UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC  20549

 

FORM 10-Q

 

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2010

 

OR

 

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission File Number 1-15319

 

SENIOR HOUSING PROPERTIES TRUST

(Exact Name of Registrant as Specified in Its Charter)

 

Maryland

 

04-3445278

(State or Other Jurisdiction of Incorporation or
Organization)

 

(IRS Employer Identification No.)

 

400 Centre Street, Newton, Massachusetts 02458

(Address of Principal Executive Offices)  (Zip Code)

 

617-796-8350

(Registrant’s Telephone Number, Including Area Code)

 

Indicate by check mark whether the registrant:  (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x   No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x   No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check One):

 

Large Accelerated Filer x

 

Accelerated Filer o

 

 

 

Non-Accelerated Filer o

 

Smaller reporting company o

(Do not check if a smaller reporting company)

 

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o No x

 

Number of registrant’s common shares outstanding as of August 2, 2010: 127,412,807.

 

 

 



 

SENIOR HOUSING PROPERTIES TRUST

 

FORM 10-Q

 

June 30, 2010

 

INDEX

 

 

 

 

Page

PART I

Financial Information

 

 

 

 

 

 

Item 1.

Financial Statements (unaudited)

 

1

 

 

 

 

 

Condensed Consolidated Balance Sheets – June 30, 2010 and December 31, 2009

 

1

 

 

 

 

 

Condensed Consolidated Statements of Income – Three and Six Months Ended June 30, 2010 and 2009

 

2

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows – Six Months Ended June 30, 2010 and 2009

 

3

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

 

4

 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

14

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

26

 

 

 

 

Item 4.

Controls and Procedures

 

28

 

 

 

 

 

Warning Concerning Forward Looking Statements

 

29

 

 

 

 

 

Statement Concerning Limited Liability

 

31

 

 

 

 

PART II

Other Information

 

 

 

 

 

 

 Item 1A.

Risk Factors

 

32

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

32

 

 

 

 

Item 6.

Exhibits

 

32

 

 

 

 

 

Signatures

 

33

 

In this Quarterly Report on Form 10-Q, the terms “the Company”, “we”, “us” and “our” refer to Senior Housing Properties Trust and its consolidated subsidiaries, unless otherwise noted.

 



 

PART I.  Financial Information

 

Item 1.    Financial Statements.

 

SENIOR HOUSING PROPERTIES TRUST

CONDENSED CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except share data)

(unaudited)

 

 

 

June 30,

 

December 31,

 

 

 

2010

 

2009

 

ASSETS

 

 

 

 

 

Real estate properties:

 

 

 

 

 

Land

 

$

367,156

 

$

365,576

 

Buildings and improvements

 

2,981,596

 

2,952,407

 

 

 

3,348,752

 

3,317,983

 

Less accumulated depreciation

 

496,728

 

454,317

 

 

 

2,852,024

 

2,863,666

 

 

 

 

 

 

 

Cash and cash equivalents

 

25,230

 

10,494

 

Restricted cash

 

4,930

 

4,222

 

Deferred financing fees, net

 

16,478

 

14,882

 

Acquired real estate leases, net

 

41,855

 

42,769

 

Other assets

 

52,710

 

51,893

 

Total assets

 

$

2,993,227

 

$

2,987,926

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

Unsecured revolving credit facility

 

$

 

$

60,000

 

Senior unsecured notes due 2012, 2015 and 2020, net of discount

 

422,708

 

322,160

 

Secured debt and capital leases

 

658,285

 

660,059

 

Accrued interest

 

14,609

 

13,693

 

Acquired real estate lease obligations, net

 

9,621

 

9,687

 

Other liabilities

 

25,445

 

21,677

 

Total liabilities

 

1,130,668

 

1,087,276

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

Common shares of beneficial interest, $0.01 par value: 149,700,000 shares authorized, 127,412,807 and 127,377,665 shares issued and outstanding at June 30, 2010 and December 31, 2009, respectively

 

1,274

 

1,273

 

Additional paid in capital

 

2,227,275

 

2,226,474

 

Cumulative net income

 

694,576

 

640,033

 

Cumulative distributions

 

(1,060,832

)

(969,111

)

Unrealized gain on investments

 

266

 

1,981

 

Total shareholders’ equity

 

1,862,559

 

1,900,650

 

Total liabilities and shareholders’ equity

 

$

2,993,227

 

$

2,987,926

 

 

See accompanying notes.

 

1



 

SENIOR HOUSING PROPERTIES TRUST

 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(amounts in thousands, except per share data)

(unaudited)

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

 

2010

 

2009

 

2010

 

2009

 

 

 

 

 

 

 

 

 

 

 

Rental income

 

$

80,765

 

$

69,399

 

$

161,212

 

$

137,776

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

Depreciation

 

22,345

 

18,635

 

44,634

 

37,024

 

General and administrative

 

5,413

 

5,056

 

10,914

 

9,807

 

Property operating expenses

 

4,144

 

3,219

 

8,519

 

6,174

 

Acquisition costs

 

404

 

1,282

 

439

 

1,394

 

Total expenses

 

32,306

 

28,192

 

64,506

 

54,399

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

48,459

 

41,207

 

96,706

 

83,377

 

 

 

 

 

 

 

 

 

 

 

Interest and other income

 

243

 

186

 

500

 

394

 

Interest expense

 

(20,515

)

(10,707

)

(38,929

)

(21,483

)

Loss on early extinguishment of debt

 

(2,433

)

 

(2,433

)

 

Impairment of assets

 

(1,095

)

 

(1,095

)

 

Equity in losses of an investee

 

(24

)

(109

)

(52

)

(109

)

Income before income tax expense

 

24,635

 

30,577

 

54,697

 

62,179

 

Income tax expense

 

(76

)

(66

)

(154

)

(135

)

Net income

 

$

24,559

 

$

30,511

 

$

54,543

 

$

62,044

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding

 

127,408

 

120,455

 

127,394

 

119,161

 

 

 

 

 

 

 

 

 

 

 

Net income per share

 

$

0.19

 

$

0.25

 

$

0.43

 

$

0.52

 

 

See accompanying notes.

