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

Thank you and good afternoon, everyone. Joining me today in this call are David Hegarty, President and Chief Operating Office, 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 the 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 upon Senior Housing’s present beliefs and expectations as of today, April 29, 2013. The company undertakes no obligation to revise or publicly release the results of any revisions 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 normalized funds from operations or normalized FFO. A reconciliation of normalized FFO to net income and the components to calculate AFFO, CAD or FAD are available on 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. Now, I would like to turn the call over to Dave Hegarty.

Thank you Tim and good afternoon everyone. Thank you for joining us on today’s call. Earlier this morning we reported normalized funds from operations or normalized FFO of $0.43 per share for the first quarter of 2013, in line with our expectations. Rick will discuss our year over year quarterly results in further detail later on in this call. tenants: In addition, 4% of our NOI is derived from wellness centers. Occupancy and rental coverage in our triple-net senior living communities was strong and essentially unchanged for the 12 months ended December 31, 2012 or the prior year period. Our managed senior living communities began to demonstrate internal growth and we believe these properties have the potential to add significant long term growth to our overall portfolio. Same store occupancy at our managed communities was up 430 basis points from last year and same store NOI increased by 3.2%. We’re encouraged by signs of continued improvement here and by the general positive outlook for the industry as a whole. Our medical office building portfolio was well occupied at 95% at March 31, 2013 and NOI was up 13% since the first quarter last year. We also executed over 300,000 square feet of leasing activity for 3.6% weighted average roll up in rent and a five year weighted average lease term. On the acquisition front, during the first quarter, we completed $75 million of acquisitions and have approximately $44 million of additional investments under agreement. On the capital markets front, we issued 11,500,000 common shares in January and raised net proceeds of approximately $262 million. We used these proceeds to repay amounts outstanding under our revolving credit facility and to fund additional acquisitions. We still have surplus cash on hand and our $750 million revolving credit facility is currently undrawn. Our…

Thank you, Dave, and good afternoon everyone. I will now review our first quarter year over year financial results. For the first quarter of 2013, we generated normalized FFO of $78.9 million, up 9% from last year. On a per share basis, normalized FFO for the quarter was $0.43 per share compared to $0.45 per share for the same period last year. The year over year quarterly decline in normalized FFO is attributable to two main items. Starting this quarter, and as I alluded to on last quarter’s call, our quarterly NOI declined by approximately $1 million due to the transfer of 10 previously triple-net leased Sunrise communities to our TRS. We expect the NOI to recover over the next four to six quarters as we invest the appropriate amount of capital that we believe will bring operations back to stabilization and eventually the NOI of these 10 communities will be better than historical performance. In addition, we experienced short term dilution from our January equity offering arising from the difference between the timing of the offering and until we invested the proceeds. Earlier this month our board declared a quarterly dividend of $0.39 per share, which represents a 91% payout ratio of the first quarter’s normalized FFO. Looking first at the income statement. Rental income for the quarter was $140 million, up 4.4%. This increase was due to external growth from acquisitions since January 1, 2012 which included five leased senior living communities and 18 Medical Office Buildings. Approximately $57 million of rental income was derived from our leased senior living communities and approximately $53 million was derived from our Medical Office Buildings. Percentage rent from our leased senior living communities was $2.2 million for the quarter, down from $2.9 million for the same period last year, due to…

(Operator Instructions). Our first question goes to the line of James Milam from Sandler O'Neill. Please go ahead.

My first question is on the MOB portfolio. So the same-store number if I heard you correctly, does no longer includes the Philadelphia Life Science building, correct?

Yes, we took that out of the statistics, results of operations.

Okay. So I guess my question is the same-store NOI was down, but it looks like you guys had some pretty good leasing velocity. Can you just I guess may be tell us how much of that include or is impacted by leases that have been signed but haven't commenced paying rent and what your outlook is maybe as those tenants take occupancy further through the rest of the year?

Sure. With the new leases that have been signed as you said, one thing that's unique about office statistics is that the occupancies that are stated here are as of quarter end and do include leases that are for future occupancy. I would expect that really is probably only about a 0.5% because of the say 95% that's in place as of quarter end. The leasing is looking pretty good for renewals and so on going forward. I'd say in a couple of properties we have situations where we've extended the leases, but had to reduce the rents a bit to keep them in place, but most of the typical doctors' offices and so on, we're seeing modest increases, a couple of percent. So net-net probably growth will be more or less flat though, I'd say for this year.

So maybe slightly positive into the second half to offset the dip in the first quarter?

Right and then also we expect some and improvement on the expense side too.

Okay, great. And then just moving to the managed communities, it sounds like the work is progressing there in line with expectations, is there -- I guess when you guys are going through some of the major projects, is that evenly spaced over the next four to six quarters or are there any quarters where there may be more disruption in terms of what's going on at the resident level and your ability to keep the units full?

We're budgeting that it's going to be consistent quarter-over-quarter. We don't have any real uptick take on any specific one quarter over the next four to six quarters.

Right. What you're seeing right now is actually a lot of the V and early Bell transactions, a lot of the CapEx being fully implemented now and some of the projects are wrapping up. So Sunrise projects are -- some of it's just commencing right now. So it should say pretty much more or less consistent over the rest of the year.

