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 September 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 November 1, 2010: 127,479,657.

 

 

 



 

SENIOR HOUSING PROPERTIES TRUST

 

FORM 10-Q

 

September 30, 2010

 

INDEX

 

 

 

 

Page

PART I

Financial Information

 

 

 

 

 

 

Item 1.

Financial Statements (unaudited)

 

  1

 

 

 

 

 

Condensed Consolidated Balance Sheets — September 30, 2010 and December 31, 2009

 

  1

 

 

 

 

 

Condensed Consolidated Statements of Income — Three and Nine Months Ended September 30, 2010 and 2009

 

  2

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows — Nine Months Ended September 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 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)

 

 

 

September 30,

 

December 31,

 

 

 

2010

 

2009

 

ASSETS

 

 

 

 

 

Real estate properties:

 

 

 

 

 

Land

 

$

371,662

 

$

365,576

 

Buildings and improvements

 

3,006,956

 

2,952,407

 

 

 

3,378,618

 

3,317,983

 

Less accumulated depreciation

 

516,860

 

454,317

 

 

 

2,861,758

 

2,863,666

 

 

 

 

 

 

 

Cash and cash equivalents

 

8,513

 

10,494

 

Restricted cash

 

5,363

 

4,222

 

Deferred financing fees, net

 

15,985

 

14,882

 

Acquired real estate leases, net

 

44,743

 

42,769

 

Other assets

 

63,350

 

51,893

 

Total assets

 

$

2,999,712

 

$

2,987,926

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

Unsecured revolving credit facility

 

$

12,000

 

$

60,000

 

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

 

422,794

 

322,160

 

Secured debt and capital leases

 

656,223

 

660,059

 

Accrued interest

 

13,358

 

13,693

 

Acquired real estate lease obligations, net

 

9,404

 

9,687

 

Other liabilities

 

33,161

 

21,677

 

Total liabilities

 

1,146,940

 

1,087,276

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

Common shares of beneficial interest, $0.01 par value: 149,700,000 shares authorized, 127,479,657 and 127,377,665 shares issued and outstanding at September 30, 2010 and December 31, 2009, respectively

 

1,275

 

1,273

 

Additional paid in capital

 

2,228,520

 

2,226,474

 

Cumulative net income

 

722,654

 

640,033

 

Cumulative distributions

 

(1,106,700

)

(969,111

)

Unrealized gain on investments

 

7,023

 

1,981

 

Total shareholders’ equity

 

1,852,772

 

1,900,650

 

Total liabilities and shareholders’ equity

 

$

2,999,712

 

$

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
September 30,

 

Nine Months Ended
September 30,

 

 

 

2010

 

2009

 

2010

 

2009

 

 

 

 

 

 

 

 

 

 

 

Rental income

 

$

80,961

 

$

72,010

 

$

242,173

 

$

209,785

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

Depreciation

 

22,505

 

19,689

 

67,139

 

56,713

 

General and administrative

 

5,549

 

5,192

 

16,463

 

14,999

 

Property operating expenses

 

4,595

 

4,112

 

13,114

 

10,286

 

Acquisition related costs

 

286

 

517

 

725

 

1,911

 

Total expenses

 

32,935

 

29,510

 

97,441

 

83,909

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

48,026

 

42,500

 

144,732

 

125,876

 

 

 

 

 

 

 

 

 

 

 

Interest and other income

 

203

 

355

 

703

 

750

 

Interest expense

 

(20,226

)

(15,949

)

(59,155

)

(37,432

)

Loss on early extinguishment of debt

 

 

 

(2,433

)

 

Impairment of assets

 

 

(11,249

)

(1,095

)

(11,249

)

Gain on sale of properties

 

109

 

 

109

 

 

Equity in earnings (losses) of an investee

 

35

 

(23

)

(17

)

(132

)

Income before income tax expense

 

28,147

 

15,634

 

82,844

 

77,813

 

Income tax expense

 

(69

)

(69

)

(223

)

(204

)

Net income

 

$

28,078

 

$

15,565

 

$

82,621

 

$

77,609

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding

 

127,423

 

121,665

 

127,404

 

120,005

 

 

 

 

 

 

 

 

 

 

 

Net income per share

 

$

0.22

 

$

0.13

 

$

0.65

 

$

0.65

 

 

See accompanying notes.

