-----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, N6+FK9DkiRl3Nf7fnF/Sq7aIJFO6OQAXqFauhw5285VNBF7RaEG1ngUhpN7DWuyx hR/tD4l/HWzn7U0B9M3nbw== 0000908737-06-000306.txt : 20060502 0000908737-06-000306.hdr.sgml : 20060502 20060502105632 ACCESSION NUMBER: 0000908737-06-000306 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20060502 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20060502 DATE AS OF CHANGE: 20060502 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: 06797796 BUSINESS ADDRESS: STREET 1: 400 CENTRE STREET CITY: NEWTON STATE: MA ZIP: 02458 BUSINESS PHONE: 6173323990 8-K 1 snh_8k.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): May 2, 2006

 

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 May 2, 2006, 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 ended March 31, 2006 and also provided certain supplemental operating and financial data for the quarter ended March 31, 2006. 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.

 

(d)

Exhibits

 

 

The Company hereby furnishes the following exhibits:

 

 

99.1

Press release dated May 2, 2006.

 

 

99.2

First Quarter 2006 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: May 2, 2006

 

 

 

 

 

 EX-99.1 2 ex99-1.htm

400 Centre Street, Newton, MA 02458-2076

tel: (617) 796-8350 fax: (617) 796-8349

 

EXHIBIT 99.1

FOR IMMEDIATE RELEASE

Contact:
Timothy Bonang
Manager of Investor Relations
(617) 796-8350
www.snhreit.com

 

Senior Housing Properties Trust Announces Results for the Period Ended March 31, 2006

 

Newton, MA (May 2, 2006): Senior Housing Properties Trust (NYSE: SNH) today announced its financial results for the quarter ended March 31, 2006.

 

Results for the quarter ended March 31, 2006:

Net income was $15.7 million, or $0.22 per share, for the quarter ended March 31, 2006, compared to $13.9 million, or $0.20 per share for the quarter ended March 31, 2005. Net income for the quarter ended March 31, 2006, included $390,000 of legal costs related to SNH’s litigation with HealthSouth Corporation, compared to $400,000 of similar legal costs for the quarter ended March 31, 2005.

 

Funds from operations (FFO) for the quarter ended March 31, 2006, were $27.7 million, or $0.39 per share. This compares to FFO for the quarter ended March 31, 2005, of $25.4 million, or $0.37 per share. FFO for the quarters ended March 31, 2006 and 2005 include the HealthSouth litigation costs described above.

 

The weighted average number of common shares outstanding were 71.8 million and 68.5 million for the quarters ended March 31, 2006 and 2005, respectively.

 

Conference Call:

On Tuesday, May 2, 2006, at 1:00 p.m. (EDT), 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 first quarter ended March 31, 2006. 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 May 8, 2006. To hear the replay, dial (719) 457-0820. The replay pass code is 6642868.

 

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 First Quarter 2006 Supplemental Operating and Financial Data is available for download from the SNH web site, www.snhreit.com.

 

Senior Housing Properties Trust is a real estate investment trust, or REIT, that owns 188 senior living properties located in 32 states. SNH is headquartered in Newton, Massachusetts.


A Maryland Real Estate Trust with transferable shares of beneficial interest listed on the New York Stock Exchange.
No shareholder, Trustee or officer is personally liable for any act or obligation of the Trust.

 

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Senior Housing Properties Trust

Financial Information

(in thousands, except per share data)

 

Income Statement:

 

 

Quarter Ended March 31,

 

 

 

2006

 

2005

 

Revenues:

 

 

 

 

 

Rental income(1)

 

$40,823

 

$38,888

 

Interest and other income

 

346

 

339

 

Total revenues

 

41,169

 

39,227

 

Expenses:

 

 

 

 

 

Interest

 

11,371

 

11,223

 

Depreciation

 

10,731

 

10,746

 

General and administrative(2)

 

3,400

 

3,393

 

Total expenses

 

25,502

 

25,362

 

Net income

 

$15,667

 

$13,865

 

 

 

 

 

 

 

Weighted average shares outstanding

 

71,812

 

68,496

 

Per share data:

 

 

 

 

 

Net income

 

$0.22

 

$0.20

 

 

 

Balance Sheet:

 

At March 31, 2006

 

At December 31, 2005

Assets

 

 

 

Real estate properties

$1,691,499

 

$1,686,169

Less accumulated depreciation

249,763

 

239,031

 

1,441,736

 

1,447,138

Cash and cash equivalents

1,247

 

14,642

Restricted cash

1,858

 

2,529

Deferred financing fees, net

9,551

 

9,968

Other assets

26,165

 

25,371

Total assets

$1,480,557

 

$1,499,648

 

Liabilities and Shareholders’ Equity

 

 

 

Unsecured revolving bank credit facility

$106,000

 

$64,000

Senior unsecured notes, net of discount

341,556

 

394,018

Junior subordinated debentures due 2041

28,241

 

28,241

Secured debt and capital leases

69,647

 

70,141

Total debt

545,444

 

556,400

Other liabilities

22,954

 

25,271

Total liabilities

568,398

 

581,671

Shareholders’ equity

912,159

 

917,977

Total liabilities and shareholders’ equity

$1,480,557

 

$1,499,648

 

 

(1)

Rental income for the quarter ended March 31, 2006, includes $2.2 million 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 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 second lawsuit against us seeking to prevent our termination of the amended lease. On September 25, 2005, the court ruled that our termination was proper. On January 18, 2006, the court ordered HealthSouth to cooperate with us in licensing a new tenant and to pay us the net patient revenues, after a 5% management fee and payment of costs and expenses of operation since October 26, 2004. HealthSouth has filed a notice of appeal of the court’s decisions; but HealthSouth’s motions for a stay of the court’s decisions during the appeal have been

 

2 of 6

 


 

denied by both the trial court and the appeals court. During the pendency of these disputes, HealthSouth continued to pay us at the disputed rent amount of $725,000 per month through January 2006. From February 1, 2006 to April 30, 2006, HealthSouth paid us an additional $6.0 million which HealthSouth represented to be amounts due from October 26, 2004 to March 31, 2006. The supporting data for the calculations of amounts due to us provided by HealthSouth appears to be incomplete and contradictory. We have attempted to obtain accurate data and clarifications from HealthSouth, but HealthSouth has been unwilling or unable to provide such data. Pending the resolution of HealthSouth’s appeal and the conclusion of our review of HealthSouth’s calculations of amounts due to us, we have recognized in income only $2.2 million, which represents the minimum amount we are entitled to if HealthSouth prevails in its appeal and HealthSouth’s lease is reinstated. We have deferred recognition of the remaining $4.5 million of cash payments received from HealthSouth. Under Internal Revenue Code laws and regulations applicable to real estate investment trusts, or REITs, a portion of the payments received from HealthSouth will be subject to income tax at corporate rates. We have also deferred recognition of $2.3 million of estimated tax expense, pending the recognition in income of the deferred payments received. In March 2006, HealthSouth filed late an Annual Report on Form 10-K for the period ending December 31, 2005. The financial and operating data included in HealthSouth’s Form 10-K show a substantial negative net worth and a history of substantial operating losses. Also, HealthSouth’s management identified several material weaknesses in its internal control over financial reporting and stated that it did not maintain effective internal control over financial reporting as of December 31, 2005. 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 additional amounts which the courts may determine to be owed to us by HealthSouth.

