DIVERSIFIED HEALTHCARE TRUST - Quarter Report: 2010 March (Form 10-Q)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC  20549

 

FORM 10-Q

 

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

 

For the quarterly period ended March 31, 2010

 

OR

 

o	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)

 

 

400 Centre Street, Newton, Massachusetts 02458

(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 x   No o

 

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 o  No o

 

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):

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o  No x

 

Number of registrant’s common shares outstanding as of May 5, 2010: 127,402,807.

 

 

 

SENIOR HOUSING PROPERTIES TRUST

 

FORM 10-Q

 

March 31, 2010

 

INDEX

 

		Page
PART I	Financial Information
Item 1.	Financial Statements (unaudited)	1
	Condensed Consolidated Balance Sheets – March 31, 2010 and December 31, 2009	1
	Condensed Consolidated Statements of Income – Three Months Ended March 31, 2010 and 2009	2
	Condensed Consolidated Statements of Cash Flows – Three Months Ended March 31, 2010 and 2009	3
	Notes to Condensed Consolidated Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	18
Item 4.	Controls and Procedures	20
	Warning Concerning Forward Looking Statements	21
	Statement Concerning Limited Liability	23
PART II	Other Information
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24
Item 6.	Exhibits	24
	Signatures	25

 

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.

 

 

PART I.  Financial Information

 

Item 1.    Financial Statements.

 

SENIOR HOUSING PROPERTIES TRUST

CONDENSED CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except share data)

(unaudited)

 

		March 31,			December 31,
		2010			2009
ASSETS
Real estate properties:
Land		$	365,576		$	365,576
Buildings and improvements		2,958,769			2,952,407
		3,324,345			3,317,983
Less accumulated depreciation		475,451			454,317
		2,848,894			2,863,666
Cash and cash equivalents		5,486			10,494
Restricted cash		4,643			4,222
Deferred financing fees, net		14,942			14,882
Acquired real estate leases, net		41,032			42,769
Other assets		51,025			51,893
Total assets		$	2,966,022		$	2,987,926
LIABILITIES AND SHAREHOLDERS’ EQUITY
Unsecured revolving credit facility		$	58,000		$	60,000
Senior unsecured notes due 2012 and 2015, net of discount		322,196			322,160
Secured debt and capital leases		657,862			660,059
Accrued interest		10,836			13,693
Acquired real estate lease obligations, net		9,318			9,687
Other liabilities		22,493			21,677
Total liabilities		1,080,705			1,087,276
Commitments and contingencies
Shareholders’ equity:
Common shares of beneficial interest, $0.01 par value: 149,700,000 shares authorized, 127,402,807 and 127,377,665 shares issued and outstanding at March 31, 2010 and December 31, 2009, respectively		1,274			1,273
Additional paid in capital		2,227,061			2,226,474
Cumulative net income		670,017			640,033
Cumulative distributions		(1,014,967		)	(969,111		)
Unrealized gain on investments		1,932			1,981
Total shareholders’ equity		1,885,317			1,900,650
Total liabilities and shareholders’ equity		$	2,966,022		$	2,987,926

 

See accompanying notes.

 

1

 

SENIOR HOUSING PROPERTIES TRUST

 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(amounts in thousands, except per share data)

(unaudited)

 

		Three Months Ended March 31,
		2010			2009
Rental income		$	80,447		$	68,377
Expenses:
Depreciation		22,289			18,389
General and administrative		5,501			4,751
Property operating expenses		4,375			2,955
Acquisition costs		35			112
Total expenses		32,200			26,207
Operating income		48,247			42,170
Interest and other income		257			208
Interest expense		(18,414		)	(10,776		)
Equity in losses of an investee		(28		)	—
Income before income tax expense		30,062			31,602
Income tax expense		(78		)	(69		)
Net income		$	29,984		$	31,533
Weighted average shares outstanding		127,380			117,853
Earnings per share:
Net income		$	0.24		$	0.27

 

See accompanying notes.