 

2



 

SENIOR HOUSING PROPERTIES TRUST

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(amounts in thousands)

(unaudited)

 

 

 

Six Months Ended
June 30,

 

 

 

2010

 

2009

 

Cash flows from operating activities:

 

 

 

 

 

Net income

 

$

54,543

 

$

62,044

 

Adjustments to reconcile net income to cash provided by operating activities:

 

 

 

 

 

Depreciation

 

44,634

 

37,024

 

Amortization of deferred financing fees and debt discounts

 

1,199

 

1,079

 

Amortization of acquired real estate leases

 

532

 

408

 

Loss on early extinguishment of debt

 

2,433

 

 

Impairment of assets

 

1,095

 

 

Equity in losses of equity investment

 

52

 

109

 

Change in assets and liabilities:

 

 

 

 

 

Restricted cash

 

(708

)

(245

)

Other assets

 

(2,566

)

(1,461

)

Accrued interest

 

916

 

(255

)

Other liabilities

 

4,572

 

9,217

 

Cash provided by operating activities

 

106,702

 

107,920

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Acquisitions

 

(31,289

)

(95,257

)

Investment in Affiliates Insurance Company

 

(44

)

(5,074

)

Proceeds from sale of real estate

 

 

3,090

 

Cash used for investing activities

 

(31,333

)

(97,241

)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Proceeds from issuance of common shares, net

 

 

96,717

 

Proceeds from issuance of unsecured senior notes, net

 

195,352

 

 

Proceeds from borrowings on revolving credit facility

 

33,000

 

119,000

 

Repayments of borrowings on revolving credit facility

 

(93,000

)

(141,000

)

Redemption of senior notes

 

(98,780

)

 

Repayment of other debt

 

(4,232

)

(1,485

)

Deferred financing fees

 

(1,252

)

(2,279

)

Distributions to shareholders

 

(91,721

)

(82,249

)

Cash used for financing activities

 

(60,633

)

(11,296

)

 

 

 

 

 

 

Increase (decrease) in cash and cash equivalents

 

14,736

 

(617

)

Cash and cash equivalents at beginning of period

 

10,494

 

5,990

 

Cash and cash equivalents at end of period

 

$

25,230

 

$

5,373

 

 

 

 

 

 

 

Supplemental cash flow information:

 

 

 

 

 

Interest paid

 

$

38,013

 

$

20,659

 

 

 

 

 

 

 

Non-cash investing activities:

 

 

 

 

 

Acquisitions funded by assumed debt

 

(2,458

)

 

 

 

 

 

 

 

Non-cash financing activities:

 

 

 

 

 

Assumption of mortgage notes payable

 

2,458

 

 

 

Issuance of common shares

 

802

 

1,002

 

 

See accompanying notes.

 

3



 

SENIOR HOUSING PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollar amounts in thousands, except per share data or as otherwise stated)

 

Note 1.  Basis of Presentation

 

The accompanying condensed consolidated financial statements of Senior Housing Properties Trust and its subsidiaries, or we, us, or our, have been prepared without audit.  Certain information and disclosures required by U.S. generally accepted accounting principles, or GAAP, for complete financial statements have been condensed or omitted.  We believe the disclosures made are adequate to make the information presented not misleading.  However, the accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes contained in our Annual Report on Form 10-K for the year ended December 31, 2009, or our Annual Report.  In the opinion of our management, all adjustments, which include only normal recurring adjustments, considered necessary for a fair presentation have been included.  All intercompany transactions and balances between us and our consolidated subsidiaries have been eliminated.  Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year.  Reclassifications have been made to the prior year’s financial statements to conform to the current year’s presentation.  These reclassifications were made to separately state on our condensed consolidated statements of income our (i) equity in losses of an investee and (ii) income tax expense, which were both previously included in general and administrative expenses.  These reclassifications had no effect on net income or shareholders’ equity.

 

Note 2.  Recent Accounting Pronouncements

 

In January 2010, the Financial Accounting Standards Board, or FASB, issued an accounting standards update requiring additional disclosures regarding fair value measurements. The update requires entities to disclose additional information regarding assets and liabilities that are transferred between levels within the fair value hierarchy. The update also clarifies the level of disaggregation at which fair value disclosures should be made and the requirements to disclose information about the valuation techniques and inputs used in estimating Level 2 and Level 3 fair values. The update is effective for interim and annual reporting periods beginning after December 15, 2009 except for the requirement to separately disclose purchases, sales, issuances and settlements in the Level 3 roll forward that becomes effective for fiscal periods beginning after December 15, 2010.

 

In February, the FASB issued an update to the disclosure requirements relating to subsequent events to exclude the requirement to disclose the date through which an entity has evaluated subsequent events and whether that date represents the date the financial statements were issued or available to be issued.

 

The adoption of these updates does not, and is not expected to, cause any material changes to the disclosures in our condensed consolidated financial statements.

 

Note 3.  Real Estate Properties

 

At June 30, 2010, we owned 300 properties located in 35 states and Washington, D.C.

 

In April 2010, we acquired a medical office building located in Colorado with 14,695 rentable square feet for approximately $4,450, excluding closing costs.  We recorded intangible lease assets of $775 and intangible lease liabilities of $168 for this acquisition.  We funded this acquisition using cash on hand and by assuming a mortgage loan for $2,458 at interest of 6.73% per annum.

