snh_Current folio_10Q

Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC  20549

 

FORM 10-Q

 

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

 

For the quarterly period ended March 31, 2015

 

OR

 

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.)

 

Two Newton Place, 255 Washington Street, Suite 300, Newton, MA 02458-1634

(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   No 

 

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   No 

 

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

 

Accelerated filer

 

 

 

Non—accelerated filer

 

Smaller reporting company

(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   No 

 

Number of registrant’s common shares outstanding as of May 5, 2015:  235,011,646. 

 

 

 


 

Table of Contents

 

SENIOR HOUSING PROPERTIES TRUST

FORM 10-Q

 

March  31, 2015

 

INDEX

 

 

 

 

 

 

Page

PART I 

Financial Information

 

 

 

 

Item 1. 

Financial Statements (unaudited)

1

 

 

 

 

Condensed Consolidated Balance Sheets — March 31, 2015 and December 31, 2014

1

 

 

 

 

Condensed Consolidated Statements of Income and Comprehensive Income — Three Months Ended March 31,  2015 and 2014

2

 

 

 

 

Condensed Consolidated Statements of Cash Flows — Three Months Ended March 31, 2015 and 2014

3

 

 

 

 

Notes to Condensed Consolidated Financial Statements

4

 

 

 

Item 2. 

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

15

 

 

 

Item 3. 

Quantitative and Qualitative Disclosures About Market Risk

34

 

 

 

Item 4. 

Controls and Procedures

37

 

 

 

 

Warning Concerning Forward Looking Statements

38

 

 

 

 

Statement Concerning Limited Liability

42

 

 

 

PART II 

Other Information

43

 

 

 

Item 2. 

Unregistered Sales of Equity Securities and Use of Proceeds

43

 

 

 

Item 5. 

Other Information. 

43

 

 

 

Item 6. 

Exhibits

44

 

 

 

 

Signatures

46

 

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.

 

 

 

 


 

Table of Contents

PART I.  Financial Information

 

Item 1.    Financial Statements.

 

SENIOR HOUSING PROPERTIES TRUST

CONDENSED CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except share and per share data)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

    

March 31,

    

December 31,

 

 

 

2015

 

2014

 

ASSETS

 

 

 

 

 

 

 

Real estate properties:

 

 

 

 

 

 

 

Land

 

$

742,763 

 

$

683,979 

 

Buildings and improvements

 

 

5,975,183 

 

 

5,554,632 

 

 

 

 

6,717,946 

 

 

6,238,611 

 

Less accumulated depreciation

 

 

(1,023,843)

 

 

(983,850)

 

 

 

 

5,694,103 

 

 

5,254,761 

 

Cash and cash equivalents

 

 

77,794 

 

 

27,594 

 

Restricted cash

 

 

7,685 

 

 

10,544 

 

Deferred financing fees, net

 

 

29,649 

 

 

30,549 

 

Acquired real estate leases and other intangible assets, net

 

 

543,776 

 

 

472,788 

 

Other assets

 

 

184,088 

 

 

172,033 

 

Total assets

 

$

6,537,095 

 

$

5,968,269 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

Unsecured revolving credit facility

 

$

 —

 

$

80,000 

 

Unsecured term loan

 

 

350,000 

 

 

350,000 

 

Senior unsecured notes, net of discount

 

 

1,743,983 

 

 

1,743,628 

 

Secured debt and capital leases

 

 

625,131 

 

 

627,076 

 

Accrued interest

 

 

31,984 

 

 

20,046 

 

Assumed real estate lease obligations, net

 

 

123,435 

 

 

122,826 

 

Other liabilities

 

 

87,769 

 

 

72,286 

 

Total liabilities

 

 

2,962,302 

 

 

3,015,862 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

 

Common shares of beneficial interest, $.01 par value: 300,000,000 shares authorized, 234,996,215 and 203,910,305 shares issued and outstanding at March 31, 2015 and December 31, 2014, respectively

 

 

2,350 

 

 

2,039 

 

Additional paid in capital

 

 

4,485,386 

 

 

3,825,063 

 

Cumulative net income

 

 

1,393,410 

 

 

1,353,622 

 

Cumulative other comprehensive income

 

 

4,823 

 

 

3,329 

 

Cumulative distributions

 

 

(2,311,176)

 

 

(2,231,646)

 

Total shareholders’ equity

 

 

3,574,793 

 

 

2,952,407 

 

Total liabilities and shareholders’ equity

 

$

6,537,095 

 

$

5,968,269 

 

 

See accompanying notes.

1


 

Table of Contents

SENIOR HOUSING PROPERTIES TRUST

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(amounts in thousands, except per share data)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

March 31,

 

    

2015

    

2014

Revenues:

 

 

 

 

 

 

Rental income

 

$

145,784 

 

$

112,055 

Residents fees and services

 

 

82,793 

 

 

79,442 

Total revenues

 

 

228,577 

 

 

191,497 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

Property operating expenses

 

 

85,794 

 

 

77,802 

Depreciation

 

 

53,707 

 

 

38,355 

General and administrative

 

 

10,574 

 

 

8,290 

Acquisition related costs

 

 

1,158 

 

 

122 

Total expenses

 

 

151,233 

 

 

124,569 

 

 

 

 

 

 

 

Operating income

 

 

77,344 

 

 

66,928 

 

 

 

 

 

 

 

Interest and other income

 

 

75 

 

 

105 

Interest expense

 

 

(35,942)

 

 

(28,900)

Loss on extinguishment of debt

 

 

