SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15() OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): December 13, 2001
-----------
SENIOR HOUSING PROPERTIES TRUST
(Exact name of registrant as specified in charter)
MARYLAND 001-15319 04-3445278
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification Number)
400 CENTRE STREET, 02458
NEWTON, MASSACHUSETTS (Zip code)
(Address of principal executive offices)
Registrant's telephone number, including area code: 617-796-8350
-----------
This report contains forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995, including with
respect to our pending acquisition of 31 senior living properties from
Crestline Capital Corporation and the pending spin-off of our subsidiary,
Five Star Quality Care, Inc. Such forward-looking statements are not
guarantees and involve risks and uncertainties. Actual results may differ
materially from those contained in or implied by the forward-looking
statements as a result of various factors. Such factors include, without
limitation, that we may not complete the Five Star spin-off on contemplated
terms and that we may not acquire the Crestline properties because of
Crestline's or our failure to satisfy conditions to the closing. The
information contained in our Annual Report on Form 10-K, including
information contained in "Business" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and our Current Reports on
Form 8-K dated September 21, 2001, October 3, 2001, as amended, and November
5, 2001 also identifies important factors that could cause such differences.
Item 5. Other Items
On December 13, 2001, we agreed to sell $200 million aggregate
principal amount of our 8 5/8% Senior Notes due 2012 in a public offering. We
expect to issue and deliver these notes on or about December 20, 2001. The
price to the public in the offering was 99.163% of the principal amount. We
intend to use the $194.3 million of expected net proceeds to partially fund
our previously announced planned acquisition of 31 senior living properties
and for general business purposes, including other acquisitions.
This report does not constitute an offer to sell or the solicitation
of an offer to buy notes, and there shall not be any offer, solicitation of
an offer to buy or sale of the notes in any state or other jurisdiction in
which such offer, solicitation or sale would be unlawful.
We have previously reported our issuance of 14,047,000 common shares
of beneficial interest, the pending spin-off of our subsidiary, Five Star
Quality Care, Inc., our pending acquisition of 31 properties from Crestline
Capital Corporation, and related pending transactions. Additional pro forma
financial information with respect to these transactions and our sale of
notes is contained in Item 7 of this Report.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits
1.1 Form of Underwriting Agreement between Senior Housing Properties
Trust and the underwriters named therein relating to the sale of
$200 million aggregate principal amount of 8 5/8% Senior Notes
due 2012.
10.1 Transaction Agreement by and among Senior Housing Properties
Trust, certain subsidiaries of Senior Housing Properties Trust
party thereto, Five Star Quality Care, Inc., certain
subsidiaries of Five Star Quality Care, Inc. party thereto,
FSQ, Inc., Hospitality Properties Trust, HRPT Properties Trust
and Reit Management & Research LLC.
10.2 Agreement of Merger among Five Star Quality Care, Inc., FSQ
Acquisition, Inc. and FSQ, Inc.
10.3 Form of Master Lease Agreement by and among certain affiliates
of Senior Housing Properties Trust, as Landlords, and Five Star
Quality Care Trust, as Tenant, relating to the 56 properties
managed by FSQ, Inc. (Incorporated by reference to Five Star
Quality Care, Inc.'s Registration Statement on Form S-1 filed
December 5, 2001, File No. 333-69846).
10.4 Form of Master Lease Agreement by and among certain affiliates
of Senior Housing Properties Trust, as Landlords, and FS Tenant
Holding Company Trust, as Tenant, relating to the 31 properties
managed by Marriott Senior Living Services, Inc. (Incorporated
by reference to Five Star Quality Care, Inc.'s Registration
Statement on Form S-1 filed December 5, 2001, File No.
333-69846).