(2)

Legal expenses incurred related to the HealthSouth litigation were approximately $390,000 and $400,000, for the quarters ended March 31, 2006 and 2005, respectively and are included in general and administrative expenses.

 

 

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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 March 31,

 

 

2006

 

2005

Net income (2)

 

$15,667

 

$13,865

Add:   Depreciation expense

 

10,731

 

10,746

Deferred percentage rent (3)

 

1,259

 

815

FFO

 

$27,657

 

$25,426

 

 

 

 

 

Weighted average shares outstanding

 

71,812

 

68,496

 

 

 

 

 

FFO per share

 

$0.39

 

$0.37

Distributions declared

 

$0.32

 

$0.32

 

 

(1)

We compute FFO as shown in the calculation above. Such calculation begins with income from continuing operations or, if such amount is the same as net income, with net income. 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 3 below. We consider FFO to be an appropriate measure of performance for a 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)

Net income includes legal expenses incurred related to the HealthSouth litigation of approximately $390,000 and $400,000 for the quarters ended March 31, 2006 and 2005, respectively.

(3)

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 DECISIONS BY A MASSACHUSETTS TRIAL COURT THAT OUR TERMINATION OF HEALTHSOUTH’S LEASE OF TWO HOSPITALS WAS PROPER AND THAT HEALTHSOUTH IS TO PAY US THE NET PATIENT REVENUES, LESS A MANAGEMENT FEE AND OPERATION COSTS, SINCE OCTOBER 26, 2004. HEALTHSOUTH HAS FILED A NOTICE OF APPEAL OF THESE DECISIONS AND HEALTHSOUTH’S APPEAL MAY BE SUCCESSFUL.

•

THIS PRESS RELEASE REPORTS THAT A MASSACHUSETTS TRIAL COURT HAS ORDERED HEALTHSOUTH TO COOPERATE WITH US TO LICENSE A NEW TENANT FOR OUR HOSPITALS

 

4 of 6

 


 

OPERATED BY HEALTHSOUTH. HEALTHSOUTH HAS FILED A NOTICE TO APPEAL THIS DECISION AND THAT APPEAL HAS NOT BEEN DECIDED, ALTHOUGH A STAY PENDING APPEAL SOUGHT BY HEALTHSOUTH WAS DENIED. HEALTHSOUTH RECENTLY FILED A MOTION IN THE TRIAL COURT SEEKING TO LIMIT ITS COOPERATION WITH THE LICENSING PROCESS AND FOR OTHER RELIEF. FUTURE ACTIONS BY HEALTHSOUTH, FUTURE DECISIONS BY COURTS WITH JURISDICTION OVER THESE MATTERS OR DECISIONS BY HEALTH REGULATORY AUTHORITIES MAY DELAY OR PREVENT OUR ENTERING A LEASE WITH A NEW TENANT FOR OUR HOSPITALS DESPITE THE EXISTING COURT ORDERS.

 

•

THIS PRESS RELEASE STATES THAT THE COURT HAS ORDERED 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.

 

•

THIS PRESS RELEASE REFERS TO A SECOND LITIGATION IN WHICH WE ARE SEEKING TO COLLECT INCREASED RENT FROM HEALTHSOUTH SINCE JANUARY 2002. THE FACT THAT WE HAVE RECEIVED A FAVORABLE RULING IN A SEPARATE LITIGATION MAY IMPLY THAT WE WILL ALSO SUCCEED IN THIS INCREASED RENT LITIGATION. HOWEVER, THE ISSUES IN THESE TWO LITIGATIONS ARE SOMEWHAT DIFFERENT AND ARE PENDING IN DIFFERENT COURTS. WE BELIEVE ALL OF OUR CLAIMS ARE VALID. HOWEVER, NOT ALL OF OUR CLAIMS HAVE BEEN FINALLY DETERMINED AND THE FACT THAT WE HAVE RECEIVED FAVORABLE RULINGS IN ONE CASE DOES NOT MEAN WE WILL SUCCEED IN THE OTHER CASE.

 

•

THE IMPLICATION OF THE FORWARD LOOKING STATEMENTS IN THIS PRESS RELEASE REGARDING OUR LITIGATIONS WITH HEALTHSOUTH MAY BE THAT WE WILL EVENTUALLY RECOGNIZE MORE INCOME FROM OUR OWNERSHIP OF THE TWO HOSPITALS THAN $725,000 PER MONTH. HOWEVER, THIS IMPLICATION MAY NOT BE REALIZED FOR MANY DIFFERENT REASONS: OUR REVIEW OF HEALTHSOUTH’S CALCULATIONS OF AMOUNTS DUE TO US MAY RESULT IN ADJUSTMENTS THAT DECREASE OR INCREASE THE FINAL AMOUNTS DUE TO US. HEALTHSOUTH MAY BECOME UNABLE TO PAY THE INCREASED AMOUNTS, IF ANY, DUE TO US. 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. HEALTHSOUTH’S APPEAL MAY BE SUCCESSFUL AND ITS LEASE MAY BE REINSTATED. THE FINANCIAL RESULTS OF THE HOSPITALS’ OPERATIONS MAY DECLINE AND THIS DECLINE MAY BE MATERIAL. IN FACT, HEALTHSOUTH MAY CEASE PAYING AMOUNTS DUE TO US UNTIL A NEW TENANT IS INSTALLED AT THE HOSPITALS.

 

•

LITIGATION IS EXPENSIVE. SINCE THE CURRENT LITIGATIONS BETWEEN US AND HEALTHSOUTH BEGAN IN APRIL 2003, WE HAVE SPENT APPROXIMATELY $2.7 MILLION IN LITIGATION COSTS. 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. WE HAVE REQUESTED THAT THE COURT ORDER HEALTHSOUTH TO PAY SOME OF OUR LITIGATION COSTS. HEALTHSOUTH HAS OPPOSED THIS REQUEST AND WE DO NOT KNOW HOW THE COURTS WILL RULE, OR WHETHER HEALTHSOUTH WILL BE WILLING OR ABLE TO HONOR ANY AWARD WHICH MAY BE MADE.