 

2

 

SENIOR HOUSING PROPERTIES TRUST

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(amounts in thousands)

(unaudited)

 

		Three Months Ended March 31,
		2010			2009
Cash flows from operating activities:
Net income		$	29,984		$	31,533
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation		22,289			18,389
Amortization of deferred financing fees and debt discounts		558			540
Amortization of acquired real estate leases		275			160
Equity in losses of equity investment		28			—
Change in assets and liabilities:
Restricted cash		(421		)	(433		)
Other assets		747			2,274
Accrued interest		(2,857		)	(2,941		)
Other liabilities		1,406			3,119
Cash provided by operating activities		52,009			52,641
Cash flows from investing activities:
Acquisitions		(6,362		)	(32,252		)
Investment in Affiliates Insurance Company		(20		)	—
Cash used for investing activities		(6,382		)	(32,252		)
Cash flows from financing activities:
Proceeds from issuance of common shares, net		—			96,767
Proceeds from borrowings on revolving credit facility		30,000			32,000
Repayments of borrowings on revolving credit facility		(32,000		)	(108,000		)
Repayment of other debt		(2,196		)	(751		)
Deferred financing fees		(583		)	(739		)
Distributions to shareholders		(45,856		)	(40,090		)
Cash used for financing activities		(50,635		)	(20,813		)
Decrease in cash and cash equivalents		(5,008		)	(424		)
Cash and cash equivalents at beginning of period		10,494			5,990
Cash and cash equivalents at end of period		$	5,486		$	5,566
Supplemental cash flow information:
Interest paid		$	21,271		$	13,717
Non-cash financing activities:
Issuance of common shares		590			28

 

See accompanying notes.

 

3

 

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, have been prepared without audit.  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, 2009, 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 between us and 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 separately state on our condensed consolidated statements of income our equity in losses of an investee and income tax expense that were previously included in general and administrative expenses.  These reclassifications had no effect on net income or shareholders’ equity.

 

Note 2.  Recent Accounting Pronouncements

 

In January 2010, the Financial Accounting Standards Board, or FASB, issued an accounting standards update requiring additional disclosures regarding fair value measurements. The update requires entities to disclose additional information regarding assets and liabilities that are transferred between levels within the fair value hierarchy. The update also clarifies the level of disaggregation at which fair value disclosures should be made and the requirements to disclose information about the valuation techniques and inputs used in estimating Level 2 and Level 3 fair values. The update is effective for interim and annual reporting periods beginning after December 15, 2009 except for the requirement to separately disclose purchases, sales, issuances and settlements in the Level 3 roll forward that becomes effective for fiscal periods beginning after December 15, 2010.

 

In February, the FASB issued an update to the disclosure requirements relating to subsequent events to exclude the requirement to disclose the date through which an entity has evaluated subsequent events and whether that date represents the date the financial statements were issued or available to be issued.

 

The adoption of these updates does not, and is not expected to, cause any material changes to the disclosures in our condensed consolidated financial statements.

 

Note 3.  Real Estate Properties

 

At March 31, 2010, we owned 298 properties located in 35 states and Washington, D.C.

 

During the three months ended March 31, 2010, pursuant to the terms of our existing leases with Five Star Quality Care, Inc., or Five Star, we purchased $6,180 of improvements made to our properties leased to Five Star, and, as a result, the annual rent payable to us by Five Star was increased by approximately $495.

 

As of March 31, 2010, two of our properties are classified as held for sale.  These two properties are included in real estate properties on our condensed consolidated balance sheets and have a net carrying value of approximately $2,612 at March 31, 2010.  These properties are currently leased to Five Star.

 

In April 2010, we acquired a medical office building located in Colorado with 14,695 rentable square feet

 

4

 

SENIOR HOUSING PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

 

for approximately $4,450, excluding closing costs.  We funded this acquisition using cash on hand and by assuming a mortgage loan totaling $2,458 with an interest rate of 6.73% per annum.

 

In April 2010, we entered into a purchase and sale agreement to acquire a medical office building located in Texas with approximately 55,800 rentable square feet for approximately $12,175, excluding closing costs.  We expect to fund this acquisition using cash on hand and borrowings under our revolving credit facility, if necessary.  The purchase of this property is contingent upon completion of our diligence and other customary closing conditions; accordingly, we can provide no assurance that we will purchase this property.

 

Note 4.  Unrealized Gain on Investments

 

On March 31, 2010, we owned 1,000,000 common shares of HRPT Properties Trust, or HRP, and 3,235,000 common shares of Five Star, which are carried at fair market value in other assets on our condensed consolidated balance sheets. The unrealized gain on investments shown on our condensed consolidated balance sheets represents the difference between the quoted market prices of our HRP and Five Star shares on March 31, 2010 ($7.78 and $3.05 per share, respectively) and our weighted costs on the dates we acquired these shares ($6.50 and $2.85 per share, respectively).

