EX-99.2 4 ex99-2.txt EXHIBIT 99.2 [logo] SENIOR HOUSING PROPERTIES TRUST Second 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 HELD 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 APPEALED 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. HEALTHSOUTH HAS APPEALED THIS DECISION AND THAT APPEAL HAS NOT BEEN DECIDED, ALTHOUGH A STAY PENDING APPEAL SOUGHT BY HEALTHSOUTH WAS DENIED AND HEALTHSOUTH'S MOTIONS IN THE TRIAL COURT SEEKING TO MODIFY AND OBTAIN OTHER RELIEF FROM THE COOPERATION ORDER HAVE BEEN DENIED. 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 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 FAVORABLE RULINGS 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. ALSO, 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 $3.0 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. o OTHER RISKS MAY ADVERSELY IMPACT US, AS DESCRIBED MORE FULLY UNDER "ITEM 1A. RISK FACTORS" IN OUR ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2005. YOU SHOULD NOT PLACE UNDUE RELIANCE UPON FORWARD LOOKING STATEMENTS. EXCEPT AS MAY BE REQUIRED BY APPLICABLE LAW, WE MAY NOT 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 June 30, 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 is a large real estate management company which was founded in 1986 to manage public investments in real estate. As of June 30, 2006, RMR manages one of the largest portfolios of publicly owned real estate in the United States, including approximately 1,000 properties, with more than 90 million square feet, located in 42 states, Washington, DC, Puerto Rico and Ontario, Canada. RMR has over 450 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 five 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 billion as of June 30, 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. We also sometimes consider investing in properties other than senior living properties. 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: ----------------------- New York Stock Exchange Trading Symbol: --------------- Common Shares -- SNH Senior Unsecured Debt Ratings: ------------------------------ Moody's -- Ba2 Standard & Poor's -- BB+ Corporate Headquarters: ----------------------- 400 Centre Street Newton, MA 02458 (t) (617) 796-8350 (f) (617) 796-8349 Portfolio Data (as of 6/30/06): ------------------------------- Total properties 188 Total units / beds 23,297 Percent of rent from private pay properties 84.4% (1)
Portfolio Concentration by facility type (as of 6/30/06): --------------------------------------------------------- Number of Number of Carrying Value of Annualized Properties Units/Beds Investment (2) Percent Current Rent Percent --------------------------------------------------------------------------------------------------- Independent Living (IL) (3) 36 10,380 $ 919,721 54.1% $ 90,767 54.1% Assisted Living (AL) 89 6,250 517,833 30.5% 50,744 30.3% Nursing Homes 61 6,303 218,095 12.9% 17,432 10.4% Hospitals 2 364 43,553 2.5% 8,700 5.2% --------------------------------------------------------------------------------------------------- Total 188 23,297 $ 1,699,202 100.0% $ 167,643 100.0% ===================================================================================================
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 7,275 $ 64,452 1.33x 93% 82% Five Star 106 8,514 40,141 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 7,355 2.04x 90% 98% Genesis HealthCare Corporation 1 156 1,535 1.77x 97% 17% 5 Private Companies (combined) 7 984 5,086 1.56x 90% 26% ---------------------------------------------- 188 23,297 $ 167,643 ============================================== (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. Sunrise Senior Living, Inc., or Sunrise, currently operates seven and Five Star currently operates 23 of these 30 properties. 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 second quarter for the 23 properties that Five Star currently manages. (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) The financial and operating data included in HealthSouth's Annual Report on Form 10-K for the year ended December 31, 2005 and Quarterly Report on Form 10-Q for the quarter ended March 31, 2006 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 and March 31, 2006. Because we do not have reliable information about HealthSouth's operations, we do not disclose any operating or financial data for these hospitals or 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 June 30, 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 June 30, 2006 RESEARCH COVERAGE -------------------------------------------------------------------------------- Equity Research Coverage -------------------------------------------------------------------------------- Cantor Fitzgerald Stifel, Nicolaus Philip Martin Jerry Doctrow (312) 469-7485 (410) 454-5142 Merrill Lynch UBS David Tsoupros Omotayo Okusanya (212) 449-9697 (212) 713-1864 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 ------------------------------------------------------------------- 6/30/2006 3/31/2006 12/31/2005 9/30/2005 6/30/2005 ------------ ----------- ---------- ----------- ---------- Shares Outstanding: ------------------ Common shares outstanding (at end of period) 71,820 71,812 71,812 68,562 68,538 Weighted average common shares outstanding - basic and diluted (1) 71,817 71,812 69,445 68,543 68,537 Common Share Data: ----------------- Price at end of period $17.91 $18.10 $16.91 $19.00 $18.91 High during period $18.18 $19.08 $19.35 $20.00 $19.45 Low during period $16.56 $16.75 $16.84 $17.79 $16.40 Annualized dividends paid per share $1.32 $1.28 $1.28 $1.28 $1.28 Annualized dividend yield (at end of period) 7.4% 7.1% 7.6% 6.7% 6.8% Market Capitalization: --------------------- Total debt (book value) $561,763 $545,444 $556,400 $551,757 $577,175 Plus: market value of common shares (at end of period) 1,286,296 1,299,797 1,214,341 1,302,678 1,296,054 ---------- ---------- ---------- ---------- ---------- Total market capitalization $1,848,059 $1,845,241 $1,770,741 $1,854,435 $1,873,229 Total debt / total market capitalization 30.4% 29.6% 31.4% 29.8% 30.8% Book Capitalization: ------------------- Total debt $561,763 $545,444 $556,400 $551,757 $577,175 Plus: total shareholders' equity 901,824 912,159 917,977 868,086 875,634 ---------- ---------- ---------- ---------- ---------- Total book capitalization $1,463,587 $1,457,603 $1,474,377 $1,419,843 $1,452,809 Total debt / total book capitalization 38.4% 37.4% 37.7% 38.9% 39.7% Selected Balance Sheet Data: --------------------------- Total assets $1,490,557 $1,480,557 $1,499,648 $1,440,403 $1,473,413 Total liabilities $588,733 $568,398 $581,671 $572,317 $597,779 Gross book value of real estate assets (2) $1,699,202 $1,691,499 $1,686,169 $1,632,013 $1,652,231 Total debt / gross book value of real estate assets (2) 33.1% 32.2% 33.0% 33.8% 34.9% Selected Income Statement Data: ------------------------------ Total revenues $41,276 $41,169 $44,111 $40,244 $39,605 EBITDA (3) $39,371 $39,028 $38,353 $37,775 $37,293 Income from continuing operations $12,686 $15,667 $10,472 $14,129 $14,316 Net income $12,686 $15,667 $15,686 $14,129 $15,033 Funds from operations (FFO) (4) $27,825 $27,657 $22,171 $25,864 $25,850 Common distributions paid $23,701 $22,980 $22,980 $21,940 $21,932 Per Share Data: -------------- Income from continuting operations $0.18 $0.22 $0.15 $0.21 $0.21 Net income $0.18 $0.22 $0.23 $0.21 $0.22 FFO (4) $0.39 $0.39 $0.32 $0.38 $0.38 Common distributions paid $0.33 $0.32 $0.32 $0.32 $0.32 FFO payout ratio (4) 84.6% 82.1% 100.0% 84.2% 84.2% Coverage Ratios: --------------- EBITDA (3) / interest expense 3.4x 3.4x 3.2x 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. (3) See page 13 for calculation of EBITDA. (4) See page 14 for calculation of FFO; see also Note 1 and Note 4 on page 11.
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Senior Housing Properties Trust Supplemental Operating and Financial Data June 30, 2006 CONSOLIDATED BALANCE SHEET ----------------------------------------------------------------------------------------------------------------- (in thousands, except share data) As of As of June 30, December 31, 2006 2005 ----------- ------------ (audited) ASSETS ------ Real estate properties, at cost: Land $185,819 $185,819 Buildings and improvements 1,513,383 1,500,350 ----------- ----------- 1,699,202 1,686,169 Less accumulated depreciation 254,087 239,031 ----------- ----------- 1,445,115 1,447,138 Cash and cash equivalents 2,747 14,642 Restricted cash 2,147 2,529 Deferred financing fees, net 7,817 9,968 Other assets 32,731 25,371 ----------- ----------- Total assets $1,490,557 $1,499,648 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Unsecured revolving bank credit facility $141,000 $64,000 Senior unsecured notes due 2012 and 2015, net of discount 341,595 394,018 Junior subordinated debentures due 2041 -- 28,241 Secured debt and capital leases 79,168 70,141 Accrued interest 12,248 13,089 Other liabilities 14,722 12,182 ----------- ----------- Total liabilities 588,733 581,671 ----------- ----------- Commitments and contingencies Shareholders' equity: Common shares of beneficial interest, $0.01 par value: 80,000,000 shares authorized; 71,819,727 and 71,812,227 shares issued and outstanding, respectively 718 718 Additional paid-in capital 1,093,612 1,093,480 Cumulative net income 295,549 267,196 Cumulative distributions (493,249) (447,289) Unrealized gain on investments 5,194 3,872 ----------- ----------- Total shareholders' equity 901,824 917,977 ----------- ----------- Total liabilities and shareholders' equity $1,490,557 $1,499,648 =========== ===========