 

YOU SHOULD NOT PLACE UNDUE RELIANCE UPON FORWARD LOOKING STATEMENTS. EXCEPT AS MAY BE REQUIRED BY APPLICABLE LAW, WE UNDERTAKE NO OBLIGATION TO UPDATE OR REVISE ANY FORWARD LOOKING STATEMENTS AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.

 

5 of 6

 

(END)

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MP'6-7+6A[(,1?@.P&V;993^B7]F5FV4G4!MV511,<0RIN%B6`1V9,A`^Q"0% M.I*RD`)(XAFL>"J*Y8R?1UW%<7ANL.%+CS691>:4VD.!``UBQ(U7)H,?'L0= MAJ=3)0K2-L:-6C%DEQTHS>0"QIX8M%9Z)[D]SKM;6.6I+P+]/,3QS$H*7FTOE18DJ;+B6 M@TZF5V!S.)!`/$0305X_$9Q-.&C"F M%N9$.MI01=6>X[D9>(7/)73^/H#,MAW!V%LP934=2"L%.9:D!)`MP9_936<* M]Z+R,3Q!C'Y[272U9$=#:5KSH;SJ(*O93C&*8AV]:P]R2E;8D.MJ6$`9P&TJ M'D.NWY5TYBC*S/4,';DNL%3;B$)S+=";6_MUC7LIJ"J+B^$ER&S"%G.XLD*2 MA5]=Q865M%#]1+QG_]#=NXQB4=QE;SQ$52B@OH;2H)5I"D9Q>X!`%B*\;QO$ M6V(TQYY"XP4]NKN+%*$J"0L(QI.(IA*PR.A]+:2REVP*TV!NC5K2-FK9:K+",1=Q., M9"F`TG,4ILO-<@D'@Y*PT:BSC%8D9]^(_(+H5&C-AFM;72%N MB6%;J_JWT2'+*'?H(*;>B/TJ5*K94CM,.(A3I1)G(TJRXK*L#NC;7[*9P_<6 M'-NH9#Q+SA<<6JQ*E'AJ5*K(63`PY,/ EX-99.2 4 ex99-2.txt EXHIBIT 99.2 SENIOR HOUSING PROPERTIES TRUST First Quarter 2006 Supplemental Operating and Financial Data Unless otherwise noted, all amounts in this report are unaudited. 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 2006 Investments/Dispositions Information 18 2006 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 DOCUMENT 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 RULED THAT OUR TERMINATION OF HEALTHSOUTH CORPORATION'S LEASE OF TWO HOSPITALS WAS PROPER AND ORDERED HEALTHSOUTH TO PAY US THE NET PATIENT REVENUES, LESS A MANAGEMENT FEE AND OPERATION COSTS, SINCE OCTOBER 26, 2004. HOWEVER, HEALTHSOUTH HAS FILED A NOTICE OF APPEAL OF THESE DECISIONS AND HEALTHSOUTH'S APPEAL MAY BE SUCCESSFUL. o A MASSACHUSETTS TRIAL COURT HAS ORDERED HEALTHSOUTH TO COOPERATE WITH US TO LICENSE A NEW TENANT FOR OUR HOSPITALS OPERATED BY HEALTHSOUTH. HEALTHSOUTH HAS FILED A NOTICE TO APPEAL THIS DECISION AND THAT APPEAL HAS NOT BEEN DECIDED, ALTHOUGH A STAY PENDING APPEAL SOUGHT BY HEALTHSOUTH WAS DENIED. HEALTHSOUTH RECENTLY FILED A MOTION IN THE TRIAL COURT SEEKING TO LIMIT ITS COOPERATION WITH THE LICENSING PROCESS AND FOR OTHER RELIEF. FUTURE ACTIONS BY HEALTHSOUTH, FUTURE DECISIONS BY COURTS WITH JURISDICTION OVER THESE MATTERS OR DECISIONS BY HEALTH REGULATORY AUTHORITIES MAY DELAY OR PREVENT OUR ENTERING A LEASE WITH A NEW TENANT FOR OUR HOSPITALS DESPITE THE EXISTING COURT ORDERS. o THE COURT HAS ORDERED HEALTHSOUTH TO CONTINUE OPERATIONS OF OUR 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 IN A SECOND LITIGATION, WE ARE SEEKING TO COLLECT INCREASED RENT FROM HEALTHSOUTH SINCE JANUARY 2002. THE FACT THAT WE HAVE RECEIVED A FAVORABLE RULING IN A SEPARATE LITIGATION MAY IMPLY THAT WE WILL ALSO SUCCEED IN THIS INCREASED RENT LITIGATION. HOWEVER, THE ISSUES IN THESE TWO LITIGATIONS ARE SOMEWHAT DIFFERENT AND ARE PENDING IN DIFFERENT COURTS. WE BELIEVE ALL OF OUR CLAIMS ARE VALID. HOWEVER, NOT ALL OF OUR CLAIMS HAVE BEEN FINALLY DETERMINED AND THE FACT THAT WE HAVE RECEIVED FAVORABLE RULINGS IN ONE CASE DOES NOT MEAN WE WILL SUCCEED IN THE OTHER CASE. o THE IMPLICATION OF THE FORWARD LOOKING STATEMENTS IN THIS DOCUMENT REGARDING OUR LITIGATIONS WITH HEALTHSOUTH MAY BE THAT WE WILL EVENTUALLY RECOGNIZE MORE INCOME FROM OUR OWNERSHIP OF THE TWO HOSPITALS THAN $725,000 PER MONTH. HOWEVER, THIS IMPLICATION MAY NOT BE REALIZED FOR MANY DIFFERENT REASONS: OUR REVIEW OF HEALTHSOUTH'S CALCULATIONS OF AMOUNTS DUE TO US MAY RESULT IN ADJUSTMENTS THAT DECREASE OR INCREASE THE FINAL AMOUNTS DUE TO US. HEALTHSOUTH MAY BECOME UNABLE TO PAY THE INCREASED AMOUNTS, IF ANY, DUE TO US. 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. HEALTHSOUTH'S APPEAL MAY BE SUCCESSFUL AND ITS LEASE MAY BE REINSTATED. THE FINANCIAL RESULTS OF THE HOSPITALS' OPERATIONS MAY DECLINE AND THIS DECLINE MAY BE MATERIAL. IN FACT, HEALTHSOUTH MAY CEASE PAYING AMOUNTS DUE TO US UNTIL A NEW TENANT IS INSTALLED AT THE HOSPITALS. o LITIGATION IS EXPENSIVE. SINCE THE CURRENT LITIGATIONS BETWEEN US AND HEALTHSOUTH BEGAN IN APRIL 2003, WE HAVE SPENT APPROXIMATELY $2.7 MILLION IN LITIGATION COSTS. 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. WE HAVE REQUESTED THAT THE COURT ORDER HEALTHSOUTH TO PAY SOME OF OUR LITIGATION COSTS. HEALTHSOUTH HAS OPPOSED THIS REQUEST AND WE DO NOT KNOW HOW THE COURTS WILL RULE OR WHETHER HEALTHSOUTH WILL BE WILLING OR ABLE TO HONOR ANY AWARD WHICH MAY BE MADE. YOU SHOULD NOT PLACE UNDUE RELIANCE UPON FORWARD LOOKING STATEMENTS. EXCEPT AS MAY BE REQUIRED BY APPLICABLE LAW, WE UNDERTAKE NO OBLIGATION TO UPDATE OR REVISE ANY FORWARD LOOKING STATEMENTS AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE. 3 CORPORATE INFORMATION Senior Housing Properties Trust Supplemental Operating and Financial Data March 31, 2006 COMPANY PROFILE - ------------------------------------------------------------------------------- The Company: Senior Housing Properties Trust, or SNH, 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, FTSE EPRA/NAREIT United States 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 March 31, 2006, RMR managed one of the largest portfolios of publicly owned real estate in the United States, including approximately 980 properties, with approximately 89.0 million square feet, located in 42 states, Washington, DC, Puerto Rico and Ontario, Canada. RMR has over 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 and its affiliates had combined total market capitalization of approximately $12.0 billion as of March 31, 2006. 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 3/31/06): Total properties 188 Total units / beds 23,282 Percent of rent from private pay properties 84.4% (1) Portfolio Concentration by facility type (as of 3/31/06):
Carrying Value Number of Number of of Annualized Properties Units/Beds Investment (2) Percent Current Rent Percent --------------------------------------------------------------------------------- Independent Living (IL) (3) 36 10,412 $908,977 53.7% $90,522 54.3% Assisted Living (AL) 89 6,197 516,674 30.6% 50,272 30.1% Nursing Homes 61 6,309 222,295 13.1% 17,334 10.4% Hospitals 2 364 43,553 2.6% 8,700 5.2% --------------------------------------------------------------------------------- Total 188 23,282 $1,691,499 100.0% $166,828 100.0% =================================================================================
