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| SNH > SEC Filings for SNH > Form 8-K/A on 29-Sep-2008 | All Recent SEC Filings |
29-Sep-2008
Financial Statements and Exhibits
This Current Report on Form 8-K/A includes pro forma financial data for us, which includes the 28 MOBs that have been acquired and the 20 MOBs proposed to be acquired from HRPT as well as other acquisitions we have completed since January 1, 2008 (balance sheet) and January 1, 2007 (statements of income). Because changes will likely occur in occupancy, rents and expenses with respect to the properties to be acquired and because some or all of the acquisitions may not be completed, the pro forma financial data presented should not be considered as a projection of future results. Differences could also result from, among other considerations, changes in our portfolio of investments, in interest rates and in our capital structure.
In the August 12 Current Report, we reported our acquisition pursuant to certain of the Purchase Agreements of the first 28 MOBs in California, Georgia, Massachusetts, New York, Pennsylvania, Texas and Rhode Island for an aggregate purchase price of $232.9 million, excluding closing costs. These acquisitions consisted of five medical office properties acquired in June 2008 for approximately $83.8 million, three medical office and clinic properties acquired on July 8, 2008 for approximately $39.1 million and 20 clinic buildings acquired on August 8, 2008 for approximately $110.0 million. We funded these acquisitions using cash on hand and assumed three mortgage loans on two properties totaling $10.8 million with a weighted average interest rate of 7.1% per annum.
Between January 1, 2008 and September 29, 2008, we acquired the following other properties from unaffiliated parties (dollars in thousands):
Date Number of Purchase
Acquired Location Properties Units Price
1/1/08 WI 5 568 $66,767
2/7/08 TX 2 98 10,292
2/17/08 NE 1 138 9,338
3/1/08 MN 1 228 48,549
3/31/08 CA, DE, MD 10 660 137,445
8/1/08 AL 2 112 14,110 (1)
8/21/08 GA, IL, TX, UT 4 NA (2) 100,000 (1)
9/1/08 IN 8 451 62,075 (1)
33 2,255 $448,576
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(2) On August 21, 2008, we acquired four wellness centers with a total of 453,000 square feet.
We funded these acquisitions using cash on hand, proceeds from equity issuances, borrowings under our revolving credit facility and by assuming 15 mortgage loans for $50.5 million on eight of these properties.
Certain properties acquired by us, or proposed to be acquired from HRPT, are leased to various tenants, including Five Star Quality Care, Inc., or Five Star, on a long term basis under net leases that transfer substantially all of the properties' operating and holding costs to the tenants. We have previously provided summary financial data and other information for Five Star in our Amendment No. 1 to our Annual Report on Form 10-K for the fiscal year ended December 31, 2007 and in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2008. The remaining tenants with net leases are engaged in a range of industries including health services, biotechnology research, and pharmaceutical with no significant concentration within any particular industry. The majority of these net lease tenants are privately owned. Certain leases are guaranteed by affiliates of the tenants. As of the date of this report, we believe that each tenant is generally current in its rent payments to HRPT. Three of the most significant net lease tenants, other than Five Star, are Fallon Clinic, Health Insurance Plan of New York, and EPIX Pharmaceuticals, Inc. Fallon Clinic is one of the largest medical group practices in Central Massachusetts providing healthcare services in more than 20 medical facilities throughout the greater Worcester community. Health Insurance Plan of New York is one of the largest health care companies providing health care services to approximately 1.4 million individuals. EPIX Pharmaceuticals, Inc., or EPIX, is a biopharmaceutical company focused on discovering and developing novel therapeutics. EPIX also has collaborations with leading organizations, including GlaxoSmithKline, Amgen, Cystic Fibrosis Foundation Therapeutics, and Bayer Schering Pharma. EPIX is listed on NASDAQ Global Market under the symbol "EPIX."
(a) Financial Statements of Businesses Acquired.
We have previously filed with the May 23 Current Report the following report and financial statements:
Report on Independent Registered Public Accounting Firm
Combined Statements of Revenues and Certain Operating Expenses for HRPT Medical Properties for the Three Months Ended March 31, 2008 and 2007 (unaudited), and for the Years Ended December 31, 2007, 2006 and 2005, along with the related Notes to Combined Statements of Revenues and Operating Expenses
The historical financial statements listed in Item 9.01(a) present the results of operations of certain of the MOBs during periods prior to their acquisition by us and exclude for properties not yet acquired, as permitted by Rule 3-14 of Regulation S-X, items of revenue and expense which are not comparable to the expected future operations by us.
(b) Pro Forma Financial Information.