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
----------------------------------
Name: John R. Hoadley
Title: Chief Financial Officer
Date: December 14, 2001
INDEX TO FINANCIAL STATEMENTS
SENIOR HOUSING PROPERTIES TRUST UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Introduction to Unaudited Pro Forma Condensed Consolidated Financial Statements......................................... F-2
Unaudited Pro Forma Condensed Consolidated Balance Sheet at September 30, 2001.......................................... F-3
Unaudited Pro Forma Condensed Consolidated Statement of Income for the year ended December 31, 2000..................... F-4
Unaudited Pro Forma Condensed Consolidated Statement of Income for the nine months ended September 30, 2001............. F-5
Unaudited Pro Forma Condensed Consolidated Statement of Income for the twelve months ended September 30, 2001........... F-6
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements................................................ F-7
F-1
SENIOR HOUSING PROPERTIES TRUST
INTRODUCTION TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
PRO FORMA CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 2001 AND
PRO FORMA CONSOLIDATED STATEMENTS OF INCOME FOR THE YEAR ENDED DECEMBER 31, 2000
AND THE NINE AND TWELVE MONTHS ENDED SEPTEMBER 30, 2001
The following unaudited pro forma consolidated balance sheet gives
separate effect to: (1) our issuance of $200 million of 8 5/8% senior
unsecured notes in December 2001 and our issuance of 14,047,000 common shares
of beneficial interest in October 2001; (2) our pending spin-off of our
subsidiary, Five Star Quality Care, Inc. (Five Star), the lease to Five Star
of 56 facilities and related transactions described in the notes thereto; and
(3) the pending acquisition of 31 properties from Crestline Capital
Corporation (Crestline), for $600 million, the lease of those properties to
Five Star and related transactions described in the notes thereto, as though
all such transactions had occurred on September 30, 2001.
The following unaudited pro forma consolidated statements of income
give separate effect to: (1) our sale of four properties in October 2000,
financing transactions completed after January 1, 2000, our issuance of $200
million of 8 5/8% senior unsecured notes in December 2001 and certain other
transactions described in the notes thereto; (2) our pending Five Star
spin-off, the lease to Five Star of 56 properties and related transactions as
described in the notes thereto; and (3) the pending acquisition of 31
properties from Crestline, the lease of those properties to Five Star and
related transactions described in the notes hereto, as though all such
transactions occurred at the beginning of the period presented.
The pro forma information is based in part upon (1) our historical
financial statements filed on our Form 10-Q for the quarter ended September
30, 2001 and our Form 10-K for the year ended December 31, 2000; (2) the
financial statements of CSL Group, Inc. and Subsidiaries as Partitioned For
Sale to SNH/CSL Properties Trust filed with our Forms 8-K dated September 21,
2001 and October 3, 2001; and (3) the financial statements of our acquired
businesses filed on Form 8-K dated January 30, 2001, as amended, and this pro
forma information should be read in conjunction with all of these financial
statements and notes thereto. In the opinion of management, all adjustments
necessary to reflect the effects of the transactions discussed above have
been reflected in the pro forma information.
The following unaudited pro forma financial data is not necessarily
indicative of what our actual financial position or results of operations would
have been as of the date or for the period indicated, nor does it purport to
represent our financial position or results of operations for future periods.
F-2
SENIOR HOUSING PROPERTIES TRUST
Unaudited Pro Forma Condensed Consolidated Balance Sheet
September 30, 2001
(DOLLARS IN THOUSANDS)
Pending Pending
Financing Spin-off Acquisition
Historical Adjustments Subtotal Adjustments Subtotal Adjustments Pro Forma
---------- ----------- ---------- ----------- -------- ----------- -----------
ASSETS
Real estate, net....... $476,437 $-- $476,437 $(3,040) (D) $473,397 $600,086 (K) $1,073,483
Cash and cash
equivalents......... 8,084 334,711 (A) 342,795 (28,286) (E) 314,509 (314,420)(L) 89
Accounts receivable,
net................. 39,133 39,133 (34,511) (F) 4,622 4,622
Other assets........... 37,994 4,250 (B) 42,244 (4,548) (G) 37,696 269 (M) 37,965
----------- ------------ ----------- ------------ ---------- ------------ -------------