 

In June 2010, we acquired a medical office building located in Texas with approximately 55,800 rentable square feet for approximately $12,175, excluding closing costs.  We recorded intangible lease assets of $1,783 and intangible lease liabilities of $506 for this acquisition.  We funded this acquisition using cash on hand.

 

4



 

SENIOR HOUSING PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollar amounts in thousands, except per share data or as otherwise stated)

 

During the three and six months ended June 30, 2010, pursuant to the terms of our existing leases with Five Star Quality Care, Inc., or Five Star, we purchased $9,631 and $15,810, respectively, of improvements made to our properties leased to Five Star, and, as a result, the annual rent payable to us by Five Star was increased by approximately $772 and $1,267, respectively.

 

As of June 30, 2010, six of our properties are classified as held for sale.  These six properties are included in real estate properties on our condensed consolidated balance sheets and have a net carrying value of approximately $3,242 at June 30, 2010.

 

We periodically evaluate our properties for impairment. Impairment indicators may include declining tenant occupancy, weak or declining tenant profitability, cash flow or liquidity, our decision to dispose of an asset before the end of its estimated useful life and legislative, market or industry changes that could permanently reduce the value of a property. If indicators of impairment are present, we evaluate the carrying value of the related property by comparing it to the expected future undiscounted cash flows to be generated from that property. If the sum of these expected future cash flows is less than the carrying value, we reduce the net carrying value of the property to its estimated fair value.  During the three and six months ended June 30, 2010, we recorded impairment of assets charges of $1,095 to reduce the carrying value of five of our held for sale properties to their estimated sale prices less costs to sell.

 

Note 4.  Unrealized Gain on Investments

 

On June 30, 2010, we owned 1,000,000 common shares of CommonWealth REIT, or CWH, formerly known as HRPT Properties Trust, and 3,235,000 common shares of Five Star, which are carried at fair market value in other assets on our condensed consolidated balance sheets. The unrealized gain on investments shown on our condensed consolidated balance sheets represents the difference between the value at quoted market prices of our CWH and Five Star shares on June 30, 2010 ($6.21 and $3.02 per share, respectively) and our weighted average costs on the dates we acquired these shares ($6.50 and $2.85 per share, respectively).  Effective July 1, 2010, CWH implemented a common share combination by which the number of its common shares outstanding was reduced by three quarters: every four existing common shares owned were combined into one common share.  As a result of this common share combination, we now own 250,000 common shares of CWH at a weighted average cost basis of $26.00 per share.

 

Note 5.  Indebtedness

 

Our principal debt obligations at June 30, 2010 were our unsecured revolving credit facility, two public issues of unsecured senior notes totaling $422,708 and $643,539 of mortgages secured by 62 of our properties.  These 62 collateralized properties had a carrying value of $740,379 at June 30, 2010.  We also have two properties recorded under capital leases totaling $14,746 at June 30, 2010.  These two properties had a carrying value of $19,049 at June 30, 2010.

 

We have an unsecured revolving credit facility that matures on December 31, 2010.  Our revolving credit facility permits borrowings up to $550,000.  The interest payable for amounts drawn under the facility is LIBOR plus a premium.  We can borrow, repay and reborrow until maturity, and no principal repayment is due until maturity.  The interest rate payable on borrowings under this revolving credit facility was 1.0% and 1.3% at June 30, 2010 and 2009, respectively.  In addition to interest, we pay certain fees to maintain this credit facility and we amortize certain set up costs.  Our revolving credit facility is available for acquisitions, working capital and general business purposes. As of June 30, 2010 and 2009, we had zero amounts and $235,000 outstanding under this credit facility, respectively, and $550,000 and $315,000 available under this credit facility, respectively.  Subject to certain conditions, this credit facility’s maturity date can be extended at our option to December 31, 2011 upon payment of a fee.  Our revolving credit facility contains financial covenants and requires us to maintain financial ratios and a minimum net worth.  We believe we were in compliance with these covenants during the periods presented.

 

5



 

SENIOR HOUSING PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollar amounts in thousands, except per share data or as otherwise stated)

 

In April 2010, we sold $200,000 of senior unsecured notes.  The notes require interest at a fixed rate of 6.75% per annum and are due in 2020.  Net proceeds from the sale of the notes, after underwriting discounts and before other expenses, were approximately $195,352.  We incurred approximately $400 of additional third party costs that are deferred over the term of the debt.  Interest on the notes is payable semi-annually in arrears.  No principal payments are due until maturity.  We used a portion of the net proceeds of this offering to repay $58,000 in borrowings under our revolving credit facility, to fund the redemption of all $97,500 of our outstanding 7.875% senior notes due 2015 and for general business purposes, including funding the acquisitions described in Note 3 above.

 

As described above, in April 2010, we called all of our outstanding 7.875% senior notes due 2015 for redemption on May 17, 2010.  As a result of this redemption, we recorded a loss on early extinguishment of debt of $2,433 consisting of the debt prepayment premium of approximately $1,280 and the write off of unamortized deferred financing fees and debt discount of approximately $1,153.

 

Note 6.  Shareholders’ Equity

 

On May 13, 2010, we paid a $0.36 per share, or $45,865, distribution to our common shareholders for the quarter ended March 31, 2010.  On July 2, 2010, we declared a distribution of $0.36 per share, or $45,869, to be paid to common shareholders of record on July 15, 2010, with respect to our results for the quarter ended June 30, 2010. We expect to pay this distribution on or about August 13, 2010.  On August 14, 2009, we paid a $0.36 per share, or $43,400, distribution to our common shareholders for the quarter ended June 30, 2009.

 

On May 12, 2010, we granted 2,000 common shares of beneficial interest, par value $0.01 per share, valued at $22.22 per share, the closing price of our common shares on the New York Stock Exchange, or the NYSE, on that day, to each of our five trustees.  We made these grants pursuant to an exemption from registration contained in Section 4(2) of the Securities Act of 1933, as amended, or the Securities Act.