Introduction to Unaudited Pro Forma Condensed Consolidated Financial Statements F-1 Unaudited Pro Forma Condensed Consolidated Balance Sheet as of June 30, 2008 F-3 Unaudited Pro Forma Condensed Consolidated Statement of Income for the Six Months Ended June 30, 2008 F-4 Unaudited Pro Forma Condensed Consolidated Statement of Income for the Year Ended December 31, 2007 F-5 Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements F-6
Introduction to Unaudited Pro Forma Condensed Consolidated Financial Statements
The following unaudited pro forma condensed consolidated balance sheet as of June 30, 2008, reflects our financial position as if the transactions described in the footnotes to the unaudited pro forma condensed consolidated financial statements were completed on June 30, 2008. The unaudited pro forma condensed consolidated statements of income for the six months ended June 30, 2008, and the year ended December 31, 2007, present our results of operations as if the transactions described in the notes to the unaudited pro forma condensed consolidated financial statements were completed on January 1, 2007. These unaudited pro forma condensed consolidated financial statements should be read in conjunction with our financial statements for the three and six months ended June 30, 2008, included in our Quarterly Report on Form 10-Q, our financial statements for the year ended December 31, 2007, included in our Annual Report on Form 10-K, and the financial statements included in the May 9 Current Report and May 22 Current Report.
The unaudited pro forma financial statements assume the acquisitions of 48 medical office, clinic and biotech laboratory buildings, or MOBs, from HRPT Properties Trust, or HRPT, are financed with cash on hand and borrowings under our revolving credit facility and by assuming three mortgage debts on two of the properties totaling $10.8 million. We expect to eventually fund these acquisitions with a mix of long term capital determined based upon market conditions. These unaudited pro forma financial statements are provided for informational purposes only and upon completion of the planned long term financing for these acquisitions our financial position and results of our operations will be significantly different than what is presented in these unaudited pro forma financial statements. In the opinion of management, all adjustments necessary to reflect the effects of the transactions described above have been included in the pro forma financial statements.
The allocation of the purchase prices of the acquisitions of the MOBs from HRPT and the other property acquisitions described in the notes to the unaudited pro forma condensed financial statements and reflected in these unaudited pro forma condensed consolidated financial statements have been based upon preliminary estimates of the fair value of assets acquired and liabilities assumed. A final determination of the fair values of the MOBs acquired or to be acquired will be based on the actual net tangible and intangible assets that exist as of the dates of the completion of the transactions. Consequently, amounts preliminarily allocated to assets acquired and liabilities assumed could change significantly from those used in the unaudited pro forma financial statements.
These unaudited pro forma financial statements are not necessarily indicative of the expected results of operations for any future period. Differences will result if the acquisitions of the MOBs from HRPT are not completed as planned. Differences could also result from, among other considerations, future changes in our portfolio of investments, changes in interest rates, changes in our capital structure, changes in property level operating expenses, and changes in property level revenues including rents expected to be received on leases in place or signed during and after 2008. Consequently, amounts presented in the unaudited pro forma financial statements related to these transactions are likely to be different than actual future results.
SENIOR HOUSING PROPERTIES TRUST
Unaudited Pro Forma Condensed Consolidated Balance Sheet
June 30, 2008
(dollars in thousands)
Pro Forma Adjustments
Other
Acquired
MOBs Acquired MOBs Pending Properties
Historical (A) (C) (B) (C) (D) Pro Forma
ASSETS:
Real estate properties,
at cost $ 2,313,697 $ 139,581 $ 306,772 $ 176,185 $ 2,936,235
Less accumulated
depreciation 351,189 - - - 351,189
1,962,508 139,581 306,772 176,185 2,585,046
Cash and cash
equivalents 185,940 (138,180 ) - (42,760 ) 5,000
Restricted cash 3,555 - - - 3,555
Deferred financing fees,
net 4,999 - - - 4,999
Acquired real estate
leases, net 14,039 19,946 31,297 - 65,282
Other assets 28,024 - - - 28,024
$ 2,199,065 $ 21,347 $ 338,069 $ 133,425 $ 2,691,906
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LIABILITIES AND
SHAREHOLDERS' EQUITY:
Unsecured revolving
credit facility $ - $ - $ 332,258 $ 82,925 415,183
Senior unsecured notes
due 2012 and 2015, net
of discount 321,945 - - - 321,945
Secured debt and capital
leases 91,515 10,782 - 50,500 152,797
Acquired real estate
lease obligations, net 5,795 10,565 5,811 - 22,171
Other liabilities 26,634 - - - 26,634
Shareholders' equity 1,753,176 - - - 1,753,176
$ 2,199,065 $ 21,347 $ 338,069 $ 133,425 $ 2,691,906
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See accompanying notes to unaudited pro forma condensed consolidated financial statements.
