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| SNH > SEC Filings for SNH > Form 8-K on 8-Apr-2009 | All Recent SEC Filings |
8-Apr-2009
Financial Statements and Exhibits
This Current Report on Form 8-K includes pro forma financial data for us, which includes the 38 MOBs that have been acquired and the 10 MOBs proposed to be acquired from HRPT as well as other acquisitions we have completed since January 1, 2009 (balance sheet) and January 1, 2008 (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.
Between June and December 31, 2008, we acquired 37 of these properties containing 1.5 million square feet for approximately $346.8 million, excluding closing costs. In January 2009, we acquired one additional property for approximately $19.3 million, excluding closing costs, and we expect the closings of the remaining 10 acquisitions to occur in 2010. We and HRPT may mutually agree to accelerate the closings of these acquisitions. We funded these acquisitions using cash on hand, proceeds from equity issuances, borrowings under our revolving credit facility and by assuming three mortgage loans on two properties totaling $10.8 million with a weighted average interest rate of 7.1% per annum and a weighted average maturity in 2018.
Between January 1, 2008 and December 31, 2008, we acquired the following other properties from unrelated 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 14,734
8/21/08 GA, IL, TX, UT 4 NA (1) 100,009
9/1/08 IN 8 451 62,268
9/30/08 NY 1 NA (2) 18,647
11/1/08 IN 1 252 30,529
35 2,507 $ 498,578
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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 regarding Five Star in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008. The remaining tenants with net leases are engaged in a range of industries including health services, biotechnology research, and pharmaceutical research and manufacturing 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 Current Report on Form 8-K, we believe that each tenant is current in its rent payments. Five of the significant net lease tenants, other than Five Star, are: Scripps Research Institute, or Scripps; Fallon Community Health Plan, or Fallon Clinic; Health Insurance Plan of New York, or HIP; EPIX Pharmaceuticals, Inc., or EPIX; and The Oklahoma City Clinics. Scripps is one of the largest non-profit health research institutes in the Country and is located in La Jolla, California. Fallon Clinic is one of the largest multi-specialty group practices providing healthcare services in central Massachusetts. HIP is one of the largest health insurance companies providing clinical services in the New York City area. EPIX is a biopharmaceutical company focused on discovering and developing novel therapeutics. EPIX is listed on NASDAQ Global Market under the symbol "EPIX". The Oklahoma City Clinics are a medical practice group operating in Oklahoma City and the surrounding areas.
(b) Pro Forma Financial Information.
Introduction to Unaudited Pro Forma Condensed Consolidated Financial F-1 Statements Unaudited Pro Forma Condensed Consolidated Balance Sheet as of F-2 December 31, 2008 Unaudited Pro Forma Condensed Consolidated Statement of Income for the F-3 Year Ended December 31, 2008 Notes to Unaudited Pro Forma Condensed Consolidated Financial F-4 Statements |
Introduction to Unaudited Pro Forma Condensed Consolidated Financial Statements
The following unaudited pro forma condensed consolidated balance sheet as of December 31, 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 December 31, 2008. The unaudited pro forma condensed consolidated statement of income for the year ended December 31, 2008, presents 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, 2008. These unaudited pro forma condensed consolidated financial statements should be read in conjunction with our financial statements for the year ended December 31, 2008, included in our Annual Report on Form 10-K, and the historical financial statements included in our Current Report on Form 8-K dated May 9, 2008 and in our Current Report on Form 8-K/A dated May 22, 2008.