 

Note 7.  Comprehensive Income

 

The following is a reconciliation of net income to comprehensive income for the three and six months ended June 30, 2010 and 2009:

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

 

2010

 

2009

 

2010

 

2009

 

Net income

 

$

24,559

 

$

30,511

 

$

54,543

 

$

62,044

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

Change in net unrealized gain on investments

 

(1,667

)

900

 

(1,715

)

704

 

Comprehensive income

 

$

22,892

 

$

31,411

 

$

52,828

 

$

62,748

 

 

Note 8.  Fair Value of Assets and Liabilities

 

The table below presents certain of our assets and liabilities measured at fair value at June 30, 2010 categorized by the level of inputs used in the valuation of each asset or liability.

 

6



 

SENIOR HOUSING PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollar amounts in thousands, except per share data or as otherwise stated)

 

Description

 

Total

 

Quoted Prices in Active
Markets for Identical
Assets
(Level 1)

 

Significant Other
Observable Inputs
(Level 2)

 

Significant
Unobservable
Inputs
(Level 3)

 

 

 

 

 

 

 

 

 

 

 

Assets held for sale (1)

 

$

3,242

 

$

 

$

3,242

 

$

 

Investments in available for sale securities (2)

 

15,980

 

15,980

 

 

 

Senior notes (3)

 

431,375

 

 

431,375

 

 

 


(1) Assets held for sale consist of six of our properties that we expect to sell that are reported at fair value.  We used offers to purchase the properties made by third parties or comparable sales transactions (level 2 inputs) to determine fair value of these properties.  We have recorded cumulative impairments of approximately $10,532 to these properties in order to reduce their carrying value to fair value, or $3,242 at June 30, 2010.

 

(2) Our investments in available for sale securities include our 1,000,000 common shares of CWH and 3,235,000 common shares of Five Star. The fair values of these shares are based on quoted prices at June 30, 2010 in active markets (level 1 inputs).

 

(3) We estimate the fair values of our senior notes by using an average of their bid and ask prices (level 2 inputs). As of June 30, 2010, the carrying value of our senior notes was $422,708.

 

In addition to the assets and liabilities described in the above table, our financial instruments include rents receivable, cash and cash equivalents, restricted cash, secured and unsecured debt and other liabilities. The fair values of these additional financial instruments approximate their carrying values at June 30, 2010 based upon their liquidity, short term maturity and / or variable rate pricing.

 

Note 9.  Segment Reporting

 

We have two reportable operating segments: (i) short term and long term residential care facilities that offer dining for residents and (ii) properties where medical related activities occur but where residential overnight stays or dining services are not provided, or MOBs.  Properties in the short term and long term residential care facilities segment include independent living facilities, assisted living facilities, skilled nursing facilities and rehabilitation hospitals.  Properties in the MOB segment include medical office, clinic and biotech laboratory buildings.  The “All Other” category in the following table includes amounts related to corporate business activities and the operating results of certain properties that offer fitness, wellness and spa services to members.

 

7



 

SENIOR HOUSING PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollar amounts in thousands, except per share data or as otherwise stated)

 

 

 

For the Three Months Ended June 30, 2010

 

 

 

Short and
Long Term
Residential
Care Facilities

 

MOB

 

All Other

 

Consolidated

 

Rental income

 

$

57,147

 

$

19,683

 

$

3,935

 

$

80,765

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

Depreciation expense

 

16,552

 

4,871

 

922

 

22,345

 

General and administrative

 

 

 

5,413

 

5,413

 

Property operating expenses

 

 

4,144

 

 

4,144

 

Acquisition costs

 

20

 

384

 

 

404

 

Total expenses

 

16,572

 

9,399

 

6,335

 

32,306

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

40,575

 

10,284

 

(2,400

)

48,459

 

 

 

 

 

 

 

 

 

 

 

Interest and other income

 

 

 

243

 

243

 

Interest expense

 

(10,485

)

(232

)

(9,798

)

(20,515

)

Loss on early extinguishment of debt

 

 

 

(2,433

)

(2,433

)

Impairment of assets

 

(1,095

)

 

 

(1,095

)

Equity in losses of an investee

 

 

 

(24

)

(24

)

Income (loss) before income tax expense

 

28,995

 

10,052

 

(14,412

)

24,635

 

Income tax expense

 

 

 

(76

)

(76

)

Net income (loss)

 

$

28,995

 

$

10,052

 

$

(14,488

)

$

24,559

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

1,948,645

 

$

749,587

 

$

294,995

 

$

2,993,227

 

 

8



 

SENIOR HOUSING PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollar amounts in thousands, except per share data or as otherwise stated)

 

 

 

For the Three Months Ended June 30, 2009

 

 

 

Short and
Long Term
Residential
Care Facilities

 

MOB

 

All Other

 

Consolidated

 

Rental income

 

$

54,484

 

$

11,004

 

$

3,911

 

$

69,399

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

Depreciation expense

 

14,983

 

2,730

 

922

 

18,635

 

General and administrative

 

 

 

5,056

 

5,056

 

Property operating expenses

 

 

3,219

 

 

3,219

 

Acquisition costs

 

 

1,282

 

 

1,282

 

Total expenses

 

14,983

 

7,231

 

5,978

 

28,192

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

39,501

 

3,773

 

(2,067

)

41,207

 

 

 

 

 

 

 

 

 

 

 

Interest and other income

 

 

 

186

 

186

 

Interest expense

 

(2,039

)

(190

)

(8,478

)

(10,707

)

Equity in losses of an investee

 

 

 

(109

)

(109

)

Income (loss) before income tax expense

 

37,462

 

3,583

 

(10,468

)

30,577

 

Income tax expense

 

 

 

(66

)

(66

)

Net income (loss)

 

$

37,462

 