(1,409)

 

 

 —

Income from continuing operations before income tax expense and equity in earnings (losses) of an investee

 

 

40,068 

 

 

38,133 

Income tax expense

 

 

(110)

 

 

(191)

Equity in earnings (losses) of an investee

 

 

72 

 

 

(97)

Income from continuing operations

 

 

40,030 

 

 

37,845 

Discontinued operations:

 

 

 

 

 

 

(Loss) income from discontinued operations

 

 

(241)

 

 

1,300 

Impairment of assets from discontinued operations

 

 

 —

 

 

(721)

Income before gain on sale of properties

 

 

39,789 

 

 

38,424 

Gain on sale of properties

 

 

 —

 

 

156 

Net income

 

$

39,789 

 

$

38,580 

 

 

 

 

 

 

 

Other comprehensive income:

 

 

 

 

 

 

Change in net unrealized gain (loss) on investments

 

 

1,448 

 

 

(1,921)

Share of comprehensive income of an investee

 

 

45 

 

 

19 

Comprehensive income

 

$

41,282 

 

$

36,678 

 

 

 

 

 

 

 

Weighted average common shares outstanding (basic)

 

 

221,375 

 

 

188,026 

Weighted average common shares outstanding (diluted)

 

 

221,397 

 

 

188,045 

 

 

 

 

 

 

 

Per common share amounts (basic and diluted):

 

 

 

 

 

 

       Income from continuing operations

 

 

0.18 

 

 

0.21 

       Income (loss) from discontinued operations

 

 

 —

 

 

 —

       Net income

 

$

0.18 

 

$

0.21 

 

See accompanying notes.

 

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Table of Contents

SENIOR HOUSING PROPERTIES TRUST

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(amounts in thousands)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

    

2015

    

2014

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net income

 

$

39,789 

 

$

38,580 

 

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

 

 

 

 

 

 

 

Depreciation

 

 

53,707 

 

 

38,355 

 

Amortization of deferred financing fees and debt discounts

 

 

1,650 

 

 

1,456 

 

Straight line rental income

 

 

(3,509)

 

 

(1,583)

 

Amortization of acquired real estate leases and other intangible assets

 

 

(1,198)

 

 

722 

 

Impairment of assets

 

 

 —

 

 

721 

 

Lease termination fees

 

 

(105)

 

 

 —

 

Gain on sale of properties

 

 

 —

 

 

(156)

 

Equity in (earnings) losses of an investee

 

 

(72)

 

 

97 

 

Change in assets and liabilities:

 

 

 

 

 

 

 

Restricted cash

 

 

2,860 

 

 

2,012 

 

Other assets

 

 

(7,751)

 

 

3,082 

 

Accrued interest

 

 

11,938 

 

 

6,060 

 

Other liabilities

 

 

6,828 

 

 

771 

 

Cash provided by operating activities

 

 

104,137 

 

 

90,117 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Real estate acquisitions and deposits

 

 

(509,045)

 

 

(50,050)

 

Real estate improvements

 

 

(12,339)

 

 

(17,101)

 

Proceeds from sale of properties

 

 

250 

 

 

2,400 

 

Cash used for investing activities

 

 

(521,134)

 

 

(64,751)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

Proceeds from issuance of common shares, net

 

 

659,750 

 

 

 —

 

Proceeds from borrowings on revolving credit facility

 

 

515,000 

 

 

90,000 

 

Repayments of borrowings on revolving credit facility

 

 

(595,000)

 

 

(45,000)

 

Repayment of other debt

 

 

(32,440)

 

 

(3,246)

 

Payment of deferred financing fees

 

 

(583)

 

 

 —

 

Distributions to shareholders

 

 

(79,530)

 

 

(73,386)

 

Cash provided by (used for) financing activities

 

 

467,197 

 

 

(31,632)

 

 

 

 

 

 

 

 

 

Increase (decrease) in cash and cash equivalents

 

 

50,200 

 

 

(6,266)

 

Cash and cash equivalents at beginning of period

 

 

27,594 

 

 

39,233 

 

Cash and cash equivalents at end of period

 

$

77,794 

 

$

32,967 

 

 

 

 

 

 

 

 

 

Supplemental cash flow information:

 

 

 

 

 

 

 

Interest paid

 

$

22,354 

 

$

21,384 

 

Income taxes paid

 

 

 —

 

 

200 

 

 

 

 

 

 

 

 

 

Non-cash investing activities:

 

 

 

 

 

 

 

Acquisitions funded by assumed debt

 

 

(29,955)

 

 

 —

 

 

 

 

 

 

 

 

 

Non-cash financing activities:

 

 

 

 

 

 

 

Assumption of mortgage notes payable

 

 

29,955 

 

 

 —

 

Issuance of common shares

 

 

808 

 

 

438 

 

 

See accompanying notes.

 

 

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Table of Contents

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, are unaudited.  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, 2014, 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 with or among 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 conform the prior periods’ rental income, property operating expenses, discontinued operations, general and administrative expenses, interest and other income and impairment of assets to the current classification.  These reclassifications had no effect on net income or shareholders’ equity.

 

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect reported amounts. Actual results could differ from those estimates.  Significant estimates in our condensed consolidated financial statements include purchase price allocations, useful lives of fixed assets and impairment of real estate and intangible assets.

 

Note 2.  Recent Accounting Pronouncements

 

In February 2015, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update No. 2015-02, Consolidation.  Among other things, this update changes how an entity determines the primary beneficiary of a variable interest entity.  This update is effective for interim and annual periods beginning after December 15, 2015, with early adoption permitted.  The implementation of this update is not expected to cause any significant changes to our condensed consolidated financial statements.

