Good morning, and welcome to the Senior Housing Properties Trust First Quarter Conference Call. This call is being recorded. At this time for opening remarks and introductions, I would like to turn the call over to the Vice President of Investor Relations, Mr. Tim Bonang. Please go ahead, sir, the floor is yours

Thank you, and good afternoon, everyone. Joining me on today's call are David Hegarty, President and Chief Operating Officer and Rick Doyle, Treasurer and 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, April 30, 2012. The Company undertakes no obligation to revise or publicly release the results of any revision to the forward-looking statements made in today's conference call other than through filings with the Securities and Exchange Commission or SEC regarding this reporting period. In addition, this call may contain non-GAAP numbers including funds from operations, normalized funds for operations or normalized 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 filings with the SEC. Investors are cautioned not to place undue reliance upon any forward-looking statements. And with that, I would like to turn the call over to Dave Hegarty.

Thank you, Tim, and thank you all for joining us on today's call, and good afternoon to you. For the first quarter of 2012, we reported normalized funds from operations or normalized FFO of $0.45 per share, and this compares with normalized FFO of $0.44 per share that we reported for the same period a year ago. Our first quarter results were in line with our expectations as we continued to absorb the new properties that we acquired at the end of last year. During the quarter, we saw above-average rental rate increases on new leases, executed at our medical office buildings and also experienced modest occupancy and rate growth in our private pay senior living communities. We still maintained the highest percentage of private pay assets in the industry, with 94% of our NOI derived from properties with the majority of revenues up in the residents or tenants private resources. Our dividend yield continues to be very attractive at about 7% and our balance sheet remained conservative and well managed. Recent data published by the National Investment Center for Seniors Housing & Care industry or NIC showed modest occupancy growth year-over-year and sequentially for both independent and assisted living properties during the first quarter. According to the recently quarterly NIC report, the seniors housing average occupancy rate has risen consistently during the past eight quarters and is 1.3 percentages points above its cyclical low in the first quarter 2010. They also note that construction of new senior housing inventory remained muted and construction of the share of existing inventory declined quarter-over-quarter. All of these statistics continue to support our thesis of investing in private pay senior living communities with its potential for occupancy growth in continued merit supply. Our acquisition activity was modest during the quarter when we closed…

Thank you Dave and good afternoon everyone. I will now discuss our year-over-year quarterly financial results for the first quarter of 2012. For the first quarter we generate normalized FFO of $72.5 million or $0.45 per share up 17% in the aggregate and 2.3% on a per share basis. Earlier this month our Board declared a quarterly dividend of $0.38 per share which represents a normalized FFO payout ratio of 84% of the first quarter’s normalized FFO. Looking first at our income statement total revenues increased 47% to $145 million. This increase was due to several factors; first we had significant external growth from acquisition since January 2011. We invested $336 million in 28 medical office buildings and $668 million in 29 senior living communities. And in addition we spent $40 million on revenue producing capital improvements as certain of our senior living communities. Second, we recognized $36 million of residence fees and services at our managed senior living communities who leased to our TRS. As we now have 23 senior living communities leased to our TRS, we expect that excluding the four properties we have left to acquire in our TRS and with all other things being equal $36 million of residence fees and services is a good run rate. And third, percentage rent from our senior living operating increased 7% to approximately $3 million driven from occupancy and rate increases at our triple net senior living communities. These increases in revenues were offset by the sale of seven properties in 2011 for approximately $40 million which reduced annual revenues by $3.5 million. Property operating expenses for the quarter were at $39 million which was in line with our expectations as we have added a significant number of senior living communities and medical office buildings to our portfolio. Of…

Ladies and gentlemen we will now begin the question-and-answer session of today's conference. (Operator Instructions). Our first question will come from the line Jana Galen of Bank of America. Please go ahead.

I wanted to follow up on your TRS operating asset margins and where do you think those margins can get to and is it driven primarily through occupancy or are there still expenses that could be taken out?