$

3,583

 

$

(10,534

)

$

30,511

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

1,881,050

 

$

439,545

 

$

239,603

 

$

2,560,198

 

 

9



 

SENIOR HOUSING PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollar amounts in thousands, except per share data or as otherwise stated)

 

 

 

For the Six Months Ended June 30, 2010

 

 

 

Short and
Long Term
Residential
Care Facilities

 

MOB

 

All Other

 

Consolidated

 

Rental income

 

$

114,164

 

$

39,243

 

$

7,805

 

$

161,212

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

Depreciation expense

 

33,013

 

9,776

 

1,845

 

44,634

 

General and administrative

 

 

 

10,914

 

10,914

 

Property operating expenses

 

 

8,519

 

 

8,519

 

Acquisition costs

 

20

 

419

 

 

439

 

Total expenses

 

33,033

 

18,714

 

12,759

 

64,506

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

81,131

 

20,529

 

(4,954

)

96,706

 

 

 

 

 

 

 

 

 

 

 

Interest and other income

 

 

 

500

 

500

 

Interest expense

 

(20,730

)

(402

)

(17,797

)

(38,929

)

Loss on early extinguishment of debt

 

 

 

(2,433

)

(2,433

)

Impairment of assets

 

(1,095

)

 

 

(1,095

)

Equity in losses of an investee

 

 

 

(52

)

(52

)

Income (loss) before income tax expense

 

59,306

 

20,127

 

(24,736

)

54,697

 

Income tax expense

 

 

 

(154

)

(154

)

Net income (loss)

 

$

59,306

 

$

20,127

 

$

(24,890

)

$

54,543

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

1,948,645

 

$

749,587

 

$

294,995

 

$

2,993,227

 

 

10



 

SENIOR HOUSING PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollar amounts in thousands, except per share data or as otherwise stated)

 

 

 

For the Six Months Ended June 30, 2009

 

 

 

Short and
Long Term
Residential
Care Facilities

 

MOB

 

All Other

 

Consolidated

 

Rental income

 

$

108,520

 

$

21,451

 

$

7,805

 

$

137,776

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

Depreciation expense

 

29,855

 

5,324

 

1,845

 

37,024

 

General and administrative

 

 

 

9,807

 

9,807

 

Property operating expenses

 

 

6,174

 

 

6,174

 

Acquisition costs

 

 

1,394

 

 

1,394

 

Total expenses

 

29,855

 

12,892

 

11,652

 

54,399

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

78,665

 

8,559

 

(3,847

)

83,377

 

 

 

 

 

 

 

 

 

 

 

Interest and other income

 

 

 

394

 

394

 

Interest expense

 

(4,069

)

(374

)

(17,040

)

(21,483

)

Equity in losses of an investee

 

 

 

(109

)

(109

)

Income (loss) before income tax expense

 

74,596

 

8,185

 

(20,602

)

62,179

 

Income tax expense

 

 

 

(135

)

(135

)

Net income (loss)

 

$

74,596

 

$

8,185

 

$

(20,737

)

$

62,044

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

1,881,050

 

$

439,545

 

$

239,603

 

$

2,560,198

 

 

Note 10. Significant Tenant

 

Rent from Five Star is 57% of our annualized rents as of June 30, 2010.  The following tables present summary financial information for Five Star for the three and six months ended June 30, 2010 and 2009, as reported in its Quarterly Report on Form 10-Q.

 

Summary Financial Information of Five Star Quality Care, Inc.

(unaudited)

 

 

 

For the Three Months Ended June 30,

 

Operations

 

2010

 

2009

 

Total revenues

 

$

311,866

 

$

294,965

 

Operating income

 

8,522

 

4,335

 

Income from continuing operations

 

8,211

 

9,311

 

Net income

 

8,153

 

8,578

 

 

11



 

SENIOR HOUSING PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollar amounts in thousands, except per share data or as otherwise stated)

 

 

 

For the Six Months Ended
June 30,

 

 

 

2010

 

2009

 

Total revenues

 

$

620,212

 

$

587,146

 

Operating income

 

13,558

 

7,945

 

Income from continuing operations

 

12,616

 

34,524

 

Net income

 

12,238

 

33,950

 

 

 

 

 

 

 

Cash Flows

 

 

 

 

 

Cash provided by operating activities

 

61,323

 

24,002

 

Net cash (used in) provided by discontinued operations

 

(378

)

570

 

Cash used in investing activities

 

(6,663

)

(10,552

)

Cash used in financing activities

 

(39,900

)

(8,409

)

Change in cash and cash equivalents

 

14,382

 

5,611

 

Cash and cash equivalents at beginning of period

 

11,299

 

16,138

 

Cash and cash equivalents at end of period

 

25,681

 

21,749

 

 

 

 

As of June 30,

 

Financial Position

 

2010

 

2009

 

Current assets

 

$

157,280

 

$

188,049

 

Non-current assets

 

229,179

 

227,337

 

Total indebtedness

 

60,617

 

119,545

 

Current liabilities

 

149,222

 

174,121

 

Non-current liabilities

 

84,751

 

117,032

 

Total shareholders’ equity

 

152,486

 

124,233

 

 

The summary financial information of Five Star is presented to comply with applicable accounting regulations of the Securities and Exchange Commission, or SEC.  References in these financial statements to the Quarterly Report on Form 10-Q for Five Star are included as textual references only, and the information in Five Star’s Quarterly Report is not incorporated by reference into these financial statements.

 

Five Star is our former subsidiary and both we and Five Star have management contracts with Reit Management & Research LLC, or RMR.  For information about our dealings with Five Star and RMR and about the risks which may arise as a result of these related person transactions, please see our Annual Report, especially the section titled “Item 1A. Risk Factors”.