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Senior Housing Properties Trust Supplemental Operating and Financial Data June 30, 2006 CONSOLIDATED STATEMENT OF INCOME ----------------------------------------------------------------------------------------------------------------------------------- (in thousands, except per share data) For the Three For the Six Months Ended Months Ended ------------------------ ----------------------- 6/30/2006 6/30/2005 6/30/2006 6/30/2005 ---------- --------- --------- --------- Revenues: Rental income (1) $40,921 $39,094 $81,744 $77,982 Interest and other income 355 511 701 850 ------- ------- ------- ------- Total revenues 41,276 39,605 82,445 78,832 ------- ------- ------- ------- Expenses: Interest 11,546 11,443 22,917 22,675 Depreciation 10,922 10,759 21,653 21,505 General and administrative 3,383 3,087 6,783 6,480 Impairment of assets 1,420 -- 1,420 -- Loss on early extinguishment of debt (2) 1,319 -- 1,319 -- ------- ------- ------- ------- Total expenses 28,590 25,289 54,092 50,660 ------- ------- ------- ------- Income from continuing operations 12,686 14,316 28,353 28,172 Gain on sale of property -- 717 -- 717 ------- ------- ------- ------- Net income $12,686 $15,033 $28,353 $28,889 ======= ======= ======= ======= Weighted average common shares outstanding 71,817 68,537 71,814 68,516 ======= ======= ======= ======= Basic and diluted earnings per share: Income from continuing operations $0.18 $0.21 $0.39 $0.41 ======= ======= ======= ======= Net income $0.18 $0.22 $0.39 $0.42 ======= ======= ======= ======= Additional Data: --------------- Straight-line rent included in rental income (3) $56 $107 $112 $214 Deferred percentage rent (4) $1,478 $775 $2,737 $1,590 Litigation expenses included in general and administrative expenses (5) $320 $500 $710 $900 (1) Rental income for the quarter and six months ended June 30, 2006, includes $2.2 million and $4.4 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 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 13, 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 appealed the court's decisions; however, 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. HealthSouth has filed various motions to modify these decisions which also have been denied. During the pendency of these disputes, HealthSouth continued to pay us at the disputed rent amount of $725,000 per month through January 2006. In 2006, HealthSouth paid us $8.5 million which includes amounts HealthSouth represented to be due from October 26, 2004 to June 30, 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 verification or correction of HealthSouth's calculations of amounts due to us, we have recognized in income $2.2 million and $4.4 million for the quarter and six months ended June 30, 2006, respectively, 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 $4.1 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 may be subject to income tax at corporate rates. We have also deferred recognition of $3.2 million of estimated tax expense, pending the recognition in income of the deferred payments received. The financial and operating data included in HealthSouth's Annual Report on Form 10-K for the year ended December 31, 2005, and Quarterly Report on Form 10-Q for the quarter ended March 31, 2006, 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, and March 31, 2006. 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) On June 15, 2006, we redeemed all of our $28.2 million of 10.125% junior subordinated debentures. The loss on early extinguishment of debt is the write off of unamortized deferred financing fees related to these debentures. (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. (4) This amount represents percentage rent with respect to the second quarter that is not included in rental income for the second quarter. We recognize percentage rental income received during the first, second and third quarters in the fourth quarter. (5) These expenses relate to our HealthSouth litigation.