Well for the quarter the operating margin was about 28% and typically for independent and assisted living properties they are significantly higher than that. I would say they are probably another about 10% that they could grow to the mid-30s or independent living if its running in our film is concerning the north of 40%. But I would say this portfolio should, when we get there with increasing occupancy and range, there's probably still some expense efficiencies that we can obtain, but I would say something mid-30s would be more appropriate.

And then just quickly on the MOBs, seeing that renewals were down on GAAP trend, maybe you can just touch upon that.

On the new renewals that we hit today's to this period, we actually have a significant increase in renewals rates in the north east particularly Boston area as well as the South West of (inaudible) and a few properties in Virginia where we have a softness within Long Island area and also some of other Maryland locations. But overall I think we had about 17% increase in new leases and reports entered into during this quarter.

Our next question will come from the line of Tayo Okusanya of Jefferies. Please go ahead.

Good afternoon Dave and Rick. Just following on Yana's question, I think she was focused on just the negative changing GAAP rents purely on the renewals, the 22 renewals that you did in the MOB portfolio this quarter. Were there like one or two renewals just skewed the whole number?

It was, I would say there are a couple locations where they did have a decline. Now considering them, there is a not a lot of activity that occurs during the quarter, so it doesn’t take much to skew it. Now at the other renewals, yes, pretty much New York was I'd say, one that had mostly declines on renewals.

Of about how much Dave?

Let's see. Those were in the in Long Island area was about 11% decline in rates.

Got it, thank you. That's helpful and then just back to the TRS portfolio on the senior housing side, I believe you guys got about five acquisitions or so to close and if I heard correctly, Rick said the run rate going forward will still be about 36 million which is currently about where it's at right now. Did I hear that correctly or did I mishear something?

No that's right. We expect that to be a good run rate and as we close on acquisitions, it would increase accordingly.

Okay, so 35.5 right now is just for the 23 you own and as you add acquisitions then that number will grow.

Yes.

Okay, got it. And the five that you have outstanding right now, if I recall correctly it was a better asset that will automatically expand the NOI margins?

Yes. Since we announced these acquisitions, the properties have been improving and remember one of these will not close until the second half of 2012.

Yes, okay that makes sense. Then the asset that you guys declined to buy, after you did the due diligence, can you talk a little bit about that and what caused that?

Well I can't give you too many specifics but that was actually a biotech property that when the diligence we discovered that they weren't a long-term player for that property and the leasing would be very expensive and so on. So we decided to pull the plug on it and terminate the transaction.

Our next question will come from the line of Daniel Bernstein of Stifel Nicolaus. Please go ahead.

I also wanted to go back over to the same store results for senior housing TRS. You added one property in the quarter and I just want to understand the impact on your results there. Looks like the results would be good for the quarter but just want to understand the impact to that one property.

That was probably the property in Alabama that we added and that came on I believe February 1st. And that property actually negatively impacted the operations for the first quarter and what we find is that most of the time it does take a couple of quarters of transition but period that before you exceed what you initially underwrote it at. I would say the Bell properties (and the) (ph) properties clearly are significantly above what we originally underwrote them at, but the one-off that we added actually negatively impacted the results this quarter and what we do find is that there is a transition period where a lot of those - the linens, the names on the buildings, everything has to be changed over and there is a fair amount of inefficiencies for a quarter or two, but we expect...

Was that just the impact in on the margin or are these properties similar occupancy, similar rates to the ones you have now?

They are similarly occupied in the mid-80s, mid to high 80s. And the impact has been on the operating expense side and so negatively impacted margins at this time.

And can you go back over the impact of the Norwalk virus on your properties, if any on the TRS and Five Star on their call earlier today went intuitively a little bit detail?

