Exhibits

 

The Company hereby furnishes the following exhibits:

 

99.1

Press release dated October 31, 2005.

 

99.2

Third Quarter 2005 Supplemental Operating and Financial Data.

 


 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

SENIOR HOUSING PROPERTIES TRUST

 

By: 

/s/ John R. Hoadley                    

 

John R. Hoadley

 

Treasurer and Chief Financial Officer

 

Date: October 31, 2005

 

 

 

 

 


 EX-99.1 2 ex99-1.htm

EXHIBIT 99.1

FOR IMMEDIATE RELEASE

 

 

Contact:

 

 

Timothy Bonang

 

 

Manager of Investor Relations

 

(617) 796-8350

 

 

www.snhreit.com

 

 

SNH Announces Results For the Periods Ended September 30, 2005

 

Newton, MA (October 31, 2005): Senior Housing Properties Trust (NYSE: SNH) today announced its financial results for the quarter ended September 30, 2005.

 

Results for the quarter ended September 30, 2005:

Income from continuing operations and net income was $14.1 million, or $0.21 per share, for the quarter ended September 30, 2005, compared to $12.9 million, or $0.20 per share for the quarter ended September 30, 2004.

 

Funds from operations (FFO) for the quarter ended September 30, 2005 were $25.9 million, or $0.38 per share. This compares to FFO for the quarter ended September 30, 2004 of $23.4 million, or $0.37 per share.

 

The weighted average number of common shares outstanding totaled 68.5 million and 63.5 million for the quarters ended September 30, 2005 and 2004, respectively.

 

Results for the nine months ended September 30, 2005:

Income from continuing operations was $42.3 million, or $0.62 per share, for the nine months ended September 30, 2005, compared to $39.0 million, or $0.62 per share for the nine months ended September 30, 2004. Net income was $43.0 million, or $0.63 per share, for the nine months ended September 30, 2005, compared to $40.2 million, or $0.64 per share, for the same period last year.

 

Funds from operations (FFO) for the nine months ended September 30, 2005 were $77.1 million, or $1.13 per share. This compares to FFO for the nine months ended September 30, 2004 of $70.4 million, or $1.12 per share.

 

The weighted average number of common shares outstanding totaled 68.5 million and 63.1 million for the nine months ended September 30, 2005 and 2004, respectively.

 

Conference Call:

On Monday, October 31, 2005, at 1:00 p.m. EST, David J. Hegarty, president and chief operating officer, and John R. Hoadley, treasurer and chief financial officer, will host a conference call to discuss the results for the quarter ended September 30, 2005. The conference call telephone number is (877) 502-9276. Participants calling from outside the United States and Canada should dial (913) 981-5591. No pass code is necessary to access the call from either number. Participants should dial in about 15 minutes prior to the scheduled start of the call. A replay of the conference call will be available through November 4, 2005. To hear the replay, dial (719) 457-0820. The replay pass code is 2346392.

 

 

 

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A live audio web cast of the conference call will also be available in listen only mode on the SNH web site. Participants wanting to access the webcast should visit the web site about five minutes before the call. The archived webcast will be available for replay on the SNH web site for about one week after the call.

 

Supplemental Data:

A copy of SNH’s Third Quarter 2005 Supplemental Operating and Financial Data is available for download from the SNH web site, which is located at www.snhreit.com.

 

Senior Housing Properties Trust is a real estate investment trust, or REIT, that owns 184 senior living properties located in 32 states. SNH is headquartered in Newton, Massachusetts.

 

 

 

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Senior Housing Properties Trust

Financial Information

(in thousands, except per share data)

 

Income Statement:

 

 

 

Quarter Ended September 30,

 

Nine Months Ended
September 30,

 

 

2005

 

2004

 

2005

 

2004

 

Revenues:

 

 

 

 

 

 

 

 

 

Rental income(1)

 

$39,506

 

$35,426

 

$117,489

 

$105,444

 

Interest and other income(2)

 

738

 

318

 

1,588

 

2,349

 

 

 

 

 

 

 

Total revenues

 

40,244

 

35,744

 

119,077

 

107,793

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

Interest

 

11,911

 

10,285

 

34,585

 

30,910

 

Depreciation

 

10,923

 

9,743

 

32,428

 

29,015

 

General and administrative(1)

 

3,281

 

2,797

 

9,762

 

8,858

 

 

 

 

 

 

 

Total expenses

 

26,115

 

22,825

 

76,775

 

68,783

 

 

 

 

 

 

 

Income from continuing operations

 

14,129

 

12,919

 

42,302

 

39,010

 

Gain on sale of properties

 

-

 

-

 

717

 

1,219

 

 

 

 

 

 

 

Net income

 

$14,129

 

$12,919

 

$43,019

 

$40,229

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding

 

68,543

 

63,477

 

68,525

 

63,102

 

 

 

 

 

 

 

Per share data:

 

 

 

 

 

 

 

 

 

Income from continuing          operations

 

$0.21

 

$0.20

 

$0.62

 

$0.62

 

 

 

 

 

 

 

Net income

 

$0.21

 

$0.20

 

$0.63

 

$0.64

 

 

 

 

 

 

 

 

 

Balance Sheet:

 

 

At September 30, 2005

 

At December 31, 2004

 

 

Assets

 

 

 

 

Real estate properties

 

$1,632,013

 

$1,600,952

Less accumulated depreciation

 

231,118

 

199,232

 

 

 

 

 

1,400,895

 

1,401,720

Cash and cash equivalents

 

1,856

 

3,409

Restricted cash

 

2,501

 

6,176

Deferred financing fees, net

 

11,312

 

9,367

Other assets

 

23,839

 

27,058

 

 

 

Total assets

 

$1,440,403

 

$1,447,730

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

Unsecured revolving bank credit facility

 

$59,000

 

$37,000

Senior unsecured notes, net of discount

 

393,898

 

393,775

Junior subordinated debentures due 2041

 

28,241

 

28,241

Secured debt and capital leases

 

70,618

 

76,162

 

 

 

Total debt

 

551,757

 

535,178

Other liabilities

 

20,560

 

21,885

 

 

 

Total liabilities

 

572,317

 

557,063

Shareholders’ equity

 

868,086

 

890,667

 

 

Total liabilities and shareholders’ equity

 

$1,440,403

 

$1,447,730

 

 

 

 

(1)

Rental income for the quarter and nine months ended September 30, 2005, includes $2.2 million and $6.6 million, respectively, of income from two hospitals operated by HealthSouth Corporation, or HealthSouth. Effective January 2, 2002, we entered an amended lease with HealthSouth for two hospitals. In April 2003, we commenced a lawsuit against HealthSouth seeking, among other matters, to reform the amended lease, based upon HealthSouth’s fraud, by increasing the rent payable to us from January 2, 2002 until the termination or expiration of the amended lease. This litigation is pending at this time. On October 26, 2004, we terminated the amended lease for default because HealthSouth failed to deliver to us accurate and timely financial information as required by the amended lease. On November 2, 2004, HealthSouth brought a new lawsuit against us seeking to prevent our termination of the amended lease. On September 25, 2005, the court ruled that our termination was proper and we have begun work to identify and qualify a new tenant operator for the hospitals.

 

 

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HealthSouth will likely appeal the court’s decision that our lease termination was proper. We believe our lease with HealthSouth requires that, after termination, HealthSouth manage the hospitals for our account for a management fee during the period of the transition to a new tenant and remit the net cash flow to us. During the pendency of these disputes, HealthSouth has continued to pay us at the disputed rent amount and we have applied the payments received against the net cash flow due, but we do not know how long HealthSouth may continue to make payments. According to affidavits submitted during this litigation by HealthSouth, the leased hospitals produced cash flow in prior periods of approximately $14 million per year in excess of amounts paid by HealthSouth to us. We do not know the cash flow currently being produced by these hospitals. The court has also granted our request to sequester the net cash proceeds of the hospitals and appointed a receiver to calculate and hold these amounts until the litigation is concluded. HealthSouth disputes that the court order requires the sequestration of cash flow from the date of the lease termination to the present. On June 27, 2005, HealthSouth filed with the SEC a restated Annual Report on Form 10-K for periods ending December 31, 2003. HealthSouth’s restated Form 10-K includes financial data which shows HealthSouth to have a substantial negative net worth and a history of substantial operating losses. To date we have been unable to obtain reliable current financial information about the operations of HealthSouth or our hospitals. Accordingly, we do not know if we will be able to collect any amounts which the courts may determine to be owed to us by HealthSouth. Legal expenses incurred related to this matter were approximately $350,000 and $1,240,000, respectively, for the quarter and nine months ended September 30, 2005 and $75,000 and $125,000, respectively, for the quarter and nine months ended September 30, 2004, and are included in general and administrative expenses.

(2)

Included in interest and other income for the nine months ended September 30, 2004 is $1.25 million received in a settlement of litigation with Marriott International, Inc.

