Good day and welcome to the Senior Housing Properties Trust fourth quarter and yearend 2011 financial results conference call. This call is being recorded. At this time for opening remarks and introductions, I would like to turn the conference over to the Vice President of Investor Relations, Tim Bonang. Please go ahead sir.

Thank you and good afternoon everyone. Joining me on today’s call are David Hegarty, President and Chief Operating Officer; and Rick Doyle, Chief Financial Officer. Today’s call includes a presentation by management followed by a question-and-answer session. I would also note that the recording and retransmission of today’s conference call is strictly prohibited without prior written consent of Senior Housing. Before we begin, I would like to state that today’s conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. These forward-looking statements are based on Senior Housing’s present beliefs and expectations as of today, February 16, 2012. The company undertakes no obligation to revise or publically release the results of any revision to the forward-looking statements made in today’s conference call other than through filings with the Securities & Exchange Commission or SEC regarding this reporting period. In addition, this call may contain non-GAAP numbers including normalized funds from operations or normalize FFO. A reconciliation of normalized FFO to net income and the components to calculate AFFO, CAD or FAD are available in our supplemental operating and financial data package found on our website at www.snhreit.com. Actual results may differ materially from those projected in any forward-looking statements. Additional information concerning factors that could cause those differences is contained in our annual Form 10-K to be filed with the SEC. Investors are cautioned not to place undue reliance on any forward-looking statements. And with that I will turn it over to Dave Hegarty.

Great. Thank you Tim and thank you all for joining us on today's call. The fourth quarter culminated an active year for our company. We had quality assets to our balance sheet and maintained our record of increasing the dividend at least once a year for over 10 years. The full benefit of the work we’ve accomplished this year may not be recognized right away. We are planting the seeds for future growth which is appealing to our income oriented long-term investors. For the fourth quarter 2011, we reported normalized funds from operations or normalized FFO of $0.42 per share and this compares with normalized FFO of $0.44 per share that we reported for the same period a year ago. For the 2011 full year, we reported normalized FFO of a $1.73 per share versus normalized FFO of a $1.71 per share a year ago. As noted in our investor presentation from February 2011, we outlined our business plan for 2011 which contained a dual acquisition focused to acquire properties in the medical office building space at cap rates between 7% and 9% as a means to diversify our portfolio and to continue to see seek out senior living acquisitions in the private pay space because we strongly believe in the fundamentals of this industry. 2011 was a very successful year as we announced over $1 billion of acquisitions in the private pay senior living and medical office building spaces, growing the size of our total portfolio to almost $5 billion. Our business plan for 2011 also included maintaining a historically strong financial profile. In 2011, we saw a tremendous opportunity to acquire once-in-a-generation senior living assets with high growth potential. The occupancies in both of the senior living portfolios we acquired were below historical averages and we believe there…

Thank you Dave and good afternoon everyone. For the fourth quarter of 2011, we generated normalized FFO of $67.9 million, up 19% from $57.2 million compared to the same period a year ago. On a per share basis, normalized FFO for the quarter was $0.42 per share. Our results for the quarter were negatively impacted by several factors. The timing of acquisitions the deployment of capital proceeds, the lease valuation amortization of recent acquisitions and a significant cash balances we maintained on deposit for acquisitions. Also, the fourth quarter results do not reflect a full quarter’s earnings from acquisitions we made during the quarter. In early January, our board declared a quarterly dividend of $0.38 per share, which represents a 90.5% pay out ratio for the fourth quarter’s normalized FFO. Percentage rent revenue from our senior living tenants for the full year of 2011 increased 9.7% to $11.3 million for the same period last year. $3 million of percentage rank using quarterly in our fourth quarter calculation of normalized FFO versus $2.6 million for the fourth quarter of 2010. In addition through occupancy and rent growth our percentage rank increased due to the addition of the 11 senior living communities we acquired in 2009 based on 2010 base share revenues. During the quarter total revenue increased 40% to $136.6 million compared to last year. We now have over 550 tenants generating these revenues. The majority of these growth was approximately $1 billion of investments we made in 2011. We invested $336 million in medical office buildings, $656 million in senior living communities of which $556 million of these investments were in senior living communities leased to our TRS. We also invested $33 million in revenue producing capital improvements at our senior living communities. The increase in revenues was offset by…

(Operator Instructions) Our first question comes from the line of Daniel Bernstein from Stifel Nicolaus. Please go ahead.