Right, well its always very difficult to exactly quantify the impact but like I said we had four of the weak properties and two of our Bell properties experience the norovirus in this first quarter. So that let's see, I think it's about 73 days I believe it was closed for new admissions. So you have a little bit of period where existing tenants pathway or transfer but you can't admit till you get a clearance and so it's very difficult to quantify the impact on occupancy. But it definitely impacted us for a period of time during this quarter.

And you call it unusual occurrence?

Yes I would. It's definitely seasonal. What happens in the first quarter more than any other time of the year, but I think that is unusual.

And then on the acquisition pipeline, starting off slow you are still hoping to fix up into the back of the year. Can you talk about maybe a little bit of the tilt of that portfolio, acquisition pipeline, is it more MOBs and senior housing or vice versa? And then maybe a related question would be, you said you'd grow the TRS to a reasonable size. Maybe you can talk about what a reasonable size would be and whether you are looking at any additional TRS assets?

Well currently I'd say what is in our pipeline is predominantly medical office buildings. So I would expect the majority of the acquisitions that I can see at this present time would be on the medical office side. I would envision maybe we will probably pick up some individual assets on a TRS basis. And I don't envision the TRS to grow tremendously. I would think that I'll probably hold it about 20% of our NOI in that range. Obviously it's not an exact science. It depends on the size of transaction. But I don't obviously want to significantly to go beyond 20% in any way.

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

I think you said this in your opening remarks that the net lease assets that you acquired in the senior housing space are going to leased to a private operator, did I get that right?

Yes, that's correct and it will be on a triple-net basis.

Okay, if so, what's the decision revolver around? How come it's not Five Star?

Well combination of things. First of all, the states that they're in, Idaho, Washington so on are states that Five Star does not have a presence in. Also we're comfortable with this operator. I think down the road we'll provide a little more detail on it, but we still have to go through some loan assumptions and license approvals, so on. So it's most likely to close about the end of this quarter and we can probably give you more detail on next call, but predominantly that is adequate cash flow there and Five Star doesn’t have a presence there.

And just based on your comments before on the Connecticut MOB that didn't make it through the due diligence period, I would think that this would contribute to dispelling some of the notion that SNH grows just for growth sake based on how RMR gets paid. Do you have any rough percentages of properties that you actually close on to just spell out that quite a few do not get closed on; maybe it's a lower percentage than investors think?

Yes, we see tremendous opportunities come through here all the time and evaluate a number of senior living properties as well as medical office and other types of properties. And I would say maybe 25% of those properties actually, we enter the negotiation stage and if we come to an acceptable pricing, we'll try to acquire that property, but as you said, things do come up in diligence, some very early, and if we hadn’t preannounced it, we probably would have killed this deal without mentioning it. And if you look at the fact that we're the fourth largest healthcare REIT, and not in the top three, I'd say we've been certainly one of the lesser acquisitive companies in our space. And if we were acquiring to grow assets, then we should be in the thick of it with the others, but we're much more cautious and we grow slower.

And this is probably a question for you Rick, just for the medical office building becoming so meaningful now, can you just share what you're budgeting for CapEx specifically for the MOB portfolio, maybe a cost per square foot?

Yes, we have a budget for the full year around $12 million for the full year and that's over 7.6 million square feet.

Okay and just further with that, can you break out, just for the senior housing assets, the triple net leased versus what you'd expect for the RIDEA?

Yes, on the TRS for the CapEx, we're figuring between $1,000 per unit a year which right now would be about 4.5 million to $5 million for 2012.

Our next question will come from the line of James Milam of Sandler O'Neil. Please go ahead.

Just wanted to follow-up on the new triple net Senior Housing portfolio. Did you guys have the option to use Five Star as the operator? I mean it sounds like you decided to go with the existing, but could you have replaced them if you wanted to or was that part of the deal that they would only sell to if they could maintain the management?

We could have replaced them, that was an option to us, but again, we chose not to and I think we were happy with the management that was going to operate these properties, and again Five Star too it would have been a new market for them that they don't have an existing presence in, so it didn't make a lot of sense for them either.