 

 

 

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Senior Housing Properties Trust

Funds From Operations

(in thousands, except per share data)

 

Calculation of Funds From Operations (FFO) (1):

 

 

Quarter Ended  

September 30,

 

Nine Months Ended

September 30,

 

 

 

 

 

 

 

 

 

 

 

2005

 

2004

 

2005

 

2004

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$14,129

 

$12,919

 

$42,302

 

$39,010

Add: Depreciation expense

 

10,923

 

9,743

 

32,428

 

29,015

Deferred percentage rent(2)

 

812

 

775

 

2,402

 

2,409

 

 

 

 

 

FFO

 

$25,864

 

$23,437

 

$77,132

 

$70,434

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding

 

68,543

 

63,477

 

68,525

 

63,102

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FFO per share

 

$0.38

 

$0.37

 

$1.13

 

$1.12

 

 

 

 

 

Distributions declared

 

$0.32

 

$0.32

 

$0.96

 

$0.94

 

 

 

 

 

 

 

(1)

We compute FFO as shown in the calculation above. Our calculation of FFO differs from the National Association of Real Estate Investment Trusts, or NAREIT, definition of FFO because we include deferred percentage rent in FFO as discussed in Note 2 below. We consider FFO to be an appropriate measure of performance for a real estate investment trust, or REIT, along with net income and cash flow from operating, investing and financing activities. We believe that FFO provides useful information to investors because by excluding the effects of certain historical costs, such as depreciation expense and gain or loss on sale of properties, FFO can facilitate comparison of current operating performance among REITs. FFO does not represent cash generated by operating activities in accordance with generally accepted accounting principles, or GAAP, and should not be considered an alternative to net income or cash flow from operating activities as a measure of financial performance or liquidity. FFO is one important factor considered by our board of trustees in determining the amount of distributions to shareholders. Other important factors include, but are not limited to, requirements to maintain our status as a REIT, limitations in our revolving bank credit facility and public debt covenants, the availability of debt and equity capital to us and our expectation of our future performance.

(2)

We recognize percentage rental income received during the first, second and third quarters in the fourth quarter. Although recognition of revenue is deferred until the fourth quarter for purposes of calculating net income, the calculation of FFO for the first three quarters includes estimated amounts with respect to those periods. The fourth quarter FFO calculation excludes the amounts recognized during the first three quarters.

 

WARNING CONCERNING FORWARD LOOKING STATEMENTS

THIS PRESS RELEASE CONTAINS FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND OTHER FEDERAL SECURITIES LAWS. THESE STATEMENTS REPRESENT OUR PRESENT BELIEFS AND EXPECTATIONS, BUT THEY MAY NOT OCCUR FOR VARIOUS REASONS. FOR EXAMPLE:

 

 

•

THIS PRESS RELEASE REPORTS A DECISION BY A MASSACHUSETTS TRIAL COURT THAT OUR TERMINATION OF HEALTHSOUTH’S LEASE OF TWO HOSPITALS WAS PROPER. HEALTHSOUTH MAY APPEAL THIS DECISION AND HEALTHSOUTH’S APPEAL MAY BE SUCCESSFUL.

 

 

•

THIS PRESS RELEASE STATES THAT THE LEASE REQUIRES HEALTHSOUTH TO CONTINUE OPERATIONS OF THE HOSPITALS DURING THE PERIOD OF TRANSITION TO A NEW TENANT. HEALTHSOUTH MAY BE UNWILLING OR UNABLE TO CONTINUE ITS OPERATIONS. IN SUCH CIRCUMSTANCES, WE MAY SEEK DAMAGES FROM HEALTHSOUTH AND TO CONTINUE THE HOSPITALS’ OPERATIONS WITH APPROPRIATE REGULATORY APPROVALS, BUT WE MAY BE UNABLE TO COLLECT SUCH DAMAGES FROM HEALTHSOUTH OR TO CONTINUE THE HOSPITALS’ OPERATIONS.

 

 

 

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•

THIS PRESS RELEASE STATES THAT THE COURT GRANTED OUR REQUEST TO HAVE THE CASH FLOW FROM THE HOSPITALS SEQUESTERED AND APPOINTED A RECEIVER TO CALCULATE AND HOLD THESE AMOUNTS. ONE IMPLICATION OF THIS STATEMENT IS THAT SOME OF THIS CASH FLOW MAY BE PAID TO US. HOWEVER, HEALTHSOUTH’S HISTORICAL STATEMENTS ABOUT ITS CASH FLOW HAVE BEEN INACCURATE AND THE EXISTENCE AND AMOUNT OF CASH FLOW FROM THE HOSPITALS WHICH WE OWN AND WHICH HEALTHSOUTH OPERATES MAY NOT BE ACCURATELY STATED. HEALTHSOUTH DISPUTES THAT THE COURT ORDER REQUIRES THE SEQUESTRATION OF CASH FLOW FROM THE DATE OF THE LEASE TERMINATION TO THE PRESENT; AND WE INTEND TO SEEK CLARIFICATION FROM THE COURT ON THIS ISSUE.

 

 

•

THIS PRESS RELEASE REFERS TO A SECOND LITIGATION IN WHICH WE ARE SEEKING TO COLLECT INCREASED RENT FROM HEALTHSOUTH BETWEEN JANUARY 2002 AND THE TERMINATION OF OUR LEASE WITH HEALTHSOUTH. THE FACT THAT WE HAVE RECEIVED A FAVORABLE RULING IN A SEPARATE LITIGATION ABOUT THE LEASE TERMINATION MAY IMPLY THAT WE WILL ALSO SUCCEED IN THIS INCREASED RENT LITIGATION. HOWEVER, THE LEASE DEFAULTS IN THE LEASE TERMINATION LITIGATION ARE SOMEWHAT DIFFERENT FROM THE FRAUDULENT INDUCEMENT CLAIMS PENDING IN THE RENT INCREASE LITIGATION. ALSO, THESE CASES ARE PENDING IN DIFFERENT COURTS. WE BELIEVE OUR RENT INCREASE CLAIMS ARE VALID. HOWEVER, THOSE CLAIMS HAVE NOT BEEN DETERMINED AND THE FACT THAT WE HAVE RECEIVED A FAVORABLE RULING REGARDING THE LEASE TERMINATION MAY NOT MEAN WE WILL SUCCEED IN THIS SECOND CASE.

 

 

•

THE IMPLICATION OF THESE FORWARD LOOKING STATEMENTS MAY BE THAT WE WILL EVENTUALLY RECEIVE MORE INCOME FROM OUR OWNERSHIP OF THE TWO HOSPITALS THAN THE $8.7 MILLION PER YEAR BEING PAID BY HEALTHSOUTH SINCE JANUARY 2002. HOWEVER, THIS IMPLICATION MAY NOT BE REALIZED FOR MANY DIFFERENT REASONS: THE COURTS MAY NEVER ORDER HEALTHSOUTH TO PAY ANY INCREASED AMOUNTS. EVEN IF THE COURTS ORDER HEALTHSOUTH TO PAY AN INCREASED AMOUNT, HEALTHSOUTH MAY BE UNABLE TO DO SO. WE MAY BE UNABLE TO IDENTIFY A NEW TENANT FOR THESE HOSPITALS WHO OBTAINS APPROPRIATE LICENSES AND WHO IS WILLING OR ABLE TO PAY INCREASED RENTS. THE FINANCIAL RESULTS OF THE HOSPITALS’ OPERATIONS MAY DECLINE AND THIS DECLINE MAY BE MATERIAL. IN FACT, HEALTHSOUTH MAY CEASE PAYING THE $8.7 MILLION PER YEAR WHICH IT HAS HISTORICALLY PAID TO US UNTIL A NEW OPERATOR ASSUMES THE OPERATIONS.

 

 

•

LITIGATION IS EXPENSIVE. SINCE THE CURRENT LITIGATIONS BETWEEN US AND HEALTHSOUTH BEGAN IN APRIL 2003, WE HAVE SPENT APPROXIMATELY $1.5 MILLION IN LITIGATION COSTS. THE EXPENSE OF THESE LITIGATIONS HAS BEEN SOMEWHAT CONCENTRATED DURING THE PAST 12 MONTHS. WE EXPECT THAT THESE EXPENSES WILL CONTINUE AND MAY INCREASE SO LONG AS THE LITIGATIONS CONTINUE. MOREOVER, WE ARE UNABLE TO PROVIDE ANY PROJECTIONS AS TO WHEN THESE LITIGATIONS MAY END OR THE AMOUNTS OF FUTURE LITIGATION COSTS.

 

FOR ALL OF THE FOREGOING REASONS YOU ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON FORWARD LOOKING STATEMENTS IN THIS PRESS RELEASE. EXCEPT AS MAY BE REQUIRED BY APPLICABLE LAW, WE DO NOT INTEND TO IMPLY THAT WE WILL RELEASE PUBLICLY THE RESULT OF ANY REVISION TO THE FORWARD LOOKING STATEMENTS CONTAINED IN THIS PRESS RELEASE TO REFLECT THE FUTURE OCCURRENCE OF PRESENTLY UNANTICIPATED EVENTS.