 

2



 

SENIOR HOUSING PROPERTIES TRUST

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(amounts in thousands)

(unaudited)

 

 

 

Nine Months Ended
September 30,

 

 

 

2010

 

2009

 

Cash flows from operating activities:

 

 

 

 

 

Net income

 

$

82,621

 

$

77,609

 

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

 

 

 

 

 

Depreciation

 

67,139

 

56,713

 

Amortization of deferred financing fees and debt discounts

 

1,847

 

1,809

 

Amortization of acquired real estate leases

 

755

 

712

 

Loss on early extinguishment of debt

 

2,433

 

 

Impairment of assets

 

1,095

 

11,249

 

Gain on sale of properties

 

(109

)

 

Equity in losses of an investee

 

17

 

132

 

Change in assets and liabilities:

 

 

 

 

 

Restricted cash

 

(1,141

)

(384

)

Other assets

 

(6,444

)

(6,580

)

Accrued interest

 

(335

)

(227

)

Other liabilities

 

13,533

 

19,506

 

Cash provided by operating activities

 

161,411

 

160,539

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Acquisitions

 

(68,136

)

(423,866

)

Investment in Five Star Quality Care, Inc.

 

 

(8,960

)

Investment in Affiliates Insurance Company

 

(75

)

(5,110

)

Proceeds from sale of properties

 

1,450

 

3,171

 

Cash used for investing activities

 

(66,761

)

(434,765

)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Proceeds from issuance of common shares, net

 

 

223,974

 

Proceeds from issuance of unsecured senior notes, net

 

195,352

 

 

Proceeds from borrowings on revolving credit facility

 

45,000

 

134,000

 

Repayments of borrowings on revolving credit facility

 

(93,000

)

(391,000

)

Proceeds from issuance of mortgage debt

 

 

512,934

 

Redemption of senior notes

 

(98,780

)

 

Repayment of other debt

 

(6,293

)

(2,234

)

Payment of deferred financing fees

 

(1,321

)

(11,335

)

Distributions to shareholders

 

(137,589

)

(125,616

)

Cash (used for) provided by financing activities

 

(96,631

)

340,723

 

 

 

 

 

 

 

(Decrease) increase in cash and cash equivalents

 

(1,981

)

66,497

 

Cash and cash equivalents at beginning of period

 

10,494

 

5,990

 

Cash and cash equivalents at end of period

 

$

8,513

 

$

72,487

 

 

 

 

 

 

 

Supplemental cash flow information:

 

 

 

 

 

Interest paid

 

$

57,643

 

$

35,850

 

 

 

 

 

 

 

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

 

2,048

 

1,763

 

 

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 earnings (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 2010, 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 did 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 September 30, 2010, we owned 298 properties located in 35 states and Washington, D.C.

 

In August 2010, we sold four skilled nursing facilities in Nebraska with an aggregate 196 licensed beds for an aggregate sales price of $1,450.  We recognized a gain on sale of these properties of approximately $109.  These properties were leased to Five Star Quality Care, Inc., or Five Star.

 

In September 2010, we acquired one medical office building, or MOB, with 64,860 square feet located in Buffalo Grove (Chicago), IL for approximately $18,400, excluding closing costs.  We recorded intangible lease assets of approximately $3,144 related to this acquisition.  This property is 88% leased to seven tenants for weighted (by rents) average lease term of approximately 7.5 years.  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)

 

In September 2010, we acquired another MOB with 38,030 square feet located in Conyers (Atlanta), GA for approximately $9,800, excluding closing costs.  We recorded intangible lease assets and liabilities of approximately $1,428 and $164, respectively, related to this acquisition.  This property is 91% leased to seven tenants for weighted (by rents) average lease term of approximately 8.3 years.  We funded this acquisition using cash on hand and borrowings under our revolving credit facility.