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, proceeds from equity issuances, 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 price of the acquisitions of the MOBs from HRPT and the other property acquisitions described in the notes to the unaudited pro forma condensed consolidated financial statements and reflected in these unaudited pro forma condensed consolidated financial statements has 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 2009. 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
December 31, 2008
(dollars in thousands)
Pro Forma Adjustments
MOBs Subsequent
Acquired MOBs Pending Event
Historical (A) (C) (B) (C) (D) Pro Forma
ASSETS:
Real estate properties, at
cost $ 2,807,256 $ 19,063 $ 178,273 $ - $ 3,004,592
Less accumulated depreciation 381,339 - - - 381,339
2,425,917 19,063 178,273 - 2,623,253
Cash and cash equivalents 5,990 - - - 5,990
Restricted cash 4,344 - - - 4,344
Deferred financing fees, net 5,068 - - - 5,068
Acquired real estate leases,
net 30,546 815 24,022 - 55,383
Other assets 25,009 - - - 25,009
$ 2,496,874 $ 19,878 $ 202,295 $ - $ 2,719,047
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LIABILITIES AND SHAREHOLDERS'
EQUITY:
Unsecured revolving credit
facility $ 257,000 $ 19,249 $ 198,990 $ (96,806 ) $ 378,433
Senior unsecured notes due
2012 and 2015, net of
discount 322,017 - - - 322,017
Secured debt and capital
leases 151,416 - - - 151,416
Acquired real estate lease
obligations, net 7,974 629 3,305 - 11,908
Other liabilities 27,109 - - - 27,109
Shareholders' equity 1,731,358 - - 96,806 1,828,164
$ 2,496,874 $ 19,878 $ 202,295 $ - $ 2,719,047
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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, 2008
(amounts in thousands, except per share amounts)
MOBs
Acquired MOBs Pending Pro Forma
Historical (E) (F) Adjustments Pro Forma
REVENUES:
Rental income $ 233,210 $ - $ - $ 15,264 (G) $ 248,474
MOB rental income - 25,990 18,037 5,621 (H) 49,648
Interest and other income 2,327 - - - 2,327
Total revenues 235,537 25,990 18,037 20,885 300,449
EXPENSES:
Property operating
expenses 2,792 7,992 4,092 569 (I) 15,445
Interest 40,154 - - 5,352 (J) 45,506
Depreciation 60,831 - - 16,962 (K) 77,793
General and
administrative 17,136 - - 2,654 (L) 19,790
Impairment of assets 8,379 - - - 8,379
Total expenses 129,292 7,992 4,092 25,537 166,913
Income before gain on
sale of properties 106,245 17,998 13,945 (4,652 ) 133,536
Gain on sale of
properties 266 - - - 266
Net income $ 106,511 $ 17,998 $ 13,945 $ (4,652 ) $ 133,802
Weighted average shares
outstanding 105,153 15,245 (M) 120,398
Basic and diluted
earnings per share:
Income before gain on
sale of properties $ 1.01 $ 1.11
Net income $ 1.01 $ 1.11
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See accompanying notes to unaudited pro forma condensed consolidated financial statements.
Unaudited Pro Forma Condensed Consolidated Balance Sheet Adjustments
(A) Represents the impact of our completed acquisition from HRPT of the one MOB which was acquired subsequent to December 31, 2008 and related financing. This acquisition was funded with borrowings under our revolving credit facility. Included in the December 31, 2008 historical numbers are 37 MOBs that were acquired between June and December 31, 2008 from HRPT for approximately $346.8 million, excluding closing costs, including the assumption of three mortgage loans that encumber two properties totaling $10.8 million at a weighted average interest rate of 7.1% per annum. Also included in the December 31, 2008 historical column is one MOB acquired from an unaffiliated party for $18.6 million, excluding closing costs.
(B) Represents the impact of our pending acquisitions of the remaining 10 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 10 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 acquisition of one MOB acquired subsequent to December 31, 2008 and the pending acquisitions of 10 MOBs from HRPT for the value of in-place leases and the fair market value of above or below market leases and customer relationships.
Acquired assets other than real estate are as follows:
MOBs Acquired: Origination Costs $ 815 Above Market Leases - Total MOBs Acquired $ 815 MOBs Pending: Origination Costs $ 7,163 Above Market Leases 16,859 Total MOBs Pending $ 24,022 |
Assumed liabilities are as follows:
Below Market Leases: MOBs Acquired $ 629 MOBs Pending 3,305 Total Below Market Leases $ 3,934 |
Included in the December 31, 2008 historical numbers are the preliminary purchase accounting adjustments for the 37 MOBs that were acquired between June and
December 31, 2008 from HRPT and one MOB acquired in September 2008 from an unaffiliated party. Intangible lease assets and liabilities recorded by us for these acquisitions totaled $29.8 million and $4.3 million, respectively.
(D) Includes the following event subsequent to December 31, 2008: in February 2009, we issued 5.9 million common shares in a public offering, raising net proceeds of approximately $96.8 million. We used the net proceeds from this offering to repay borrowings outstanding under our revolving credit facility.
Unaudited Pro Forma Condensed Consolidated Statement of Income Adjustments for the Year Ended December 31, 2008
(E) Represents the impact on rental income, reimbursement income and operating expenses for the year ended December 31, 2008 of the historical results of the one MOB acquired by us subsequent to December 31, 2008 and pro rated results of the 37 MOBs acquired by us between June and December 31, 2008, as if these acquisitions occurred on January 1, 2008. Included in rental income, interest expense, depreciation, general and administrative expenses and impairment of assets in the historical column are $12.3 million, $346,000, $3.3 million, $16,000 and $1.4 million, respectively, of the 37 MOBs acquired from HRPT and the one MOB acquired from an unaffiliated party since June 1, 2008 from the date of acquisition through December 31, 2008. A management fee of 3% of gross rents is included in property operating expenses.
(F) Represents the impact on rental income, reimbursement income and operating expenses for the year ended December 31, 2008 of the historical results of our pending acquisitions from HRPT of 10 MOBs as if these acquisitions occurred on January 1, 2008. A management fee of 3% of gross rents is included in property operating expenses.