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Senior Housing Properties Trust Supplemental Operating and Financial Data June 30, 2006 CONSOLIDATED STATEMENT OF CASH FLOWS -------------------------------------------------------------------------------------------------------------------------- (in thousands) For the Six Months Ended ----------------------------------------- 6/30/2006 6/30/2005 ------------- ------------ Cash flows from operating activities: Net income $28,353 $28,889 Adjustments to reconcile net income to cash provided by operating activities: Depreciation 21,653 21,505 Impairment of assets 1,420 -- Loss on early extinguishment of debt 1,319 -- Gain on sale of property -- (717) Amortization of deferred financing fees and debt discounts 909 1,061 Change in assets and liabilities: Restricted cash 382 4,089 Other assets (6,037) 2,698 Accrued interest (841) 183 Other liabilities 2,672 (863) -------- -------- Cash provided by operating activities 49,830 56,845 -------- -------- Cash flows from investing activities: Acquisitions (11,076) (31,704) Mortgage financing provided -- (24,000) Proceeds from sale of real estate -- 4,600 -------- -------- Cash used for investing activities (11,076) (51,104) -------- -------- Cash flows from financing activities: Proceeds from borrowings on revolving bank credit facility 90,000 66,000 Repayments of borrowings on revolving bank credit facility (13,000) (19,000) Redemption of senior notes (52,500) -- Redemption of junior subordinated debentures (28,241) -- Repayment of other debt (948) (5,085) Deferred financing fees -- (8) Distributions to shareholders (45,960) (43,850) -------- -------- Cash used for financing activities (50,649) (1,943) -------- -------- (Decrease) increase in cash and cash equivalents (11,895) 3,798 Cash and cash equivalents at beginning of period 14,642 3,409 -------- -------- Cash and cash equivalents at end of period $2,747 $7,207 ======== ======== Supplemental cash flow information: Interest paid $22,850 $21,430 Non cash investing activity: Increase in capital lease assets $(9,975) $ -- Non cash financing activities: Increase in capital lease obligations $ 9,975 $ -- Issuance of common shares 132 369
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Senior Housing Properties Trust Supplemental Operating and Financial Data June 30, 2006 CALCULATION OF EBITDA ------------------------------------------------------------------------------------------------------------------------------ (dollars in thousands) For the Three Months Ended For the Six Months Ended --------------------------------- -------------------------------- 6/30/2006 6/30/2005 6/30/2006 6/30/2005 ------------ ------------ ------------ ------------ Income from continuing operations (1) $12,686 $14,316 $28,353 $28,172 Plus: interest expense 11,546 11,443 22,917 22,675 depreciation expense 10,922 10,759 21,653 21,505 impairment of assets 1,420 -- 1,420 -- loss on early extinguishment of debt 1,319 -- 1,319 -- deferred percentage rent adjustment (2) 1,478 775 2,737 1,590 ------- ------- ------- ------- EBITDA $39,371 $37,293 $78,399 $73,942 ======= ======= ======= ======= (1) Income from continuing operations includes legal expenses incurred related to our HealthSouth litigation of approximately $320,000 and $500,000 for the quarters ended June 30, 2006, and 2005, respectively, and $710,000 and $900,000 for the six months ended June 30, 2006 and 2005, respectively. 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 June 30, 2006 CALCULATION OF FUNDS FROM OPERATIONS (FFO) ----------------------------------------------------------------------------------------------------------------------------------- (amounts in thousands, except per share data) For the Three Months Ended For the Six Months Ended -------------------------------- ------------------------------- 6/30/2006 6/30/2005 6/30/2006 6/30/2005 ----------- ----------- ----------- ----------- Income from continuing operations (1) $12,686 $14,316 $28,353 $28,172 Plus: depreciation expense 10,922 10,759 21,653 21,505 impairment of assets 1,420 -- 1,420 -- loss on early extinguishment of debt 1,319 -- 1,319 -- deferred percentage rent adjustment (2) 1,478 775 2,737 1,590 ------- ------- ------- ------- FFO $27,825 $25,850 $55,482 $51,267 ======= ======= ======= ======= Weighted average shares outstanding 71,817 68,537 71,814 68,516 Income from continuing operations per share $0.18 $0.21 $0.39 $0.41 FFO per share $0.39 $0.38 $0.77 $0.75 Supplemental data: Straight-line rent included in rental income (3) $56 $107 $112 $214 Amortization of deferred financing fees and debt discounts $454 $530 $909 $1,061 (1) Income from continuing operations includes legal expenses incurred related to our HealthSouth litigation of approximately $320,000 and $500,000 for the quarters ended June 30, 2006, and 2005, respectively, and $710,000 and $900,000 for the six months ended June 30, 2006 and 2005, respectively. 