 

Subsequent to September 30, 2010, we acquired one MOB with 58,605 square feet located in Conroe (Houston), TX for approximately $15,000, excluding closing costs.  This property is 100% leased to Montgomery County Management Company, LLC for approximately 13.8 years.  We funded this acquisition using cash on hand and borrowings under our revolving credit facility.

 

During the three and nine months ended September 30, 2010, pursuant to the terms of our existing leases with Five Star, we purchased $7,958 and $23,768, 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 $638 and $1,905, respectively.

 

As of September 30, 2010, two of our properties are classified as held for sale located in Pennsylvania with an aggregate 173 licensed units.  These two properties are operated and leased by Five Star.  These two properties are included in real estate properties on our condensed consolidated balance sheets and have a net carrying value of approximately $1,900 at September 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 effected 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 nine months ended September 30, 2010, we recorded impairment of assets charges of $1,095 to reduce the carrying value of five of our properties to their estimated sales price less costs to sell.

 

Note 4.  Unrealized Gain on Investments

 

On September 30, 2010, we owned 250,000 common shares of CommonWealth REIT, or CWH, 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 net 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 September 30, 2010 ($25.60 and $5.05 per share, respectively) and our weighted average costs on the dates we acquired these shares ($26.00 and $2.85 per share, respectively).

 

Note 5.  Indebtedness

 

Our principal debt obligations at September 30, 2010 were our unsecured revolving credit facility, two public issues of unsecured senior notes totaling $422,794 and $641,562 of mortgages secured by 62 of our properties.  These 62 collateralized properties had a carrying value of $738,459 at September 30, 2010.  We also have two properties recorded under capital leases totaling $14,662 at September 30, 2010.  These two properties had a carrying value of $18,516 at September 30, 2010.

 

5



 

SENIOR HOUSING PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

 

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 rate 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 1.1% at September 30, 2010 and 2009.  In addition to interest, we pay certain fees to maintain this credit facility and we amortize certain arrangement costs.  Our revolving credit facility is available for acquisitions, working capital and general business purposes. As of September 30, 2010 and 2009, we had $12,000 and zero amounts, respectively, outstanding under this credit facility and $538,000 and $550,000, respectively, available under this credit facility.  We currently intend to exercise our option to extend the maturity date of this facility to December 31, 2011.  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.

 

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 and amortized 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 August 12, 2010, we paid a $0.36 per share, or $45,869, distribution to our common shareholders for the quarter ended June 30, 2010.  On October 4, 2010, we declared a distribution of $0.37 per share, or $47,167, to be paid to common shareholders of record on October 15, 2010, with respect to our results for the quarter ended September 30, 2010. We expect to pay this distribution on or about November 12, 2010.  On November 16, 2009, we paid a $0.36 per share, or $45,856, distribution to our common shareholders for the quarter ended September 30, 2009.

 

On September 17, 2010, pursuant to our equity compensation plan, we granted an aggregate of 66,850 common shares of beneficial interest, par value $0.01 per share, valued at $24.31 per share, the closing price of our common shares on the New York Stock Exchange, or the NYSE, on that day, to our officers and certain employees of our manager, Reit Management & Research LLC, or RMR.  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 nine months ended September 30, 2010 and 2009:

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

 

2010

 

2009

 

2010

 

2009

 

Net income

 

$

28,078

 

$

15,565

 

$

82,621

 

$

77,609

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

Change in net unrealized gain on investments

 

6,757

 

6,273

 

5,042

 

6,977

 

Comprehensive income

 

$

34,835

 

$

21,838

 

$

87,663

 

$

84,586

 

 

6



 

SENIOR HOUSING PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

 

Note 8.  Fair Value of Assets and Liabilities

 

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

 

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)

 

$

1,900

 

$

 

$

1,900

 

$

 

Investments in available for sale securities (2)

 

22,737

 

22,737

 

 

 

Senior notes (3)

 

444,125

 

 

444,125

 

 

 


(1) Assets held for sale consist of two 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 the fair value of these properties.  We have recorded cumulative impairments of approximately $9,051 to these properties in order to reduce their carrying value to fair value, or $1,900, at September 30, 2010.