SENIOR HOUSING PROPERTIES TRUST
Unaudited Pro Forma Condensed Consolidated Statement of Income
Six Months Ended June 30, 2008
(amounts in thousands, except per share amounts)
Pro Forma Adjustments
Other
MOBs MOBs Acquired
Acquired Pending Properties
Historical (E) (F) (G) Adjustments Pro Forma
REVENUES:
Rental income $ 101,663 $ - $ - $ 7,593 $ 3,529 (H) $ 112,785
MOB rental income - 9,574 13,910 - 932 (I) 24,416
Interest and other
income 1,280 1,360 2,066 - - 4,706
Total revenues 102,943 10,934 15,976 7,593 4,461 141,907
EXPENSES:
MOB property operating
expenses - 2,271 4,793 - - 7,064
Interest 19,328 - - 3,003 5,797 (J) 28,128
Depreciation 27,298 - - 2,265 7,896 (K) 37,459
General and
administrative 8,381 - - 440 2,214 (L) 11,035
Impairment of assets 2,940 - - - - 2,940
Total expenses 57,947 2,271 4,793 5,708 15,907 86,626
Net income $ 44,996 $ 8,663 $ 11,183 $ 1,885 $ (11,446 ) $ 55,281
Weighted average shares
outstanding 95,691 18,798 (M) 114,489
Basic and diluted
earnings per share:
Net income $ 0.47 $ 0.48
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See accompanying notes to unaudited pro forma condensed consolidated financial statements.
SENIOR HOUSING PROPERTIES TRUST
Unaudited Pro Forma Condensed Consolidated Statement of Income
Year Ended December 31, 2007
(amounts in thousands, except per share amounts)
2
Pro Forma Adjustments
Other
Acquired
MOBs Acquired MOBs Pending Properties
Historical (N) (O) (P) Adjustments Pro Forma
REVENUES:
Rental income $ 185,936 $ - $ - $ 15,186 $ 27,469 (Q) $ 228,591
MOB rental income - 19,198 28,263 - 4,357 (R) 51,818
Interest and other income 2,086 2,656 4,709 - - 9,451
Total revenues 188,022 21,854 32,972 15,186 31,826 289,860
EXPENSES:
MOB property operating
expenses - 4,118 9,234 - - 13,352
Interest 37,755 - - 5,210 13,079 (S) 56,044
Depreciation 47,384 - - 4,530 22,257 (T) 74,171
General and
administrative 14,154 - - 881 6,023 (U) 21,058
Loss on early
extinguishment of debt 2,026 - - - - 2,026
Impairment of assets 1,400 - - - - 1,400
Total expenses 102,719 4,118 9,234 10,621 41,359 168,051
Net income $ 85,303 $ 17,736 $ 23,738 $ 4,565 $ (9,533 ) $ 121,809
Weighted average shares
outstanding 83,168 31,321 (V) 114,489
Basic and diluted
earnings per share:
Net income $ 1.03 $ 1.06
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See accompanying notes to unaudited pro forma condensed consolidated financial statements.
Unaudited Pro Forma Condensed Consolidated Balance Sheet Adjustments
(B) Represents the impact of our pending acquisitions of the remaining 20 MOBs we expect to acquire from HRPT and relating financings. These pending acquisitions are expected to be funded with borrowings under our revolving credit facility. The estimated purchase prices of these 20 MOBs are subject to change based on contractual terms of any applicable purchase agreement. The form of funds for these acquisitions is subject to change based on capital market conditions at the time of closings.
(C) Includes the impact of the preliminary purchase accounting adjustments for the completed acquisitions of 23 MOBs acquired subsequent to June 30, 2008 and the pending acquisitions of 20 MOBs from HRPT for the value of in-place leases and the fair market value of above or below market leases and customer relationships.
The allocation of assets is as follows:
MOBs Acquired: Origination Costs $ 5,832 Above Market Leases 14,114 Total MOBs Acquired $ 19,946 MOBs Pending: Origination Costs $ 11,660 Above Market Leases 19,637 Total MOBs Pending $ 31,297 |
The allocation of liabilities is as follows:
Below Market Leases: MOBs Acquired $ 10,565 MOBs Pending 5,811 Total Below Market Leases $ 16,376 |
Included in the June 30, 2008 historical numbers are the preliminary purchase accounting adjustments for the five MOBs that were acquired in June 2008 from HRPT. Intangible lease assets and liabilities recorded by us for these acquisitions totaled $11.8 million and $1.7 million, respectively.