$561,648 $338,961 $900,609 $(70,385) $830,224 $285,935 $1,116,159
=========== ============ =========== ============ ========== ============ =============
LIABILITIES AND
SHAREHOLDERS' EQUITY
Revolving credit
facility............ $31,000 $(31,000)(A) $-- $-- $-- $51,000 (N) $51,000
Unsecured senior debt,
net of discount..... -- 198,326 (B) 198,326 198,326 198,326
Other debt............. 9,100 9,100 9,100 233,386 (N) 242,486
Prepaid and deferred
rents............... 9,475 9,475 9,475 9,475
Security deposits...... 1,520 1,520 1,520 1,520
Accounts payable and
accrued expenses of
facilities'
operations.......... 16,113 16,113 (16,113) (H) -- --
Other liabilities...... 7,185 7,185 (4,272) (I) 2,913 1,549 (O) 4,462
----------- ------------ ----------- ------------ ---------- ------------ -------------
Total liabilities...... 74,393 167,326 241,719 (20,385) 221,334 285,935 507,269
Trust preferred
securities.......... 27,394 27,394 27,394 27,394
Shareholders' equity... 459,861 171,635 (C) 631,496 (50,000) (J) 581,496 581,496
----------- ------------ ----------- ------------ ---------- ------------ -------------
$561,648 $338,961 $900,609 $(70,385) $830,224 $285,935 $1,116,159
=========== ============ =========== ============ ========== ============ =============
F-3
SENIOR HOUSING PROPERTIES TRUST
Unaudited Pro Forma Condensed Consolidated Statement of Income
For The Year Ended December 31, 2000
(amounts in thousands, except per share amounts)
Financing Pending Pending
and Other Spin-off Acquisition
Historical Adjustments Subtotal Adjustments Subtotal Adjustments Pro Forma
---------- ----------- ---------- ----------- -------- ----------- -----------
REVENUES:
Rental income.............. $64,377 $(9,366) (P) $54,426 $(1,227) (W) $53,199 $63,000 (AA) $116,199
(585) (Q)
Other real estate income... 2,520 2,520 (2,520) (X) --
Interest and other income.. 1,520 400 (R) 1,920 (695) (Y) 1,225 1,225
FF&E reserve income........ -- -- -- 6,794 (BB) 6,794
Gain on foreclosures and
lease terminations...... 7,105 (7,105) (S) -- -- --
---------- ------------- ----------- ---------- ------------- ----------- -----------
Total revenues............. 75,522 (16,656) 58,866 (4,442) 54,424 69,794 124,218
EXPENSES:
Interest................... 15,366 3,333 (T) 18,699 -- 18,699 26,051 (CC) 44,750
Distributions on trust
preferred securities.... -- 2,811 (U) 2,811 2,811 2,811
Depreciation............... 20,140 (1,936)(P) 18,167 (619) (Z) 17,548 17,003 (DD) 34,551
(37)(Q)
General and administrative.
--Recurring................ 5,475 (424)(P) 4,995 4,995 3,500 (DD) 8,495
(56)(Q)
-- Related to foreclosures
and lease terminations.. 3,519 (3,519)(S) -- -- --
---------- ------------- ----------- ---------- ------------- ----------- -----------
Total expenses............. 44,500 172 44,672 (619) 44,053 46,554 90,607
---------- ------------- ----------- ---------- ------------- ----------- -----------
Income before gain on sale
of properties........... $31,022 $(16,828) $14,194 $(3,823) $10,371 $23,240 $33,611
========== ============= =========== ========== ============= =========== ===========
Weighted average shares
outstanding............. 25,958 17,464 (V) 43,422 43,422 43,422
========== ============= =========== ============= ===========
Basic and diluted earnings
per share:
Net income................. $1.20 $0.33 $0.24 $0.77
========== =========== ============= ===========
F-4
SENIOR HOUSING PROPERTIES TRUST
Unaudited Pro Forma Condensed Consolidated Statement of Income
For Nine Months Ended September 30, 2001
(amounts in thousands, except per share amounts)
(unaudited)
Financing Pending Pending
and Other Spin-off Acquisition
Historical Adjustments Subtotal Adjustments Subtotal Adjustments Pro Forma
---------- ----------- ---------- ----------- -------- ----------- -----------
REVENUES:
Rental income............... $33,302 $-- $33,302 $5,250 (W) $38,552 $47,250 (AA) $85,802
Facilities' operations...... 170,681 170,681 (170,681)(X) -- --
Interest and other income... 897 897 897 897
FF&E reserve income......... -- -- -- -- 4,293 (BB) 4,293
---------- ----------- ----------- ------------- --------- ----------- -------------
Total revenues.............. 204,880 204,880 (165,431) 39,449 51,543 90,992
EXPENSES:
Interest.................... 4,900 9,009 (T) 13,909 13,909 17,271 (CC) 31,180
Distributions on trust
preferred securities..... 749 1,359 (U) 2,108 2,108 2,108
Depreciation................ 14,537 14,537 (1,098) (Z) 13,439 12,752 (DD) 26,191
Facilities' operations...... 166,230 166,230 (166,230) (X) -- --
General and administrative..
