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| SNH > SEC Filings for SNH > Form 8-K on 7-Jul-2009 | All Recent SEC Filings |
7-Jul-2009
Financial Statements and Exhibits
Pro Forma Financial Data
This Current Report on Form 8-K includes pro forma financial data for us, which includes the 40 MOBs that have been acquired and the seven MOBs proposed to be acquired from HRP as well as the one MOB that we sold to a third party, and other acquisitions we have completed since April 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 changes in our portfolio of investments, in interest rates, in our capital structure and for other reasons.
Between June 1, 2008 and March 31, 2009, we acquired 38 of the MOBs containing 1.6 million square feet for approximately $366.0 million, excluding closing costs. Subsequent to March 31, 2009, we acquired two additional MOBs and sold one MOB containing 193,000 square feet and 25,000 square feet, respectively, for approximately $50.8 million, excluding closing costs, and $3.1 million, respectively, and we expect the closings of the remaining seven acquisitions to occur before May 2010. We and HRP 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 July 6, 2009, 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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(2) On September 30, 2008, we acquired one medical office building from an unaffiliated party with a total of 89,000 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 HRP, 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. The other leases, consisting solely of MOBs, are modified gross leases or "full service" leases. We have previously provided summary financial data and other information regarding Five Star in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2009 and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008. Our other 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 in 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 are: Five Star, Scripps Research Institute, or Scripps; Fallon Community Health Plan, or Fallon Clinic; Health Insurance Plan of New York, or HIP; and EPIX Pharmaceuticals, Inc., or EPIX. 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".
(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 March 31, 2009 Unaudited Pro Forma Condensed Consolidated Statement of Income for the F-3 Three Months Ended March 31, 2009 Unaudited Pro Forma Condensed Consolidated Statement of Income for the F-4 Year Ended December 31, 2008 Notes to Unaudited Pro Forma Condensed Consolidated Financial F-5 Statements |
Introduction to Unaudited Pro Forma Condensed Consolidated Financial Statements
The following unaudited pro forma condensed consolidated balance sheet as of March 31, 2009, reflects our financial position as if the transactions described in the footnotes to the unaudited pro forma condensed consolidated financial statements were completed on March 31, 2009. The unaudited pro forma condensed consolidated statement of income for the quarter ended March 31, 2009 and 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 quarter ended March 31, 2009, included in our Quarterly Report on Form 10-Q, our financial statements for the year ended December 31, 2008, included in our Annual Report on Form 10-K, 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 and the unaudited pro forma condensed consolidated financial statements included in our Current Report on Form 8-K/A dated September 29, 2008, Current Report on Form 8-K dated December 17, 2008 and Current Report on Form 8-K dated April 8, 2009.
The unaudited pro forma financial statements assume the acquisitions of 47 medical office, clinic and biotech laboratory buildings, or MOBs, from HRPT Properties Trust, or HRP, are financed with cash on hand, proceeds from equity issuances, borrowings under our revolving credit facility and by assuming three mortgage loans on two of the properties. 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 HRP 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 is 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 and liabilities assumed 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 HRP are not completed as planned. Differences could also result from 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 leases in place or signed during and after 2009 or for other reasons. Consequently, actual future results are likely to be different than amounts presented in the unaudited pro forma financial statements related to these transactions.