 

Note 5.  Indebtedness

 

We have an unsecured revolving credit facility that matures on December 31, 2010.  Our revolving credit facility permits borrowings up to $550,000.  The interest payable for amounts drawn under the facility is LIBOR plus a premium.  We can borrow, repay and reborrow until maturity, and no principal repayment is due until maturity.  The interest rate payable on borrowings under this revolving credit facility was 1.0% and 1.3% at March 31, 2010 and 2009, respectively.  In addition to interest, we pay certain fees to maintain this credit facility and we amortize certain set up costs.  Our revolving credit facility is available for acquisitions, working capital and general business purposes. As of March 31, 2010 and 2009, we had $58,000 and $181,000 outstanding under this credit facility, respectively, and $492,000 and $369,000 available under this credit facility, respectively.  Subject to certain conditions, this credit facility’s maturity date can be extended at our option to December 31, 2011 upon payment of a fee.  Our revolving credit facility contains financial covenants and requires us to maintain financial ratios and a minimum net worth.  We believe we were in compliance with these covenants during the periods presented.

 

In April 2010, we sold $200,000 of senior unsecured notes.  The notes require interest at a fixed rate of 6.75% per annum and are due in 2020.  Net proceeds from the sale of the notes, after underwriting discounts and other expenses, were approximately $195,000.  Interest on the notes is payable semi-annually in arrears.  No principal payments are due until maturity.  We used a portion of the net proceeds of this offering to repay $58,000 in borrowings under our revolving credit facility and we intend to use the remaining net proceeds of this offering to fund the redemption of our $97,500 outstanding 7.875% senior notes due 2015 and for general business purposes, including pending and possible future acquisitions.  In April 2010, we called all of the outstanding 7.875% senior notes due 2015 for redemption on May 17, 2010.  As a result of this redemption, we expect to record losses on early extinguishment of debt of approximately $2,300 consisting of the debt prepayment premium and the write-off of unamortized deferred financing fees.

 

Note 6.  Shareholders’ Equity

 

On February 16, 2010, we paid a $0.36 per share, or $45,856, distribution to our common shareholders for the quarter ended December 31, 2009.  On April 1, 2010, we declared a distribution of $0.36 per share, or $45,865, to be paid to common shareholders of record on April 15, 2010, with respect to our results for the quarter ended March 31, 2010. We expect to pay this distribution on or about May 14, 2010.

 

5

 

SENIOR HOUSING PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

 

Under the terms of our business management agreement with Reit Management & Research LLC, or RMR, on March 25, 2010 we issued 25,142 common shares in payment of an incentive fee of approximately $557 for services rendered by RMR during 2009. We issued these shares pursuant to an exemption from registration contained in Section 4(2) of the Securities Act of 1933, as amended.

 

The following is a reconciliation of net income to comprehensive income for the three months ended March 31, 2010 and 2009:

 

		Three Months Ended March 31,
		2010			2009
Net income		$	29,984		$	31,533
Other comprehensive income:
Change in net unrealized gain (loss) on investments		(49		)	(197		)
Comprehensive income		$	29,935		$	31,336

 

Note 7.  Fair Value of Assets and Liabilities

 

The table below presents certain of our assets and liabilities measured at fair value at March 31, 2010 categorized by the level of inputs used in the valuation of each asset or liability.

 

Description		Total			Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Assets held for sale (1)		$	2,612		$	—		$	2,612		$	—
Investments in available for sale securities (2)		17,647			17,647			—			—
Senior notes (3)		332,775			—			332,775			—

 

(1) Assets held for sale consist of two of our properties that we expect to sell that are reported at fair value.  We used offers to purchase the properties made by third parties or comparable sales transactions (level 2 inputs) to determine fair value of these properties.  We have recorded cumulative impairments of approximately $8,338 to these properties in order to reduce their carrying value to fair value, or $2,612 at March 31, 2010.

 

(2) Our investments in available for sale securities include our 1,000,000 common shares of HRP and 3,235,000 common shares of Five Star. The fair values of these shares are based on quoted prices at March 31, 2010 in active markets (level 1 inputs).

 

(3) We estimate the fair values of our senior notes by using an average of their bid and ask prices (level 2 inputs). As of March 31, 2010, the carrying value of our senior notes was $322,196.

 

In addition to the assets and liabilities described in the above table, our additional financial instruments  include rents receivable, cash and cash equivalents, restricted cash, secured and unsecured debt and other liabilities. The fair values of these additional financial instruments approximate their carrying values at March 31, 2010 based upon their liquidity, short term maturity and / or variable rate pricing.