I have question on the actual operating TRS portfolio. How much of that is currently on lease up and not stabilized?

I would say it’s really on one property in Lake Spivey, Georgia that is probably about 70% occupied and that was about that level at the time we made the acquisition. Everything else is pretty much stabilized assets that you know have range from say, 80% occupancy to low 90% occupancy.

So you’re just expecting the upside basically from improving senior housing fundamentals?

Correct, yeah.

One of the TRS or were all the TRS acquisitions in the quarter related to previously announced acquisitions or did you buy anything new in the quarter that you just decided to put in the TRS and then in that sense, are you looking for more acquisitions to grow your TRS portfolio?

Well, the only one that was added during the quarter was the property on Walnut Creek, California. It was a one-off deal. And then subsequent to quarter end, we’ve added the Alabama property. I would say for the foreseeable future, anyways that most properties will be just added to the TRS to make it stronger and also I believe that this is probably and at least for the foreseeable future greater upside potential.

You’re looking to further dispose off any assets particularly like in senior housing or MOB that is not as high quality; I mean you’ve already disposed off a lot of your SNF portfolio or call it your SNF portfolio are there a lot more asserts on the senior housing side or MOB that you think could be called this year?

I do not expect many; we are always looking at the portfolio and I would expect over the course of the year we will probably call a couple of properties on the MOB side. We still have a portfolio of roughly 40 skilled nursing facilities that we would consider selling and components over the course of next several years and may be if the right situation, the majority of the portfolio we might sell it once But it is significant something that ultimately we intend to exit.

And the last question I have is, are you looking at any development opportunities; I know you fund some of Five Star’s CapEx and perhaps expansions. But do you see any development opportunities in the senior housing space or do you see that become more attractive relative to acquisitions?

Well, we are not going to get into the development business in the foreseeable future. As you said, we do have situations where I expect our funding will ramp up more on adding additional wings or units to buildings; we do know that there have been blueprints here and there of like an assisted living facility that would be built on the grounds of the campuses that we currently own. So I think that I do see some opportunity there, but we are not going to it significantly in the near term.

Our next question comes from the line of Todd Stender from Wells Fargo Securities. Please go ahead.

Just to clarify the December acquisition at the Walnut Creek asset, that will go into the TRS?

That is correct.

Okay and then same with the February acquisition of the one in Alabama.

Yes.

Right and a couple of thoughts on that. One is that when you are buying individual assets and so on, you actually do get an initial return more comparable to what we used to get in a traditional sale leaseback and then we believe that there should be more upside in the near term just because of the fundamentals of the industry. So net-net we think from our perspective that we will probably get a better return at the current time on doing a sale leaseback.

Sure and I don't know if I missed this, did you give the initial yields on both of those properties.

I did not. I would say that in both cases that they were in the upper 8% cap rates.

Okay. And just going back with the life science asset with the March lease expiration, what market is that in, and if you could just kind of go through what the in place rents are and then maybe what the market rate of rent is?

That property is in the Mid-Atlantic, I think probably on next call I will give a little more detail on it, but it is a biotech space that they are consolidating on and therefore vacating it. The current rent we are getting into triple net of $12 a foot. So it really will be, the whole new economics will be probably significantly different because I envision we probably have to redesign a fair amount of the space and a lot of build out for the next tenant. And I think it’s too early to speculate. At the moment we don’t have a particular candidate for that space. So I can’t quantify yet the extent of the capital improvements that we would have to do to it. So probably $12 triple net for biotech space is not all that pricey, but again we could do a significant amount of capital improvements and end up with a much higher rate.

Sure. Would this be a candidate for disposition or really do you like where the asset is positioned?

It is a potential situation for disposition.

Okay. And then just moving towards, just terming out your line balance. Does preferred come into the equation for you guys this year? We’ve seen some of the other REITs start to look at the preferred market as pricing has been attractive. How do you guys think about that and maybe where would a preferred price for SNH?

We always considering the preferred, Todd and that is definitely one of our options. The pricing might be around the 7 to 7.25 mark.