(G) During the year ended December 31, 2008, we purchased 30 senior living properties with a total of 2,507 units and four wellness centers with a total of 458,000 square feet for approximately $379.3 million and $100.0 million, respectively, from nine unaffiliated parties. We leased these properties for initial rent of $39.4 million. We funded these acquisitions using cash on hand, proceeds from equity issuances in December 2007 and February and June 2008, borrowings under our revolving credit facility and the assumption of 15 mortgage loans that encumber eight of these senior living properties totaling $50.5 million at a weighted average interest rate of 6.5% per annum. The adjustment to rental income represents the full year impact assuming we acquired these 30 senior living properties and four wellness centers on January 1, 2008.
(H) Represents the rental income adjustment for the one MOB acquired from an unaffiliated party on September 30, 2008 and the straight-line rent adjustment for the 38 acquired MOBs and 10 pending MOBs from HRPT. Also includes the preliminary amortization of capitalized above and below market lease values for these acquired and pending acquisitions. The adjustments are as follows:
MOBs Acquired from Unaffiliated Party $ 1,832 MOBs Acquired from HRPT (Straight-line) 2,473 MOBs Pending from HRPT (Straight-line) 2,421 MOBs Pending from HRPT (Above Market Leases) (1,512 ) MOBs Acquired from Unaffiliated Party (Above Market Leases) (41 ) MOBs Acquired from HRPT (Below Market Leases) 73 MOBs Pending from HRPT (Below Market Leases) 334 MOBs Acquired from Unaffiliated Party (Below Market Leases) 41 Total $ 5,621 |
(I) Represents the property operating expenses adjustment for the one MOB acquired from an unaffiliated party on September 30, 2008. The adjustment represents the full year impact assuming we acquired this property on January 1, 2008.
(J) Represents the impact on interest expense for the year ended December 31, 2008, from $218.2 million outstanding on our revolving credit facility at our current interest rate of 2.2% per annum drawn in connection with the purchase of the 38 acquired MOBs and 10 pending MOBs described in Notes (A) and (B), respectively, and the impact on interest expense for our February 2009 equity offering described in Notes (D) and (M) used to repay borrowings outstanding under our revolving credit facility as if this equity offering occurred on January 1, 2008. Also includes the interest expense on the assumption of three mortgage loans that encumber two of the MOBs totaling $10.8 million at a weighted average interest rate of 7.1% per annum described above in Note (A) and the assumption of 15 mortgage loans that encumber eight of the senior living properties totaling $50.5 million at a weighted average interest rate of 6.5% per annum described above in Note (G). The additional net interest expense is as follows:
MOBs Acquired $ 426 MOBs Acquired - Debt Assumption 461 MOBs Pending 4,406 2009 Equity Offering - Reduction in Interest Expense (2,143 ) Senior Living Properties Acquired - Debt Assumption 2,202 Total $ 5,352 |
(K) Represents the impact on depreciation expense for the year ended December 31, 2008, of properties acquired by us during the year ended December 31, 2008 described in Notes (G) and (H) and the impact of the acquisitions of the 38 acquired MOBs and 10 pending MOBs described in Notes (E) and (F), respectively. Also includes the preliminary amortization of capitalized origination costs for these acquired and pending MOB acquisitions. The additional depreciation expense is as follows:
2008 Senior Living and Wellness Center Acquisitions $ 4,681 MOBs Acquired from HRPT 6,424 MOBs Pending from HRPT 4,584 MOBs Acquired from Unaffiliated Party 342 MOBs Acquired from HRPT (Origination Costs) 95 MOBs Pending from HRPT (Origination Costs) 731 MOBs Acquired from Unaffiliated Party (Origination Costs) 105 Total $ 16,962 |
(L) Represents the impact on general and administrative expenses for the year ended December 31, 2008, of properties acquired by us during the year ended December 31, 2008 described in Notes (G) and (H) and the impact of the acquisitions of the 38 acquired MOBs and 10 pending MOBs described in Notes (E) and (F), respectively. The increase in general and administrative expense represents the management fees payable to Reit Management & Research LLC, or 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. The additional general and administrative expenses are as follows:
2008 Senior Living and Wellness Center Acquisitions $ 912 MOBs Acquired from HRPT 898 MOBs Pending from HRPT 774 MOBs Acquired from Unaffiliated Party 70 Total $ 2,654 |
(M) In February 2008, June 2008 and February 2009, we issued 6.2 million, 19.6 million and 5.9 million of our common shares in underwritten public offerings, raising net proceeds of $129.4 million, $393.7 million and $96.8 million, respectively. We used the net proceeds from these offerings to repay borrowings outstanding on our revolving credit facility and for general business purposes, including funding, in part, the acquisitions described in Notes (E), (G) and (H). The adjustment to our weighted average shares outstanding shows the effect on our weighted average shares outstanding for the year ended December 31, 2008, as if we issued the additional shares on January 1, 2008.
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