 

(END)

 

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EX-99.2 3 ex99-2.txt Exhibit 99.2 SENIOR HOUSING PROPERTIES TRUST Third Quarter 2005 Supplemental Operating and Financial Data All amounts in this report are unaudited, except for the December 31, 2004 Consolidated Balance Sheet. TABLE OF CONTENTS Page CORPORATE INFORMATION Company Profile 5 Investor Information 6 Research Coverage 7 FINANCIAL INFORMATION Key Financial Data 9 Consolidated Balance Sheet 10 Consolidated Statement of Income 11 Consolidated Statement of Cash Flows 12 Calculation of EBITDA 13 Calculation of Funds from Operations (FFO) 14 Debt Summary 15 Debt Maturity Schedule 16 Leverage Ratios, Coverage Ratios and Public Debt Covenants 17 Investments Information 18 Financing Activities 19 PORTFOLIO INFORMATION Portfolio Summary by Facility Type and Tenant 21 Occupancy by Facility Type and Tenant 22 % Private Pay by Facility Type and Tenant 23 Rent Coverage by Tenant 24 Portfolio Lease Expiration Schedule 25 2 WARNING CONCERNING FORWARD LOOKING STATEMENTS THIS SUPPLEMENTAL OPERATING AND FINANCIAL DATA REPORT CONTAINS FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND OTHER FEDERAL SECURITIES LAWS. THESE STATEMENTS REPRESENT OUR PRESENT BELIEFS AND EXPECTATIONS, BUT THEY MAY NOT OCCUR FOR VARIOUS REASONS. FOR EXAMPLE: O A MASSACHUSETTS TRIAL COURT HAS DECIDED THAT OUR TERMINATION OF HEALTHSOUTH'S LEASE OF TWO HOSPITALS WAS PROPER. HEALTHSOUTH MAY APPEAL THIS DECISION AND HEALTHSOUTH'S APPEAL MAY BE SUCCESSFUL. O THE LEASE REQUIRES HEALTHSOUTH TO CONTINUE OPERATIONS OF THE HOSPITALS DURING THE PERIOD OF TRANSITION TO A NEW TENANT. HEALTHSOUTH MAY BE UNWILLING OR UNABLE TO CONTINUE ITS OPERATIONS. IN SUCH CIRCUMSTANCES, WE MAY SEEK DAMAGES FROM HEALTHSOUTH AND TO CONTINUE THE HOSPITALS' OPERATIONS WITH APPROPRIATE REGULATORY APPROVALS, BUT WE MAY BE UNABLE TO COLLECT SUCH DAMAGES FROM HEALTHSOUTH OR TO CONTINUE THE HOSPITALS' OPERATIONS. O THE COURT GRANTED OUR REQUEST TO HAVE THE CASH FLOW FROM THE HOSPITALS SEQUESTERED AND APPOINTED A RECEIVER TO CALCULATE AND HOLD THESE AMOUNTS. ONE IMPLICATION OF THIS STATEMENT IS THAT SOME OF THIS CASH FLOW MAY BE PAID TO US. HOWEVER, HEALTHSOUTH'S HISTORICAL STATEMENTS ABOUT ITS CASH FLOW HAVE BEEN INACCURATE AND THE EXISTENCE AND AMOUNT OF CASH FLOW FROM THE HOSPITALS WHICH WE OWN AND WHICH HEALTHSOUTH OPERATES MAY NOT BE ACCURATELY STATED. HEALTHSOUTH DISPUTES THAT THE COURT ORDER REQUIRES THE SEQUESTRATION OF CASH FLOW FROM THE DATE OF THE LEASE TERMINATION TO THE PRESENT; AND WE INTEND TO SEEK CLARIFICATION FROM THE COURT ON THIS ISSUE. O IN A SECOND LITIGATION, WE ARE SEEKING TO COLLECT INCREASED RENT FROM HEALTHSOUTH BETWEEN JANUARY 2002 AND THE TERMINATION OF OUR LEASE WITH HEALTHSOUTH. THE FACT THAT WE HAVE RECEIVED A FAVORABLE RULING IN A SEPARATE LITIGATION ABOUT THE LEASE TERMINATION MAY IMPLY THAT WE WILL ALSO SUCCEED IN THIS INCREASED RENT LITIGATION. HOWEVER, THE LEASE DEFAULTS IN THE LEASE TERMINATION LITIGATION ARE SOMEWHAT DIFFERENT FROM THE FRAUDULENT INDUCEMENT CLAIMS PENDING IN THE RENT INCREASE LITIGATION. ALSO, THESE CASES ARE PENDING IN DIFFERENT COURTS. WE BELIEVE OUR RENT INCREASE CLAIMS ARE VALID. HOWEVER, THOSE CLAIMS HAVE NOT BEEN DETERMINED AND THE FACT THAT WE HAVE RECEIVED A FAVORABLE RULING REGARDING THE LEASE TERMINATION MAY NOT MEAN WE WILL SUCCEED IN THIS SECOND CASE. O THE IMPLICATION OF THESE FORWARD LOOKING STATEMENTS MAY BE THAT WE WILL EVENTUALLY RECEIVE MORE INCOME FROM OUR OWNERSHIP OF THE TWO HOSPITALS THAN THE $8.7 MILLION PER YEAR BEING PAID BY HEALTHSOUTH SINCE JANUARY 2002. HOWEVER, THIS IMPLICATION MAY NOT BE REALIZED FOR MANY DIFFERENT REASONS: THE COURTS MAY NEVER ORDER HEALTHSOUTH TO PAY ANY INCREASED AMOUNTS. EVEN IF THE COURTS ORDER HEALTHSOUTH TO PAY AN INCREASED AMOUNT, HEALTHSOUTH MAY BE UNABLE TO DO SO. WE MAY BE UNABLE TO IDENTIFY A NEW TENANT FOR THESE HOSPITALS WHO OBTAINS APPROPRIATE LICENSES AND WHO IS WILLING OR ABLE TO PAY INCREASED RENTS. THE FINANCIAL RESULTS OF THE HOSPITALS' OPERATIONS MAY DECLINE AND THIS DECLINE MAY BE MATERIAL. IN FACT, HEALTHSOUTH MAY CEASE PAYING THE $8.7 MILLION PER YEAR WHICH IT HAS HISTORICALLY PAID TO US UNTIL A NEW OPERATOR ASSUMES THE OPERATIONS. O LITIGATION IS EXPENSIVE. SINCE THE CURRENT LITIGATIONS BETWEEN US AND HEALTHSOUTH BEGAN IN APRIL 2003, WE HAVE SPENT APPROXIMATELY $1.5 MILLION IN LITIGATION COSTS. THE EXPENSE OF THESE LITIGATIONS HAS BEEN SOMEWHAT CONCENTRATED DURING THE PAST 12 MONTHS. WE EXPECT THAT THESE EXPENSES WILL CONTINUE AND MAY INCREASE SO LONG AS THE LITIGATIONS CONTINUE. MOREOVER, WE ARE UNABLE TO PROVIDE ANY PROJECTIONS AS TO WHEN THESE LITIGATIONS MAY END OR THE AMOUNTS OF FUTURE LITIGATION COSTS. FOR ALL OF THE FOREGOING REASONS YOU ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON FORWARD LOOKING STATEMENTS. EXCEPT AS MAY BE REQUIRED BY APPLICABLE LAW, WE DO NOT INTEND TO IMPLY THAT WE WILL RELEASE PUBLICLY THE RESULT OF ANY REVISION TO THE FORWARD LOOKING STATEMENTS CONTAINED IN THIS REPORT TO REFLECT THE FUTURE OCCURRENCE OF PRESENTLY UNANTICIPATED EVENTS. 3 CORPORATE INFORMATION Senior Housing Properties Trust Supplemental Operating and Financial Data September 30, 2005 COMPANY PROFILE - -------------------------------------------------------------------------------- The Company: - ------------ Senior Housing Properties Trust is a real estate investment trust, or REIT, which owns independent and assisted living properties, continuing care retirement communities and nursing homes located throughout the United States. We are included in a number of stock indices, including the Russell 2000(R), the MSCI US REIT Index, NAREIT Real Time Index and the S&P REIT Composite Index. Management: - ----------- Senior Housing Properties Trust is managed by Reit Management & Research LLC, or RMR. RMR was founded in 1986 to manage public investments in real estate. As of September 30, 2005, RMR managed one of the largest portfolios of publicly owned real estate in the United States, including approximately 900 properties, with approximately 85.0 million square feet, located in 42 states, Washington, DC, Puerto Rico and Ontario, Canada. RMR has approximately 400 employees in its headquarters and regional offices located throughout the country. In addition to managing SNH, RMR and its affiliates also manage Hospitality Properties Trust, a publicly traded REIT that owns hotels, HRPT Properties Trust, a publicly traded REIT that primarily owns office buildings and four mutual funds which invest in unaffiliated real estate companies. The public companies managed by RMR had combined total market capitalization of approximately $12.0 billion as of September 30, 2005. We believe that being managed by RMR is a competitive advantage for SNH because RMR provides SNH with a depth of management and experience which may be unequaled in the real estate industry. We also believe RMR is able to provide management services to SNH at costs that are lower than SNH would have to pay for similar quality services. Strategy: - --------- Our present business plan is to maintain an investment portfolio of independent living properties, assisted living properties and nursing homes and to acquire additional senior living properties primarily for income and secondarily for appreciation potential. Our current growth strategy is generally focused on making portfolio acquisitions of geographically diverse, primarily independent and assisted senior living properties where the majority of the residents pay for occupancy and services from private resources rather than through government programs. We base our acquisition decisions on the historical and projected operating results of the target properties and the financial strength of the proposed tenants and their guarantors, among other considerations. Our present financial strategy is to maintain a conservative capital structure which limits the amount of debt that we issue. We do not have any investments in joint ventures or partnerships. Also, the majority of our debt is fixed rate, and we have no significant debt maturities until 2012. Stock Exchange Listing: Corporate Headquarters: - ----------------------- ----------------------- New York Stock Exchange 400 Centre Street Newton, MA 02458 Trading Symbol: (t) (617) 796-8350 - --------------- (f) (617) 796-8349 Common Shares -- SNH Senior Unsecured Debt Ratings: - ------------------------------ Moody's -- Ba2 Standard & Poor's -- BB+ Portfolio Data (as of 9/30/05): - ------------------------------- Total properties 184 Total units / beds 22,721 Percent of rent from private pay properties 84.0% (1) Portfolio Concentration by facility type (as of 9/30/05): - ---------------------------------------------------------
Number of Number of Carrying Value of Annualized Properties Units/Beds Investment (2) Percent Current Rent Percent --------------------------------------------------------------------------------- Independent Living (IL) (3) 36 10,412 $ 905,693 55.5% $ 90,824 56.3% Assisted Living (AL) 85 5,636 463,717 28.4% 44,718 27.7% Nursing Homes 61 6,309 219,050 13.4% 17,128 10.6% Hospitals 2 364 43,553 2.7% 8,700 5.4% --------------------------------------------------------------------------------- Total 184 22,721 $ 1,632,013 100.0% $ 161,370 100.0% =================================================================================
Operating Statistics by tenant (Q3 2005): - ---------------------------------------------