 

(2) Our investments in available for sale securities include our 250,000 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 September 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 September 30, 2010, the carrying value of our senior notes was $422,794.

 

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 September 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 September 30, 2010

 

 

 

Short and
Long Term
Residential
Care Facilities

 

MOB

 

All Other

 

Consolidated

 

Rental income

 

$

57,315

 

$

19,743

 

$

3,903

 

$

80,961

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

Depreciation expense

 

16,597

 

4,986

 

922

 

22,505

 

General and administrative

 

 

 

5,549

 

5,549

 

Property operating expenses

 

 

4,595

 

 

4,595

 

Acquisition related costs

 

 

286

 

 

286

 

Total expenses

 

16,597

 

9,867

 

6,471

 

32,935

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

40,718

 

9,876

 

(2,568

)

48,026

 

 

 

 

 

 

 

 

 

 

 

Interest and other income

 

 

 

203

 

203

 

Interest expense

 

(10,574

)

(234

)

(9,418

)

(20,226

)

Gain on sale of properties

 

109

 

 

 

109

 

Equity in earnings of an investee

 

 

 

35

 

35

 

Income (loss) before income tax expense

 

30,253

 

9,642

 

(11,748

)

28,147

 

Income tax expense

 

 

 

(69

)

(69

)

Net income (loss)

 

$

30,253

 

$

9,642

 

$

(11,817

)

$

28,078

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

1,933,822

 

$

776,126

 

$

289,764

 

$

2,999,712

 

 

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 September 30, 2009

 

 

 

Short and
Long Term
Residential
Care Facilities

 

MOB

 

All Other

 

Consolidated

 

Rental income

 

$

54,401

 

$

13,706

 

$

3,903

 

$

72,010

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

Depreciation expense

 

15,348

 

3,419

 

922

 

19,689

 

General and administrative

 

 

 

5,192

 

5,192

 

Property operating expenses

 

 

4,112

 

 

4,112

 

Acquisition related costs

 

 

517

 

 

517

 

Total expenses

 

15,348

 

8,048

 

6,114

 

29,510

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

39,053

 

5,658

 

(2,211

)

42,500

 

 

 

 

 

 

 

 

 

 

 

Interest and other income

 

 

 

355

 

355

 

Interest expense

 

(7,475

)

(185

)

(8,289

)

(15,949

)

Impairment of assets

 

(3,784

)

(7,465

)

 

(11,249

)

Equity in losses of an investee

 

 

 

(23

)

(23

)

Income (loss) before income tax expense

 

27,794

 

(1,992

)

(10,168

)

15,634

 

Income tax expense

 

 

 

(69

)

(69

)

Net income (loss)

 

$

27,794

 

$

(1,992

)

$

(10,237

)

$

15,565

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

1,866,832

 

$

746,218

 

$

341,986

 

$

2,955,036

 

 

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 Nine Months Ended September 30, 2010

 

 

 

Short and
Long Term
Residential
Care Facilities

 

MOB

 

All Other

 

Consolidated

 

Rental income

 

$

171,479

 

$

58,986

 

$

11,708

 

$

242,173

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

Depreciation expense

 

49,640

 

14,762

 

2,737

 

67,139

 

General and administrative

 

 

 

16,463

 

16,463

 

Property operating expenses

 

 

13,114

 

 

13,114

 

Acquisition related costs

 

20

 

705

 

 

725

 