--Recurring................. 3,189 3,189 3,189 2,625 (DD) 5,814
--Related to foreclosures and
lease terminations....... 4,167 (4,167)(S) -- -- --
---------- ----------- ----------- ------------- --------- ----------- -------------
Total expenses.............. 193,772 6,201 199,973 (167,328) 32,645 32,648 65,293
---------- ----------- ----------- ------------- --------- ----------- -------------
Net income.................. $11,108 $(6,201) $4,907 $1,897 $6,804 $18,895 $25,699
========== =========== =========== ============= ========= =========== =============
Weighted average shares
outstanding.............. 27,049 16,373 (V) 43,422 43,422 43,422
========== =========== =========== ========= =============
Basic and diluted earnings
per share:
Net income.................. $0.41 $0.11 $0.16 $0.59
========== =========== ========= =============
F-5
Senior Housing Properties Trust
------------------------------------------------------------------------------
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
For Twelve Months Ended September 30, 2001
(amounts in thousands, except per share amounts)
(unaudited)
Financings Pending Pending
and Other Spin-off Acquisition Pro
Historical Adjustments Subtotal Adjustments Subtotal Adjustments Forma
----------------------------------------------------------------------------------------------------------------------------
Revenues:
Rental income............ $47,799 $(1,050)(P) $46,749 $7,000 (W) $53,749 $63,000 (AA) $116,749
Facilities' operations... 170,681 170,681 (170,681)(X) -- --
Other real estate
income................. 1,292 1,292 (1,292)(X) --
Interest and other
income................. 1,088 1,088 1,088 1,088
FF&E reserve income...... -- -- -- 5,992 (BB) 5,992
Gain on foreclosures and
lease terminations..... 7,105 (7,105)(S) -- -- --
--------- --------- --------- -------- --------- -------- --------
Total revenues........... 227,965 (8,155) 219,810 (164,973) 54,837 68,992 123,829
Expenses:
Interest................. 7,671 10,919 (T) 18,590 18,590 23,887 (CC) 42,477
Distributions on trust
preferred securities... 749 2,062 (U) 2,811 2,811 2,811
Depreciation............. 19,298 (194)(P) 19,104 (1,253)(Z) 17,851 17,003 (DD) 34,854
Facilities' operations... 166,230 166,230 (166,230)(X) -- --
General and
administrative
--Recurring.............. 4,273 (43)(P) 4,230 4,230 3,500 (DD) 7,730
--Related to foreclosures
and lease
terminations........... 6,816 (6,816)(S) -- -- --
--------- --------- --------- -------- --------- -------- --------
Total expenses........... 205,037 5,928 210,965 (167,483) 43,482 44,390 87,872
--------- --------- --------- -------- --------- -------- --------
Income before gain on
sale of properties..... $22,928 $(14,083) $8,845 $2,510 $11,355 $24,602 $35,957
========= ========= ========= ======== ========= ======== ========
Weighted average shares
outstanding............ 26,766 16,656 (V) 43,422 43,422 43,422
========= ========= ========= ========= ========
Basic and diluted
earnings per share:
Income before gain on
sale of properties..... $0.86 $0.20 $0.26 $0.83
========= ========= ========= ========
F-6
SENIOR HOUSING PROPERTIES TRUST
CONDENSED CONSOLIDATED BALANCE SHEET ADJUSTMENTS
(DOLLARS IN THOUSANDS)
A. Represents the net proceeds from our issuance of common shares in
October 2001, a portion of which was used to reduce our revolving
credit facility to zero and our issuance of $200 million of
8 5/8% senior unsecured notes due 2012:
Net proceeds from issuance of senior unsecured notes (see Note B)...... $194,076
Net proceeds from issuance of common shares (see Note C)............... 171,635
Total net proceeds applied to credit facility.......................... (31,000)
--------------
Net cash available..................................................... $334,711
==============
B. Represents our issuance of $200 million of 8 5/8% senior
unsecured notes due 2012. The underwriters' commission and other
issuance costs constitute other assets to be amortized over the
term of the notes:
Gross proceeds.......................................... $200,000
Less: discount.......................................... (1,674)
-------------
Adjusted gross proceeds................................. 198,326
Underwriters' commission and other issuance costs....... (4,250)
-------------
Net proceeds............................................ $194,076
=============
C. Represents our issuance of common shares in October 2001. A
portion of the net proceeds was used to reduce our revolving
credit facility to zero (see Note A). The remaining net proceeds
are held as cash and cash equivalents:
Total common shares issued............................. 14,047,000
Price per common share................................. x $12.90
--------------
Gross proceeds......................................... $181,206
Underwriters' discount and other issuance costs........ (9,571)
--------------
Net proceeds from issuance of common shares............ $171,635
==============
D. Represents the real estate and related personal property owned by
Five Star at the time of the spin-off.