Number of Number of Annualized Rent Percent Tenant Properties Units/Beds Current Rent Coverage (4) Occupancy (4) Private Pay (4) - ----------------------------------------------------------------------------------------------------------------- Five Star / Sunrise (5) 31 7,307 $ 64,478 1.11x 92% 84% Five Star 101 7,906 34,207 1.77x 90% 44% Sunrise / Marriott (6) 14 4,091 31,197 1.27x 90% 79% NewSeasons / IBC (7) 10 1,019 9,287 1.17x 80% 100% HealthSouth (8) 2 364 8,700 NA NA NA Alterra Healthcare Corporation 18 894 7,136 1.87x 88% 98% Genesis HealthCare Corporation 1 156 1,535 1.82x 94% 24% 5 Private Companies (combined) 7 984 4,830 1.86x 84% 24% -------------------------------------- 184 22,721 $ 161,370 ====================================== (1) Represents the percentage of SNH's rental income that is derived from properties where the underlying operating revenues are greater than 80% private pay. (2) Amounts are before depreciation, but after impairment write downs. (3) Properties where the majority of units are independent living apartments are classified as independent living communities. (4) All tenant operating data presented are based upon the operating results provided by our tenants for the indicated periods, or the most recent prior period for which tenant operating results are available to us from our tenants. Rent coverage is calculated as operating cash flow from our tenants' facility operations, before subordinated charges and capital expenditure reserves, divided by rent payable to us. We have not independently verified our tenants' operating data. (5) These 31 properties are leased to Five Star Quality Care, Inc., or Five Star, and 30 are currently managed by Sunrise Senior Living, Inc., or Sunrise. Five Star intends to begin to directly operate 12 of these 31 properties during the fourth quarter of 2005. Sunrise does not guaranty Five Star's lease obligations. (6) Marriott International, Inc., or Marriott, guarantees the lease for these 14 properties leased to Sunrise. (7) Independence Blue Cross, or IBC, a Pennsylvania health insurer, guarantees the lease for the 10 properties leased to NewSeasons Assisted Living Communities, Inc., or NewSeasons. (8) During 2003, HealthSouth issued a press release stating that its historical financial information should not be relied upon. From that time until June 2005, HealthSouth had not filed audited financial information with the SEC. In June 2005, HealthSouth filed a restated Annual Report on Form 10-K, or Form 10K, for periods ending December 31, 2003. The financial and operating data included in HealthSouth's restated Form 10-K show a substantial negative net worth and a history of substantial operating losses. Because we do not have reliable current information about the operations or financial performance of HealthSouth or our hospitals, we do not show operating data for this operator. See also Note 3 on page 21 regarding our litigation with HealthSouth.
5 Senior Housing Properties Trust Supplemental Operating and Financial Data September 30, 2005 INVESTOR INFORMATION - -------------------------------------------------------------------------------- Board of Trustees - -------------------------------------------------------------------------------- Barry M. Portnoy Gerard M. Martin Managing Trustee Managing Trustee Frank J. Bailey Frederick N. Zeytoonjian Independent Trustee Independent Trustee John L. Harrington Independent Trustee Senior Management - -------------------------------------------------------------------------------- David J. Hegarty John R. Hoadley President, Chief Operating Officer Treasurer and Chief Financial Officer and Secretary Contact Information - -------------------------------------------------------------------------------- Investor Relations Inquiries Senior Housing Properties Trust Financial inquiries should be directed 400 Centre Street to John R. Hoadley, Treasurer and Chief Newton, MA 02458 Financial Officer, at (617) 796-8350 (t) (617) 796-8350 or jhoadley@reitmr.com. (f) (617) 796-8349 (email) info@snhreit.com Investor and media inquiries should be (website) www.snhreit.com directed to Timothy A. Bonang, Manager of Investor Relations, at (617) 796-8149 or tbonang@reitmr.com. 6 Senior Housing Properties Trust Supplemental Operating and Financial Data September 30, 2005 RESEARCH COVERAGE - -------------------------------------------------------------------------------- Equity Research Coverage - -------------------------------------------------------------------------------- A.G. Edwards & Sons RBC Capital Markets John Sheehan Jay Leupp (314) 955-5834 (415) 633-8588 Legg Mason Stifel, Nicolaus Jerry Doctrow Phillip Martin (410) 454-5142 (312) 454-3985 Merrill Lynch UBS David Tsoupros Christopher Pike (212) 449-9697 (212) 713-2087 Raymond James Wachovia Securities Paul Puryear Stephen Swett (727) 573-3800 (212) 909-0954 Debt Research Coverage - -------------------------------------------------------------------------------- UBS Wachovia Securities Ray Garson Dan Sullivan (203) 719-6415 (704) 383-6441 Rating Agencies - -------------------------------------------------------------------------------- Moody's Investor Service Standard and Poor's Lori Halpern George Skoufis (212) 553-1098 (212) 438-2608 SNH is followed by the analysts and its publicly held debt is rated by the rating agencies listed above. Please note that any opinions, estimates or forecasts regarding SNH's performance made by these analysts or agencies do not represent opinions, forecasts or predictions of SNH or its management. SNH does not by its reference above imply its endorsement of or concurrence with any information, conclusions or recommendations provided by any of these analysts or agencies. 7 FINANCIAL INFORMATION
Senior Housing Properties Trust Supplemental Operating and Financial Data KEY FINANCIAL DATA ------------------------------------------------------------------------------------------------------------------------------ (share amounts and dollars in thousands, except per share data) As of and For the Three Months Ended ----------------------------------------------------------------- 9/30/2005 6/30/2005 3/31/2005 12/31/2004 9/30/2004 ------------ ------------ ------------- ------------ ------------ SHARES OUTSTANDING: Common shares outstanding (at end of period) 68,562 68,538 68,496 68,496 63,496 Weighted average common shares outstanding - basic and diluted (1) 68,543 68,537 68,496 64,311 63,477 COMMON SHARE DATA: Price at end of period $ 19.00 $ 18.91 $ 16.68 $ 18.94 $ 17.82 High during period $ 20.00 $ 19.45 $ 19.10 $ 20.34 $ 18.24 Low during period $ 17.79 $ 16.40 $ 16.20 $ 17.85 $ 16.10 Annualized dividends paid per share $ 1.28 $ 1.28 $ 1.28 $ 1.28 $ 1.28 Annualized dividend yield (at end of period) 6.7% 6.8% 7.7% 6.8% 7.2% MARKET CAPITALIZATION: Total debt (book value) $ 551,757 $ 577,175 $ 535,748 $ 535,178 $ 478,274 Plus: market value of common shares (at end of period) 1,302,678 1,296,054 1,142,513 1,297,314 1,131,499 ------------ ------------ ------------- ------------ ------------ Total market capitalization $ 1,854,435 $ 1,873,229 $ 1,678,261 $ 1,832,492 $ 1,609,773 Total debt / total market capitalization 29.8% 30.8% 31.9% 29.2% 29.7% BOOK CAPITALIZATION: Total debt $ 551,757 $ 577,175 $ 535,748 $ 535,178 $ 478,274 Plus: total shareholders' equity 868,086 875,634 881,692 890,667 798,536 ------------ ------------ ------------- ------------ ------------ Total book capitalization $ 1,419,843 $ 1,452,809 $ 1,417,440 $ 1,425,845 $ 1,276,810 Total debt / total book capitalization 38.9% 39.7% 37.8% 37.5% 37.5% SELECTED BALANCE SHEET DATA: Total assets $ 1,440,403 $ 1,473,413 $ 1,436,848 $ 1,447,730 $ 1,300,173 Total liabilities $ 572,317 $ 597,779 $ 555,156 $ 557,063 $ 501,637 Gross book value of real estate assets (2) $ 1,632,013 $ 1,652,231 $ 1,604,693 $ 1,600,952 $ 1,447,874 Total debt / gross book value of real estate assets (2) 33.8% 34.9% 33.4% 33.4% 33.0% SELECTED INCOME STATEMENT DATA: Total revenues $ 40,244 $ 39,605 $ 39,227 $ 40,730 $ 35,744 EBITDA (3) $ 37,775 $ 37,293 $ 36,649 $ 35,316 $ 33,722 Net income $ 14,129 $ 15,033 $ 13,865 $ 16,513 $ 12,919 Funds from operations (FFO) (4) $ 25,864 $ 25,850 $ 25,426 $ 24,390 $ 23,437 Common distributions paid $ 21,940 $ 21,932 $ 21,919 $ 21,919 $ 20,319 PER SHARE DATA: Net income $ 0.21 $ 0.22 $ 0.20 $ 0.26 $ 0.20 FFO $ 0.38 $ 0.38 $ 0.37 $ 0.38 $ 0.37 Common distributions paid $ 0.32 $ 0.32 $ 0.32 $ 0.32 $ 0.32 FFO payout ratio 84.2% 84.2% 86.2% 89.9% 86.7% COVERAGE RATIOS: EBITDA (3) / interest expense 3.2x 3.3x 3.3x 3.2x 3.3x (1) SNH has no outstanding common share equivalents, such as units, convertible debt or stock options. (2) Gross book value of real estate assets is real estate properties, at cost, after impairment write downs, including purchase price allocations relating to FAS 141. (3) See page 13 for calculation of EBITDA. (4) See page 14 for calculation of FFO.
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Senior Housing Properties Trust Supplemental Operating and Financial Data September 30, 2005 CONSOLIDATED BALANCE SHEET - ---------------------------------------------------------------------------------------------------------------------------------- (in thousands, except share data) As of As of September 30, December 31, 2005 2005 ----------------- ----------------- (audited) ASSETS Real estate properties, at cost: Land $ 180,285 $ 178,353 Buildings and improvements 1,451,728 1,422,599 ----------------- ----------------- 1,632,013 1,600,952 Less accumulated depreciation 231,118 199,232 ----------------- ----------------- 1,400,895 1,401,720 Cash and cash equivalents 1,856 3,409 Restricted cash 2,501 6,176 Deferred financing fees, net 11,312 9,367 Other assets 23,839 27,058 ----------------- ----------------- Total assets $ 1,440,403 $ 1,447,730 ================= ================= LIABILITIES AND SHAREHOLDERS' EQUITY Unsecured revolving bank credit facility $ 59,000 $ 37,000 Senior unsecured notes due 2012 and 2015, net of discount 393,898 393,775 Junior subordinated debentures due 2041 28,241 28,241 Secured debt and capital leases 70,618 76,162 Accrued interest 10,361 12,519 Other liabilities 10,199 9,366 ----------------- ----------------- Total liabilities 572,317 557,063 ----------------- ----------------- Commitments and contingencies Shareholders' equity: Common shares of beneficial interest, $0.01 par value: 80,000,000 shares authorized; 68,562,227 and 68,495,908 shares issued and outstanding, respectively 685 685 Additional paid-in capital 1,035,343 1,034,686 Cumulative net income 251,510 208,491 Cumulative distributions (425,349) (359,567) Unrealized gain on investments 5,897 6,372 ----------------- ----------------- Total shareholders' equity 868,086 890,667 ----------------- ----------------- Total liabilities and shareholders' equity $ 1,440,403 $ 1,447,730 ================= =================