 

In April 2015, the FASB issued Accounting Standards Update No. 2015-03, Simplifying the Presentation of Debt Issuance Costs, which requires debt issuance costs to be presented in the balance sheet as a direct deduction from the associated debt liability. This update is effective for interim and annual reporting periods beginning after December 15, 2015 and requires retrospective application.  The implementation of this update is not expected to cause any material changes to our consolidated financial statements other than the reclassification of debt issuance costs from assets to liabilities on our condensed consolidated balance sheets.

 

Note 3.  Real Estate Properties

 

At March 31, 2015, we owned 392 properties (419 buildings) located in 39 states and Washington, D.C. We have accounted, or expect to account for, the following acquisitions as business combinations unless otherwise noted.

 

MOB Acquisitions:

 

In January 2015, we acquired 23 properties (23 buildings) leased to medical providers, medical related businesses, clinics and biotech laboratory tenants, or MOBs, for approximately $539,000, including the assumption of approximately $29,955 of mortgage debt with a weighted average interest rate of 4.73%, and excluding closing costs. These MOBs are located in 12 states and include approximately 2,170,000 square feet of leasable space. We funded this acquisition using cash on hand and borrowings under our revolving credit facility. The 23 properties were purchased

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SENIOR HOUSING PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

from Select Income REIT, or SIR, in connection with the acquisition by SIR of Cole Corporate Income Trust, Inc., or CCIT. See Note 10 for further information regarding this transaction. 

 

MOB Acquisitions since January 1, 2015:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

    

    

    

    

    

    

Cash Paid

    

    

 

    

    

 

    

    

 

    

Acquired

    

    

 

    

    

 

 

 

 

 

 

Number

 

 

 

plus

 

 

 

 

 

 

 

Acquired

 

Real Estate

 

 

 

 

Premium

 

 

 

 

 

of

 

Square

 

Assumed

 

 

 

 

Buildings and

 

Real Estate

 

Lease

 

Assumed

 

on Assumed

 

Date

 

Location

 

Properties

 

Feet (000’s)

 

Debt (1)

 

Land

 

Improvements

 

Leases

 

Obligations

 

Debt

 

Debt

 

Jan-15

 

12 States

 

23

 

2,170 

 

$

539,000 

 

$

58,294 

 

$

399,582 

 

$

85,496 

 

$

(3,298)

 

$

(29,955)

 

$

(1,074)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

23

 

2,170 

 

$

539,000 

 

$

58,294 

 

$

399,582 

 

$

85,496 

 

$

(3,298)

 

$

(29,955)

 

$

(1,074)

 

 


(1)

These amounts include the cash we paid plus the debt we assumed, if any, as well as other settlement adjustments with respect to the acquisitions, but exclude closing costs.  The allocation of the purchase price of our acquisitions shown above is based upon preliminary estimates of the fair value of assets acquired and liabilities assumed.  Consequently, amounts preliminarily allocated to assets acquired and liabilities assumed may change from those used in these condensed consolidated financial statements.

 

Senior Living Community Acquisitions:

 

In December 2014, we entered into a purchase agreement to acquire 38 senior living communities with 3,466 living units located in 16 states for $790,000, excluding closing costs, and including the assumption of approximately $153,000 of mortgage debt with a weighted average interest rate of 4.77%.  These communities include an aggregate of 3,466 living units, comprised of 826 independent living units, 1,860 assisted living units, 744 memory care units and 36 skilled nursing facility units.  On May 1, 2015, we completed the acquisition of 37 of these senior living communities with 3,379 living units for approximately $762,611, excluding closing costs, and we amended the purchase agreement to accommodate a delayed closing of the remaining senior living community with 87 living units.  The acquisition of the one remaining senior living community is subject to various conditions; accordingly, we can provide no assurance that we will acquire this community, that the acquisition will not be delayed further or that the terms will not change. Nineteen of the 38 communities, with 2,190 living units, including the one community that we have not yet acquired, are leased to seven senior living operators. The 19 remaining communities, with 1,276 living units, were acquired using taxable real estate investment trust, or REIT, subsidiary, or TRS, structures. Pursuant to pre-existing management agreements, we paid fees of $975 and terminated these agreements for 14 of the 19 communities, with 881 living units, and entered into management agreements with Five Star Quality Care, Inc., or Five Star, to manage these communities. See Note 10 for further information regarding these management agreements with Five Star. The remaining five communities, with 395 living units, continue to be managed by the current third party senior living operator. As of the date of this filing, the purchase price allocation for this acquisition is pending. 

 

In April 2015, we entered into an agreement to acquire one senior living community with 40 private pay independent living units located in Cumming, GA, for approximately $9,750, excluding closing costs. We intend to acquire this community using a TRS structure and we expect to enter into a management agreement with Five Star to manage this community. This senior living community is adjacent to another community that we own which is managed by Five Star. This acquisition is subject to various conditions; accordingly, we can provide no assurance that we will purchase this property, that the acquisition and related expected management arrangement with Five Star will not be delayed or that the terms will not change.

 

Impairment:

 

We periodically evaluate our properties for impairments. 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.

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SENIOR HOUSING PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

If indicators of impairment are present, we evaluate the carrying value of the affected property by comparing it to the expected future undiscounted net cash flows to be generated from that property. If the sum of these expected future net cash flows is less than the carrying value, we reduce the net carrying value of the property to its estimated fair value.