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 as discussed in Note 2 above, and exclude loss on early extinguishment of debt not settled in cash from FFO. 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 June 30, 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 21.4 Mortgage - secured by 16 properties (1) 6.970% 6.330% 36,213 6/2/12 30,069 5.9 Mortgage - secured by 4 properties (1) 6.110% 6.420% 12,326 11/30/13 10,218 7.4 Capital leases - 2 properties 7.700% 7.700% 15,929 4/30/26 -- 19.8 ----- ----- -------- -------- ----- Total / weighted average secured fixed rate debt 6.780% 6.535% $79,168 $54,987 11.8 ===== ===== ======== ======== ===== Unsecured Debt: -------------- Unsecured Floating Rate Debt: ---------------------------- Revolving credit facility (LIBOR + 100 b.p.) 6.350% 6.350% $141,000 11/30/09 $141,000 3.4 Unsecured Fixed Rate Debt: ------------------------- Senior notes due 2012 8.625% 8.625% $245,000 1/15/12 $245,000 5.5 Senior notes due 2015 7.875% 7.875% 97,500 4/15/15 97,500 8.8 ----- ----- -------- -------- ----- Total / weighted average unsecured fixed rate debt 8.411% 8.411% $342,500 $342,500 6.5 ===== ===== ======== ======== ===== Total / weighted average unsecured debt 7.810% 7.810% $483,500 $483,500 5.6 ===== ===== ======== ======== ===== Total / weighted average secured debt fixed rate debt 6.780% 6.535% $79,168 $54,987 11.8 Total / weighted average unsecured floating rate debt 6.350% 6.350% 141,000 141,000 3.4 Total / weighted average unsecured fixed rate debt 8.411% 8.411% 342,500 342,500 6.5 ----- ----- -------- -------- ----- Total / weighted average debt 7.665% 7.631% $562,668 $538,487 6.5 ===== ===== ======== ======== ===== (1) Includes the effect of mark to market accounting for certain assumed mortgages.
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Senior Housing Properties Trust Supplemental Operating and Financial Data June 30, 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 $ 667 $ - $ - $ 667 2007 1,410 - - 1,410 2008 1,496 - - 1,496 2009 1,605 141,000 - 142,605 2010 1,714 - - 1,714 2011 1,829 - - 1,829 2012 31,418 - 245,000 276,418 2013 11,016 - - 11,016 2014 544 - - 544 2015 614 - 97,500 98,114 2016 and thereafter 26,855 - - 26,855 ------------------ ------------------- ------------------ ------------------ $ 79,168 $ 141,000 $ 342,500 $ 562,668 ================== =================== ================== ==================
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Senior Housing Properties Trust Supplemental Operating and Financial Data June 30, 2006 LEVERAGE RATIOS, COVERAGE RATIOS AND PUBLIC DEBT COVENANTS --------------------------------------------------------------------------------------------------------------------------------- As Of And For The Three Months Ended ---------------------------------------------------------------- 6/30/2006 3/31/2006 12/31/2005 9/30/2005 6/30/2005 ----------- ----------- ------------ ----------- ----------- Leverage Ratios: ---------------- Total debt / total assets 37.7% 36.8% 37.1% 38.3% 39.2% Total debt / gross book value of real estate assets (1) 33.1% 32.2% 33.0% 33.8% 34.9% Total debt / total market capitalization 30.4% 29.6% 31.4% 29.8% 30.8% Total debt / total book capitalization 38.4% 37.4% 37.7% 38.9% 39.7% Secured debt / total assets 5.3% 4.7% 4.7% 4.9% 4.8% Variable rate debt / total debt 25.1% 19.4% 11.5% 10.7% 14.6% Coverage Ratios: ---------------- EBITDA (2) / interest expense 3.4x 3.4x 3.2x 3.2x 3.3x Public Debt Covenants (3): -------------------------- Total debt / adjusted total assets - allowable maximum 60.0% 32.4% 30.0% 30.5% 34.5% 32.6% Secured debt / adjusted total assets - allowable maximum 40.0% 4.6% 4.1% 4.1% 4.3% 4.2% Consolidated income available for debt service / debt service - required minimum 2.00x 3.75x 3.83x 3.53x 3.59x 3.66x Total unencumbered assets to unsecured debt - required minimum 1.50x 3.30x 3.55x 3.49x 3.38x 3.25x (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.
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Senior Housing Properties Trust Supplemental Operating and Financial Data June 30, 2006 2006 INVESTMENTS/DISPOSITIONS INFORMATION ------------------------------------------------------------------------------------------------------------------------------------ (dollars in thousands) Acquisitions (1): ----------------- Purchase Date Number of Purchase Price Cap Acquired Tenant Type of Property Properties Units Price Per Unit Rate --------------- --------- -------------------- ---------------- ----------- -------------- ---------------- --------- There were no acquisitions during the six months ended June 30, 2006. Dispositions: ------------- Original Sale Price Allocated Multiple of Date Number of Purchase Original Book Gain Sold Location Type of Property Properties Sale Price Price Purchase Price on Sale ------- ----------------- -------------------- ---------------- ------------- -------------- ----------------- ---------- There were no dispositions during the six months ended June 30, 2006. (1) Excludes investments in existing properties.