 

6

 

SENIOR HOUSING PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

 

Note 8. Segment Reporting

 

We have two reportable operating segments: (i) short term and long term residential care facilities that offer dining for residents and (ii) properties where medical related activities occur but where residential overnight stays or dining services are not provided, or MOBs.  Properties in the short term and long term residential care facilities segment include independent living facilities, assisted living facilities, skilled nursing facilities and rehabilitation hospitals.  Properties in the MOB segment include medical office, clinic and biotech laboratory buildings.  The “All Other” category in the following table includes amounts 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, 2010
		Short and Long Term Residential Care Facilities			MOB			All Other			Consolidated
Rental income		$	57,018		$	19,559		$	3,870		$	80,447
Expenses:
Depreciation expense		16,461			4,906			922			22,289
General and administrative		—			—			5,501			5,501
Property operating expenses		—			4,375			—			4,375
Acquisition costs		—			35			—			35
Total expenses		16,461			9,316			6,423			32,200
Operating income (loss)		40,557			10,243			(2,553		)	48,247
Interest and other income		—			—			257			257
Interest expense		(10,243		)	(169		)	(8,002		)	(18,414		)
Equity in losses of an investee		—			—			(28		)	(28		)
Income (loss) before income tax expense		30,314			10,074			(10,326		)	30,062
Income tax expense		—			—			(78		)	(78		)
Net income (loss)		$	30,314		$	10,074		$	(10,404	)	$	29,984
Total assets		$	1,959,151		$	733,703		$	273,168		$	2,966,022

 

7

 

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, 2009
		Short and Long Term Residential Care Facilities			MOB			All Other			Consolidated
Rental income		$	54,037		$	10,446		$	3,894		$	68,377
Expenses:
Depreciation expense		14,873			2,594			922			18,389
General and administrative		—			—			4,751			4,751
Property operating expenses		—			2,955			—			2,955
Acquisition costs		—			112			—			112
Total expenses		14,873			5,661			5,673			26,207
Operating income (loss)		39,164			4,785			(1,779		)	42,170
Interest and other income		—			—			208			208
Interest expense		(2,030		)	(184		)	(8,562		)	(10,776		)
Income (loss) before income tax expense		37,134			4,601			(10,133		)	31,602
Income tax expense		—			—			(69		)	(69		)
Net income (loss)		$	37,134		$	4,601		$	(10,202	)	$	31,533
Total assets		$	1,885,213		$	392,770		$	230,559		$	2,508,542

 

Note 9. Significant Tenant

 

Five Star is the lessee of 57% of our annualized rents as of March 31, 2010.  The following tables present summary financial information for Five Star for the three months ended March 31, 2010 and 2009, as reported in its Quarterly Report on Form 10-Q.

 

Summary Financial Information of Five Star Quality Care, Inc.

(unaudited)

 

		For the Three Months Ended March 31,
		2010			2009
Total revenues		$	310,331		$	293,846
Operating income		4,937			3,450
Income from continuing operations		4,306			25,053
Net income		4,085			25,372
Cash Flows
Cash provided by operating activities		15,459			21,791
Net cash (used in) provided by discontinued operations		(221		)	1,442
Cash used in investing activities		(5,142		)	(6,170		)
Cash used in financing activities		(2,831		)	(4,775		)
Change in cash and cash equivalents		7,265			12,288
Cash and cash equivalents at beginning of period		11,299			16,138
Cash and cash equivalents at end of period		18,564			28,426

 

8

 

SENIOR HOUSING PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

 

		As of March 31,
Financial Position		2010			2009
Current assets		$	182,574		$	116,305
Non-current assets		230,412			298,535
Total indebtedness		98,458			129,679
Current liabilities		175,315			135,797
Non-current liabilities		93,216			167,272
Total shareholders’ equity		144,455			111,771

 

The summary financial information of Five Star is presented to comply with applicable accounting regulations of the SEC.  References in these financial statements to the Quarterly Report on Form 10-Q for Five Star are included as textual references only, and the information in Five Star’s Quarterly Report is not incorporated by reference into these financial statements.

 

Five Star is our former subsidiary and both we and Five Star have management contracts with RMR.  For information about our dealings with Five Star and RMR and about the risks which may arise as a result of these related person transactions, please see our Annual Report, especially the section titled “Risk Factors”.