Okay and thanks. And last question, the growth in 2011 was tremendous for you guys and then kind of it looks like you are on the right pace for 2012, how do you think about building out your top management ranks to accommodate this growth? Have you thought about that or kind of how may be senior management might expand just because of this year’s size of your portfolio?

Sure. Well I guess what you don’t see and most of the people probably on this call don’t see is that we are a part of a larger organization with REIT management research and we do have multiple divisions within the company and as new properties are added to the portfolio, people are being added to the ranks to take on the responsibility or realign responsibilities. I would say the REIT management is currently up to about 780 employees at this time. So although, for the most part you will see Rick and I and Tim and Beth that most of the presentations and tours and stuff. In fact at the Cedars-Sinai tour, people did have an opportunity to meet the property manager for the Cedars-Sinai properties who has been there, well over a dozen years and then you have the regional Vice President based in Sacramento area for REIT management research. So there is a deeper bench because you don’t have to really see them at investor conferences or on these calls.

Okay. And does that get layered into your G&A, how do you kind of account for that?

Well, it’s not incremental. As we make investments, there is a standard 50 basis points on invested assets for the new investment and that encompasses all incremental costs and stuff that we would incur for that.

(Operator Instructions) Our next question comes from the line of Tayo Okusanya from Jefferies. Please go ahead.

I may have missed this, but the $144.8 million of deals that you guys have under purchase agreements right now, could you give us a sense of what cap rates you intend to buy those assets?

Well, the 144 is just a partial of the acquisitions we have under, the 144 represents the previous announced acquisitions, the property in Yonkers, New York. It’s part of the B property. And then the two, to another property of the (inaudible). So the 144 really represents those that those are the old. We do have new pending acquisitions of above $145 million.

That’s what I meant. The 144.8 million, the 145.

So, you want about the 145 million?

Yeah.

So, the 145 is about is senior housing and medical office. I would say the average is a little over 8.5 for going in cap rate.

That’s helpful. And then the November deal, the two properties located in Virginia? I mean, it’s a relatively small deal of $11.4 million, but it has $9.6 million of debt against it and I was just kind of curious what your appetite was kind of on the deals that have meaningful amount of leverage behind the buildings already?

Well obviously it does enhance our return on the cash that we put into it. We do look for opportunities to pay off that debt. Most of the debt that we are assuming tends to have four to five years left on a term. So we would have a quite a bit of refinancing to do in 2015 and 2016, all those types of mortgages and you know I think we try to focus on $10 million and up for acquisitions and given that it is very nice buildings with great tenancy such as HCA and we are happy to do those. We have to do more of them obviously to add up to a few $100 million.

But the debt to asset ratio being like almost 90% is not a real concern?

No I mean obviously for our case we prefer a debt rate with (inaudible). We actually do better when something is 50% levered because it limits the competitors vying for those assets and this one is a roughly minor amount of equity, but I think we have all the resources and capability to add these to our portfolio which is not really a lot of extra effort to do it.

Okay, just last question. One of your peers announced this morning a fairly large JV deal in Canada. I don’t think you guys are interested in Canada, but I am just kind of curious what you guys are seeing on the US front in regards to acquisition opportunities for fairly sizeable senior housing or MOB portfolios.

There's a couple of out there of decent size. We do see these. We did look at that Canadian transaction and I think we have plenty of opportunity for healthcare REITS for the upcoming year.

Across all property types or specific property types?

What I am more seeing is in the senior living and skilled nursing area which is obviously skilled or not, something we are pursuing but there are some opportunities out there of decent size and then medical office, there's a couple of portfolios of a couple of hundred million dollars inside and then a fair amount of one to three property sized portfolios in the medical office side.

Our next question comes from the line of James Milam from Sandler O'Neill. Please go ahead.

I just want to ask a quick follow-up on the coverage ratio given the CMS, because you said five basis points as of the fourth quarter was that an annualized impact or just what you've seen so far for the trailing 12.

That was actually just Q4 annualized. It doesn't have the historical up through September 30, results impacting that, if you are looking at Q4 times four.

And then I was wondering if you could give us just a little bit more color, the acquisition leases that are amortizing in, as a negative impact, can you just tell us what deals those relate to maybe what the amortization time period is for that if we should you know look at that is kind of the run rate going forward or not?