Total expenses

 

49,660

 

28,581

 

19,200

 

97,441

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

121,819

 

30,405

 

(7,492

)

144,732

 

 

 

 

 

 

 

 

 

 

 

Interest and other income

 

 

 

703

 

703

 

Interest expense

 

(31,304

)

(636

)

(27,215

)

(59,155

)

Loss on early extinguishment of debt

 

 

 

(2,433

)

(2,433

)

Impairment of assets

 

(1,095

)

 

 

(1,095

)

Gain on sale of properties

 

109

 

 

 

109

 

Equity in losses of an investee

 

 

 

(17

)

(17

)

Income (loss) before income tax expense

 

89,529

 

29,769

 

(36,454

)

82,844

 

Income tax expense

 

 

 

(223

)

(223

)

Net income (loss)

 

$

89,529

 

$

29,769

 

$

(36,677

)

$

82,621

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

1,933,822

 

$

776,126

 

$

289,764

 

$

2,999,712

 

 

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 Nine Months Ended September 30, 2009

 

 

 

Short and
Long Term
Residential
Care Facilities

 

MOB

 

All Other

 

Consolidated

 

Rental income

 

$

162,920

 

$

35,157

 

$

11,708

 

$

209,785

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

Depreciation expense

 

45,203

 

8,743

 

2,767

 

56,713

 

General and administrative

 

 

 

14,999

 

14,999

 

Property operating expenses

 

 

10,286

 

 

10,286

 

Acquisition related costs

 

 

1,911

 

 

1,911

 

Total expenses

 

45,203

 

20,940

 

17,766

 

83,909

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

117,717

 

14,217

 

(6,058

)

125,876

 

 

 

 

 

 

 

 

 

 

 

Interest and other income

 

 

 

750

 

750

 

Interest expense

 

(11,544

)

(560

)

(25,328

)

(37,432

)

Impairment of assets

 

(3,784

)

(7,465

)

 

(11,249

)

Equity in losses of an investee

 

 

 

(132

)

(132

)

Income (loss) before income tax expense

 

102,389

 

6,192

 

(30,768

)

77,813

 

Income tax expense

 

 

 

(204

)

(204

)

Net income (loss)

 

$

102,389

 

$

6,192

 

$

(30,972

)

$

77,609

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

1,866,832

 

$

746,218

 

$

341,986

 

$

2,955,036

 

 

Note 10. Significant Tenant

 

Rent from Five Star is 56% of our total rents as of September 30, 2010.  The following tables present summary financial information for Five Star for the three and nine months ended September 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 September 30,

 

 

 

2010

 

2009

 

Operations

 

 

 

 

 

Total revenues

 

$

315,060

 

$

295,304

 

Operating income

 

5,754

 

1,441

 

Income from continuing operations

 

5,610

 

4,411

 

Net income

 

5,158

 

4,108

 

 

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 Nine Months Ended
September 30,

 

 

 

2010

 

2009

 

Total revenues

 

$

935,272

 

$

882,450

 

Operating income

 

19,312

 

9,386

 

Income from continuing operations

 

18,226

 

38,935

 

Net income

 

17,396

 

38,058

 

 

 

 

 

 

 

Cash Flows

 

 

 

 

 

Cash provided by operating activities

 

109,997

 

32,845

 

Net cash (used in) provided by discontinued operations

 

(830

)

275

 

Cash used in investing activities

 

(25,972

)

(15,956

)

Cash used in financing activities

 

(51,503

)

(11,790

)

Change in cash and cash equivalents

 

31,692

 

5,374

 

Cash and cash equivalents at beginning of period

 

5,017

 

16,138

 

Cash and cash equivalents at end of period

 

36,709

 

21,512

 

 

 

 

As of September 30,

 

 

 

2010

 

2009

 

Financial Position

 

 

 

 

 

Current assets

 

$

136,575

 

$

195,763

 

Non-current assets

 

251,116

 

223,825

 

Total indebtedness

 

48,922

 

103,725

 

Current liabilities

 

141,019

 

180,054

 

Non-current liabilities

 

87,332

 

101,199

 

Total shareholders’ equity

 

159,340

 

138,335

 

 

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.