 

Note 10.  Related Person Transactions

 

In connection with our property management agreement with RMR, we recognized expenses of $549 and $294 for the three months ended March 31, 2010 and 2009, respectively.  These amounts are included in property operating expenses in our condensed consolidated financial statements.  In connection with our business management agreement with RMR, we recognized expense of $4,218 and $3,729 for the three months ended March 31, 2010 and 2009, respectively.  These amounts are included in general and administrative expenses in our consolidated financial statements.

 

As of March 31, 2010, we have invested $5,154 in Affiliates Insurance Company, or Affiliates Insurance, concurrently with RMR and other companies to which RMR provides management services.  All of our trustees are currently serving on the board of directors of Affiliates Insurance.  At March 31, 2010, we owned approximately 14.29% of Affiliates Insurance.  We expect to procure some of our insurance from Affiliates Insurance.  Although we own less than 20% of Affiliates Insurance, we use the equity method to account for this investment because we believe that we have significant influence over Affiliates Insurance because each of our trustees is a director of Affiliates Insurance.  This investment is carried on our balance sheet in other assets and had a carrying value of $4,992 and $5,000 as of March 31, 2010 and December 31, 2009, respectively.  During the first quarter of 2010, we recognized a loss of $28 related to this investment.

 

9

 

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 our Annual Report on Form 10-K for the year ended December 31, 2009, or our Annual Report.

 

PORTFOLIO OVERVIEW

 

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

 

(As of March 31, 2010)		Number of Properties		Number of Units/Beds or Square Feet		Investment Carrying Value (1)			% of Investment		Annualized Current Rent (2)			% of Annualized Current Rent
Facility Type
Independent living communities (3)		43		11,524		$	1,124,891		33.9%		$	111,618		33.8%
Assisted living facilities (3)		131		9,342		1,029,649			31.0%		94,424			28.6%
Skilled nursing facilities (3)		56		5,707		226,911			6.8%		20,353			6.2%
Rehabilitation hospitals		2		364		64,130			1.9%		9,884			3.0%
Wellness centers		10		812,000	sq. ft.	180,017			5.4%		17,069			5.2%
MOBs		56		2,867,862	sq. ft.	698,747			21.0%		76,347			23.2%
Total		298				$	3,324,345		100.0%		$	329,695		100.0%
Tenant / Operator
Five Star (Lease No. 1)		89		6,468		$	630,767		19.0%		$	53,895		16.3%
Five Star (Lease No. 2)		49		6,031		505,687			15.2%		49,579			15.0%
Five Star (Lease No. 3)		28		5,618		621,643			18.7%		61,991			18.8%
Five Star (Lease No. 4)		26		2,720		252,103			7.6%		23,026			7.0%
Sunrise / Marriott (4)		14		4,091		325,165			9.8%		32,507			9.9%
Brookdale		18		894		61,122			1.8%		8,349			2.5%
6 private companies (combined)		8		1,115		49,094			1.5%		6,932			2.1%
Wellness centers		10		812,000	sq. ft.	180,017			5.4%		17,069			5.2%
Multi-tenant MOBs		56		2,867,862	sq. ft.	698,747			21.0%		76,347			23.2%
Total		298				$	3,324,345		100.0%		$	329,695		100.0%

 

10

 

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

Tenant Operating Statistics (5)

 

		Rent Coverage				Occupancy				Annualized Rental Income per Living Unit, Bed or Square Foot (6)
		2009		2008		2009		2008		2010			2009
Five Star (Lease No. 1)		1.28x		1.21x		86%		88%		$	8,333		$	7,691
Five Star (Lease No. 2) (7)		1.30x		1.33x		82%		84%		$	7,005		$	6,922
Five Star (Lease No. 3)		1.51x		1.58x		89%		92%		$	11,034		$	10,716
Five Star (Lease No. 4)		1.05x		1.29x		85%		88%		$	8,465		$	8,548
Sunrise / Marriott (4)		1.39x		1.47x		89%		91%		$	7,946		$	8,199
Brookdale		2.11x		2.11x		91%		93%		$	9,339		$	8,949
6 private companies (combined)		1.94x		1.96x		84%		84%		$	6,217		$	6,133
Wellness centers (8)		2.27x		2.34x		100%		100%		NA			NA
Multi-tenant MOBs (9)		NA		NA		96%		99%		$	27		$	25

 