SENIOR HOUSING PROPERTIES TRUST
Unaudited Pro Forma Condensed Consolidated Balance Sheet
March 31, 2009
(dollars in thousands)
Pro Forma Adjustments
MOBs
Acquired MOBs Pending MOB Sold
Historical (A) (B) (C) Pro Forma
ASSETS:
Real estate properties, at cost $ 2,838,751 $ 47,484 $ 127,134 $ (3,090 ) $ 3,010,279
Less accumulated depreciation 398,946 - - - 398,946
2,439,805 47,484 127,134 (3,090 ) 2,611,333
Cash and cash equivalents 5,566 - - - 5,566
Restricted cash 4,777 - - - 4,777
Deferred financing fees, net 5,303 - - - 5,303
Acquired real estate leases, net 30,636 3,373 20,649 - 54,658
Other assets 22,455 - - - 22,455
$ 2,508,542 $ 50,857 $ 147,783 $ (3,090 ) $ 2,704,092
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LIABILITIES AND SHAREHOLDERS'
EQUITY:
Unsecured revolving credit facility $ 181,000 $ 50,771 $ 144,565 $ (3,090 ) $ 373,246
Senior unsecured notes due 2012 and
2015, net of discount 322,053 - - - 322,053
Secured debt and capital leases 150,665 - - - 150,665
Acquired real estate lease
obligations, net 8,166 86 3,218 - 11,470
Other liabilities 27,259 - - - 27,259
Shareholders' equity 1,819,399 - - - 1,819,399
$ 2,508,542 $ 50,857 $ 147,783 $ (3,090 ) $ 2,704,092
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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
Three Months Ended March 31, 2009
(amounts in thousands, except per share amounts)
MOBs
Acquired MOBs Pending Pro Forma
Historical (D) (E) Adjustments Pro Forma
REVENUES:
Rental income $ 68,377 $ - $ - $ - $ 68,377
MOB rental income - 1,642 2,939 220 (F) 4,801
Interest and other
income 208 - - - 208
Total revenues 68,585 1,642 2,939 220 73,386
EXPENSES:
Property operating
expenses 2,955 736 320 (3 ) (G) 4,008
Interest 10,776 - - 629 (H) 11,405
Depreciation 18,389 - - 1,339 (I) 19,728
Acquisition costs 112 - - - 112
General and
administrative 4,820 - - 179 (J) 4,999
Total expenses 37,052 736 320 2,144 40,252
Income before loss on
sale of properties 31,533 906 2,619 (1,924 ) 33,134
Loss on sale of
properties - - - (365 ) (K) (365 )
Net income $ 31,533 $ 906 $ 2,619 ) $ (2,289 ) $ 32,769
Weighted average shares
outstanding 117,853 2,545 (L) 120,398
Basic and diluted
earnings per share:
Income before loss on
sale of properties $ 0.27 $ 0.28
Net income $ 0.27 $ 0.27
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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 (M) (N) Adjustments Pro Forma
REVENUES:
Rental income $ 233,210 $ - $ - $ 15,264 (O) $ 248,474
MOB rental income - 32,118 11,594 5,301 (P) 49,013
Interest and other income 2,327 - - - 2,327
Total revenues 235,537 32,118 11,594 20,565 299,814
EXPENSES:
Property operating expenses 2,792 10,777 1,297 560 (Q) 15,426
Interest 40,154 - - 5,482 (R) 45,636
Depreciation 60,831 - - 16,962 (S) 77,793
General and administrative 17,136 - - 2,580 (T) 19,716
Impairment of assets 8,379 - - - 8,379
Total expenses 129,292 10,777 1,297 25,584 166,950
Income before gain (loss) on
sale of properties 106,245 21,341 10,297 (5,019 ) 132,864
Gain (loss) on sale of
properties 266 - - (365 ) (U) (99 )
Net income $ 106,511 $ 21,341 $ 10,297 $ (5,384 ) $ 132,765
Weighted average shares
outstanding 105,153 15,245 (V) 120,398
Basic and diluted earnings
per share:
Income before gain (loss) on
sale of properties $ 1.01 $ 1.10
Net income $ 1.01 $ 1.10
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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 HRP of two MOBs which were acquired subsequent to March 31, 2009 and related financing. These acquisitions were funded with borrowings under our revolving credit facility. The value of in-place leases and the fair market value of above or below market leases and customer relationships for the two MOBs acquired subsequent to March 31, 2009 is as follows:
Acquired assets other than real estate:
Origination Costs $ 1,548 Above Market Leases 1,825 Total $ 3,373 Assumed liabilities: Below Market Leases $ 86 |
Included in the March 31, 2009 historical numbers are 38 MOBs that were acquired between June 2008 and March 31, 2009 from HRP for approximately $366.0 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. The March 31, 2009 historical column also includes one MOB acquired in September 2008 from an unaffiliated party for $18.6 million, excluding closing costs. Intangible lease assets and liabilities recorded by us for these acquisitions totaled $31.0 million and $4.8 million, respectively.
(B) Represents the impact of our pending acquisitions of the remaining seven MOBs we expect to acquire from HRP and relating financings. These pending acquisitions are expected to be funded with borrowings under our revolving credit facility. The estimated purchase prices of these seven MOBs are subject to change based on contractual terms of the applicable purchase agreement. The funding of these acquisitions is subject to change based on capital market conditions at the time of the closings. The value of in-place leases and the fair market value of above or below market leases and customer relationships for the seven pending MOBs is as follows:
Pending assets to be acquired other than real estate:
Origination Costs $ 5,615 Above Market Leases 15,034 Total MOBs $ 20,649 Assumed liabilities: Below Market Leases $ 3,218 |
(C) In May 2009, we sold one MOB that was classified as held for sale to an unaffiliated party for $3.1 million. We used the net proceeds from the sale to repay borrowings outstanding under our revolving credit facility.