 

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 September 30, 2010, we leased 186 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 September 30, 2010 was $186,137, excluding percentage rent based on increases in gross revenues at certain properties.  We recognized rent from Five Star in the amount of $138,698 and $130,429 for the nine months ended September 30, 2010 and 2009, respectively, and as of September 30, 2010 and December 31, 2009, our rents receivable from Five Star were $16,573 and $16,468, respectively, and are included in other assets on our condensed consolidated balance sheets.  During the three and nine months ended September 30, 2010, pursuant to the terms of our existing leases with Five Star, we purchased $7,958 and $23,768, 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 $638 and $1,905, respectively.  In August 2010, we sold four skilled nursing facilities located in Nebraska with an aggregate 196 licensed beds for $1,450 that were leased to Five Star and recognized a gain on sale of approximately $109.

 

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 $4,317 and $12,715, and $3,778 and $11,705 for the three and nine months ended September 30, 2010 and 2009, respectively.  These amounts are included in general and administrative expenses in our condensed consolidated statements of income.  In connection with our property management agreement with RMR, we recognized expenses of $561 and $1,665, and $388 and $993 for the three and nine months ended September 30, 2010 and 2009, respectively.  These amounts are included in property operating expenses in our condensed consolidated statements of income.

 

As of September 30, 2010, we have invested $5,209 in Affiliates Insurance Company, or Affiliates Insurance, with RMR and other companies to which RMR provides management services.  All of our trustees serve on the board of directors of Affiliates Insurance.  At September 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.  We carry this investment on our condensed consolidated balance sheets in other assets and at $5,058 and $5,000 as of September 30, 2010 and December 31, 2009, respectively.  During the three and nine months ended September 30, 2010, we invested an additional $32 and $76, respectively, in Affiliates Insurance.  During the three and nine months ended September 30, 2010, we recognized earnings and losses of approximately $35 and $(17), 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 September 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

 

$

1,133,275

 

33.5%

 

$

112,715

 

33.4%

 

Assisted living facilities (3)

 

131

 

9,342

 

1,033,319

 

30.6%

 

95,490

 

28.2%

 

Skilled nursing facilities (3)

 

52

 

5,514

 

225,354

 

6.7%

 

20,058

 

5.9%

 

Rehabilitation hospitals

 

2

 

364

 

67,577

 

2.0%

 

10,203

 

3.0%

 

Wellness centers

 

10

 

812,000

 sq. ft.

180,017

 

5.3%

 

17,069

 

5.0%

 

MOBs

 

60

 

3,037,874

 sq. ft.

739,076

 

21.9%

 

83,047

 

24.5%

 

Total

 

298

 

 

 

$

3,378,618

 

100.0%

 

$

338,582

 

100.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tenant / Operator

 

 

 

 

 

 

 

 

 

 

 

 

 

Five Star (Lease No. 1)

 

88

 

6,421

 

$

631,183

 

18.7%

 

$

54,140

 

16.1%

 

Five Star (Lease No. 2)

 

46

 

5,885

 

510,466

 

15.1%

 

50,222

 

14.8%

 

Five Star (Lease No. 3)

 

28

 

5,618

 

628,919

 

18.6%

 

62,805

 

18.5%

 

Five Star (Lease No. 4)

 

26

 

2,720

 

253,576

 

7.5%

 

23,234

 

6.9%

 

Sunrise / Marriott (4)

 

14

 

4,091

 

325,165

 

9.6%

 

32,684

 

9.7%

 

Brookdale

 

18

 

894

 

61,122

 

1.8%

 

8,449

 

2.5%

 

6 private companies (combined)

 

8

 

1,115

 

49,094

 

1.5%

 

6,932

 

2.0%

 

Wellness centers

 

10

 

812,000

 sq. ft.