Yes, that impacted us for a full quarter here, those are leases that we assumed and you have to do the above and below market rents on those. It affected us and you could see that in the supplemental where it affects us for $481,000 for the fourth quarter. And these leases on average about four or five years out or so you will see that on the quarters. And that number changes as we acquire other properties with in-place leases and they net against each other. But for the fourth quarter it affected us about $481,000.

Okay. so obviously there are more deals to close but we can kind think about that has being what’s in the existing portfolio on a go-forward basis?

Yes.

Okay, great. Thanks. And then I just wanted ask a follow up on the balance sheet what you guys are seeing in terms of the unsecured market and you had talk about a term loan in the fourth quarter as begin potential opportunity for you. What you guys are thinking in terms of those options just looking out into 2012.

Yes, that’s another option that we have to raise some capital as Todd asked earlier. The preferred in these term loans are attractive rate out there. So we are in favor of looking at those and considering those in the future.

Have gone quotes on either on unsecured, a 10 year or maybe at the shorter term loan recently. Do you have any idea what the price looks like?

On those term loan that you referred, some of that you price at sort of couple of seven year out there you don’t see them really in the 10-year and never really know what the return to negotiating but there is some retail there that’s up 5% or right around 5%.

Okay. And then on a just a tenure on security, do you have any idea where that might place right now?

I would think and once again you don’t know until you are negotiating. But I would think around 6% tenure.

Okay, great. Thanks. And then just my last question what you guys are looking at when you sort of look at 2012 from a same-store cash NOI basis for NOB then operating senior housing, what you guys kind of think as reasonable expectations are going out this year?

This is an interesting question because our financials and our discussions of results are on a GAAP basis, down for the FFO level and as a result we have about 1% same-store growth rate on a GAAP basis. So any time the straight line rent essentially smooth up to show no growth, but on a cash basis, you have to go further down to look at the FAD or AFFO and so on and we have not published numbers from our perspective from that. But typically the cash side for us would be more closer to the 3% to 4%. Like I mentioned the leases that have renewed in the quarter have typically been in 4.3% rate increase we have been able to achieve. But I think I would say, on a cash basis were in the 3% to 4% range.

Our next question comes from the line of Jarrell Golotti from Morgan Stanley. Please go ahead.

So, I was looking at your MOB leasing summary, specifically I was looking at the weighted average lease terms by square feet for the renewals. And I noticed that for the first three quarters that you have on the supplement. So, the lease terms are about seven, 7.5 years, and afterwards, it goes around five. I was just wondering if you can provide some color on the reduction in the lease terms?

I am not sure that I know exactly where you’re focused on but we have, this is on the whole portfolio, not just medical offices and senior housing. But typically we got some long-term leases in for, say, biotech space and certainly our senior housing properties are on the long-term and this includes senior housing.

On page 25 on the sub?

Page 25 and on page 27.

Page 25. So you look at the weighted average lease term by square feet years, you have renewals and then you have from 12, 30, 2010 to 6, 30, 2011, lease terms are about seven and seven and half years and then.

I feel its like I guess as times going on, the terms get shorter. And that is very interesting insight picked up on is that the more were in the multi-tenant medical office buildings, the more people are only doing leases for three to five years,. So you have that factored in and then properties that we are rented by 12-31-2010 base that have longer lease terms, with another year or so it burned off those lease terms. So between the combination of two I would think today the average lease term is 5 and a half year term for the MOBs. So, it’s a function of a longer termed leased assets having some lease term burned off and in addition most of the newer multi tenanted probably is coming online are in that around five years plus or minus per average lease terms.

You had renewals at 4% spread and that is on a cash basis how much would that be?

We are still achieving pretty much in the 2.5% to 3% on cash basis.

Got it. Is this something you would expect to see go on during 2012?

I would. Obviously as the economy picks up more steam and we can push for more increases that we currently have right now. Obviously it is a balancing act depending on market you ran and how much you feel you can push rates. In some cases we are making a little bit of concession in exchange for getting some more term from other markets, so that I can see a sign or waiting list, we just can’t figure out how much we are comfortable pushing rates there.

Thank you and in terms of still sticking to the MOBs, your margins of about 77% on a same store basis, do you say that's your target margin or could you see that trend up?

I think that's pretty much target we will be at.