My second question is, the G&A was a pretty big increase over the fourth quarter. Is that just related to the portfolio growth or was there something else that also caused that large increase?

Well the G&A is what we expected. It's right in line with our expectations, and the breakout as I said on the call, was 25 million to the TRSs and the remaining to the MOBs, but it's as expected and it will grow as we start closing on these pending acquisitions.

Okay, great. Thanks. And then my last one, just what about 230 million out on the line of credit, and a couple of hundred million dollars more of capital you'll need to close these acquisitions over the course of the year. What are your thoughts on sort of permanent capital to finance those acquisitions? Are you looking more to equity, unsecured debt or possibly term loans, and maybe if you could give color on pricing for each of the possible options?

Yes, we do have multiple options to look at and once again, we do have 515 million on that credit facility available and a few of these acquisitions are going to close overtime, especially the property in New York, so we do have some time. But our options would be looking at equity, be looking at the debt market, and we're looking at the term loan, we don't have a term loan on our books. And we also have an option for it. So, I think all those options are available to us and we'd consider all of them at the time.

Is there any sense of urgency from you guys, it seems like the capital markets are pretty favorable right now. Is it something you'd like to pre-fund with these acquisitions identified or are you content or I guess patient to wait until closer to closing?

It's just long time, and like you said, when we're going to close, if there is any other activity going, I don't think we're rushing out to any market. And so, we do have time on our side and we do have availability on the credit facilities if something did come up.

Let me just ask one more and then I'll be done. It looks like there is a big drop in the lease maturities for 2013, but the total lease maturities overtime didn't really decrease by that much. Was that switch, is that related to the Sunrise portfolio or is there something else in there as well?

We moved the four properties that Sunrise extended till 2018 so we just moved it down because now it's going to close on 2018 for four of those properties.

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

You mentioned that the NOI margin goal for the RIDEA asset is 30% to 35%. I was just wondering where you envision that NOI margin being at the end of the year?

Let's see, I can't tell how fast things will progress but I do expect it will improve from the 28% today and I do expect the occupancy to continue to improve and sort of like in the Florida locations the rates can be pushed. I think expenses will remain in check. So I hope to be at least at the 30% by year end. One of the other things that’s also difficult is that as we add properties in they may increase or decrease that margin percentagewise. So I'd say some of the existing portfolio should do better from where it is today. A number of the Bell Properties that are still yet to come into the fold have better margins and average. So those would help bring us up. The Yonkers property is a big one that is back more in a 25% margin and by the time that comes in that will be much higher but those are variables that would affect that margin.

And the other question I had is in relation to your acquisitions run rate. So you had mentioned that the run rate is anywhere between $300 million to $400 million per year. You've already committed or have closed on $340 million of assets, which is the midpoint of that guidance. I was wondering how much more upside do you see from your committed deals or acquired deals considering that you are at the midpoint right now of your guidance.

It is very difficult to predict. We seem to manage to buy $50 million or so each quarter in normal bread and butter transactions and we occasionally hope to win some of these bids on larger portfolios. So I'd say you could probably factor in say $50 million a quarter barring something significant.

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

I was just wondering if you could provide any update on the negotiations or if there have been any with Sunrise regarding the 10 remaining assets?

Sure, well we're in regular ongoing discussions with them. We don’t have anything to report on what's going to happen or where those assets are today. I can say that we'll continue to interact with them on possible scenarios.

How active would you say you've been over the last three months just marketing those assets to other operators other than Sunrise?

Not very at the moment. I think we still have about 18 months left, no more than that, 20 months left on the lease. So we really can't do anything if we would have to compensate Sunrise to walk away from the leases and so right now it's pretty much a dialogue with them.

And I guess just in general with negotiations on lease renewals, how long of a timeframe do you typically like to lock up a tenant before the lease expires, just in generalities, maybe just not even talking about this lease in general but typically would you like to have a tenant secured by 12 months or eight, nine months before?