E. Represents cash which will be contributed by us to Five Star as
part of its capitalization immediately prior to the spin-off,
as follows:
Net equity to be contributed................................ $50,000
Real estate and related personal property (See Note D)...... (3,040)
Accounts receivable (See Note F)............................ (34,511)
Prepaid expenses (See Note G)............................... (4,548)
Accounts payable and accrued expenses (See Note H).......... 16,113
Other liabilities (See Note I).............................. 4,272
------------
Net cash and cash equivalents............................... $28,286
============
F-7
F. Represents patient accounts receivable arising from 56 nursing
home operations which will belong to Five Star at the time of the
spin-off.
G. Represents primarily prepaid expenses associated with 56 nursing
home operations which will belong to Five Star at the time of the
spin-off.
H. Represents accounts payable and accrued expenses associated with
56 nursing home operations which will belong to Five Star at the
time of the spin-off.
I. Represents other liabilities associated with the 56 nursing home
operations which will be liabilities of Five Star at the time of
the spin-off.
J. Represents the net equity (assets in excess of liabilities, see
Notes D through I) which will be contributed by us to Five Star at
the time of the spin-off.
K. The purchase of properties from Crestline will be reported using
the purchase method of accounting. Estimated closing costs and
contractual adjustments are estimated at $2,733, net. When these
properties are leased to Five Star, Five Star will assume the
operating accounts receivable and operating accounts payable and
accrued operating expenses and we will make a payment to Five Star
of the amount of these operating liabilities in excess of these
operating assets, estimated to be $3,573. Accordingly, using the
data as of the end of Crestline's 2001 third fiscal quarter
(September 7, 2001), amounts allocated to fixed assets are as
follows:
Contract purchase price.......................................... $600,000
Estimated closing costs and adjustments, net..................... 2,733
Estimated payment to Five Star at lease commencement............. 3,573
------------
Subtotal...................................................... 606,306
Monetary assets assumed from Crestline (see Note L).............. (7,769)
Monetary liabilities assumed from Crestline other than
funded debt (see Note N) ........................................ 1,549
------------
Total fixed assets............................................... $600,086
============
L. Represents estimated cash used to complete the purchase from
Crestline, as follows:
Adjusted contract price, closing costs and payments to Five Star (See Note K).... $606,306
Assumed Crestline debt, including capital leases (See Note N).................... (233,386)
Borrowings under our revolving bank credit facility (See Note N)................. (51,000)
Deposit applied (See Note M)..................................................... (7,500)
-----------
Net cash used.................................................................... $314,420
===========
M. Amounts allocated to other assets represent cash deposits in
restricted accounts for use: (1) servicing future interest
payments on assumed mortgage debt; (2) real estate tax escrows;
and (3) cash escrow accounts for capital expenditures at the
facilities. The assets received in the Crestline transaction are
offset by a deposit currently in escrow that will be applied to
the purchase price when the Crestline transaction is closed:
Assets received......................... $7,769
Deposit to be applied............... (7,500)
--------------
Net adjustment to other assets....... $269
==============
F-8
N. To finance the acquisition from Crestline, we expect to assume
certain existing Crestline debts and to draw $51,000 under our
revolving bank credit facility, as follows:
Assumed Crestline debt, including capital leases... $233,386
Borrowings under our revolving credit facility..... 51,000
O. Other liabilities primarily represent accrued interest related to
the assumed Crestline debt.