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Senior Housing Properties Trust Supplemental Operating and Financial Data June 30, 2006 2006 FINANCING ACTIVITIES -------------------------------------------------------------------------------------------------------------- (share amounts and dollars in thousands) For the Three Months Ended 6/30/2006 3/31/2006 --------------------- ------------------ Debt Transactions: ------------------ New debt raised $ - $ - New debt assumed as part of acquisitions - - --------------------- ------------------ Total new debt - - Debt retired 28,241 52,500 --------------------- ------------------ Net debt $ (28,241) $ (52,500) ===================== ================== Equity Transactions: -------------------- New common shares issued - - New common equity raised, net $ - $ - Revolving Credit Facility Transactions: --------------------------------------- Balance oustanding at beginning of period $ 106,000 $ 64,000 Drawings during period $ 43,000 $ 47,000 Repayments during period $ (8,000) $ (5,000) --------------------- ------------------ Balance oustanding at end of period $ 141,000 $ 106,000 Balance available for drawing $ 409,000 $ 444,000
19 PORTFOLIO INFORMATION
Senior Housing Properties Trust Supplemental Operating and Financial Data June 30, 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 10,380 $919,721 54.1% $88.6 $90,767 54.1% Assisted Living (AL) 89 6,250 517,833 30.5% 82.9 50,744 30.3% Nursing Homes 61 6,303 218,095 12.9% 34.6 17,432 10.4% Hospitals (3) 2 364 43,553 2.6% 119.7 8,700 5.2% ----------------------------------------------------------------------------------------------- Total 188 23,297 $1,699,202 100.0% $72.9 $167,643 100.0% =============================================================================================== Tenant: ------- Five Star / Sunrise (4) 30 7,275 $646,270 38.0% $88.8 $64,452 38.4% Five Star 106 8,514 486,045 28.6% 57.1 40,141 23.9% 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 2.5% 119.7 8,700 5.2% Alterra / Brookdale (7) 18 894 61,126 3.6% 68.4 7,355 4.4% Genesis HealthCare Corporation 1 156 13,007 0.8% 83.4 1,535 0.9% 5 Private Companies (combined) 7 984 36,087 2.1% 36.7 5,086 3.0% ----------------------------------------------------------------------------------------------- Total 188 23,297 $1,699,202 100.0% $72.9 $167,643 100.1% =============================================================================================== (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. As of June 30, 2006, Sunrise operated 7 and Five Star operated 23 of these 30 properties. 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 June 30, 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) The financial and operating data included in HealthSouth's Annual Report on Form 10-K for the year ended December 31, 2005, and Quarterly Report on Form 10-Q for the quarter ended March 31, 2006, 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 and March 31, 2006. Because we do not have reliable information about HealthSouth's operations, we do not disclose any operating or financial data for these hospitals or 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 June 30, 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) The financial and operating data included in HealthSouth's Annual Report on Form 10-K for the year ended December 31, 2005, and Quarterly Report on Form 10-Q for the quarter ended March 31, 2006, 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 and March 31, 2006. Because we do not have reliable information about HealthSouth's operations, we do not disclose any operating or financial data for these hospitals or 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 June 30, 2006 RENT COVERAGE --------------------------------------------------------------------------------------------------------------------------- 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. As of June 30, 2006, Sunrise operated 7 and Five Star operated 23 of these properties. 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. (2) Includes data for periods prior to our ownership of certain properties included in this lease. (3) The financial and operating data included in HealthSouth's Annual Report on Form 10-K for the year ended December 31, 2005, and Quarterly Report on Form 10-Q for the quarter ended March 31, 2006, 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 and March 31, 2006. Because we do not have reliable information about HealthSouth's operations, we do not disclose any operating or financial data for these hospitals or 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 June 30, 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 32,287 20.3% 21.1% 2014 - - 21.1% 2015 2,006 1.3% 22.4% 2016 and thereafter 123,381 77.6% 100.0% -------------------------- -------------------------- Total $ 158,943 100.0% ========================== ========================== Weighted average remaining lease term (in years) 11.2 (1) Excludes the two hospitals operated by HealthSouth. See Note 1 on page 11.
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