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| SNH > SEC Filings for SNH > Form 8-K on 18-Aug-2009 | All Recent SEC Filings |
18-Aug-2009
Financial Statements and Exhibits
This Current Report on Form 8-K includes pro forma financial data for us, which includes the 43 MOBs that have been acquired and the four 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 July 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 June 30, 2009, we acquired 40 of the MOBs (including one MOB we sold in May 2009) containing 1.8 million square feet for approximately $416.8 million, plus closing costs, and sold one MOB containing 22,000 square feet for approximately $3.1 million. On August 6, 2009, we acquired three additional MOBs containing 164,000 square feet for approximately $115.7 million, plus closing costs, and we expect the closings of the remaining four acquisitions to occur before February 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, proceeds from mortgage financing 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.
On August 4, 2009, a special purpose subsidiary of ours closed a $512.9 million mortgage financing with FNMA. This mortgage loan is secured by first liens on 28 senior living properties that we own and lease to Five Star with 5,618 living units / beds located in 16 states. We used a portion of the proceeds from this mortgage financing to repay amounts outstanding under our revolving credit facility and to purchase three MOBs from HRP. We intend to use the balance of the proceeds to fund investments, including possibly accelerating the remaining MOB acquisitions from HRP, and for general business purposes. For more information about this FNMA financing and the agreement we entered with Five Star to facilitate this financing please see Part II, Item 5 of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2009.
Between January 1, 2008 and August 17, 2009, we acquired the following other properties from unrelated parties (dollars in thousands):
Date Purchase
Acquired Location Number of 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. As of the date of this report, we have an agreement to acquire one senior living property from an unaffiliated party for approximately $21.0 million.
Certain properties acquired by us, or proposed to be acquired from HRP, are leased to various tenants, including 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 and six months ended June 30, 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. Four of the significant net lease tenants are: Five Star, Scripps Research Institute, or Scripps; Fallon Community Health Plan, or Fallon Clinic; and Health Insurance Plan of New York, or HIP. 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.
(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, 2009 F-3 Unaudited Pro Forma Condensed Consolidated Statement of Income for the Six Months Ended June 30, 2009 F-4 Unaudited Pro Forma Condensed Consolidated Statement of Income for the Year Ended December 31, 2008 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, 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 June 30, 2009. The unaudited pro forma condensed consolidated statement of income for the six months ended June 30, 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, 2009 and 2008, respectively. These unaudited pro forma condensed consolidated financial statements should be read in conjunction with our financial statements for the quarter and six months ended June 30, 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, our Current Report on Form 8-K dated December 17, 2008, our Current Report on Form 8-K dated April 8, 2009 and our Current Report on Form 8-K dated July 7, 2009.
The unaudited pro forma financial statements assume the receipt of $512.9 million of mortgage financing proceeds and the acquisitions of 47 medical office, clinic and biotech laboratory buildings, or MOBs, from HRPT Properties Trust, or HRP, which are financed with cash on hand, proceeds from mortgage financing, proceeds from equity issuances, borrowings under our revolving credit facility and by assuming three mortgage loans on two of the properties. We expect to fund the pending 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 the pending 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