F-9
CONDENSED CONSOLIDATED STATEMENT OF INCOME ADJUSTMENTS
(DOLLARS IN THOUSANDS)
P. Represents elimination of rental income, depreciation expense and
general and administrative expense related to four facilities we
sold in October 2000.
Q. Represents elimination of rental and interest income,
depreciation expense and general and administrative expense
related to the period prior to transfer to a former tenant
of five facilities and transfer to a former borrower of one
mortgage as part of foreclosure settlements, net of impact from
one facility transferred to us as part of a foreclosure settlement
and leased to a new tenant.
R. Represents annualized dividend income on common shares of HRPT
Properties Trust conveyed to us as part of a foreclosure
settlement.
S. Represents the elimination of the gain on foreclosure and lease
terminations and the related general and administrative expenses
because they are not expected to recur.
T. Common equity issuances during the pro forma periods produced
net proceeds sufficient to repay our outstanding revolving credit
facility balance in full on a pro forma basis. This adjustment
represents the elimination of historical interest expense on our
revolving credit facility and an adjustment for interest on the
$9.1 million of mortgages payable, which we obtained in July 2001,
and on the 8 5/8% senior unsecured notes due 2012 expected to be
issued in December 2001, as follows:
Nine Months Twelve
Year Ended Ended Months Ended
December 31, September 30, September 30,
2000 2001 2001
---- ---- ----
Elimination of interest expense on
revolving bank credit facility........ $(15,366) $(4,792) $(7,563)
Adjustment for interest on
mortgages payable..................... 857 419 640
Adjustment for interest on the 8 5/8%
senior unsecured notes................ 17,842 13,382 17,842
-------------- --------------- -------------
$3,333 $9,009 $10,919
============== =============== =============
The mortgages require interest to be paid based on prime less a
discount. The interest expense adjustment was calculated as
follows:
YEAR ENDED DECEMBER 31, 2000 Unsecured
Mortgages Senior Notes
--------- -------------
Debt balance.................................... $9,100 $200,000
Average rate for period......................... x 8.2% x 8.625%
------------- -------------
Interest expense................................ $ 746 $ 17,250
Plus amortization of deferred financing fees.... 111 592
------------- -------------
Total adjustment................................ $ 857 $ 17,842
============= =============
Unsecured
Senior
NINE MONTHS ENDED SEPTEMBER 30, 2001 Mortgages Notes
--------- ---------
Debt balance................................. $9,100 $200,000
Average rate for period...................... x 6.5% x 8.625%
------------- ------------
Interest expense............................. $ 444 $ 12,938
Plus amortization of deferred financing fees. 83 444
------------- ------------
Total expense................................. 527 13,382
Less amount included in historical results ... (108) --
------------- ------------
Net adjustment................................ $ 419 $ 13,382
============= ============
Unsecured
Senior
TWELVE MONTHS ENDED SEPTEMBER 30, 2001 Mortgages Notes
--------- ---------
Debt balance................................. $9,100 $200,000
Average rate for period...................... x 7% x 8.625%
------------- ------------
Interest expense............................. $ 637 $ 17,250
Plus amortization of deferred financing fees. 111 592
------------- ------------
Total expense................................. 748 17,842
Less amount included in historical results ... (108) --
------------- ------------
Net adjustment................................ $ 640 $ 17,842
============= ============
F-10
U. During June and July 2001, we issued trust preferred securities.
This adjustment represents distributions on trust preferred
securities as follows:
Year Ended Nine Months Ended Twelve Months Ended
December 31, 2000 September 30, 2001 September 30, 2001
------------------- ------------------- -------------------
Gross amount of trust preferred securities...... $27,394 $27,394 $27,394
Distribution rate (10.125% per annum)........... x 10.125% x 7.59375% x 10.125%
---------------- ------------- --------------
Total pro forma distributions for the period.... $ 2,774 $ 2,080 $ 2,774
Add: amortization of related deferred issuance
costs........................................... 37 28 37
---------------- ------------- --------------
Distributions for period........................ 2,811 2,108 2,811
Less: amount included in historical results..... -- (749) (749)
---------------- ------------- --------------
Net adjustment.................................. $ 2,811 $ 1,359 $ 2,062
================ ============= ==============
V. Represents the impact of the common equity issuance described in
Note C and our July 2001 common equity issuance of 3,445,000
shares on our weighted average common shares outstanding during
the periods shown.