Operating Statistics by tenant (Q1 2006):
Number of Number of Annualized Rent Percent Tenant Properties Units/Beds Current Rent Coverage (4) Occupancy (4) Private Pay (4) - ---------------------------------------------------------------------------------------------------------------------- Five Star / Sunrise (5) 30 7,307 $ 64,246 1.33x 93% 82% Five Star 106 8,467 39,780 1.49x 91% 48% Sunrise / Marriott (6) 14 4,091 31,087 1.26x 92% 80% NewSeasons / IBC (7) 10 1,019 9,287 1.16x 85% 100% HealthSouth (8) 2 364 8,700 NA NA NA Alterra / Brookdale (9) 18 894 7,232 2.04x 90% 98% Genesis HealthCare Corporation 1 156 1,535 1.77x 97% 17% 5 Private Companies (combined) 7 984 4,961 1.56x 90% 26% -------------------------------------- 188 23,282 $ 166,828 ====================================== (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 30 properties are leased to Five Star Quality Care, Inc., or Five Star, and 17 were managed by Sunrise Senior Living, Inc., or Sunrise, at March 31, 2006. As of March 31, 2006, Five Star operated 13 of these 30 properties and intends to begin operating 10 additional properties during the second quarter of 2006. Sunrise does not guaranty Five Star's lease obligations. The rent that Five Star pays to us is subordinate to the management fees paid by Five Star to Sunrise, but is not subordinate to Five Star's internal management costs. The rent coverage presented for this lease has been adjusted to exclude management fees paid to Sunrise during the first quarter for the 23 properties that Five Star currently manages and expects to manage in the second quarter of 2006. (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) In March 2006, HealthSouth filed late an Annual Report on Form 10-K for the period ending December 31, 2005. The financial and operating data included in HealthSouth's Form 10-K show a substantial negative net worth and a history of substantial operating losses. Also, HealthSouth's management identified several material weaknesses in its internal control over financial reporting and stated that it did not maintain effective internal control over financial reporting as of December 31, 2005. 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 1 on page 11 regarding our litigation with HealthSouth. (9) Brookdale Senior Living, Inc., or Brookdale, guarantees the lease for 18 properties leased to Alterra Healthcare Corporation, or Alterra.
5 Senior Housing Properties Trust Supplemental Operating and Financial Data March 31, 2006 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@snhreit.com. 6 Senior Housing Properties Trust Supplemental Operating and Financial Data March 31, 2006 RESEARCH COVERAGE - -------------------------------------------------------------------------------- Equity Research Coverage - -------------------------------------------------------------------------------- Merrill Lynch Stifel, Nicolaus David Tsoupros Jerry Doctrow (212) 449-9697 (410) 454-5142 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 March 31, 2006 KEY FINANCIAL DATA - ----------------------------------------------------------------------------------------------------------------------------------- (share amounts and dollars in thousands, except per share data) As of and For the Three Months Ended ------------------------------------------------------------------- 3/31/2006 12/31/2005 9/30/2005 6/30/2005 3/31/2005 ------------ ------------ ------------ ------------ ------------ SHARES OUTSTANDING: Common shares outstanding (at end of period) 71,812 71,812 68,562 68,538 68,496 Weighted average common shares outstanding - basic and diluted (1) 71,812 69,445 68,543 68,537 68,496 COMMON SHARE DATA: Price at end of period $18.10 $16.91 $19.00 $18.91 $16.68 High during period $19.08 $19.35 $20.00 $19.45 $19.10 Low during period $16.75 $16.84 $17.79 $16.40 $16.20 Annualized dividends paid per share $1.28 $1.28 $1.28 $1.28 $1.28 Annualized dividend yield (at end of period) 7.1% 7.6% 6.7% 6.8% 7.7% MARKET CAPITALIZATION: Total debt (book value) $545,444 $556,400 $551,757 $577,175 $535,748 Plus: market value of common shares (at end of period) 1,299,797 1,214,341 1,302,678 1,296,054 1,142,513 ---------- ---------- ---------- ---------- ---------- Total market capitalization $1,845,241 $1,770,741 $1,854,435 $1,873,229 $1,678,261 Total debt / total market capitalization 29.6% 31.4% 29.8% 30.8% 31.9% BOOK CAPITALIZATION: Total debt $545,444 $556,400 $551,757 $577,175 $535,748 Plus: total shareholders' equity 912,159 917,977 868,086 875,634 881,692 ---------- ---------- ---------- ---------- ---------- Total book capitalization $1,457,603 $1,474,377 $1,419,843 $1,452,809 $1,417,440 Total debt / total book capitalization 37.4% 37.7% 38.9% 39.7% 37.8% SELECTED BALANCE SHEET DATA: Total assets $1,480,557 $1,499,648 $1,440,403 $1,473,413 $1,436,848 Total liabilities $568,398 $581,671 $572,317 $597,779 $555,156 Gross book value of real estate assets (2) $1,691,499 $1,686,169 $1,632,013 $1,652,231 $1,604,693 Total debt / gross book value of real estate assets (2) 32.2% 33.0% 33.8% 34.9% 33.4% SELECTED INCOME STATEMENT DATA: Total revenues $41,169 $44,111 $40,244 $39,605 $39,227 EBITDA (3) $39,028 $38,353 $37,775 $37,293 $36,649 Income from continuing operations $15,667 $10,472 $14,129 $14,316 $13,865 Net income $15,667 $15,686 $14,129 $15,033 $13,865 Funds from operations (FFO) (4) $27,657 $22,171 $25,864 $25,850 $25,426 Common distributions paid $22,980 $22,980 $21,940 $21,932 $21,919 PER SHARE DATA: Income from continuting operations $0.22 $0.15 $0.21 $0.21 $0.20 Net income $0.22 $0.23 $0.21 $0.22 $0.20 FFO (4) $0.39 $0.32 $0.38 $0.38 $0.37 Common distributions paid $0.32 $0.32 $0.32 $0.32 $0.32 FFO payout ratio (4) 82.1% 100.0% 84.2% 84.2% 86.5% COVERAGE RATIOS: EBITDA (3) / interest expense 3.4x 3.2x 3.2x 3.3x 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 Note 1 and Note 3 on page 11.
9