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Senior Housing Properties Trust Supplemental Operating and Financial Data September 30, 2005 CONSOLIDATED STATEMENT OF INCOME - ----------------------------------------------------------------------------------------------------------------------------- (in thousands, except per share data) For the Three Months Ended For the Nine Months Ended --------------------------- ---------------------------- 9/30/2005 9/30/2004 9/30/2005 9/30/2004 ------------- ------------- -------------- ------------- Revenues: Rental income (1) $ 39,506 $ 35,426 $ 117,489 $ 105,444 Interest and other income (2) 738 318 1,588 2,349 ------------- ------------- -------------- ------------- Total revenues 40,244 35,744 119,077 107,793 ------------- ------------- -------------- ------------- Expenses: Interest 11,911 10,285 34,585 30,910 Depreciation 10,923 9,743 32,428 29,015 General and administrative (1) 3,281 2,797 9,762 8,858 ------------- ------------- -------------- ------------- Total expenses 26,115 22,825 76,775 68,783 ------------- ------------- -------------- ------------- Income from continuing operations 14,129 12,919 42,302 39,010 Gain on sale of property - - 717 1,219 ------------- ------------- -------------- ------------- Net income $ 14,129 $ 12,919 $ 43,019 $ 40,229 ============= ============= ============== ============= Weighted average common shares outstanding 68,543 63,477 68,525 63,102 ============= ============= ============== ============= Basic and diluted earnings per share: Income from continuing operations $ 0.21 $ 0.20 $ 0.62 $ 0.62 ============= ============= ============== ============= Net income $ 0.21 $ 0.20 $ 0.63 $ 0.64 ============= ============= ============== ============= Additional Data: Corporate general and administrative expense $ 3,281 $ 2,797 $ 9,762 $ 8,858 Less: litigation / due diligence costs included in G&A (3) $ 350 $ 75 $ 1,250 $ 950 ------------- ------------- -------------- ------------- Adjusted general and administrative expenses $ 2,931 $ 2,722 $ 8,512 $ 7,908 Adjusted general and administrative expenses / total revenues (4) 7.1% 7.5% 7.0% 7.2% Adjusted general and administrative expenses / total assets (at end of period) 0.20% 0.21% 0.59% 0.60% Straight-line rent included in rental income (5) $ 107 $ 115 $ 322 $ 294 (1) Rental income for the quarter and nine months ended September 30, 2005, includes $2.2 million and $6.6 million, respectively, of income from two hospitals operated by HealthSouth Corporation, or HealthSouth. Effective January 2, 2002, we entered an amended lease with HealthSouth for two hospitals. In April 2003, we commenced a lawsuit against HealthSouth seeking, among other matters, to reform the amended lease, based upon HealthSouth's fraud, by increasing the rent payable to us from January 2, 2002 until the termination or expiration of the amended lease. This litigation is pending at this time. On October 26, 2004, we terminated the amended lease for default because HealthSouth failed to deliver to us accurate and timely financial information as required by the amended lease. On November 2, 2004, HealthSouth brought a new lawsuit against us seeking to prevent our termination of the amended lease. On September 25, 2005, the court ruled that our termination was proper and we have begun work to identify and qualify a new tenant operator for the hospitals. HealthSouth will likely appeal the court's decision that our lease termination was proper. We believe our lease with HealthSouth requires that, after termination, HealthSouth manage the hospitals for our account for a management fee during the period of the transition to a new tenant and remit the net cash flow to us. During the pendency of these disputes, HealthSouth has continued to pay us at the disputed rent amount and we have applied the payments received against the net cash flow due, but we do not know how long HealthSouth may continue to make payments. According to affidavits submitted during this litigation by HealthSouth, the leased hospitals produced cash flow in prior periods of approximately $14 million per year in excess of amounts paid by HealthSouth to us. We do not know the cash flow currently being produced by these hospitals. The court has also granted our request to sequester the net cash proceeds of the hospitals and appointed a receiver to calculate and hold these amounts until the litigation is concluded. HealthSouth disputes that the court order requires the sequestration of cash flow from the date of the lease termination to the present. On June 27, 2005, HealthSouth filed with the SEC a restated Annual Report on Form 10-K for periods ending December 31, 2003. HealthSouth's restated Form 10-K includes financial data which shows HealthSouth to have a substantial negative net worth and a history of substantial operating losses. To date we have been unable to obtain reliable current financial information about the operations of HealthSouth or our hospitals. Accordingly, we do not know if we will be able to collect any amounts which the courts may determine to be owed to us by HealthSouth. Legal expenses incurred related to this matter were approximately $350,000 and $1,240,000, respectively, for the quarter and nine months ended September 30, 2005 and $75,000 and $125,000, respectively, for the quarter and nine months ended September 30, 2004, and are included in general and administrative expenses. (2) Included in interest and other Income for the nine months ended September 30, 2004 is $1.25 million received in a settlement of litigation with Marriott International, Inc. (3) Includes costs associated with our litigations with HealthSouth (on going) and Marriott (settled in January 2004) and costs associated with a failed acquisition written off in the first quarter of 2004. (4) Includes deferred percentage rent (see Note 1 on pages 13 and 14). (5) We report rental income on a straight line basis over the terms of the respective leases. Rental income includes non-cash straight line rent adjustments.
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Senior Housing Properties Trust Supplemental Operating and Financial Data September 30, 2005 CONSOLIDATED STATEMENT OF CASH FLOWS - ------------------------------------------------------------------------------------------------------------ (in thousands) For the Nine Months Ended ------------------------------ 9/30/2005 9/30/2004 -------------- -------------- Cash flows from operating activities: Net income $ 43,019 $ 40,229 Adjustments to reconcile net income to cash provided by operating activities: Depreciation 32,428 29,015 Gain on sale of property (717) (1,219) Amortization of deferred finance fees and debt discounts 1,728 1,579 Change in assets and liabilities: Restricted cash 3,675 (5) Other assets 2,975 335 Accrued interest (2,158) (1,886) Other liabilities 1,259 4,141 -------------- -------------- Cash provided by operating activities 82,209 72,189 -------------- -------------- Cash flows from investing activities: Acquisitions (35,486) (34,809) Mortgage financing provided (24,000) - Mortgage financing repaid 24,000 - Proceeds from sale of real estate 4,600 5,900 -------------- -------------- Cash used for investing activities (30,886) (28,909) -------------- -------------- Cash flows from financing activities: Proceeds from issuance of common shares, net - 86,144 Proceeds from borrowings on revolving bank credit facility 79,000 53,000 Repayments of borrowings on revolving bank credit facility (57,000) (125,000) Repayment of debt (5,544) (588) Deferred financing fees (3,550) - Distributions to shareholders (65,782) (57,472) -------------- -------------- Cash used for financing activities (52,876) (43,916) -------------- -------------- Decrease in cash and cash equivalents (1,553) (636) Cash and cash equivalents at beginning of period 3,409 3,530 -------------- -------------- Cash and cash equivalents at end of period $ 1,856 $ 2,894 ============== ============== Supplemental cash flow information: Interest paid $ 35,015 $ 31,217 Non cash investing and financing activities: Issuance of common shares $ 657 $ 733