Yes, typically if you look through all of our leases its generally one year to two years per notification period and then once you know their intentions then you typically work out a transition with them. It also depends on what states they are in. Like I say one year is usually adequate, but when you're in New York or California or few other states, the process can be very cumbersome and last a long time. So it is negotiation once you line up somebody else but one year as most deals, this deal we were very fortunate to have a two year notice.

Our next question is a follow up from the line of Tayo Okusanya of Jefferies. Please go ahead.

Just most of a conceptual question, just given how large the MOB portfolio is getting at this point and really just trying to get your comments on if the Supreme Court ultimately does end up striking down the Healthcare Reform Act, exactly what impact you would expect that to have on the medical office building business, whether it's all of a sudden because all the uncertainty becomes hard to lease stuff up or kind of whatever general commentary if the world suddenly changes come June.

I think either way it pans out. I don’t think it would necessarily be bad news for us in the medical office space because healthcare is moving this way anyway. Obviously the demographics for the baby boomer, 65 and up tend to be the biggest users of the medical system. I think I heard a sort of statistic that up to now about 70% of medical procedures have been done in patient and the goal is ultimately get them to 70% to be done on an outpatient basis, all of which would suggest smaller outpatient centers located closer out to where the residents are, where the potential patients are. So I think there is a lot of compelling forces that are going to create demand for this space regardless of what happens with healthcare reform. If healthcare reform stays in place I think you'll see a lot more of the healthcare systems becoming much more proactive in managing the real estate and trying to design a plan which would create opportunities for us, and also you would have the increased patient population that would utilize the system. So another positive force for people in this space. If it's rejected I think you'll still have a fair amount of discussion in Washington about if it's a modified plan that could be passed to preserve some of this and I think it will be a bit positive, it takes some pressure off the healthcare systems to do something immediately and they may to wait to see what the new legislation might look like but again, I think that may slow down the process a little but I do think that it's still going in that direction of increasing demand for these services.

And our next question is also a follow up from the line of Daniel Bernstein of Stifel Nicolaus. Please go ahead.

Just going back to the Sunrise leased assets that aren’t being renewed, there is a big disparity between lease coverage on the 10 assets that now are being renewed versus before that are. Is there some mechanism in the leases to I guess reset the rents on the four to a market rate? Just want to understand how the rent mechanism works there.

The rent mechanism is a continuation of the existing rent formula which is a base rent plus percentage rent as the revenues grow at the properties. There are reasons that those, and in fact one renewal option was exercised for five years. So that’s why the leases on those four properties go out to December 31, 2018 and then presumably we'd have to face the whole discussion again in 2016. And obviously with the Marriott International Guarantee I think Sunrise paid a significant sum and utilized a considerable amount of resources to get Marriott to continue on with the guarantee and as a result I don’t think they either could or would have wanted to commit more resources to take on more than these four properties from us. So I think it's more economical in their end.

How many more renewals are there? Was it just one or?

There's three more renewals following the one that they just exercised.

And like Dave said, Marriott would have to be on those renewals. So we'll have to take them one at a time.

In same rents terms or would it just continue with whatever normal bumps?

After a couple of more renewals down yes.

There are no further questions in queue at this time. I'd like to turn the conference call back over to Mr. Dave Hegarty.

Great. Thank you all for joining us today. We will be participating in several conferences this spring including the JMP Securities Conference in San Francisco, the BofA Merrill Lynch Healthcare Conference in Las Vegas, also in May and the Jefferies Healthcare Conference as well as the NAREIT Conference both in New York City in June. So we look forward to meeting with our investors and analysts at any one of those events and thank you again. Have a great day.

Ladies and gentlemen, that does conclude our conference call for today. On behalf of today's panel I'd like to thank you for your participation and thank you for using AT&T. Have a wonderful day. You may now disconnect.