Unaudited Pro Forma Condensed Consolidated Statement of Income Adjustments for the Quarter Ended March 31, 2009
(D) Represents the impact on rental income, reimbursement income and operating expenses for the quarter ended March 31, 2009 of the historical results of the two MOBs acquired by us subsequent to March 31, 2009 and prorated results of the one MOB acquired by us in January 2009, as if these acquisitions occurred on January 1, 2009. Included in rental income, interest expense, depreciation and general and administrative expenses in the historical column are $10.4 million, $184,000, $2.6 million and $6,000, respectively, of the 38 MOBs acquired from HRP and the one MOB acquired from an unaffiliated party prior to March 31, 2009. A management fee of 3% of gross rents is included in property operating expenses.
(E) Represents the impact on rental income, reimbursement income and operating expenses for the quarter ended March 31, 2009 of the historical results of our pending acquisitions from HRP of seven MOBs as if these acquisitions occurred on January 1, 2009. A management fee of 3% of gross rents is included in property operating expenses.
(F) Represents the rental income adjustment for the sale of one MOB to an unaffiliated party for $3.1 million in May 2009 and the straight-line rent adjustment for the two MOBs acquired subsequent to March 31, 2009 and seven MOBs pending acquisition from HRP. Also includes the preliminary amortization of capitalized above and below market lease values for these acquired and pending acquisitions. The adjustments are as follows:
MOB Sold to Unaffiliated Party $ (91 ) MOBs Acquired from HRP (Straight-line) 169 MOBs Pending from HRP (Straight-line) 437 MOBs Acquired from HRP (Above Market Leases) (77 ) MOBs Pending from HRP (Above Market Leases) (301 ) MOBs Acquired from HRP (Below Market Leases) 3 MOBs Pending from HRP (Below Market Leases) 80 Total $ 220 |
(G) Represents the property operating expenses adjustment for the sale of one MOB to an unaffiliated party in May 2009. The adjustment represents the full quarter impact assuming we sold this property on January 1, 2009.
(H) Represents the impact on interest expense for the quarter ended March 31, 2009, from $195.3 million outstanding on our revolving credit facility at our current interest rate of
1.3% per annum drawn in connection with the purchase of the two acquired MOBs subsequent to March 31, 2009 and seven pending MOBs described in Notes (A) and (B), respectively and the impact on interest expense for our sale of one MOB in May 2009 described in Note (C) used to repay borrowings outstanding under our revolving credit facility as if this sale occurred on January 1, 2009. The additional net interest expense is as follows:
MOBs Acquired $ 166 MOBs Pending 473 May 2009 Sale of MOB - Reduction in Interest Expense (10 ) Total $ 629 |
(I) Represents the impact on depreciation expense for the quarter ended March 31, 2009, of properties acquired by us in 2009 described in Note (D) and the impact of the acquisitions of the seven pending MOBs described in Note (E). Also includes the preliminary amortization of capitalized origination costs for these acquired and pending MOBs. The additional depreciation expense is as follows:
MOBs Acquired from HRP $ 339 MOBs Pending from HRP 817 MOBs Acquired from HRP (Origination Costs) 63 MOBs Pending from HRP (Origination Costs) 120 Total $ 1,339 |
(J) Represents the impact on general and administrative expenses for the quarter ended March 31, 2009, of properties acquired by us in 2009 described in Note (D) and the impact of the acquisitions of the seven pending MOBs described in Note (E). 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 HRP will be the same as the management fees that are currently being paid by HRP with respect to these MOBs and they will not increase as a result of our purchase prices being higher than HRP's historical costs of these MOBs. The additional general and administrative expenses are as follows:
MOBs Acquired from HRP $ 51 MOBs Pending from HRP 128 Total $ 179 |
(K) In May 2009, we sold one MOB that was classified as held for sale to an unaffiliated party for $3.1 million and recognized a loss on sale of $365,000.
(L) In February 2009, we issued 5.9 million of our common shares in an underwritten public offering, raising net proceeds of $96.8 million. We used the net proceeds from this offering to repay borrowings outstanding on our revolving credit facility and for
general business purposes, including funding, in part, the acquisitions described in Note (D). The adjustment to our weighted average shares outstanding shows the effect on our weighted average shares outstanding for the quarter ended March 31, 2009, as if we issued the additional shares on January 1, 2009.
Unaudited Pro Forma Condensed Consolidated Statement of Income Adjustments for the Year Ended December 31, 2008
(M) Represents the impact on rental income, reimbursement income and . . .
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