Senior Housing Properties Trust Supplemental Operating and Financial Data March 31, 2006 CONSOLIDATED BALANCE SHEET - --------------------------------------------------------------------------------------------------- (in thousands, except per share data) As of As of March 31, December 31, 2006 2005 ------------- --------------- (audited) ASSETS Real estate properties, at cost: Land $185,819 $185,819 Buildings and improvements 1,505,680 1,500,350 ----------- ----------- 1,691,499 1,686,169 Less accumulated depreciation 249,763 239,031 ----------- ----------- 1,441,736 1,447,138 Cash and cash equivalents 1,247 14,642 Restricted cash 1,858 2,529 Deferred financing fees, net 9,551 9,968 Other assets 26,165 25,371 ----------- ----------- Total assets $1,480,557 $1,499,648 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Unsecured revolving bank credit facility $106,000 $64,000 Senior unsecured notes due 2012 and 2015, net of discount 341,556 394,018 Junior subordinated debentures due 2041 28,241 28,241 Secured debt and capital leases 69,647 70,141 Accrued interest 8,829 13,089 Other liabilities 14,125 12,182 ----------- ----------- Total liabilities 568,398 581,671 ----------- ----------- Commitments and contingencies Shareholders' equity: Common shares of beneficial interest, $0.01 par value: 80,000,000 shares authorized; 71,812,227 shares issued and outstanding 718 718 Additional paid-in capital 1,093,480 1,093,480 Cumulative net income 282,863 267,196 Cumulative distributions (470,269) (447,289) Unrealized gain on investments 5,367 3,872 ----------- ----------- Total shareholders' equity 912,159 917,977 ----------- ----------- Total liabilities and shareholders' equity $1,480,557 $1,499,648 =========== ===========
10
Senior Housing Properties Trust Supplemental Operating and Financial Data March 31, 2006 CONSOLIDATED STATEMENT OF INCOME --------------------------------------------------------------------------------------------------- (in thousands, except per share data) For the Three Months Ended -------------------------- 3/31/2006 3/31/2005 ---------- ---------- Revenues: Rental income (1) $40,823 $38,888 Interest and other income 346 339 ------- ------- Total revenues 41,169 39,227 ------- ------- Expenses: Interest 11,371 11,223 Depreciation 10,731 10,746 General and administrative 3,400 3,393 ------- ------- Total expenses 25,502 25,362 ------- ------- Net income $15,667 $13,865 ======= ======= Weighted average common shares outstanding 71,812 68,496 ======= ======= Basic and diluted earnings per share: Net income $ 0.22 $ 0.20 ======= ======= Additional Data: Straight-line rent included in rental income (2) $ 56 $ 107 Deferred percentage rent (3) $ 1,259 $ 815 Litigation expenses included in general and administrative expenses (4) $ 390 $ 400 (1) Rental income for the quarter ended March 31, 2006, includes $2.2 million 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 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 second lawsuit against us seeking to prevent our termination of the amended lease. On September 25, 2005, the court ruled that our termination was proper. On January 18, 2006, the court ordered HealthSouth to cooperate with us in licensing a new tenant and to pay us the net patient revenues, after a 5% management fee and payment of costs and expenses of operation since October 26, 2004. HealthSouth has filed a notice of appeal of the court's decisions; but HealthSouth's motions for a stay of the court's decisions during the appeal have been denied by both the trial court and the appeals court. During the pendency of these disputes, HealthSouth continued to pay us at the disputed rent amount of $725,000 per month through January 2006. From February 1, 2006 to April 30, 2006, HealthSouth paid us an additional $6.0 million which HealthSouth represented to be amounts due from October 26, 2004 to March 31, 2006. The supporting data for the calculations of amounts due to us provided by HealthSouth appears to be incomplete and contradictory. We have attempted to obtain accurate data and clarifications from HealthSouth, but HealthSouth has been unwilling or unable to provide such data. Pending the resolution of HealthSouth's appeal and the conclusion of our review of HealthSouth's calculations of amounts due to us, we have recognized in income only $2.2 million, which represents the minimum amount we are entitled to if HealthSouth prevails in its appeal and HealthSouth's lease is reinstated. We have deferred recognition of the remaining $4.5 million of cash payments received from HealthSouth. Under Internal Revenue Code laws and regulations applicable to real estate investment trusts, or REITs, a portion of the payments received from HealthSouth will be subject to income tax at corporate rates. We have also deferred recognition of $2.3 million of estimated tax expense, pending the recognition in income of the deferred payments received. In March 2006, HealthSouth filed late an Annual Report on Form 10-K for the period ending December 31, 2005. The financial and operating data included in HealthSouth's Form 10-K show a substantial negative net worth and a history of substantial operating losses. Also, HealthSouth's management identified several material weaknesses in its internal control over financial reporting and stated that it did not maintain effective internal control over financial reporting as of December 31, 2005. 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 additional amounts which the courts may determine to be owed to us by HealthSouth. (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. (3) This amount represents rent with respect to the first quarter that is not included in rental income for the first quarter. We recognize percentage rental income received during the first, second and third quarters in the fourth quarter. (4) These expenses relate to our HealthSouth litigation.