180,017

 

5.3%

 

17,069

 

5.0%

 

Multi-tenant MOBs

 

60

 

3,037,874

 sq. ft.

739,076

 

21.9%

 

83,047

 

24.5%

 

Total

 

298

 

 

 

$

3,378,618

 

100.0%

 

$

338,582

 

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)

 

1.32x

 

1.25x

 

88%

 

88%

 

$

8,432

 

$

7,649

 

Five Star (Lease No. 2) (7)

 

1.32x

 

1.28x

 

82%

 

84%

 

$

7,249

 

$

6,904

 

Five Star (Lease No. 3)

 

1.49x

 

1.58x

 

88%

 

91%

 

$

11,179

 

$

10,958

 

Five Star (Lease No. 4)

 

1.11x

 

1.13x

 

84%

 

87%

 

$

8,542

 

$

8,592

 

Sunrise / Marriott (4)

 

1.35x

 

1.43x

 

89%

 

90%

 

$

7,989

 

$

7,924

 

Brookdale

 

2.13x

 

2.10x

 

92%

 

93%

 

$

9,451

 

$

9,142

 

6 private companies (combined)

 

2.15x

 

1.87x

 

83%

 

82%

 

$

6,217

 

$

6,187

 

Wellness centers (8)

 

2.21x

 

2.36x

 

100%

 

100%

 

NA

 

NA

 

Multi-tenant MOBs (9)

 

NA

 

NA

 

97%

 

99%

 

$

27

 

$

28

 

 

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)

 

64%

 

61%

 

12%

 

14%

 

24%

 

25%

 

Five Star (Lease No. 2)

 

52%

 

53%

 

33%

 

32%

 

15%

 

15%

 

Five Star (Lease No. 3)

 

87%

 

87%

 

12%

 

12%

 

1%

 

1%

 

Five Star (Lease No. 4)

 

66%

 

68%

 

14%

 

13%

 

20%

 

19%

 

Sunrise / Marriott (4)

 

74%

 

66%

 

22%

 

30%

 

4%

 

4%

 

Brookdale

 

99%

 

99%

 

 

 

1%

 

1%

 

6 private companies (combined)

 

23%

 

24%

 

24%

 

23%

 

53%

 

53%

 

 


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

(2)          Annualized rent is as of September 30, 2010.

(3)          Properties are categorized by the type of living units or beds which constitute a majority of the living units or 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 June 30, 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 September 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 September 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

 

$

 —

 

$

282

 

$

 —

 

$

282

 

0.1%

 

0.1%

 

2011

 

 

2,228

 

 

2,228

 

0.7%

 

0.8%

 

2012

 

 

6,097

 

 

6,097

 

1.8%

 

2.6%

 

2013

 

32,684

 

3,754

 

 

36,438

 

10.7%

 

13.3%

 

2014

 

 

4,357

 

 

4,357

 

1.3%

 

14.6%

 

2015

 

3,437

 

6,248

 

 

9,685

 

2.9%

 

17.5%

 

2016

 

2,895

 

6,995

 

 

9,890

 

2.9%

 

20.4%

 

2017

 

31,682

 

1,753

 

 

33,435

 

9.9%

 

30.3%

 

2018

 

 

3,500

 

 

3,500

 

1.0%

 

31.3%

 

2019 and thereafter

 

167,768

 

47,833

 

17,069

 

232,670

 

68.7%

 

100.0%

 

Total

 

$

238,466

 

$

83,047

 

$

17,069

 

$

338,582

 

100.0%

 

 

 

 

Average remaining lease term for all properties (weighted by rent):  12.0 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

 

 

12

 

 

12

 

5.1%

 

5.1%

 

2011

 

 

24

 

 

24

 

10.3%

 

15.4%

 

2012

 

 

39

 

 

39

 

16.7%

 