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Senior Housing Properties Trust Supplemental Operating and Financial Data September 30, 2005 CALCULATION OF EBITDA - ---------------------------------------------------------------------------------------------------------------------- (dollars in thousands) For the Three Months Ended For the Nine Months Ended --------------------------------- --------------------------------- 9/30/2005 9/30/2004 9/30/2005 9/30/2004 ---------------- ---------------- ---------------- ---------------- Income from continuing operations $ 14,129 $ 12,919 $ 42,302 $ 39,010 Plus: interest expense 11,911 10,285 34,585 30,910 Plus: depreciation expense 10,923 9,743 32,428 29,015 Plus: deferred percentage rent adjustment (1) 812 775 2,402 2,409 ---------------- ---------------- ---------------- ---------------- EBITDA $ 37,775 $ 33,722 $ 111,717 $ 101,344 ================ ================ ================ ================ (1) We recognize percentage rental income received during the first, second and third quarters in the fourth quarter. Although recognition of revenue is deferred until the fourth quarter for purposes of calculating income from continuing operations, our calculation of EBITDA for the first three quarters includes estimated amounts with respect to those periods. The fourth quarter EBITDA calculation excludes the amounts recognized during the first three quarters. We compute EBITDA as income from continuing operations plus interest expense, depreciation expense and deferred percentage rent. We consider EBITDA to be an appropriate measure of performance for a REIT, along with net income and cash flow from operating, investing and financing activities. EBITDA does not represent cash generated by operating activities in accordance with generally accepted accounting principals, or GAAP, and should not be considered an alternative to net income or cash flow from operating activities as a measure of financial performance or liquidity.
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Senior Housing Properties Trust Supplemental Operating and Financial Data September 30, 2005 CALCULATION OF FUNDS FROM OPERATIONS (FFO) - -------------------------------------------------------------------------------------------------------------------------------- (amounts in thousands, except per share data) For the Three Months Ended For the Nine Months Ended -------------------------------- --------------------------------- 9/30/2005 9/30/2004 9/30/2005 9/30/2004 --------------- --------------- --------------- ---------------- Income from continuing operations $ 14,129 $ 12,919 $ 42,302 $ 39,010 Plus: depreciation expense 10,923 9,743 32,428 29,015 Plus: deferred percentage rent adjustment (1) 812 775 2,402 2,409 --------------- --------------- --------------- ---------------- FFO $ 25,864 $ 23,437 $ 77,132 $ 70,434 =============== =============== =============== ================ Weighted average shares outstanding 68,543 63,477 68,525 63,102 Income from continuing operations per share $ 0.21 $ 0.20 $ 0.62 $ 0.62 FFO per share $ 0.38 $ 0.37 $ 1.13 $ 1.12 Supplemental data: Straight-line rent included in rental income (2) $ 107 $ 115 $ 322 $ 294 Amortization of deferred financing fees and debt discounts $ 665 $ 526 $ 1,726 $ 1,579 (1) We recognize percentage rental income received during the first, second and third quarters in the fourth quarter. Although recognition of revenue is deferred until the fourth quarter for purposes of calculating income from continuing operations, the calculation of FFO for the first three quarters includes estimated amounts with respect to those periods. The fourth quarter FFO calculation excludes the amounts recognized during the first three quarters. (2) We report rental income on a straight line basis over the terms of the respective leases. Rental income includes non-cash straight line rent adjustments. We compute FFO as shown in the calculation above. Our calculation of FFO differs from the National Association of Real Estate Investment Trusts, or NAREIT, definition of FFO because we include deferred percentage rent in FFO as discussed in Note 1 above. We consider FFO to be an appropriate measure of performance for a real estate investment trust, or REIT, along with net income and cash flow from operating, investing and financing activities. We believe that FFO provides useful information to investors because by excluding the effects of certain historical costs, such as depreciation expense and gain or loss on sale of properties, FFO can facilitate a comparison of our current operating performance with our past operating performance and of operating performance among REITs. FFO does not represent cash generated by operating activities in accordance with generally accepted accounting principles, or GAAP, and should not be considered an alternative to net income or cash flow from operating activities as a measure of financial performance or liquidity. FFO is one important factor considered by our board of trustees in determining the amount of distributions to shareholders. Other important factors include, but are not limited to, requirements to maintain our status as a REIT, limitations in our revolving bank credit facility and public debt covenants, the availability of debt and equity capital to us and our expectation of our future performance.
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Senior Housing Properties Trust Supplemental Operating and Financial Data September 30, 2005 DEBT SUMMARY - ------------------------------------------------------------------------------------------------------------------------------------ (dollars in thousands) Coupon Interest Principal Maturity Due at Years to Rate Rate Balance Date Maturity Maturity ------------- -------------- ------------ ---------- ---------- ---------- Secured Debt: Secured Fixed Rate Debt: Tax exempt bonds - secured by 1 property 5.875% 5.875% $ 14,700 12/1/27 $ 14,700 22.2 Mortgage - secured by 16 properties (1) 6.970% 6.330% 36,835 6/2/12 30,069 6.7 Mortgage - secured by 4 properties (1) 6.110% 6.420% 12,490 11/30/13 10,218 8.2 Capital leases - 2 properties 7.700% 7.700% 6,593 5/31/16 - 10.7 ------------- -------------- ------------ ---------- ---------- Total / weighted average secured fixed rate debt 6.658% 6.379% $ 70,618 $ 54,987 10.5 ============= ============== ============ ========== ========== Total / weighted average secured debt 6.658% 6.379% $ 70,618 $ 54,987 10.5 ============= ============== ============ ========== ========== Unsecured Debt: Unsecured Floating Rate Debt: Revolving credit facility (LIBOR + 100 b.p.) 4.840% 4.840% $ 59,000 11/30/09 $ 59,000 4.2 Unsecured Fixed Rate Debt: Senior notes due 2012 8.625% 8.625% $ 245,000 1/15/12 $245,000 6.3 Senior notes due 2015 7.875% 7.875% 150,000 4/15/15 150,000 9.5 Junior subordinated debentures (2) 10.125% 10.125% 28,241 6/15/41 28,241 35.7 ------------- -------------- ------------ ---------- ---------- Total / weighted average unsecured fixed rate debt 7.784% 7.784% $ 423,241 $423,241 7.0 ============= ============== ============ ========== ========== Total / weighted average unsecured debt 7.424% 7.424% $ 482,241 $482,241 6.7 ============= ============== ============ ========== ========== Total / weighted average secured debt fixed rate debt 6.658% 6.379% $ 70,618 $ 54,987 10.5 Total / weighted average unsecured floating rate debt 4.840% 4.840% 59,000 59,000 4.2 Total / weighted average unsecured fixed rate debt 7.784% 7.784% 423,241 423,241 7.0 ------------- -------------- ------------ ---------- ---------- Total / weighted average debt 7.326% 7.290% $ 552,859 $537,228 7.2 ============= ============== ============ ========== ========== (1) Includes the effect of mark to market accounting for certain assumed mortgages. (2) Our junior subordinated debentures will become prepayable at par in June 2006.
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Senior Housing Properties Trust Supplemental Operating and Financial Data September 30, 2005 DEBT MATURITY SCHEDULE - ------------------------------------------------------------------------------------------------------------------ (dollars in thousands) Scheduled Principal Payments During Period ------------------------------------------------------------------------------------- Secured Fixed Rate Unsecured Unsecured Debt and Floating Fixed Year Capital Leases Rate Debt Rate Debt Total - -------------------------- ------------------ ------------------- ------------------ ------------------ 2005 $ 477 $ - $ - $ 477 2006 1,982 - - 1,982 2007 2,123 - - 2,123 2008 2,265 - - 2,265 2009 2,435 59,000 - 61,435 2010 2,007 - - 2,007 2011 1,703 - - 1,703 2012 31,259 - 245,000 276,259 2013 10,820 - - 10,820 2014 310 310 2015 and thereafter 15,237 - 178,241 193,478 ------------------ ------------------- ------------------ ------------------ $ 70,618 $ 59,000 $ 423,241 $ 552,859 ================== =================== ================== ==================
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Senior Housing Properties Trust Supplemental Operating and Financial Data September 30, 2005 LEVERAGE RATIOS, COVERAGE RATIOS AND PUBLIC DEBT COVENANTS - ------------------------------------------------------------------------------------------------------------------------------------ As Of And For The Three Months Ended ------------------------------------------------------------ 9/30/2005 6/30/2005 3/31/2005 12/31/2004 9/30/2004 ---------- ---------- ----------- ---------- ---------- Leverage Ratios: Total debt / total assets 38.3% 39.2% 37.3% 37.0% 36.8% Total debt / gross book value of real estate assets (1) 33.8% 34.9% 33.4% 33.4% 33.0% Total debt / total market capitalization 29.8% 30.8% 31.9% 29.2% 29.7% Total debt / total book capitalization 38.9% 39.7% 37.8% 37.5% 37.5% Secured debt / total assets 4.9% 4.8% 5.3% 5.3% 2.0% Variable rate debt / total debt 10.7% 14.6% 7.9% 7.7% 7.1% Coverage Ratios: EBITDA / interest expense 3.2x 3.3x 3.3x 3.2x 3.3x Public Debt Covenants (2): Total debt / adjusted total assets - allowable maximum 60.0% 34.5% 32.6% 31.0% 30.9% 30.4% Secured debt / adjusted total assets - allowable maximum 40.0% 4.3% 4.2% 4.6% 4.7% 1.8% Consolidated income available for debt service / debt service - required minimum 2.00x 3.59x 3.66x 3.67x 3.65x 3.72x Total unencumbered assets to unsecured debt - required minimum 1.50x 3.38x 3.25x 3.48x 3.48x 3.37x (1) Gross book value of real estate assets is real estate properties, at cost, less impairment write downs, including purchase price allocations relating to FAS 141. (2) Adjusted total assets and unencumbered assets include original cost of real estate assets less impairment write downs and exclude depreciation and amortization, accounts receivable and intangible assets. Consolidated income available for debt service is earnings from operations excluding interest expense, depreciation and amortization, taxes, gains and losses on sales of property and amortization of deferred charges.