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Senior Housing Properties Trust Supplemental Operating and Financial Data March 31, 2006 CONSOLIDATED STATEMENT OF CASH FLOWS - ------------------------------------------------------------------------------------------------------------------------- (in thousands) For the Three Months Ended ----------------------------------- 3/31/2006 3/31/2005 -------------- ------------- Cash flows from operating activities: Net income $15,667 $13,865 Adjustments to reconcile net income to cash provided by operating activities: Depreciation 10,731 10,746 Amortization of deferred finance fees and debt discounts 455 531 Change in assets and liabilities: Restricted cash 671 (351) Other assets 702 2,998 Accrued interest (4,260) (1,937) Other liabilities 1,943 (559) -------- -------- Cash provided by operating activities 25,909 25,293 -------- -------- Cash flows from investing activity: Acquisitions (5,330) (3,741) -------- -------- Cash used for investing activity (5,330) (3,741) -------- -------- Cash flows from financing activities: Proceeds from borrowings on revolving bank credit facility 47,000 10,000 Repayments of borrowings on revolving bank credit facility (5,000) (9,000) Redemption of senior notes (52,500) -- Repayment of other debt (494) (471) Deferred financing fees -- (8) Distributions to shareholders (22,980) (21,919) -------- -------- Cash used for financing activities (33,974) (21,398) -------- -------- Decrease in cash and cash equivalents (13,395) 155 Cash and cash equivalents at beginning of period 14,642 3,409 -------- -------- Cash and cash equivalents at end of period $1,247 $3,564 ======== ======== Supplemental cash flow information: Interest paid $15,176 $12,629
12 Senior Housing Properties Trust Supplemental Operating and Financial Data March 31, 2006 CALCULATION OF EBITDA - -------------------------------------------------------------------------------- (dollars in thousands) For the Three Months Ended ----------------------------- 3/31/2006 3/31/2005 ------------- ------------- Net income (1) $ 15,667 $ 13,865 Plus: interest expense 11,371 11,223 depreciation expense 10,731 10,746 deferred percentage rent adjustment (2) 1,259 815 ------------- ------------- EBITDA $ 39,028 $ 36,649 ============= ============= (1) Net income includes legal expenses incurred related to our HealthSouth litigation of approximately $390,000 for the quarter ended March 31, 2006 and $400,000 for the quarter ended March 31, 2005. See Note 1 on page 11 regarding our HealthSouth litigation. (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 this calculation total revenues for the first three quarters includes estimated amounts with respect to those periods. The fourth quarter calculation excludes the amounts recognized during the first three quarters. We compute EBITDA as shown in the calculation above. Such calculation begins with income from continuing operations or, if such amount is the same as net income, with net income. 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. 13
Senior Housing Properties Trust Supplemental Operating and Financial Data March 31, 2006 CALCULATION OF FUNDS FROM OPERATIONS (FFO) - ------------------------------------------------------------------------------------------------------- (amounts in thousands, except per share data) For the Three Months Ended ------------------------------ 3/31/2006 3/31/2005 -------------- ------------- Net income (1) $ 15,667 $ 13,865 Plus: depreciation expense 10,731 10,746 deferred percentage rent adjustment (2) 1,259 815 -------------- ------------- FFO $ 27,657 $ 25,426 ============== ============= Weighted average shares outstanding 71,812 68,496 Net income per share $ 0.22 $ 0.20 FFO per share $ 0.39 $ 0.37 Supplemental data: Straight-line rent included in rental income (3) $ 56 $ 107 Amortization of deferred financing fees and debt discounts $ 455 $ 530 (1) Net income includes legal expenses incurred related to our HealthSouth litigation of approximately $390,000 for the quarter ended March 31, 2006 and $400,000 for the quarter ended March 31, 2005. See Note 1 on page 11 regarding our HealthSouth litigation. (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 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. (3) 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. Such calculation begins with income from continuing operations or, if such amount is the same as net income, with net income. 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 above. We consider FFO to be an appropriate measure of performance for a 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 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. 14
Senior Housing Properties Trust Supplemental Operating and Financial Data March 31, 2006 DEBT SUMMARY - ----------------------------------------------------------------------------------------------------------------------------------- (dollars in thousands) Coupon Interest Principal Maturity Due at Years to Rate Rate Balance Date Maturity Maturity -------- -------- --------- --------- ---------- --------- Secured Fixed Rate Debt: Tax exempt bonds - secured by 1 property 5.875% 5.875% $14,700 12/1/27 $14,700 21.7 Mortgage - secured by 16 properties (1) 6.970% 6.330% 36,416 6/2/12 30,069 6.2 Mortgage - secured by 4 properties (1) 6.110% 6.420% 12,380 11/30/13 10,218 7.7 Capital leases - 2 properties 7.700% 7.700% 6,151 5/31/16 -- 10.2 -------- -------- --------- ---------- ------- Total / weighted average secured fixed rate debt 6.650% 6.371% $69,647 $54,987 10.1 ======== ======== ========= ========== ======= Unsecured Debt: Unsecured Floating Rate Debt: Revolving credit facility (LIBOR + 100 b.p.) 5.690% 5.690% $106,000 11/30/09 $106,000 3.7 Unsecured Fixed Rate Debt: Senior notes due 2012 8.625% 8.625% $245,000 1/15/12 $245,000 5.8 Senior notes due 2015 7.875% 7.875% 97,500 4/15/15 97,500 9.0 Junior subordinated debentures (2) 10.125% 10.125% 28,241 6/15/41 28,241 35.2 -------- -------- --------- ---------- ------- Total / weighted average unsecured fixed rate debt 8.542% 8.542% $370,741 $370,741 8.9 ======== ======== ========= ========== ======= Total / weighted average unsecured debt 7.908% 7.908% $476,741 $476,741 7.7 ======== ======== ========= ========== ======= Total / weighted average secured debt fixed rate debt 6.650% 6.371% $69,647 $54,987 10.1 Total / weighted average unsecured floating rate debt 5.690% 5.690% 106,000 106,000 3.7 Total / weighted average unsecured fixed rate debt 8.542% 8.542% 370,741 370,741 8.9 -------- -------- --------- ---------- ------- Total / weighted average debt 7.748% 7.712 % $546,388 $531,728 8.0 ======== ======== ========= ========== ======= (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 March 31, 2006 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 - -------------------- ---------------- ----------- ----------- ----------- 2006 $ 1,488 $ - $ - $ 1,488 2007 2,123 - - 2,123 2008 2,265 - - 2,265 2009 2,435 106,000 - 108,435 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 338 - 97,500 97,838 2016 and thereafter 14,899 - 28,241 43,140 ---------------- ----------- ----------- ----------- $ 69,647 $ 106,000 $ 370,741 $ 546,388 ================ =========== =========== ===========