		Short and Long Term Residential Care Facilities Percentage of Operating Revenue Sources
		Private Pay (10)				Medicare				Medicaid
		2009		2008		2009		2008		2009		2008
Five Star (Lease No. 1)		61%		58%		14%		15%		25%		27%
Five Star (Lease No. 2)		52%		52%		32%		32%		16%		16%
Five Star (Lease No. 3)		87%		88%		12%		12%		1%		—
Five Star (Lease No. 4)		67%		69%		14%		13%		19%		18%
Sunrise / Marriott (4)		71%		66%		25%		30%		4%		4%
Brookdale		100%		99%		—		—		—		1%
6 private companies (combined)		23%		26%		24%		23%		53%		51%

 

(1)	Amounts are before depreciation, but after impairment write downs, if any.
(2)	Annualized rent is as of March 31, 2010.
(3)	Properties are categorized by the type of living units / beds which constitute a majority of the living units / beds at the property.
(4)	Marriott International, Inc., or Marriott, guarantees this lease.
(5)	All tenant operating data presented are based upon the operating results provided by our tenants for the 12 months ended December 31, 2009 and 2008, or the most recent prior period for which tenant operating results are available to us. Rent coverage is calculated as operating cash flow from our tenants’ operations of our properties, before subordinated charges, divided by minimum rents payable to us. We have not independently verified our tenants’ operating data. The table excludes data for periods prior to our ownership of some of these properties.
(6)	Represents annualized rent by lease divided by the number of living units, beds or square feet leased at March 31, 2010 and 2009.
(7)	Annualized rental income per living unit, bed or square foot excludes the two rehabilitation hospitals because these properties have extensive clinic space for services to both overnight patients and patients who receive treatment and do not stay overnight, and these properties are not comparable to residential senior living properties.
(8)	Annualized rental income per living unit, bed or square foot excludes the wellness centers because these properties have extensive indoor and outdoor recreation space which is not comparable to properties where rent is based on interior space only.
(9)	Our medical office, clinic and biotech laboratory buildings, or MOBs, leases include both triple net leases where, in addition to paying fixed rents, the tenants assume the obligation to operate and maintain the properties at their expense, and net and modified gross leases where we are responsible to operate and maintain the properties and we charge tenants for some or all of the property operating costs. A small percentage of our MOB leases are so-called “full-service” leases where we receive fixed rent from our tenants and no reimbursement for our property operating costs.
(10)	Private pay excludes revenues from the Medicare and Medicaid programs.

 

11

 

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

The following tables set forth information regarding our lease expirations as of March 31, 2010 (dollars in thousands):

 

		Annualized Rent												Percent of Total		Cumulative Percentage of Annualized
Year		Short and Long Term Residential Care Facilities			MOBs			Wellness Centers			Total			Annualized Current Rent Expiring		Current Rent Expiring
2010		$	1,373		$	1,833		$	—		$	3,206		1.0%		1.0%
2011		—			2,146			—			2,146			0.7%		1.7%
2012		—			5,999			—			5,999			1.8%		3.5%
2013		32,507			3,691			—			36,198			11.0%		14.5%
2014		—			3,114			—			3,114			0.9%		15.4%
2015		2,065			6,081			—			8,146			2.5%		17.9%
2016		2,895			6,604			—			9,499			2.9%		20.8%
2017		31,375			1,715			—			33,090			10.0%		30.8%
2018		—			1,898			—			1,898			0.6%		31.4%
2019 and after		166,064			43,266			17,069			226,399			68.6%		100.0%
Total		$	236,279		$	76,347		$	17,069		$	329,695		100.0%

 

Average remaining lease term for all properties (weighted by rent):  12.5 years

 

		Number of Tenants										Cumulative
Year		Short and Long Term Residential Care Facilities		MOBs		Wellness Centers		Total		Percent of Total Number of Tenants Expiring		Percentage of Number of Tenants Expiring
2010		1		23		—		24		11.0%		11.0%
2011		—		24		—		24		11.0%		22.0%
2012		—		38		—		38		17.4%		39.4%
2013		1		20		—		21		9.6%		49.0%
2014		—		25		—		25		11.4%		60.4%
2015		2		23		—		25		11.4%		71.8%
2016		2		17		—		19		8.7%		80.5%
2017		2		14		—		16		7.3%		87.8%
2018		—		6		—		6		2.7%		90.5%
2019 and after		4		15		2		21		9.5%		100.0%
Total		12		205		2		219		100.0%

 

12