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Senior Housing Properties Trust Supplemental Operating and Financial Data September 30, 2005 INVESTMENTS INFORMATION - ------------------------------------------------------------------------------------------------------------------------------------ (dollars in thousands) ACQUISITIONS: Purchase Date Number of Purchase Price Cap Acquired Tenant Type of Property Properties Units Price (1) Per Unit Rate (2) - ----------------- ---------------------- ---------------- ----------------- -------------- --------------- ------------ ------------ There were no acquisitions during the three months ended March 31, 2005. ------------------------------------------------------------------------------------------------------------------ Q1 2005 Totals - - $ - $ - - 6/3/05 Five Star Assisted Living 4 299 $ 24,000 $ 80 9.0% ------------------------------------------------------------------------------------------------------------------ Q2 2005 Totals 4 299 $ 24,000 $ 80 9.0% There were no acquisitions during the three months ended September 30, 2005. ------------------------------------------------------------------------------------------------------------------ Q3 2005 Totals - - $ - $ - - ------------------------------------------------------------------------------------------------------------------ Total 4 299 $ 24,000 $ 80 9.0% ================================================================================================================== (1) Represents the gross purchase price and excludes closing costs and purchase price allocations relating to FAS 141. (2) Represents annual GAAP rent divided by the purchase price. MORTGAGES: Transaction Number of Investment Interest Date Borrower Amount Type of Property Properties Units Per Unit Rate - ----------------- ---------------------- ---------------- ----------------- -------------- --------------- ------------ ------------ There were no mortgage investments during the three months ended March 31, 2005. ------------------------------------------------------------------------------------------------------------------ Q1 2005 Totals $ - - - - $ - - 6/3/05 Five Star $ 24,000 (1) Assisted Living 6 654 $ 37 9.0% ------------------------------------------------------------------------------------------------------------------ Q2 2005 Totals $ 24,000 6 654 $ 37 9.0% There were no mortgage investments during the three months ended September 30, 2005. ------------------------------------------------------------------------------------------------------------------ Total $ 24,000 6 654 $ 37 9.0% ================================================================================================================== (1) This mortgage investment is a line of credit. The initial availability under this line of credit was for up to $43.5 million. At closing, $24.0 million was drawn and availability under the line of credit was reduced to $19.5 million. In August 2005, the $24.0 million was repaid by the borrower. We expect to purchase the six properties that secure this line of credit on October 31, 2005 and, simultaneously, terminate the line of credit.
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Senior Housing Properties Trust Supplemental Operating and Financial Data September 30, 2005 FINANCING ACTIVITIES - -------------------------------------------------------------------------------------------------- (share amounts and dollars in thousands) For the Three Months Ended -------------------------------------------------- 9/30/2005 6/30/2005 3/31/2005 -------------------------------------------------- DEBT TRANSACTIONS (1): New debt raised $-- $ -- $-- New debt assumed as part of acquisitions -- -- -- -------------------------------------------------- Total new debt -- -- -- Debt retired -- (4,170) -- -------------------------------------------------- Net debt $-- $(4,170) $-- ================================================== EQUITY TRANSACTIONS: New common shares issued -- -- -- New common equity raised, net $-- $ -- $-- (1) Exclude drawings and repayments on our revolving credit facility.
19 PORTFOLIO INFORMATION
Senior Housing Properties Trust Supplemental Operating and Financial Data September 30, 2005 PORTFOLIO SUMMARY BY FACILITY TYPE AND TENANT - ----------------------------------------------------------------------------------------------------------------------------- (dollars in thousands) Number of Number of Carrying Value of Investment Annualized Properties Units/Beds Investment (1) Percent per unit Current Rent Percent --------------------------------------------------------------------------------------------- Facility Type: Independent Living (IL) (2) 36 10,412 $905,693 55.5% $87.0 $90,824 56.3% Assisted Living (AL) 85 5,636 463,717 28.4% 82.3 44,718 27.7% Nursing Homes 61 6,309 219,050 13.4% 34.7 17,128 10.6% Hospitals (3) 2 364 43,553 2.7% 119.7 8,700 5.4% --------------------------------------------------------------------------------------------- Total 184 22,721 $1,632,013 100.0% $71.8 $161,370 100.0% ============================================================================================= Tenant: Five Star / Sunrise (4) 31 7,307 $631,605 38.7% $86.4 $64,478 40.0% Five Star 101 7,906 433,521 26.6% 54.8 34,207 21.2% Sunrise / Marriott (5) 14 4,091 325,473 19.9% 79.6 31,197 19.3% NewSeasons / IBC (6) 10 1,019 87,641 5.4% 86.0 9,287 5.7% HealthSouth (3) 2 364 43,553 2.7% 119.7 8,700 5.4% Alterra Healthcare Corporation 18 894 61,126 3.7% 68.4 7,136 4.4% Genesis HealthCare Corporation 1 156 13,007 0.8% 83.4 1,535 1.0% 5 Private Companies (combined) 7 984 36,087 2.2% 36.7 4,830 3.0% --------------------------------------------------------------------------------------------- Total 184 22,721 1,632,013 100.0% $71.8 $161,370 100.0% ============================================================================================= (1) Amounts are before depreciation, but after impairment write downs. (2) Properties where the majority of units are independent living apartments are classified as independent living communities. (3) Rental income for the quarter and nine months ended September 30, 2005, includes $2.2 million and $6.6 million, respectively, of income from two hospitals operated by HealthSouth. Effective January 2, 2002, we entered an amended lease with HealthSouth for two hospitals. In April 2003, we commenced a lawsuit against HealthSouth seeking, among other matters, to reform the amended lease, based upon HealthSouth's fraud, by increasing the rent payable to us from January 2, 2002 until the termination or expiration of the amended lease. This litigation is pending at this time. On October 26, 2004, we terminated the amended lease for default because HealthSouth failed to deliver to us accurate and timely financial information as required by the amended lease. On November 2, 2004, HealthSouth brought a new lawsuit against us seeking to prevent our termination of the amended lease. On September 25, 2005, the court ruled that our termination was proper and we have begun work to identify and qualify a new tenant operator for the hospitals. HealthSouth will likely appeal the court's decision that our lease termination was proper. We believe our lease with HealthSouth requires that, after termination, HealthSouth manage the hospitals for our account for a management fee during the period of the transition to a new tenant and remit the net cash flow to us. During the pendency of these disputes, HealthSouth has continued to pay us at the disputed rent amount and we have applied the payments received against the net cash flow due, but we do not know how long HealthSouth may continue to make payments. According to affidavits submitted during this litigation by HealthSouth, the leased hospitals produced cash flow in prior periods of approximately $14 million per year in excess of amounts paid by HealthSouth to us. The court has also granted our request to sequester the net cash proceeds of the hospitals and appointed a receiver to calculate and hold these amounts until the litigation is concluded. HealthSouth disputes that the court order requires the sequestration of cash flow from the date of the lease termination to the present. On June 27, 2005, HealthSouth filed with the SEC a restated Annual Report on Form 10-K for periods ending December 31, 2003. HealthSouth's restated Form 10-K includes financial data which shows HealthSouth to have a substantial negative net worth and a history of substantial operating losses. To date we have been unable to obtain reliable current financial information about the operations of HealthSouth or our hospitals. Accordingly, we do not know if we will be able to collect any amounts which the courts may determine to be owed to us by HealthSouth. (4) These 31 properties are leased to Five Star Quality Care, Inc., or Five Star, and 30 are currently managed by Sunrise Senior Living, Inc., or Sunrise. Five Star intends to begin to directly operate 12 of these 31 properties during the fourth quarter of 2005. Sunrise does not guaranty Five Star' s lease obligations. (5) Marriott International, Inc., or Marriott, guarantees the lease for the 14 properties leased to Sunrise. (6) Independence Blue Cross, or IBC, a Pennsylvania health insurer, guarantees the lease for the 10 properties leased to NewSeasons Assisted Living Communities, Inc., or NewSeasons.
21 Senior Housing Properties Trust Supplemental Operating and Financial Data September 30, 2005