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Senior Housing Properties Trust Supplemental Operating and Financial Data March 31, 2006 LEVERAGE RATIOS, COVERAGE RATIOS AND PUBLIC DEBT COVENANTS - ------------------------------------------------------------------------------------------------------------------------------------ As Of And For The Three Months Ended ---------------------------------------------------------- 3/31/2006 12/31/2005 9/30/2005 6/30/2005 3/31/2005 ----------- ---------- ---------- ---------- ---------- Leverage Ratios: Total debt / total assets 36.8% 37.1% 38.3% 39.2% 37.3% Total debt / gross book value of real estate assets (1) 32.2% 33.0% 33.8% 34.9% 33.4% Total debt / total market capitalization 29.6% 31.4% 29.8% 30.8% 31.9% Total debt / total book capitalization 37.4% 37.7% 38.9% 39.7% 37.8% Secured debt / total assets 4.7% 4.7% 4.9% 4.8% 5.3% Variable rate debt / total debt 19.4% 11.5% 10.7% 14.6% 7.9% Coverage Ratios: EBITDA (2) / interest expense 3.4x 3.2x 3.2x 3.3x 3.3x Public Debt Covenants (3): Total debt / adjusted total assets - allowable maximum 60.0% 30.0% 30.5% 34.5% 32.6% 31.0% Secured debt / adjusted total assets - allowable maximum 40.0% 4.1% 4.1% 4.3% 4.2% 4.6% Consolidated income available for debt service / debt service - required minimum 2.00x 3.83x 3.53x 3.59x 3.66x 3.67x Total unencumbered assets to unsecured debt - required minimum 1.50x 3.55x 3.49x 3.38x 3.25x 3.48x (1) Gross book value of real estate assets is real estate properties, at cost, less impairment write downs. (2) See page 13 for the calculation of EBITDA. (3) 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.
17 Senior Housing Properties Trust Supplemental Operating and Financial Data March 31, 2006 2006 INVESTMENTS/DISPOSITIONS INFORMATION - -------------------------------------------------------------------------------- (dollars in thousands) ACQUISITIONS: Purchase Date Type of Number of Purchase Price Acquired Tenant Property Properties Units Price Per Unit - -------------------------------------------------------------------------------- There were no acquisitions during the three months ended March 31, 2006. MORTGAGES: Transaction Type of Number of Investment Date Borrower Amount Property Properties Units Per Unit - -------------------------------------------------------------------------------- There were no mortgage investments during the three months ended March 31, 2006. DISPOSITIONS: Original Sale Price Allocated Multiple of Date Type of Number of Sale Purchase Original Sold Location Property Properties Price Price Purchase Price - -------------------------------------------------------------------------------- There were no dispositions during the three months ended March 31, 2006. 18 Senior Housing Properties Trust Supplemental Operating and Financial Data March 31, 2006 2006 FINANCING ACTIVITIES - -------------------------------------------------------------------------------- (share amounts and dollars in thousands) For the Three Months Ended 3/31/2006 --------------- DEBT TRANSACTIONS: New debt raised $ -- New debt assumed as part of acquisitions -- --------- Total new debt -- Debt retired 52,500 --------- Net debt $(52,500) ========= EQUITY TRANSACTIONS: New common shares issued -- New common equity raised, net $ -- REVOLVING CREDIT FACILITY TRANSACTIONS: Balance oustanding on 1/1/06 $64,000 Drawings 1/1/06 to 3/31/06 $47,000 Repayments 1/1/06 to 3/31/06 $(5,000) --------- Balance oustanding on 3/31/06 $106,000 Balance available for drawing $444,000 19 PORTFOLIO INFORMATION
Senior Housing Properties Trust Supplemental Operating and Financial Data March 31, 2006 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 $908,977 53.7% $87.3 $90,522 54.3% Assisted Living (AL) 89 6,197 516,674 30.6% 83.4 50,272 30.1% Nursing Homes 61 6,309 222,295 13.1% 35.2 17,334 10.4% Hospitals (3) 2 364 43,553 2.6% 119.7 8,700 5.2% --------------------------------------------------------------------------------------------- Total 188 23,282 $1,691,499 100.0% $72.7 $166,828 100.0% ============================================================================================= Tenant: Five Star / Sunrise (4) 30 7,307 $634,222 37.5% $86.8 $64,246 38.5% Five Star 106 8,467 490,390 29.0% 57.9 39,780 23.8% Sunrise / Marriott (5) 14 4,091 325,473 19.2% 79.6 31,087 18.6% NewSeasons / IBC (6) 10 1,019 87,641 5.2% 86.0 9,287 5.6% HealthSouth (3) 2 364 43,553 2.6% 119.7 8,700 5.2% Alterra / Brookdale (7) 18 894 61,126 3.6% 68.4 7,232 4.3% Genesis HealthCare Corporation 1 156 13,007 0.8% 83.4 1,535 1.0% 5 Private Companies (combined) 7 984 36,087 2.1% 36.7 4,961 3.0% --------------------------------------------------------------------------------------------- Total 188 23,282 $1,691,499 100.0% $72.7 $166,828 100.0% ============================================================================================= (1) Amounts are before depreciation, but after impairment write downs, and include purchase price allocations related to FAS 141. (2) Properties where the majority of units are independent living apartments are classified as independent living communities. (3) See Note 1 on page 11. (4) These 30 properties are leased to Five Star and 17 were managed by Sunrise on March 31, 2006. As of March 31, 2006, Five Star operated 13 of these 30 properties and intends to begin operating ten additional properties during the second quarter of 2006. Sunrise does not guaranty Five Star's lease obligations. (5) Marriott guarantees the lease for the 14 properties leased to Sunrise. (6) IBC guarantees the lease for the 10 properties leased to NewSeasons. (7) Brookdale guarantees the lease for the 18 properties leased to Alterra.