 

Discontinued Operations and Properties Held for Sale:

 

As of March 31, 2015, we had three senior living communities with 192 living units and one MOB (four buildings) with 323,541 square feet categorized as properties held for sale.  These four properties are included in other assets in our condensed consolidated balance sheets and have a net book value (after impairment) of approximately $3,145 at March 31, 2015. We classify all properties as held for sale in our condensed consolidated balance sheets that meet the applicable criteria for that treatment as set forth in the Property, Plant and Equipment Topic of the FASB Accounting Standards Codification, or the Codification.

 

Results of operations for properties sold or held for sale are included in discontinued operations in our condensed consolidated statements of operations once the criteria for discontinued operations in the Presentation of Financial Statements Topic of the Codification are met. The senior living properties which we are or were offering for sale as of the applicable periods do not meet the criteria for discontinued operations as they are included within combination leases with other properties that we expect to continue leasing. We had one MOB (four buildings) and four MOBs (seven buildings), classified in discontinued operations as of March 31, 2015 and 2014, respectively. Summarized income statement information for these MOBs that meet the criteria for inclusion in discontinued operations is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

    

2015

    

2014

 

Rental income

 

$

32 

 

$

2,294 

 

Property operating expenses

 

 

(273)

 

 

(994)

 

(Loss) income from discontinued operations

 

$

(241)

 

$

1,300 

 

 

Dispositions:

 

In February 2015, we sold one vacant senior living community located in Pennsylvania for a sale price of $250, excluding closing costs. In April 2015, we sold the remaining held for sale MOB (four buildings) for a sale price of $1,500, excluding closing costs. Any adjustments to net book value related to this sale will be recognized in the second quarter of 2015 when all of the costs of the sale are known. 

 

Note 4.  Unrealized Gain / Loss on Investments

 

As of March 31, 2015, we owned 250,000 common shares of Equity Commonwealth (formerly known as CommonWealth REIT), or EQC, and 4,235,000 common shares of Five Star which are carried at fair market value in other assets on our condensed consolidated balance sheets. Cumulative other comprehensive income shown in our condensed consolidated balance sheets includes the net unrealized gain or loss on investments determined as the net difference between the value at quoted market prices of our EQC and Five Star shares as of March 31, 2015  ($26.55 and $4.44 per share, respectively) and our weighted average costs at the time we acquired these shares, as adjusted to reflect any share splits or combinations  ($26.00 and $3.36 per share, respectively). 

 

Note 5.  Indebtedness

 

Our principal debt obligations at March 31, 2015 were: (1) six public issuances of senior unsecured notes, including: (a) $250,000 principal amount at an annual interest rate of 4.30% due 2016, (b) $400,000 principal amount at an annual interest rate of 3.25% due 2019, (c) $200,000 principal amount at an annual interest rate of 6.75% due 2020,

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SENIOR HOUSING PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

(d) $300,000 principal amount at an annual interest rate of 6.75% due 2021, (e) $250,000 principal amount at an annual interest rate of 4.75% due 2024 and (f) $350,000 principal amount at an annual interest rate of 5.625% due 2042; (2) our $350,000 principal amount term loan; and (3) $609,032 aggregate principal amount of mortgages secured by 46 of our properties  (48 buildings) with maturity dates from 2015 to 2043.  The 46 mortgaged properties (48 buildings) had a carrying value of $776,980 at March 31, 2015.  We also had two properties subject to capital leases totaling $12,621 at March 31, 2015; these two properties had a carrying value of $18,095 at March 31, 2015. The capital leases expire in 2026.

 

We have a $750,000 unsecured revolving credit facility that is available for general business purposes, including acquisitions.  The maturity date of our revolving credit facility is January 15, 2018 and, subject to the payment of an extension fee and meeting certain other conditions, we have an option to further extend the stated maturity date by an additional one year to January 15, 2019.  The revolving credit facility agreement provides that we can borrow, repay and reborrow funds available under the revolving credit facility agreement until maturity, and no principal repayment is due until maturity.  The revolving credit facility agreement includes a feature under which maximum borrowings under the facility may be increased to up to $1,500,000 in certain circumstances. The interest rate paid on borrowings under the revolving credit facility agreement is LIBOR plus a premium of 130 basis points, and the facility fee is 30 basis points per annum on the total amount of lending commitments.  Both the interest rate premium and the facility fee are subject to adjustment based upon changes to our credit ratings.  As of March 31, 2015, the interest rate payable on borrowings under our revolving credit facility was 1.47%, and the weighted average interest rate for borrowings under our revolving credit facility was 1.54% and 1.42% for the three months ended March 31, 2015 and 2014, respectively.  As of March 31, 2015, we had no amounts outstanding and $750,000 available for borrowing by us, and as of May 5, 2015, we had $550,000 outstanding and $200,000 available for borrowing by us under our revolving credit facility. 

 

In 2014, we entered into a term loan agreement pursuant to which we obtained a $350,000 unsecured term loan. Our term loan matures on January 15, 2020, and is prepayable without penalty at any time.  In addition, our term loan includes a feature under which maximum borrowings may be increased to up to $700,000 in certain circumstances. Our term loan bears interest at a rate of LIBOR plus a premium of 140 basis points that is subject to adjustment based upon changes to our credit ratings. As of March 31, 2015, the interest rate payable for amounts outstanding under our term loan was 1.57%.  The weighted average annual interest rate for amounts outstanding on our term loan was 1.59% for the three months ended March 31, 2015.