And also touching on the, I guess the financing strategy for 2012, you mentioned that all options are open, I just want to get an idea of what your optimal leverage ratio would be?

I think its pretty much keeping it around the level we are at today, plus or minus in the 42% or so, where we are comfortable at.

Historically, we've been lower than that but as we’re growing, we are a bigger company we’re hitting the $5 billion mark so 40% to 45% is a spot that we’re comfortable at.

And that's debt to un-depreciated book?

That's the high 30s right now and we could see that being there. I was talking about total book capital.

I am sorry what was that?

I was talking about total book capital of 40% to 45% and maybe high 30s un-depreciated.

And how does that play into your ratings, how do the ratings agencies, I mean in the sense of, you were previously 10% lower or that was your target, now you are more comfortable at 42%. How is that perceived by them?

My impression is that they are still very comfortable with the leverage ratios. They thought the other leverage ratio was conservative and given the size of the company and also given the fact that skilled nursing was a bigger component of our percentage basis, of our portfolio, they thought it was wise to maintain a low leverage ratio. I think as we’ve grown, they have seen a lot of the investments go into medical office buildings and for the diversifying the revenue stream. So I believe they are very comfortable with this new level for us. And if you were look at like the other healthcare REITs, I think we are in the ballpark of pretty much most of the other healthcare REITs.

In terms of the properties you have agreements to acquire in 2012; focusing on the senior housing asset, do you plan to structure that acquisition as RIDEA investment?

Yes, I would say for the foreseeable future, I anticipate most of our senior living assets will be put into RIDEA structure.

Is that a symptom or is that a result of where we are in the cycle of -- generally speaking in the economic cycle?

Yes. It’s a combination of current market conditions for acquisitions, but in addition, we do believe that the wind is at our back for the next several years. So it’s an opportunity to capture above average returns.

And in terms of the Sunrise assets, so as soon as those come off from Sunrise as the operator, is there any thought into putting those into RIDEA as well?

It’s an option; especially they cover total rent count, base rent plus percentage rent they cover 1.3 times. That allows you to put into management fee arrangement and still have a bump in performance for us; plus I think that there is more upside potential at those properties. So yeah, it would lend itself to RIDEA format, but the drove is still out as to what we want to do or if we – you know that something I would finalize alternatively, that’s also on the table.

What is your optimum RIDEA exposure?

It’s not exact science obviously, but I would say it’s around 20% to 25%.

And in terms of yields you are seeing right now for independent versus assisted living, can you comment on those -- I know you earlier said you have been seeing yours is between 7% and 9% range; I was just wanting to get a little more granular as to between those two senior housing property types?

Well, I think there is a swing right now in the view point of independent living versus assisted living. I think independent living has been sort of batted down the most in this recessionary period and assigned to rebound right now. Having said that, I think individual independent living properties still can be bought at pretty decent cap rates and liaises in many cases. A lot of it depends if you are standalone independent living facility based in Washington D.C. the cap rates going to be a lot lower than something in the Midwest or other parts of the country. You know, similarly with assisted living, I think assisted living is probably trading at a bit lower cap rate than independent living. And there is always a portfolio of premium.

And when do you think, I mean when said from now on forth that you probably looking more at putting senior housing assets in your RIDEA structure rather than triple net structure. What sort of premium would you allocate when you make that decision like so what would be the premium going from like RIDEA to triple net or vice versa?

Well, I mean, I think, part of the two is competitive landscape. If you do want to acquire an asset or portfolio of assets then you’re going to have to pay up for that and as a result, you may settle for something percent of cap rate. And the whole reason you want to acquire those assets is you believe that there is a decent amount of upside potential. It’s very difficult to compare that to a theoretical sale leaseback that you may not be able to achieve in this marketplace. There are very few sale leasebacks being done out there and if you’re going to bid on either higher cap rate for a sale leaseback, I don’t know if you’re going to get it; I don’t know if that deal will happen.

One last question. For the 2012 acquisitions, you say that they basically will happen in 2012, I guess there was no specificity as to when they will actually happen. I was just wondering if that’s something you can provide?

Well, the acquisitions, the ones that $144 million that are on agreement from this past year, really its likely more to happen around the end of the second quarter, around the third quarter.

So that goes – you’re talking specifically about the senior living community and the four MOBs right?