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Senior Housing Properties Trust Supplemental Operating and Financial Data March 31, 2006 OCCUPANCY BY FACILITY TYPE AND TENANT - -------------------------------------------------------------------------------------------------------------------- For the Three Months Ended ------------------------------------------------------------------------ 3/31/2006 12/31/2005 9/30/2005 6/30/2005 3/31/2005 ------------ ----------- ----------- ------------ ------------ Facility Type: Independent Living (IL) 93% 92% 91% 91% 91% Assisted Living (AL) 91% 91% 90% 84% 84% Nursing Homes 92% 90% 90% 91% 88% Hospitals (1) NA NA NA NA NA Tenant: Five Star / Sunrise 93% 93% 92% 92% 92% Five Star (2) 91% 91% 90% 87% 87% Sunrise / Marriott 92% 92% 90% 89% 90% NewSeasons / IBC 85% 80% 80% 81% 79% HealthSouth (1) NA NA NA NA NA Alterra / Brookdale 90% 90% 88% 84% 84% Genesis HealthCare Corporation 97% 97% 94% 96% 96% 5 Private Companies (combined) 90% 88% 84% 84% 87% (1) In March 2006, HealthSouth filed late an Annual Report on Form 10K for the period ending December 31, 2005. The financial and operating data included in HealthSouth's Form 10-K show a substantial negative net worth and a history of substantial operating losses. Also, HealthSouth's management identified several material weaknesses in its internal control over financial reporting and stated that it did not maintain effective internal control over financial reporting as of December 31, 2005. 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 1 on page 11 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. 22
Senior Housing Properties Trust Supplemental Operating and Financial Data March 31, 2006 % PRIVATE PAY BY FACILITY TYPE AND TENANT - ------------------------------------------------------------------------------------------------------------ For the Three Months Ended ---------------------------------------------------------------------- 3/31/2006 12/31/2005 9/30/2005 6/30/2005 3/31/2005 -------------- ------------ ----------- ----------- ------------ Facility Type: Independent Living (IL) 84% 87% 84% 84% 84% Assisted Living (AL) 93% 92% 94% 93% 92% Nursing Homes 30% 27% 29% 26% 18% Hospitals (1) NA NA NA NA NA Tenant: Five Star / Sunrise 82% 84% 84% 84% 85% Five Star (2) 48% 45% 44% 42% 41% Sunrise / Marriott 80% 80% 79% 81% 80% NewSeasons / IBC 100% 100% 100% 100% 100% HealthSouth (1) NA NA NA NA NA Alterra / Brookdale 98% 98% 98% 98% 98% Genesis HealthCare Corporation 17% 17% 20% 23% 23% 5 Private Companies (combined) 26% 24% 24% 27% 24% (1) In March 2006, HealthSouth filed late an Annual Report on Form 10K for the period ending December 31, 2005. The financial and operating data included in HealthSouth's Form 10-K show a substantial negative net worth and a history of substantial operating losses. Also, HealthSouth's management identified several material weaknesses in its internal control over financial reporting and stated that it did not maintain effective internal control over financial reporting as of December 31, 2005. 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 1 on page 11 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. 23
Senior Housing Properties Trust Supplemental Operating and Financial Data March 31, 2006 RENT COVERAGE BY TENANT - ---------------------------------------------------------------------------------------------------- For the Three Months Ended ---------------------------------------------------------------- Tenant 3/31/2006 12/31/2005 9/30/2005 6/30/2005 3/31/2005 - -------------------------------- ---------- ----------- ----------- ----------- ----------- Five Star / Sunrise (1) 1.33x 1.27x 1.37x 1.43x 1.41x Five Star (2) 1.49x 1.78x 1.77x 1.68x 1.77x Sunrise / Marriott 1.26x 1.25x 1.27x 1.25x 1.25x NewSeasons / IBC 1.16x 1.10x 1.17x 1.10x 1.11x HealthSouth (3) NA NA NA NA NA Alterra / Brookdale 2.04x 1.98x 1.87x 1.80x 1.63x Genesis HealthCare Corporation 1.77x 2.16x 1.82x 2.03x 1.71x 5 Private companies (combined) 1.56x 1.92x 1.86x 1.65x 1.87x (1) These 30 properties are leased to Five Star and 17 were managed by Sunrise Senior Living, Inc., or Sunrise, at March 31, 2006. As of March 31, 2006, Five Star operated 13 of these 30 properties and intends to begin operating 10 additional properties during the second quarter of 2006. Sunrise does not guaranty Five Star's lease obligations. The rent that Five Star pays to us is subordinate to the management fees that Five Star pays to Sunrise, but is not subordinate to Five Star's internal management costs. The rent coverage presented for this lease has been adjusted to exclude management fees paid to Sunrise during the periods presented for the 23 properties that Five Star currently manages and expects to manage in the second quarter of 2006. (2) Includes data for periods prior to our ownership of certain properties included in this lease. (3) In March 2006, HealthSouth filed late an Annual Report on Form 10K for the period ending December 31, 2005. The financial and operating data included in HealthSouth's Form 10-K show a substantial negative net worth and a history of substantial operating losses. Also, HealthSouth's management identified several material weaknesses in its internal control over financial reporting and stated that it did not maintain effective internal control over financial reporting as of December 31, 2005. 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 1 on page 11 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 March 31, 2006 PORTFOLIO LEASE EXPIRATION SCHEDULE (1) - -------------------------------------------------------------------------------- (dollars in thousands) Cumulative % of Annualized % of Annualized Annualized Current Rent Current Rent Current Rent ------------------------------------------------------- 2006 $ -- $ - 0.0% 2007 -- - 0.0% 2008 -- - 0.0% 2009 -- - 0.0% 2010 1,269 0.8% 0.8% 2011 -- - 0.8% 2012 -- - 0.8% 2013 32,162 20.3% 21.1% 2014 -- - 21.1% 2015 2,006 1.3% 22.4% 2016 and thereafter 122,691 77.6% 100.0% ----------- ---------- Total $ 158,128 100.0% =========== ========== Weighted average remaining lease term (in years) 11.5 (1) Excludes the two hospitals operated by HealthSouth. See Note 1 on page 11. 25 -----END PRIVACY-ENHANCED MESSAGE-----