 

Our revolving credit facility and term loan agreements provide for the acceleration of payment of all amounts outstanding upon the occurrence and continuation of certain events of default, including a change of control of us, which includes Reit Management & Research LLC, or RMR, ceasing to act as our business manager and property manager.

 

In December 2014, we entered an agreement to acquire the 38 senior living communities discussed in Note 3 above.  Simultaneous with entering this agreement, we received a bridge loan commitment for $700,000. In February 2015, we terminated the bridge loan commitment and we recognized a loss of $1,409 on extinguishment of debt in the first quarter of 2015 in connection with that termination. We acquired 37 of these 38 senior living communities in May 2015 and financed the acquisition using cash on hand, borrowings under our revolving credit facility and the assumption of approximately $139,181 of mortgage debt with a weighted average interest rate of 4.59%.

 

Our public debt indenture and its related supplements and our credit facility and term loan agreements contain a number of financial and other covenants, including covenants that restrict our ability to incur indebtedness or to make distributions under certain circumstances and require us to maintain financial ratios. We believe we were in compliance with the terms and conditions of our public debt indenture and its supplements and our credit facility and term loan agreements at March 31, 2015.

 

In connection with two of the properties acquired in January 2015, discussed in Note 3 above, we assumed $29,955 of mortgage debt, which we recorded at their aggregate fair value of $31,029.  These two assumed mortgage notes have a

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

contractual weighted average interest rate of 4.73% and mature in July 2016 and October 2022.  We determined the fair value of the assumed mortgage notes using a market approach based upon Level 3 inputs (significant other unobservable inputs) in the fair value hierarchy.

 

In February 2015, we repaid  a mortgage note that encumbered one of our properties that had a principal balance of $29,227 and an interest rate of 6.02%.

 

In April 2015, we prepaid a mortgage note that encumbered one of our properties that had a principal balance of $6,274 and an interest rate of 5.81%.

 

Note 6.  Shareholders’ Equity

 

In February 2015, we issued 31,050,000 common shares in a public offering, raising net proceeds of approximately $659,750 after underwriting discounts and expenses. We used the net proceeds from this offering to repay borrowings outstanding under our revolving credit facility and for general business purposes.

 

On February 24, 2015, we paid a distribution to common shareholders of $0.39 per share, or approximately $79,530, that was declared on January 12, 2015 and was payable to shareholders of record on January 23, 2015.

 

On April 13, 2015, we declared a distribution payable to common shareholders of record on April 24, 2015, of $0.39 per share, or approximately $91,655. We expect to pay this distribution on or about May 21, 2015 using cash on hand and borrowings under our revolving credit facility.

 

During the three months ended March 31, 2015 and the period from April 1, 2015 to May 5, 2015, we issued 36,610 and 15,431, respectively, of our common shares to RMR as part of the business management fee payable by us under our business management agreement. See Note 10 for further information regarding this agreement.

 

Note 7.  Fair Value of Assets and Liabilities

 

The following table presents certain of our assets and liabilities that are measured at fair value on a recurring and non recurring basis at March 31, 2015 categorized by the level of inputs used in the valuation of each asset or liability.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

    

 

    

Quoted Prices in

    

Significant

    

Significant

 

 

 

 

 

 

Active Markets for

 

Other

 

Unobservable

 

 

 

 

 

 

Identical Assets

 

Observable Inputs

 

Inputs

 

 

 

 

 

 

 

 

 

 

 

Description

 

Total

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets held for sale(1)

 

$

3,145 

 

$

 

$

 

$

3,145 

 

Investments in available for sale securities(2)

 

$

25,441 

 

$

25,441 

 

$

 

$

 

 


(1)

Assets held for sale consist of four of our properties (seven buildings) that we expect to sell or have sold subsequent to March 31, 2015 that are reported at fair value less estimated costs to sell. We used offers to purchase these properties made by third parties or comparable sales transactions (Level 3 inputs) to determine the fair values of these properties. We have recorded cumulative impairments of approximately $11,365 to these properties in order to reduce their book value to fair value.

(2)

Our investments in available for sale securities include our 250,000 common shares of EQC and 4,235,000 common shares of Five Star. The fair values of these shares are based upon quoted prices at March 31, 2015 in active markets (Level 1 inputs).

 

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SENIOR HOUSING PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

We estimate the fair values of our senior unsecured notes using an average of the bid and ask price of our outstanding six issuances of senior notes (Level 1 inputs) on or about March 31, 2015.  The fair values of these senior note obligations exceed their aggregate book values of $1,743,983 by $107,931 because these notes were trading at premiums to their face amounts.

 

We estimate the fair values of our secured debt by using discounted cash flow analyses and currently prevailing market terms as of the measurement date (Level 3 inputs). The fair value of our secured debt exceeds its book value of $609,032 by $66,837 because current market interest rates are lower than the market interest rates at the time we assumed the secured debt. Because Level 3 inputs are unobservable, our estimated fair value may differ materially from the actual fair value.

 

In addition to the assets and liabilities described in the above table and our senior unsecured notes and secured debt, our additional financial instruments include rents receivable, cash and cash equivalents, restricted cash and other unsecured debt. The fair values of these additional financial instruments approximate their carrying values at March 31, 2015 based upon their liquidity, short term maturity, variable rate pricing or our estimate of fair value using discounted cash flow analyses and prevailing interest rates.