OCCUPANCY BY FACILITY TYPE AND TENANT - ----------------------------------------------------------------------------------------------------------- For the Three Months Ended ----------------------------------------------------------------------------- 9/30/2005 6/30/2005 3/31/2005 12/31/2004 9/30/2004 ----------------------------------------------------------------------------- FACILITY TYPE: Independent Living (IL) 91% 91% 91% 92% 88% Assisted Living (AL) 90% 84% 84% 82% 89% Nursing Homes 90% 91% 88% 89% 89% Hospitals (1) NA NA NA NA NA TENANT: Five Star / Sunrise 92% 92% 92% 90% 90% Five Star (2) 90% 87% 87% 88% 89% Sunrise / Marriott 90% 89% 90% 91% 91% NewSeasons / IBC 80% 81% 79% 79% 80% HealthSouth (1) NA NA NA NA NA Alterra Healthcare Corporation 88% 84% 84% 85% 82% Genesis HealthCare Corporation 94% 96% 96% 96% 97% 5 Private Companies (combined) 84% 84% 87% 88% 85% (1) During 2003, HealthSouth issued a press release stating that its historical financial information should not be relied upon. From that time until June 2005, HealthSouth had not filed audited financial information with the SEC. In June 2005, HealthSouth filed a restated Form 10-K for periods ending December 31, 2003. The financial and operating data included in HealthSouth's restated Form 10-K show a substantial negative net worth and a history of substantial operating losses. Because we do not have reliable current information about the operations or financial performance of HealthSouth or our hospitals, we do not show operating data for this operator. See also Note 3 on page 21 regarding our litigation with HealthSouth. (2) Includes data for periods prior to our ownership of certain properties included in this lease. All tenant operating data presented are based upon the operating results provided by our tenants for the indicated quarterly periods, or the most recent prior period for which tenant operating results are available to us from our tenants. We have not independently verified our tenants' operating data.
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Senior Housing Properties Trust Supplemental Operating and Financial Data September 30, 2005 % PRIVATE PAY BY FACILITY TYPE AND TENANT - ------------------------------------------------------------------------------------------------------------- For the Three Months Ended ------------------------------------------------------------------------- 9/30/2005 6/30/2005 3/31/2005 12/31/2004 9/30/2004 ------------------------------------------------------------------------- Facility Type: Independent Living (IL) 84% 84% 84% 85% 85% Assisted Living (AL) 94% 93% 92% 92% 92% Nursing Homes 29% 26% 18% 22% 20% Hospitals (1) NA NA NA NA NA Tenant: Five Star / Sunrise 84% 84% 85% 85% 85% Five Star (2) 44% 42% 41% 43% 35% Sunrise / Marriott 79% 81% 80% 81% 82% NewSeasons / IBC 100% 100% 100% 100% 100% HealthSouth (1) NA NA NA NA NA Alterra Healthcare Corporation 98% 98% 98% 98% 98% Genesis HealthCare Corporation 24% 23% 23% 23% 22% 5 Private Companies (combined) 24% 27% 24% 24% 25% (1) During 2003, HealthSouth issued a press release stating that its historical financial information should not be relied upon. From that time until June 2005, HealthSouth had not filed audited financial information with the SEC. In June 2005, HealthSouth filed a restated Form 10-K for periods ending December 31, 2003. The financial and operating data included in HealthSouth's restated Form 10-K show a substantial negative net worth and a history of substantial operating losses. Because we do not have reliable current information about the operations or financial performance of HealthSouth or our hospitals, we do not show operating data for this operator. See also Note 3 on page 21 regarding our litigation with HealthSouth. (2) Includes data for periods prior to our ownership of certain properties included in this lease. All tenant operating data presented are based upon the operating results provided by our tenants for the indicated quarterly periods, or the most recent prior period for which tenant operating results are available to us from our tenants. We have not independently verified our tenants' operating data.
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Senior Housing Properties Trust Supplemental Operating and Financial Data September 30, 2005 RENT COVERAGE BY TENANT - --------------------------------------------------------------------------------------------------------------------- For the Three Months Ended ------------------------------------------------------------------------------- Tenant 9/30/2005 6/30/2005 3/31/2005 12/31/2004 9/30/2004 - --------------------------------------------------------------------------------------------------------------------- Five Star / Sunrise (1) 1.11x 1.17x 1.14x 1.10x 1.06x Five Star (2) 1.77x 1.68x 1.63x 1.77x 1.78x Sunrise / Marriott 1.27x 1.25x 1.25x 1.32x 1.26x NewSeasons / IBC 1.17x 1.10x 1.11x 1.13x 1.19x HealthSouth (3) NA NA NA NA NA Alterra Healthcare Corporation 1.87x 1.80x 1.63x 1.63x 1.58x Genesis HealthCare Corporation 1.82x 2.03x 1.71x 1.85x 1.92x 5 Private companies (combined) 1.86x 1.65x 1.87x 2.11x 1.87x (1) Rent coverage is after non-subordinated management fees. (2) Includes data for periods prior to our ownership of certain properties included in this lease. (3) During 2003, HealthSouth issued a press release stating that its historical financial information should not be relied upon. From that time until June 2005, HealthSouth had not filed audited financial information with the SEC. In June 2005, HealthSouth filed a restated Form 10-K for periods ending December 31, 2003. The financial and operating data included in HealthSouth's restated Form 10-K show a substantial negative net worth and a history of substantial operating losses. Because we do not have reliable current information about the operations or financial performance of HealthSouth or our hospitals, we do not show operating data for this operator. See also Note 3 on page 21 regarding our litigation with HealthSouth. All tenant operating data presented are based upon the operating results provided by our tenants for the indicated periods, or the most recent prior period for which tenant operating results are available to us from our tenants. Rent coverage is calculated as operating cash flow from our tenants' facility operations, before subordinated charges and capital expenditure reserves, if any, divided by rent payable to us. We have not independently verified our tenants' operating data.
24 Senior Housing Properties Trust Supplemental Operating and Financial Data September 30, 2005 PORTFOLIO LEASE EXPIRATION SCHEDULE (1) - -------------------------------------------------------------------------------- (dollars in thousands) Cumulative % Annualized % of Annualized of Annuliazed Current Rent Current Rent Current Rent ---------------- --------------- ---------------- 2005 $ - - - 2006 1,535 1.0% 1.0% 2007 - - 1.0% 2008 - - 1.0% 2009 - - 1.0% 2010 1,244 0.8% 1.8% 2011 - - 1.8% 2012 - - 1.8% 2013 32,272 20.0% 21.8% 2014 - - 21.8% 2015 and thereafter 117,619 78.2% 100.0% --------------- ----------- Total $ 152,670 100.0% =============== =========== Weighted average remaining lease term (in years) 11.9 (1) Excludes the two hospitals operated by HealthSouth. Effective January 2, 2002, we entered an amended lease with HealthSouth for two hospitals. In April 2003, we commenced a lawsuit against HealthSouth seeking, among other matters, to reform the amended lease, based upon HealthSouth's fraud, by increasing the rent payable to us from January 2, 2002 until the termination or expiration of the amended lease. This litigation is pending at this time. On October 26, 2004, we terminated the amended lease for default because HealthSouth failed to deliver to us accurate and timely financial information as required by the amended lease. On November 2, 2004, HealthSouth brought a new lawsuit against us seeking to prevent our termination of the amended lease. On September 25, 2005, the court ruled that our termination was proper and we have begun work to identify and qualify a new tenant operator for the hospitals. HealthSouth will likely appeal the court's decision that our lease termination was proper. We believe our lease with HealthSouth requires that, after termination, HealthSouth manage the hospitals for our account for a management fee during the period of the transition to a new tenant and remit the net cash flow to us. During the pendency of these disputes, HealthSouth has continued to pay us at the disputed rent amount and we have applied the payments received against the net cash flow due, but we do not know how long HealthSouth may continue to make payments. According to affidavits submitted during this litigation by HealthSouth, the leased hospitals produced cash flow in prior periods of approximately $14 million per year in excess of amounts paid by HealthSouth to us. We do not know the cash flow currently being produced by these hospitals. The court has also granted our request to sequester the net cash proceeds of the hospitals and appointed a receiver to calculate and hold these amounts until the litigation is concluded. HealthSouth disputes that the court order requires the sequestration of cash flow from the date of the lease termination to the present. On June 27, 2005, HealthSouth filed with the SEC a restated Annual Report on Form 10-K for periods ending December 31, 2003. HealthSouth's restated Form 10-K includes financial data which shows HealthSouth to have a substantial negative net worth and a history of substantial operating losses. To date we have been unable to obtain reliable current financial information about the operations of HealthSouth or our hospitals. Accordingly, we do not know if we will be able to collect any amounts which the courts may determine to be owed to us by HealthSouth. 25 -----END PRIVACY-ENHANCED MESSAGE-----