No, no the old ones; the senior living in it and the four MOBs are the new pending ones (inaudible) today. Dave was mentioning the other buildings that we previously announced in 2011, we don’t expect to close until the end of second quarter sometime during the second half of 2012 and that primarily relates to regulations. The new ones we do have some models to go through, we don’t feel like they will be close or have any impact in Q1, but we do feel they will close sometime during Q2.

Okay, so the $145 million, so the four MOBs and senior living community likely will close next quarter?

Sometime during next quarter.

Our next question comes from the line of Derek Bower from UBS. Please go ahead.

So going back to the 10 Sunrise leases, can you just remind me what’s the difference between that 1.3 coverage that you just stated and the 1.6 that was in the press release from December?

The difference is percentage rent.

And so what would be your, I guess, can you remind us what you would underwrite a new I guess senior housing triple net at least to on a coverage basis.

Well, typically it would be around 1.15 to 1.2 in that range.

Okay, so it’s still above your range.

Yeah.

And this is Ross Nussbaum. So is the issue basically that you are just trying to extract higher rent out of Sunrise in either exchange for the fact that you view their credit as being weaker without the Marriott guarantee or you view underwriting to be different if you will?

It’s still very preliminary. We've got two years to work something out and I think we also have more clarity on the status of Sunrise as a company going forward. So I don't think I can comment much more on that but there is cushion that we could, clearly the other four leases that have a Marriott International guarantee could continue on as they were originally underwritten. But now if you take the Marriott international guarantee off that, then that clearly, Sunrise should not get the same pricing as if it had a Marriott guarantee. So that might be a solution as to workout different pricing on the rent. We have a few options on the table.

And our next question comes from the line of Philip Martin from Morning Star. Please go ahead.

Just a couple of quick questions. Number one, just on the Marriott and the Sunrise portfolio on the 10 assets that are not guaranteed by Marriott on a go forward basis. Fundamentally and operationally are they performing at a much different level or even from the risk award standpoint, can you just characterize the 10 versus the 4?

Sure, the other 10 are fine properties, obviously they were originally operated or built by Marriott and Sunrise was more than happy to operate them. So I think the one key difference is the four properties that Sunrise and Marriott are willing to stay on are just located in the Mid-Atlantic and in Florida whereas these other properties are located, scattered around the country. I think part of it is the concentration. You know this is a mirror image of the bulk of property that they are not renewing on and it is a beautiful property built by Marriott. It is just, I mean you to realize too that we don’t know the specifics of the relationship of the deal between Sunrise and Marriott, but it is costing Sunrise a significant sum to keep Marriott on the guarantee. So that had to be a factor into the consideration on how many properties they are willing to pay Marriott to stay on.

Exactly. Okay. Now shifting gears a little bit, your pipeline going forward et cetera value add deals versus stabilized. Again, it looks like the RIDEA structure is going to be a big focus for you in 2012; are there a fair amount of value-add deals in this market that you are seeing?

I remember value-add deals, we are not a big pursuer of them. But there are number of situations we just need the right personnel or somebody around capital to continue to turn them fair quite a bit of CCRC entrance fee product type out there that still needs to be straightened out. But none of those are our particular investment parameters.

And again, I know you are not a big developer and will not be doing that going forward, but from a redevelopment and re-positioning standpoints, repositioning from a management of the property or redevelopments, you are seeing those; I am just looking at the potential growth within the RIDEA structure, so we could try to get some handle on?

With SNH or in the industry?

Within SNH?

Well, our growth is going to be just, again there is a vehicle to use the RIDEA for redevelopment and so on. But that’s not we are going to do. We will do incremental things to improve the operations at properties, we do putting into it, as well as expansion. Many of the properties we have do have a parcel of land adjacent to it that have potential for expansion, so I can envision us doing that type of growth and so on.

That was my next question. So there is a fair amount of expansion spaces associated with your pipeline. Okay, thank you.

And that’s all the time we have for our question-and-answers today. I would like to turn the call back over to Dave Hegarty. Please go ahead.

Great. Thank you all for joining us and in two months we’ll be doing this again. Thank you. Bye, bye.

That does conclude our conference for today. Thank you for your participation and for using the AT&T Executive Teleconference service. You may now disconnect.