 

Note 8.  Segment Reporting

 

We have four operating segments, of which three are separately reportable operating segments: (i) triple net senior living communities that we lease to operators who provide short term and long term residential care and dining services for residents, (ii) managed senior living communities that provide short term and long term residential care and dining services for residents and (iii) MOBs. Our triple net and managed senior living communities include independent living communities, assisted living communities and skilled nursing facilities, or SNFs. Properties in the MOB segment include medical office, clinic and biotech laboratory buildings. The “All Other” category in the following table includes amounts

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SENIOR HOUSING PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

related to corporate business activities and the operating results of certain properties that offer fitness, wellness and spa services to members.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31, 2015

 

 

    

Triple Net

    

 

 

    

 

 

    

 

 

    

 

 

 

 

 

Leased

 

Managed

 

 

 

 

 

 

 

 

 

 

 

 

Senior Living

 

Senior Living

 

 

 

 

All Other

 

 

 

 

 

 

Communities

 

Communities

 

MOBs

 

Operations

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental income

 

$

55,251 

 

$

 —

 

$

86,001 

 

$

4,532 

 

$

145,784 

 

Residents fees and services

 

 

 —

 

 

82,793 

 

 

 —

 

 

 —

 

 

82,793 

 

Total revenues

 

 

55,251 

 

 

82,793 

 

 

86,001 

 

 

4,532 

 

 

228,577 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property operating expenses

 

 

 —

 

 

62,403 

 

 

23,391 

 

 

 —

 

 

85,794 

 

Depreciation

 

 

15,125 

 

 

8,460 

 

 

29,174 

 

 

948 

 

 

53,707 

 

General and administrative

 

 

 —

 

 

 —

 

 

 —

 

 

10,574 

 

 

10,574 

 

Acquisition related costs

 

 

 —

 

 

 —

 

 

 —

 

 

1,158 

 

 

1,158 

 

Total expenses

 

 

15,125 

 

 

70,863 

 

 

52,565 

 

 

12,680 

 

 

151,233 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

 

40,126 

 

 

11,930 

 

 

33,436 

 

 

(8,148)

 

 

77,344 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and other income

 

 

 —

 

 

 —

 

 

 —

 

 

75 

 

 

75 

 

Interest expense

 

 

(5,985)

 

 

(2,019)

 

 

(1,768)

 

 

(26,170)

 

 

(35,942)

 

Loss on extinguishment of debt

 

 

 —

 

 

 —

 

 

 —

 

 

(1,409)

 

 

(1,409)

 

Income (loss) before income tax expense and equity in earnings of an investee

 

 

34,141 

 

 

9,911 

 

 

31,668 

 

 

(35,652)

 

 

40,068 

 

Income tax expense

 

 

 —

 

 

 —

 

 

 —

 

 

(110)

 

 

(110)

 

Equity in earnings of an investee

 

 

 —

 

 

 —

 

 

 —

 

 

72 

 

 

72 

 

Income (loss) from continuing operations

 

 

34,141 

 

 

9,911 

 

 

31,668 

 

 

(35,690)

 

 

40,030 

 

Discontinued operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from discontinued operations

 

 

 —

 

 

 —

 

 

(241)

 

 

 —

 

 

(241)

 

Net income (loss)

 

 

34,141 

 

 

9,911 

 

 

31,427 

 

 

(35,690)

 

 

39,789 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

1,767,189 

 

$

967,751 

 

$

3,451,814 

 

$

350,341 

 

$

6,537,095 

 

 

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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 March 31, 2014

 

 

    

Triple Net

    

 

 

    

 

 

    

 

 

    

 

 

 

 

 

Leased

 

Managed

 

 

 

 

 

 

 

 

 

 

 

 

Senior Living

 

Senior Living

 

 

 

 

All Other

 

 

 

 

 

 

Communities

 

Communities

 

MOBs

 

Operations

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental income

 

$

54,890 

 

$

 —

 

$

52,763 

 

$

4,402 

 

$

112,055 

 

Residents fees and services

 

 

 —

 

 

79,442 

 

 

 —

 

 

 —

 

 

79,442 

 

Total revenues

 

 

54,890 

 

 

79,442 

 

 

52,763 

 

 

4,402 

 

 

191,497 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property operating expenses

 

 

 —

 

 

60,788 

 

 

17,014 

 

 

 —

 

 

77,802 

 

Depreciation

 

 

15,637 

 

 

8,155 

 

 

13,615 

 

 

948 

 

 

38,355 

 

General and administrative

 

 

 —

 

 

 —

 

 

 —

 

 

8,290 

 

 

8,290 

 

Acquisition related costs

 

 

 —

 

 

 —

 

 

 —

 

 

122 

 

 

122 

 

Total expenses

 

 

15,637 

 

 

68,943 

 

 

30,629 

 

 

9,360 

 

 

124,569 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

 

39,253 

 

 

10,499 

 

 

22,134 

 

 

(4,958)

 

 

66,928 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and other income

 

 

 —

 

 

 —

 

 

 —

 

 

105 

 

 

105 

 

Interest expense

 

 

(6,388)

 

 

(2,988)

 

 

(1,337)

 

 

(18,187)

 

 

(28,900)

 

Loss on extinguishment of debt

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

Income (loss) before income tax expense and equity in earnings of an investee

 

 

32,865 

 

 

7,511 

 

 

20,797 

 

 

(23,040)

 

 

38,133 

 

Income tax expense

 

 

 —

 

 

 —

 

 

 —

 

 

(191)

 

 

(191)

 

Equity in earnings of an investee

 

 

 —

 

 

 —

 

 

 —

 

 

(97)

 

 

(97)

 