June 30, 2009
(dollars in thousands)
Pro Forma Adjustments
Financing, Other
MOBs Pending
Acquired MOBs Acquisitions and
Historical (A) Pending (B) Adjustments (C) Pro Forma
ASSETS:
Real estate properties, at
cost $ 2,896,734 $ 96,567 $ 30,567 $ 29,500 $ 3,053,368
Less accumulated
depreciation 416,697 - - - 416,697
2,480,037 96,567 30,567 29,500 2,636,671
Cash and cash equivalents 5,373 (115,654 ) (28,911 ) 232,734 93,542
Restricted cash 4,589 - - - 4,589
Deferred financing fees,
net 6,340 - - 6,740 13,080
Acquired real estate
leases, net 31,834 19,087 1,562 - 52,483
Other assets 32,025 - - 8,960 40,985
$ 2,560,198 $ - $ 3,218 $ 277,934 $ 2,841,350
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LIABILITIES AND
SHAREHOLDERS' EQUITY:
Unsecured revolving credit
facility $ 235,000 $ - $ - $ (235,000 ) $ -
Senior unsecured notes due
2012 and 2015, net of
discount 322,089 - - - 322,089
Secured debt and capital
leases 149,931 - - 512,934 662,865
Acquired real estate lease
obligations, net 8,509 - 3,218 - 11,727
Other liabilities 35,096 - - - 35,096
Shareholders' equity 1,809,573 - - - 1,809,573
$ 2,560,198 $ - $ 3,218 $ 277,934 $ 2,841,350
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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, 2009
(amounts in thousands, except per share amounts)
MOBs
Acquired MOBs Pro Forma
Historical (D) Pending (E) Adjustments Pro Forma
REVENUES:
Rental income $ 137,776 $ - $ - $ (81 ) (F) $ 137,695
MOB rental income - 7,002 1,280 296 (G) 8,578
Interest and other income 394 - - - (H) 394
Total revenues 138,170 7,002 1,280 215 146,667
EXPENSES:
Property operating expenses 6,174 1,782 51 (4 ) (I) 8,003
Interest 21,483 - - 16,022 (J) 37,505
Depreciation 37,024 - - 2,680 (K) 39,704
Acquisition costs 1,394 - - - 1,394
General and administrative 10,051 - - 386 (L) 10,437
Total expenses 76,126 1,782 51 19,084 97,043
Income before loss on sale
of property 62,044 5,220 1,229 (18,869 ) 49,624
Loss on sale of property - - - - -
Net income $ 62,044 $ 5,220 $ 1,229 $ (18,869 ) $ 49,624
Weighted average shares
outstanding 119,161 1,303 (M) 120,464
Basic and diluted earnings
per share:
Income before loss on sale
of property $ 0.52 $ 0.41
Net income $ 0.52 $ 0.41
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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 Pro Forma
Historical (N) Pending (O) Adjustments Pro Forma
REVENUES:
Rental income $ 233,210 $ - $ - $ 15,102 (P) $ 248,312
MOB rental income - 41,155 2,557 5,303 (Q) 49,015
Interest and other income 2,327 - - - (R) 2,327
Total revenues 235,537 41,155 2,557 20,405 299,654
EXPENSES:
Property operating expenses 2,792 11,990 84 560 (S) 15,426
Interest 40,154 - - 34,918 (T) 75,072
Depreciation 60,831 - - 17,408 (U) 78,239
General and administrative 17,136 - - 2,685 (V) 19,821
Impairment of assets 8,379 - - - 8,379
Total expenses 129,292 11,990 84 55,571 196,937
Income before gain on sale
of properties 106,245 29,165 2,473 (35,166 ) 102,717
Gain on sale of properties 266 - - - 266
Net income $ 106,511 $ 29,165 $ 2,473 $ (35,166 ) $ 102,983
Weighted average shares
outstanding 105,153 15,311 (W) 120,464
Basic and diluted earnings
per share:
Income before gain on sale
of properties $ 1.01 $ 0.85
Net income $ 1.01 $ 0.85
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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 three MOBs which were acquired subsequent to June 30, 2009 and related financing. This acquisition was funded with cash on hand. The value of in-place leases and the fair market value of above market leases and customer relationships for the three MOBs acquired subsequent to June 30, 2009 is as follows:
Acquired assets other than real estate:
Origination Costs $ 4,053 Above Market Leases 15,034 Total $ 19,087 |
Included in the June 30, 2009 historical numbers are 39 MOBs that were acquired between June 2008 and June 30, 2009 from HRP for approximately $411.9 million, plus 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 June 30, 2009 historical column also includes one MOB acquired in September 2008 from an unaffiliated party for $18.6 million, plus closing costs. Intangible lease assets and liabilities recorded by us for these acquisitions totaled $33.6 million and $5.4 million, respectively.