32.1%

 

2013

 

1

 

20

 

 

21

 

9.0%

 

41.1%

 

2014

 

 

28

 

 

28

 

12.0%

 

53.1%

 

2015

 

3

 

25

 

 

28

 

12.0%

 

65.1%

 

2016

 

2

 

19

 

 

21

 

9.0%

 

74.1%

 

2017

 

2

 

14

 

 

16

 

6.8%

 

80.9%

 

2018

 

 

12

 

 

12

 

5.1%

 

86.0%

 

2019 and thereafter

 

4

 

27

 

2

 

33

 

14.0%

 

100.0%

 

Total

 

12

 

220

 

2

 

234

 

100.0%

 

 

 

 

16



 

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

 

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

 

 

 

Living Units or 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

 

 

0.0%

 

0.0%

 

7,328

 

 

7,328

 

0.2%

 

0.2%

 

2011

 

 

0.0%

 

0.0%

 

65,949

 

 

65,949

 

1.7%

 

1.9%

 

2012

 

 

0.0%

 

0.0%

 

291,480

 

 

291,480

 

7.7%

 

9.6%

 

2013

 

4,091

 

15.3%

 

15.3%

 

143,819

 

 

143,819

 

3.8%

 

13.4%

 

2014

 

 

0.0%

 

15.3%

 

137,915

 

 

137,915

 

3.7%

 

17.1%

 

2015

 

423

 

1.6%

 

16.9%

 

266,106

 

 

266,106

 

7.1%

 

24.2%

 

2016

 

517

 

1.9%

 

18.8%

 

331,414

 

 

331,414

 

8.8%

 

33.0%

 

2017

 

3,614

 

13.5%

 

32.3%

 

48,361

 

 

48,361

 

1.3%

 

34.3%

 

2018

 

 

0.0%

 

32.3%

 

101,197

 

 

101,197

 

2.7%

 

37.0%

 

2019 and thereafter

 

18,099

 

67.7%

 

100.0%

 

1,568,536

 

812,000

 

2,380,536

 

63.0%

 

100.0%

 

Total

 

26,744

 

100.0%

 

 

 

2,962,105

 

812,000

 

3,774,105

 

100.0%

 

 

 

 

17



 

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

 

RESULTS OF OPERATIONS

 

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

 

 

 

2010

 

2009

 

Change

 

% Change

 

 

 

(dollars in thousands, except per share amounts)

 

 

 

Rental Income:

 

 

 

 

 

 

 

 

 

Short and long term residential care facilities

 

$

57,315

 

$

54,401

 

$

2,914

 

5.4%

 

MOB

 

19,743

 

13,706

 

6,037

 

44.0%

 

All Other

 

3,903

 

3,903

 

 

 

Total rental income

 

80,961

 

72,010

 

8,951

 

12.4%

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

Depreciation

 

22,505

 

19,689

 

2,816

 

14.3%

 

General and administrative

 

5,549

 

5,192

 

357

 

6.9%

 

Property operating expenses

 

4,595

 

4,112

 

483

 

11.7%

 

Acquisition related costs

 

286

 

517

 

(231

)

(44.7)%

 

Total expenses

 

32,935

 

29,510

 

3,425

 

11.6%

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

48,026

 

42,500

 

5,526

 

13.0%

 

 

 

 

 

 

 

 

 

 

 

Interest and other income

 

203

 

355

 

(152

)

(42.8)%

 

Interest expense

 

(20,226

)

(15,949

)

(4,277

)

(26.8)%

 

Impairment of assets

 

 

(11,249

)

11,249

 

 

Gain on sale of properties

 

109

 

 

109

 

 

Equity in earnings (losses) of an investee

 

35

 

(23

)

58

 

252.2%

 

Income before income tax expense

 

28,147

 

15,634

 

12,513

 

80.0%

 

Income tax expense

 

(69

)

(69

)

 

 

Net income

 

$

28,078

 

$

15,565