Income (loss) from continuing operations

 

 

32,865 

 

 

7,511 

 

 

20,797 

 

 

(23,328)

 

 

37,845 

 

Discontinued operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from discontinued operations

 

 

 —

 

 

 —

 

 

1,300 

 

 

 —

 

 

1,300 

 

Impairment of assets from discontinued operations

 

 

 —

 

 

 —

 

 

(721)

 

 

 —

 

 

(721)

 

Income (loss) before gain on sale of properties

 

 

32,865 

 

 

7,511 

 

 

21,376 

 

 

(23,328)

 

 

38,424 

 

Gain on sale of properties

 

 

156 

 

 

 —

 

 

 —

 

 

 —

 

 

156 

 

Net income (loss)

 

$

33,021 

 

$

7,511 

 

$

21,376 

 

$

(23,328)

 

 

38,580 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

1,843,510 

 

$

949,468 

 

$

1,717,000 

 

$

268,689 

 

$

4,778,667 

 

 

 

 

Note 9. Significant Tenant

 

Five Star is our former subsidiary.  Rental income from Five Star represented 32.7% of our rental income for the three months ended March 31, 2015, and the properties Five Star leases from us represented 31.8% of our investments, at cost, as of March 31, 2015.  As of March 31, 2015, Five Star also managed 46 senior living communities for our account. See Note 10 for further information relating to our leases and management arrangements with Five Star. 

 

Note 10. Related Person Transactions

 

We have relationships and historical and continuing transactions with Five Star, RMR and others affiliated with them, including other companies to which RMR provides management services and which have trustees, directors and officers who are also trustees, directors or officers of us or RMR.  For further information about these and other such relationships and certain other related person transactions, please refer to our Annual Report.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

Five StarAs of March 31, 2015, we leased 180 senior living communities to Five Star.  Five Star's total minimum annual rent payable to us as of March 31, 2015, was $191,007, excluding percentage rent.  We recognized total rental income from Five Star of $47,691 and $47,506 for the three months ended March 31, 2015 and 2014, respectively.  As of March 31, 2015 and December 31, 2014, our rents receivable from Five Star were $15,893 and $17,310, respectively, and those amounts are included in other assets in our condensed consolidated balance sheets.  In April 2015 and 2014, we received estimated percentage rent payments from Five Star of $1,456 and $1,416 for the three months ended March 31, 2015 and 2014, respectively.  We determine actual percentage rent due under our Five Star leases annually and recognize any resulting amount as rental income at year end when all contingencies are met.  During the three months ended March 31, 2015 and 2014, pursuant to the terms of our leases with Five Star, we purchased $4,550 and $8,614, respectively, of improvements made to properties leased to Five Star, and, as a result, the annual rent payable to us by Five Star increased by approximately $367 and $689, respectively.  

 

In February 2015, we and Five Star sold a vacant assisted living community located in Pennsylvania with 120 units for a sale price of $250; and, as a result of this sale, Five Star’s annual minimum rent payable to us decreased by $23 in accordance with the terms of the applicable lease.

 

As of March 31, 2015, Five Star managed 46 senior living communities for our account.  Pursuant to our management agreements with Five Star, we incurred management fees of $2,523 and $2,425 for the three months ended March 31, 2015 and 2014, respectively, with respect to the communities Five Star manages.  These amounts are included in property operating expenses in our condensed consolidated statements of income and comprehensive income.

 

In connection with our acquisition of 37 senior living communities in May 2015 described in Note 3, we terminated the pre-existing management agreements for 14 of these communities, with 881 living units, and entered into management agreements with Five Star to manage these communities for our account.

 

In April 2015, we entered into an agreement to acquire one senior living community with 40 private pay independent living units located in Cumming, GA, for approximately $9,750, excluding closing costs. We intend to acquire this community using a TRS structure and we expect to enter into a management agreement with Five Star to manage this community. This senior living community is adjacent to another community that we own which is managed by Five Star. This acquisition is subject to various conditions; accordingly, we can provide no assurance that we will purchase this property, that the acquisition and related expected management arrangement with Five Star will not be delayed or that the terms will not change.

 

Pursuant to the sublease agreement between one of our TRSs and D&R Yonkers LLC, D&R Yonkers LLC paid to us $752 and $730 in rent for the three months ended March 31, 2015 and 2014, respectively.  D&R Yonkers LLC is owned by our officers in order to accommodate certain state licensing requirements. Five Star manages the senior living community to which the sublease agreement relates.

 

RMR:  Pursuant to our business management agreement with RMR, we recognized business management fees of $8,869 and $6,682 for the three months ended March 31, 2015 and 2014, respectively. The business management fees we recognized for the 2014 and 2015 periods are included in general and administrative expenses in our condensed consolidated financial statements.  In accordance with the terms of our business management agreement, we issued 39,467 of our common shares to RMR for the three months ended March 31, 2015, as payment for a portion of the base business management fee we recognized for that period.

 

Pursuant to our property management agreement with RMR, the aggregate property management and construction supervision fees we recognized were $2,438 and $1,638 for the three months ended March 31, 2015 and 2014, respectively.  These amounts are included in property operating expenses or have been capitalized, as appropriate, in our condensed consolidated financial statements.

 

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

SIR:  On January 29, 2015, we acquired from SIR, entities owning 23 MOBs that SIR acquired when its subsidiary merged with CCIT.  Our purchase price for these 23 MOBs was approximately $539,000, including the assumption of approximately $29,955 of mortgage debt.  These 23 MOBs contain approximately 2,170,000 square feet and are located in 12 states. As of March 31, 2015, $8,993 of amounts due from related persons included in other assets in our condensed consolidated balance sheet represented amounts owed to us from SIR related to working capital activity for the 23 MOBs as of the sale date. This amount was paid to us in April 2015.