(B) Represents the impact of our pending acquisitions of the remaining four MOBs we expect to acquire from HRP and relating financings. These pending acquisitions are expected to be funded with cash on hand and borrowings under our revolving credit facility, if needed. The estimated purchase prices of these four 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 four pending MOBs is as follows:
Pending assets to be acquired other than real estate:
Origination Costs $ 1,562
Assumed liabilities:
Below Market Leases $ 3,218
(C) Represents the impact of a pending senior living property that we have agreed to acquire from an unaffiliated party for approximately $21.0 million. We expect to fund this acquisition using cash on hand and borrowings on our revolving credit facility, if needed.
On August 4, 2009, a special purpose subsidiary of ours closed a $512.9 million mortgage financing with FNMA. This mortgage loan is secured by first liens on 28 senior living properties that we own and lease to Five Star Quality Care Inc., or Five Star, with 5,618 living units / beds located in 16 states. We used a portion of the proceeds from this mortgage financing to repay amounts outstanding under our revolving credit facility and to purchase three MOBs from HRP. We intend to use the balance of the proceeds to fund investments, including possibly accelerating the remaining MOB acquisitions from HRP, and for general business purposes.
In connection with this transaction, SNH and Five Star agreed that SNH would pay Five Star $18.6 million as consideration for their cooperation with the FNMA transaction. The preliminary allocation of this consideration is as follows:
Purchase of Five Star PP&E in FNMA mortgaged properties $ 8,500 Purchase of 3.2 million common shares of Five Star at $2.80 per share (closing price August 4, 2009) 8,960 Deferred Financing Fees 1,140 Total Compensation to Five Star $ 18,600 |
Also, we agreed to reduce the annual rent payable to us under one of the leases, but not the lease under which the mortgaged properties are leased, by $2.0 million per year for the term of that lease, which will expire in 2026.
For more information about this FNMA financing and the agreement we entered with Five Star to facilitate this financing please see Part II, Item 5 of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2009, filed with the Securities and Exchange Commission on August 10, 2009.
We estimate the total deferred financing fees in completing this transaction with FNMA to be $9.5 million that will be amortized over the ten year loan term. The breakout of this deferred financing fees is as follows:
Total Estimated Deferred Financing Fees $ 9,500 FNMA Deferred Financing Fees Accrued at June 30, 2009 (2,760 ) Balance $ 6,740 (1) |
(1) Includes $1,140 of deferred financing fees as part of the Five Star transaction discussed above.
The breakout of additions to real estate properties is as follows:
Pending Senior Living Acquisition from an Unaffiliated Party $ 21,000 Purchase of Five Star PP&E in FNMA Mortgaged Properties 8,500 Total $ 29,500 |
Unaudited Pro Forma Condensed Consolidated Statement of Income Adjustments for the Six Months Ended June 30, 2009
(D) Represents the impact on rental income, reimbursement income and operating expenses for the six months ended June 30, 2009 of the historical results of the three MOBs acquired by us subsequent to June 30, 2009 and prorated results of the one MOB acquired by us in January 2009 and two MOBs acquired in May 2009, as if these acquisitions occurred on January 1, 2009. Included in rental income, interest expense, depreciation and acquisition costs in the historical column are $21.5 million, $374,000, $5.3 million and $1.4 million, respectively, of the 40 MOBs acquired from HRP (one of which we sold in May 2009), the one MOB acquired from an unaffiliated party and the pro rated results of the one MOB sold prior to June 30, 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 six months ended June 30, 2009 of the historical results of our pending acquisitions from HRP of four 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) We have agreed to acquire one senior living property from an unaffiliated party for approximately $21.0 million. We intend to lease this property for initial rent of $1.8 million. We expect to fund this acquisition using cash on hand and borrowings under our revolving credit facility, if needed. The adjustment to rental income represents the six month impact assuming we acquired this one senior living property on January 1, 2009. This adjustment also includes a $1.0 million rental income reduction related to the FNMA transaction described in Note (C), as if this transaction occurred on January 1, 2009. The adjustments are as follows:
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