 

Note 11.  Related Person Transactions

 

Five Star is our largest tenant and it is our former subsidiary.  We beneficially own more than 9% of Five Star’s common shares.  RMR provides management services to both us and Five Star.  Five Star pays us minimum rent amounts plus percentage rent based on increases in gross revenues at certain properties.  As of June 30, 2010, we leased 190 senior living communities and two rehabilitation hospitals to Five Star.  Five Star’s total minimum annual rent payable to us under those leases as of June 30, 2010 was $185,643, excluding percentage rent based on increases in gross revenues at certain properties.  Total rent recognized by us from Five Star for the six months ended June 30, 2010 and 2009 amounted to $92,310 and $86,751, respectively, and as of June 30, 2010 and December 31, 2009 our rents receivable from Five Star amounted to $16,459 and $16,468, respectively, which amounts are included in other assets on our condensed consolidated balance sheets.  During the three and six months ended June 30, 2010, pursuant to the terms of our existing leases with Five Star, we purchased $9,631 and $15,810, respectively, of improvements made to our properties leased to Five Star, and, as a result, the annual rent payable to us by Five Star was increased by approximately $772 and $1,267, respectively.

 

12



 

SENIOR HOUSING PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollar amounts in thousands, except per share data or as otherwise stated)

 

In connection with our business management agreement with RMR, we recognized expenses of $4,187 and $8,405, and $4,198 and $7,927 for the three and six months ended June 30, 2010 and 2009, respectively.  These amounts are included in general and administrative expenses in our consolidated financial statements.  In connection with our property management agreement with RMR, we recognized expenses of $551 and $1,104, and $311 and $606 for the three and six months ended June 30, 2010 and 2009, respectively.  These amounts are included in property operating expenses in our condensed consolidated financial statements.

 

As of June 30, 2010, we have invested $5,177 in Affiliates Insurance Company, or Affiliates Insurance, concurrently with RMR and other companies to which RMR provides management services.  All of our trustees are currently serving on the board of directors of Affiliates Insurance.  At June 30, 2010, we owned approximately 14.29% of Affiliates Insurance.  Although we own less than 20% of Affiliates Insurance, we use the equity method to account for this investment because we believe that we have significant influence over Affiliates Insurance because each of our trustees is a director of Affiliates Insurance.  This investment is carried on our condensed consolidated balance sheets in other assets and had a carrying value of $4,992 and $5,000 as of June 30, 2010 and December 31, 2009, respectively. During the three and six months ended June 30, 2010, we invested an additional $23 and $44, respectively, in Affiliates Insurance.  During the three and six months ended June 30, 2010, we recognized a loss of $24 and $52, respectively, related to this investment.  In June 2010, we, RMR and other companies to which RMR provides management services purchased property insurance pursuant to an insurance program arranged by Affiliates Insurance.  Our annual premiums for this property insurance are expected to be approximately $275.  We are currently investigating the possibilities to expand our insurance relationships with Affiliates Insurance to include other types of insurance.

 

For more information about our related person transactions, including our dealings with Five Star, RMR, Affiliates Insurance, our Managing Trustees and their affiliates and about the risks which may arise as a result of these and other related person transactions, please see our Annual Report and our other filings made with the SEC, and, in particular, the sections captioned “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Related Person Transactions” in our Annual Report, and the section captioned “Related Person Transactions and the Company Review of Such Transactions” in our Proxy Statement dated February 22, 2010 relating to our 2010 Annual Meeting of Shareholders and in Item 1.01 in our Current Report on Form 8-K filed with the SEC on January 13, 2010.

 

13



 

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

The following discussion should be read in conjunction with our condensed consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q and our Annual Report.

 

PORTFOLIO OVERVIEW

 

The following tables present an overview of our portfolio (dollars in thousands except per unit/square foot):

 

(As of June 30, 2010)

 

Number of
Properties

 

Number of
Units/Beds or
Square Feet

 

Investment
Carrying Value 
(1)

 

% of
Investment

 

Annualized
Current Rent 
(2)

 

% of
Annualized
Current Rent

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Facility Type

 

 

 

 

 

 

 

 

 

 

 

 

 

Independent living communities (3)

 

43

 

11,524

 

$

1,129,200

 

33.7%

 

$

113,000

 

33.7%

 

Assisted living facilities (3)

 

131

 

9,342

 

1,030,211

 

30.8%

 

95,467

 

28.5%

 

Skilled nursing facilities (3)

 

56

 

5,707

 

227,483

 

6.8%

 

20,379

 

6.1%

 

Rehabilitation hospitals

 

2

 

364

 

67,246

 

2.0%

 

10,133

 

3.0%

 

Wellness centers

 

10

 

812,000

 sq. ft.

180,017

 

5.4%

 

17,069

 

5.1%

 

MOBs

 

58

 

2,938,364

 sq. ft.

714,595

 

21.3%

 

78,986

 

23.6%

 

Total

 

300

 

 

 

$

3,348,752

 

100.0%

 

$

335,034

 

100.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tenant / Operator

 

 

 

 

 

 

 

 

 

 

 

 

 

Five Star (Lease No. 1)

 

89

 

6,468

 

$

631,127

 

18.9%

 

$

54,067

 

16.1%

 

Five Star (Lease No. 2)

 

49

 

6,031

 

510,562

 

15.2%

 

50,161

 

15.0%

 

Five Star (Lease No. 3)

 

28

 

5,618

 

624,751

 

18.7%

 

62,457

 

18.6%

 

Five Star (Lease No. 4)

 

26

 

2,720

 

252,319

 

7.5%

 

23,129

 

6.9%

 

Sunrise / Marriott (4)

 

14

 

4,091

 

325,165

 

9.7%

 

33,884

 

10.1%

 

Brookdale

 

18

 

894

 

61,122

 

1.8%

 

8,349

 

2.5%

 

6 private companies (combined)

 

8

 

1,115

 

49,094

 

1.5%

 

6,932

 

2.1%

 

Wellness centers

 

10

 

812,000

 sq. ft.