W. Represents minimum rent expected to be paid by Five Star for our
56 nursing home properties, net of rent received from former
tenants prior to foreclosure. Additional rent equal to 3% of Five
Star's revenues at these properties in excess of 2003 revenues is
due us beginning in 2004.
Year Ended Nine Months Ended Twelve Months Ended
December 31, 2000 September 30, 2001 September 30, 2001
------------------- ------------------ --------------------
Minimum rent for 56 facilities currently
owned by us to be leased to Five Star.......... $ 7,000 $5,250 $7,000
Less rent received from former tenants
prior to foreclosure........................... (8,227) -- --
---------- -------- ------
Net adjustment................................... $(1,227) $5,250 $7,000
========== ======== ======
X. Represents elimination, for any period subsequent to December 31,
2000, of facilities' operating revenues and expenses, and for any
period prior to December 31, 2000, of other real estate income.
These amounts were derived from the operations of facilities that
were conducted for our own account. The facilities will be
leased by Five Star subsequent to the spin-off and no longer
operated for our account.
Y. Represents elimination of interest income received from a former
mortgagee prior to foreclosure.
Z. Represents the elimination of historical depreciation expense
related to the properties to be transferred to Five Star (see
Note D).
AA. Represents minimum rent expected to be paid by Five Star for the
31 properties which we expect to acquire in the pending
acquisition. Additional rent equal to 5% of revenues at these
properties in excess of 2002 revenues is due beginning in 2003.
BB. In addition to the minimum rent and additional rent described in
Note W and Note AA, our lease with Five Star and the Marriott
management agreements for the 31 properties to be acquired from
Crestline will require Five Star to deposit a percentage of gross
revenues from these properties into an FF&E reserve for capital
expenditures at the 31 properties which we expect to acquire in
the pending Crestline transaction. The FF&E reserve accounts and
improvements and other items purchased with those funds will
belong to us. Accordingly, the periodic deposits will be reported
as additional rental income to us under GAAP.
F-11
CC. To complete the purchase from Crestline, we will assume debts as
described in Note N above. These debts bear interest at various
rates, including some at floating rates based on LIBOR. The
applicable interest rates during the pro forma periods, assuming
LIBOR equals its monthly average during the periods presented,
were as follows:
Nine Months Twelve Months
Year Ended Ended Ended
December 31, September 30, September 30,
2000 2001 2001
---- ---- ----
Assumed term debt including capitalized
leases, fixed rates.......................... 9.4% 9.4% 9.4%
Assumed term debt, floating rates................ 9.2% 7.1% 7.7%
Revolving bank credit facility, floating rate.... 8.4% 6.3% 6.9%
Some of the debt we will assume in the Crestline transaction
requires both interest and principal payments. The weighted
average outstanding balance for the obligations described
above are as follows:
Nine Months Twelve Months
Year Ended Ended Ended
December 31, September 30, September 30,
2000 2001 2001
---- ---- ----
Assumed term debt including capitalized
leases, fixed rates....................... $142,370 $141,016 $141,016
Assumed term debt, floating rates............. 92,370 92,370 92,370
Revolving bank credit facility, floating
rate.......................................... 49,646 51,000 51,000
---------------- -------------- --------------
Total......................................... $284,386 $284,386 $284,386
================ ============== ==============
On a pro forma basis, the combination of the average interest
rates and the average debt balances set forth above produce
interest expense as follows:
Nine Months Twelve Months
Ended Ended
Year Ended September 30, September 30,
December 31, 2000 2001 2001
----------------- ---- ----
Assumed term debt including capitalized
leases, fixed rates....................... $13,383 $9,942 $13,256
Assumed term debt, floating rates............ 8,498 4,919 7,112
Revolving bank credit facility, floating
rate......................................... 4,170 2,410 3,519
------------------- -------------- ---------
Total........................................ $26,051 $17,271 $23,887
=================== ============== =========
As outlined above, a portion of the debt we expect
to incur as part of the acquisition of properties
from Crestline will be at floating rates. A 1/8
percentage point increase in interest rates would
produce pro forma interest expense which is $178 higher
per annum.
DD. Represents the impact of the purchase of the 31 properties from
Crestline on depreciation expense and general and administrative
expense.
F-12