(D) Includes the acquisition of 10 senior living facilities and four wellness centers from unaffiliated parties subsequent to June 30, 2008 for approximately $76.2 million and $100.0 million, respectively, excluding closing costs. These acquisitions were funded with cash on hand and borrowings under our revolving credit facility and by assuming 15 mortgage loans on eight of the senior living properties totaling $50.5 million with a weighted average interest rate of 6.5% per annum.
Unaudited Pro Forma Condensed Consolidated Statement of Income Adjustments for the Six Months Ended June 30, 2008
(E) Represents the impact on rental income, reimbursement income and operating expenses for the six months ended June 30, 2008 of the historical results of the 23 MOBs acquired by us subsequent to June 30, 2008 and pro rated results of the five MOBs acquired by us in June 2008 as if these acquisitions occurred on January 1, 2008. Included in rental income and general and administrative expenses in the historical column are $232,000 and $126,000, respectively, of the five MOBs acquired in June from the date of acquisition through June 30, 2008. A management fee of 3% of gross rents is included in MOB property operating expenses.
(F) Represents the impact on rental income, reimbursement income and operating expenses for the six months ended June 30, 2008 of the historical results of our pending acquisitions from HRPT of 20 MOBs as if these acquisitions occurred on January 1, 2008. A management fee of 3% of gross rents is included in MOB property operating expenses.
(G) Represents the impact on revenues and expenses for the six months ended June 30, 2008 of the acquisition of 10 senior living properties and four wellness centers from unaffiliated parties subsequent to June 30, 2008, as if these acquisitions occurred on January 1, 2008. The aggregate purchase price for these acquisitions was approximately $176.2 million, excluding closing costs. These acquisitions were funded with cash on hand and borrowings under our revolving credit facility at an interest rate of 3.3% per annum and by assuming 15 mortgage loans on eight of the senior living properties totaling $50.5 million with a weighted average interest rate of 6.5% per annum. The impact on depreciation expense is the pro forma impact as if these acquisitions occurred on January 1, 2008. The increase in general and administrative expense represents the management fees payable to RMR.
(H) During the first quarter of 2008, we purchased 19 senior living properties with a total of 1,692 units for approximately $272.4 million from five unaffiliated parties. We leased these properties for initial rent of $21.8 million. We funded these acquisitions using cash on hand, proceeds from equity issuances in December 2007 and February 2008 and borrowings under our revolving credit facility of $115.0 million. The adjustment to rental income represents the full six month impact assuming we acquired these 19 senior living properties on January 1, 2008.
(I) Represents the straight-line rent adjustment for the 28 acquired MOBs and 20 pending MOBs from HRPT. Also includes the preliminary amortization of capitalized above and below market lease values for these acquired and pending acquisitions. The allocation of the adjustment is as follows:
MOBs Acquired (Straight-line) $ 626 MOBs Pending (Straight-line) 901 MOBs Acquired (Above Market Leases) (524 ) MOBs Pending (Above Market Leases) (1,025 ) MOBs Acquired (Below Market Leases) 565 MOBs Pending (Below Market Leases) 389 Total $ 932 |
(J) Represents the impact on interest expense for the six months ended June 30, 2008, from $332.3 million outstanding on our revolving credit facility at our current interest rate of 3.3% per annum for the 28 acquired MOBs and 20 pending MOBs described in Notes (A) and (B), respectively. Also includes the interest expense on the assumption of three mortgage loans that encumber two of the MOBs for a total of $10.8 million at a weighted average interest rate of 7.1% per annum as described above in Note (A). The allocation of interest expense is as follows:
MOBs Acquired $ 381 MOBs Pending 5,416 Total $ 5,797 |
(K) Represents the impact on depreciation expense for the six months ended June 30, 2008, of properties acquired by us during the first quarter of 2008 described in Note (H) and the pro forma impact of the acquisitions of the 28 acquired MOBs and 20 pending MOBs described in Notes (E) and (F), respectively. The allocation of depreciation expense is as follows:
First Quarter 2008 Acquisitions $ 1,134 MOBs Acquired 2,818 MOBs Pending 3,944 Total $ 7,896 |
(L) Represents the impact on general and administrative expenses for the six months ended June 30, 2008, of properties acquired by us during the first quarter of 2008 described in Note (H) and the pro forma impact of the acquisitions of the 28 acquired MOBs and 20 pending MOBs described in Notes (E) and (F), respectively. The increase in general and administrative expense represents the management fees payable to RMR. The management fees paid by us to RMR with respect to the acquired and pending MOBs from HRPT will be the same as the management fees that are currently being paid by HRPT with respect to these MOBs and they will not increase as a result of our purchase prices being higher than HRPT's historical costs of these MOBs. Also includes the preliminary amortization of the value of in-place leases exclusive of the value of above and below market in-place leases for the 28 acquired MOBs and the 20 . . .
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