180,017

 

5.4%

 

17,069

 

5.1%

 

Multi-tenant MOBs

 

58

 

2,938,364

 sq. ft.

714,595

 

21.3%

 

78,986

 

23.6%

 

Total

 

300

 

 

 

$

3,348,752

 

100.0%

 

$

335,034

 

100.0%

 

 

Tenant Operating Statistics (5)

 

 

 

Rent Coverage

 

Occupancy

 

Annualized Rental Income per
Living Unit, Bed or Square Foot
(6)

 

 

 

2010

 

2009

 

2010

 

2009

 

2010

 

2009

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Five Star (Lease No. 1)

 

1.30x

 

1.22x

 

87%

 

88%

 

$

8,359

 

$

7,635

 

Five Star (Lease No. 2) (7)

 

1.31x

 

1.28x

 

82%

 

84%

 

$

7,063

 

$

6,878

 

Five Star (Lease No. 3)

 

1.48x

 

1.59x

 

88%

 

91%

 

$

11,117

 

$

10,890

 

Five Star (Lease No. 4)

 

1.05x

 

1.21x

 

84%

 

88%

 

$

8,503

 

$

8,556

 

Sunrise / Marriott (4)

 

1.38x

 

1.43x

 

89%

 

91%

 

$

8,283

 

$

7,924

 

Brookdale

 

2.11x

 

2.11x

 

91%

 

93%

 

$

9,339

 

$

9,076

 

6 private companies (combined)

 

2.04x

 

1.85x

 

82%

 

82%

 

$

6,217

 

$

6,175

 

Wellness centers (8)

 

2.23x

 

2.36x

 

100%

 

100%

 

NA

 

NA

 

Multi-tenant MOBs (9)

 

NA

 

NA

 

97%

 

99%

 

$

27

 

$

27

 

 

14



 

Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

Tenant Operating Statistics (continued) (5)

 

 

 

Short and Long Term Residential Care Facilities

 

 

 

Percentage of Operating Revenue Sources

 

 

 

Private Pay (10)

 

Medicare

 

Medicaid

 

 

 

2010

 

2009

 

2010

 

2009

 

2010

 

2009

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Five Star (Lease No. 1)

 

63%

 

61%

 

13%

 

14%

 

24%

 

25%

 

Five Star (Lease No. 2)

 

52%

 

52%

 

32%

 

32%

 

16%

 

16%

 

Five Star (Lease No. 3)

 

87%

 

87%

 

12%

 

12%

 

1%

 

1%

 

Five Star (Lease No. 4)

 

67%

 

68%

 

14%

 

14%

 

19%

 

18%

 

Sunrise / Marriott (4)

 

73%

 

66%

 

23%

 

31%

 

4%

 

3%

 

Brookdale

 

100%

 

99%

 

 

 

 

1%

 

6 private companies (combined)

 

23%

 

25%

 

24%

 

23%

 

53%

 

52%

 

 


(1)

Amounts are before depreciation, but after impairment write downs, if any.

(2)

Annualized rent is as of June 30, 2010.

(3)

Properties are categorized by the type of living units / beds which constitute a majority of the living units / beds at the property.

(4)

Marriott International, Inc. guarantees this lease.

(5)

All tenant operating data presented are based upon the operating results provided by our tenants for the 12 months ended March 31, 2010 and 2009, or the most recent prior period for which tenant operating results are available to us. Rent coverage is calculated as operating cash flow from our tenants’ operations of our properties, before subordinated charges, divided by minimum rents payable to us. We have not independently verified our tenants’ operating data. The table excludes data for periods prior to our ownership of some of these properties.

(6)

Represents annualized rent by lease divided by the number of living units, beds or square feet leased at June 30, 2010 and 2009.

(7)

Annualized rental income per living unit, bed or square foot excludes the two rehabilitation hospitals because these properties have extensive clinic space for services to both overnight patients and patients who receive treatment and do not stay overnight, and these properties are not comparable to residential senior living properties.

(8)

Annualized rental income per living unit, bed or square foot excludes the wellness centers because these properties have extensive indoor and outdoor recreation space which is not comparable to properties where rent is based on interior space only.

(9)

Our MOB leases include both triple net leases where, in addition to paying fixed rents, the tenants assume the obligation to operate and maintain the properties at their expense, and net and modified gross leases where we are responsible to operate and maintain the properties and we charge tenants for some or all of the property operating costs. A small percentage of our MOB leases are so-called “full-service” leases where we receive fixed rent from our tenants and no reimbursement for our property operating costs.

(10)

Private pay excludes revenues from the Medicare and Medicaid programs.

 

15



 

Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

The following tables set forth information regarding our lease expirations as of June 30, 2010 (dollars in thousands):

 

 

 

Annualized Rent

 

Percent of
Total

 

Cumulative
Percentage
of
Annualized

 

Year

 

Short and Long
Term Residential
Care Facilities

 

MOBs

 

Wellness
Centers

 

Total

 

Annualized
Current Rent
Expiring

 

Current
Rent
Expiring

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

$

1,373

 

$

705

 

$

 

$

2,078

 

0.6%

 

0.6%

 

2011

 

 

2,156

 

 

2,156

 

0.6%

 

1.2%

 

2012

 

 

6,000

 

 

6,000

 

1.8%

 

3.0%

 

2013

 

33,884

 

3,805

 

 

37,689

 

11.3%

 

14.3%

 

2014

 

 

3,765

 

 

3,765

 

1.1%

 

15.4%

 

2015

 

2,065

 

6,096

 

 

8,161

 

2.4%

 

17.8%

 

2016

 

2,895

 

6,897

 

 

9,792

 

2.9%

 

20.7%

 