 

AIC:  As of March 31, 2015, our investment in Affiliates Insurance Company, or AIC, an Indiana insurance company, had a carrying value of $6,944, which amount is included in other assets on our condensed consolidated balance sheet.  We recognized income (loss) of $72 and ($97) related to our investment in AIC for the three months ended March 31, 2015 and 2014, respectively.    

 

Note 11.  Income Taxes

 

We have elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, and as such, are generally not subject to federal and most state income taxation on our operating income provided we distribute our taxable income to our shareholders and meet certain organization and operating requirements. We do, however, lease certain managed senior living communities to our wholly owned TRSs that, unlike most of our subsidiaries, file a separate consolidated federal corporate income tax return and are subject to federal and state income taxes.  Our consolidated income tax provision includes the income tax provision related to the operations of our TRSs and certain state income taxes we incur despite our REIT status.  During the three months ended March 31, 2015 and 2014, we recognized income tax expense of $110 and $191, respectively.

 

Note 12. Weighted Average Per Common Share Amounts

 

We calculate basic earnings per common share by dividing net income by the weighted average number of common shares outstanding during the period. We calculate diluted earnings per common share by using the more dilutive of the two class method or the treasury stock method. Unvested share awards and other potentially dilutive common shares, including contingently issuable common shares under our business management agreement with RMR, if any, and the related impact on earnings, are considered when calculating diluted earnings per share. The following table provides a reconciliation of the weighted average number of common shares used in the calculation of basic and diluted earnings per share (in thousands):

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

2015

 

2014

Weighted average common shares for basic earnings per share

 

 

221,375 

 

 

188,026 

Effect of dilutive securities: unvested share awards

 

 

22 

 

 

19 

Weighted average common shares for diluted earnings per share

 

 

221,397 

 

 

188,045 

 

 

 

Note 13.  Pro Forma Information

 

During the three months ended March 31, 2015, we acquired 23 properties for an aggregate purchase price of $539,000, excluding closing costs, and including the assumption of $29,955 of mortgage debt with a weighted average interest rate of 4.73%.  We recognized rental income and property operating expenses from this acquisition of $7,046 and $1,094, respectively, for the three months ended March 31, 2015. In February 2015, we sold 31,050,000 of our common shares in a public offering raising net proceeds of approximately $659,750 after underwriting discounts and expenses.

 

During 2014, we purchased two senior living communities and two MOBs (three buildings) for $1,204,393, excluding closing costs. We also assumed $15,630 of mortgage debt at a weighted average interest rate of 6.28% related to one of

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Table of Contents

SENIOR HOUSING PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

our 2014 acquisitions. In April 2014, we issued 15,525,000 common shares in a public offering, raising net proceeds of approximately $322,807 after underwriting discounts and expenses.  Also in April 2014, we sold $400,000 of 3.25% senior unsecured notes due 2019 and $250,000 of 4.75% senior unsecured notes due 2024, raising net proceeds of approximately $644,889 after underwriting discounts and expenses. In May 2014, we entered into a $350,000 term loan agreement, which bears interest at a rate of LIBOR plus a premium of 140 basis points.

 

The following table presents our pro forma results of operations for the three months ended March 31, 2015 and 2014 as if the acquisition of the 37 senior living communities described in Note 3 and the 2015 acquisition and financing activities described in the two preceding paragraphs had occurred on January 1, 2014, and the 2014 acquisition and financing activities described in the two paragraphs above had occurred on January 1, 2013.  This pro forma data is not necessarily indicative of what our actual results of operations would have been for the periods presented, nor does it represent the results of operations for any future period. Differences could result from numerous factors, including future changes in our portfolio of investments, changes in interest rates, changes in our capital structure, changes in property level operating expenses, changes in property level revenues, including rents expected to be received on our existing leases or leases we may enter into during and after 2015, and for other reasons.

 

 

 

 

 

 

 

 

 

 

    

Three Months Ended

 

 

March 31,

 

March 31,

 

 

2015

 

2014

Total revenues

 

$

254,851 

 

$

254,301 

Net income

 

$

45,628 

 

$

36,065 

Net income per share

 

$

0.19 

 

$

0.15 

 

 

 

 

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Table of Contents

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 with our Annual Report. We are a REIT organized under Maryland law. At March 31,  2015, we owned 392 properties (419 buildings) located in 39 states and Washington, D.C., including four properties  (seven buildings) classified as held for sale.  Of the properties classified as held for sale, one property (four buildings) is included in discontinued operations at March 31, 2015. On that date, the undepreciated carrying value of our properties, net of impairment losses, was $6.7 billion, excluding properties classified as held for sale. As of March 31, 2015, 97% of our net operating income, or NOI, came from properties where a majority of the charges are paid from our residents’ and tenants’ private resources.

 

PORTFOLIO OVERVIEW (1)

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

 

   

Number of

 

 

 

   

 

    

Investment per

   

 

 

   

% of

 

 

 

Number of

 

Units/Beds or

 

Investment

 

% of Total

 

Unit / Bed or

 

Q1 2015

 

Q1 2015

 

(As of March 31, 2015)

 

Properties

 

Square Feet

 

Carrying Value(2)

 

Investment

 

Square Foot(3)

 

NOI(4)

 

NOI