2017

 

31,478

 

1,721

 

 

33,199

 

9.9%

 

30.6%

 

2018

 

 

1,906

 

 

1,906

 

0.6%

 

31.2%

 

2019 and thereafter

 

167,284

 

45,935

 

17,069

 

230,288

 

68.8%

 

100.0%

 

Total

 

$

238,979

 

$

78,986

 

$

17,069

 

$

335,034

 

100.0%

 

 

 

 

Average remaining lease term for all properties (weighted by rent):  12.2 years

 

 

 

Number of Tenants

 

 

 

Cumulative

 

Year

 

Short and
Long Term
Residential
Care Facilities

 

MOBs

 

Wellness
Centers

 

Total

 

Percent of
Total Number
of Tenants
Expiring

 

Percentage
of Number
of Tenants
Expiring

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

1

 

17

 

 

18

 

8.2%

 

8.2%

 

2011

 

 

24

 

 

24

 

11.0%

 

19.2%

 

2012

 

 

38

 

 

38

 

17.4%

 

36.6%

 

2013

 

1

 

21

 

 

22

 

10.0%

 

46.6%

 

2014

 

 

25

 

 

25

 

11.4%

 

58.0%

 

2015

 

2

 

23

 

 

25

 

11.4%

 

69.4%

 

2016

 

2

 

18

 

 

20

 

9.1%

 

78.5%

 

2017

 

2

 

14

 

 

16

 

7.3%

 

85.8%

 

2018

 

 

6

 

 

6

 

2.7%

 

88.5%

 

2019 and thereafter

 

4

 

19

 

2

 

25

 

11.5%

 

100.0%

 

Total

 

12

 

205

 

2

 

219

 

100.0%

 

 

 

 

16



 

Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

Number of Living Units/Beds or Square Feet with Leases Expiring

 

 

 

Units/Beds

 

Square Feet

 

Year

 

Short and
Long Term
Residential
Care
Facilities
(Units/Beds)

 

Percent
of Total
Living
Units or
Beds
Expiring

 

Cumulative
Percentage
of Total
Living
Units or
Beds
Expiring

 

MOBs
(Square
Feet)

 

Wellness
Centers
(Square
Feet)

 

Total
Square
Feet

 

Percent
of Total
Square
Feet
Expiring

 

Cumulative
Percent of
Total
Square
Feet
Expiring

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

140

 

0.5%

 

0.5%

 

19,603

 

 

19,603

 

0.5%

 

0.5%

 

2011

 

 

0.0%

 

0.5%

 

65,702

 

 

65,702

 

1.8%

 

2.3%

 

2012

 

 

0.0%

 

0.5%

 

288,033

 

 

288,033

 

7.9%

 

10.2%

 

2013

 

4,091

 

15.2%

 

15.7%

 

146,688

 

 

146,688

 

4.0%

 

14.2%

 

2014

 

 

0.0%

 

15.7%

 

119,720

 

 

119,720

 

3.3%

 

17.5%

 

2015

 

283

 

1.1%

 

16.8%

 

261,693

 

 

261,693

 

7.2%

 

24.7%

 

2016

 

517

 

1.9%

 

18.7%

 

329,388

 

 

329,388

 

9.0%

 

33.7%

 

2017

 

3,614

 

13.4%

 

32.1%

 

47,866

 

 

47,866

 

1.3%

 

35.0%

 

2018

 

 

0.0%

 

32.1%

 

55,775

 

 

55,775

 

1.5%

 

36.5%

 

2019 and thereafter

 

18,292

 

67.9%

 

100.0%

 

1,509,375

 

812,000

 

2,321,375

 

63.5%

 

100.0%

 

Total

 

26,937

 

100.0%

 

 

 

2,843,843

 

812,000

 

3,655,843

 

100.0%

 

 

 

 

17



 

Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

RESULTS OF OPERATIONS

 

Three Months Ended June 30, 2010 Compared to Three Months Ended June 30, 2009:

 

 

 

2010

 

2009

 

Change

 

% Change

 

 

 

(dollars in thousands, except per share amounts)

 

 

 

Rental Income:

 

 

 

 

 

 

 

 

 

Short and long term residential care facilities

 

$

57,147

 

$

54,484

 

$

2,663

 

4.9%

 

MOB

 

19,683

 

11,004

 

8,679

 

78.9%

 

All Other

 

3,935

 

3,911

 

24

 

0.6%

 

Total rental income

 

80,765

 

69,399

 

11,366

 

16.4%

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

Depreciation

 

22,345

 

18,635

 

3,710

 

19.9%

 

General and administrative

 

5,413

 

5,056

 

357

 

7.1%

 

Property operating expenses

 

4,144

 

3,219

 

925

 

28.7%

 

Acquisition costs

 

404

 

1,282

 

(878

)

(68.5)%

 

Total expenses

 

32,306

 

28,192

 

4,114

 

14.6%

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

48,459

 

41,207

 

7,252

 

17.6%

 

 

 

 

 

 

 

 

 

 

 

Interest and other income

 

243

 

186

 

57

 

30.6%

 

Interest expense

 

(20,515

)

(10,707

)

(9,808

)

(91.6)%

 

Loss on early extinguishment of debt

 

(2,433

)

 

(2,433

)

 

Impairment of assets

 

(1,095

)

 

(1,095

)

 

Equity in losses of an investee

 

(24

)

(109

)

85

 

78.0%

 

Income before income tax expense

 

24,635

 

30,577

 

(5,942

)

(19.4)%

 

Income tax expense

 

(76

)

(66

)

(10

)

(15.2)%

 

Net income

 

$

24,559

 

$

30,511

 

$

(5,952

)

(19.5)%

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding

 

127,408

 

120,455

 

6,953

 

5.8%

 

 

 

 

 

 

 

 

 

 

 

Net income per share