Okay. And then sorry, Dave, just my last question, you mentioned the margin last quarter was 27.5% and now it's 30.5%. Is that for everything except the former Sunrise assets?

That is correct.

(Operator Instructions). I’ll go to the line of Jorel Guilloty from Morgan Stanley. Please go ahead.

I had a question on acquisition. So you said on the last call that you've envisioned $300 million to $400 million of acquisitions for the year. You mentioned earlier on this call that acquisitions pace has been slower if you will, especially as I compare what you've announced in closest years is $120 million versus $340 million at this point last year. So what I wanted to get is a little bit more color as to timing, as to when you expect the acquisitions pace to quicken and a little bit more color as to what exactly is driving this slowness if you will so far this year?

Well, I think it's fair to say that most, but not all of the large portfolios of the senior living properties out there have already probably been acquired. So now it's this handful of major -- of large portfolios that still could be acquired, but generally we're seeing the one-off in small portfolios and those typically are a developer has developed a property or two or somebody is trying to turnaround over the last couple of years and bringing it to market now that it's stabilized and probably going to get some very good value for the pricing. So I think we had people who were rushing to get what they could get done before yearend last year to take advantage of what -- if you recall back in December nobody was quite sure of what the tax increases were going to be, but they knew they were going to be going up. So there are a lot of closings that occurred in December. Then January just first couple of weeks started off really quite slow, but we're seeing I would probably say a half dozen opportunities a week to consider. So I think it's starting to pick up to pretty much a steady pace where it was in the middle of last year. And I think there is also considerable amount of capital chasing senior living and Medical Office Buildings. So it clearly probably will affect pricing and drive down cap rates a bit more. But it’s a truly Class A product that's coming out one at a time typically and those are probably going to be fives and sixes for cap rates. I would say the A minus B properties will still be in the 7th and I guess we’ll see a pretty steady amount of individual assets from that category. In medical office it's probably similar where I expect more of our growth to come from medical office this year than from Senior Housing and it's because we’re seeing a lot more opportunity there and again it's in our $10 million to $25 million per transaction type sweet spot where we can compete very effectively. (I thought I'd give you some color on it.

When you say fives and sixes are you talking about individual assets or small portfolios?

Individual Class A or A plus assets. There are some that are just hit their stride this year and have been coming to market about once every other week and those tend to be trophies and it’s a lot of money chasing them.

Then on their call this morning and as a corollary to the cap rate compression comment, Five Star mentioned that they are actually looking more into redevelopment to drive returns just because of where pricing is right now. Is this an area of more interest to you and if so how would you two intend to participate? Would you do investments on -- direct equity investments yourself? Would you provide loans to your tenants? Is it something that's been more considered now given where cap rates are at?

Right. It is something we’re actively considering and I know we already have a mechanism in our Five Star leases where they all do these improvements and then look for us to reimburse them basically and when we do reimburse them, the rent will go up at typically 8% on the dollars invested. And during the quarter we did a bit over $8 million in the first quarter, that type of expenditure, a revenue producing expansion let's say. So I would expect that number to pick up as they expand certain properties that are under our leases. I'm trying to think. There are a few locations too where it may even make sense for them to do a whole new facility catering to Alzheimer's care or assisted living and we may or may not because some of those standalones. And we also have done it for other tenants, some of our private operators we've funded expansions there too and in every case we get a return on investment and we structure it as additional rent.

We’ll now go to the line of Michael Carroll from RBC Capital. Please go ahead.

Could you give us an idea of how much you would spend this year or annually on those redevelopment projects that you're mentioning?

Let's see. Well, we seem to be running at I would say at $10 million anyways per quarter. So I would envision there would be an uptick from that. So it could be probably be say $50 million or $60 million this year of expansions, improvements and so on.

Is that just with Five Star or do you have other tenants you're doing that with too?

At the moment I would envision that just to be with Five Star. We have like I say done a few million dollar expansions at other tenants, particularly the private ones. So I think we’re open to it, but at the moment we don't have any on the plate.

Then with the transitioning Sunrise communities, do you expect incremental evolution going into the second quarter or did we already receive that initial drop and it should be going up from here on?

Well, we received that drop and we -- the rents now where we're getting there and the operations now should be flat to slightly better as we move forward you won't see any more dilution from where we stand in the first quarter of 2013.

Those assets should be stabilized by yearend. Is that correct?

We would hope that most of those 10 properties will be stabilized by the yearend and as we've been saying it make take four to six quarters to get the capital needs completed and the major projects completed. So a couple of properties may take until mid-2014.

Then with the Senior Housing assets that you currently have under a contract, is that a triple net acquisition or will that be put into the RIDEA structure?

That will be put into the RIDEA structure.

And then my final question is related to the asset you're marking for sale in Pittsburgh. How big is that asset and what's the reason for the sale?

Well, that was an asset that was acquired as part of a portfolio years ago and to be honest was a converted school and made it difficult to operate. And so we decided to empty it out and just sell it. So right now we probably only received a million or so on sales proceeds of it. And right now, we're talking about triple net leased assets. So we're getting rent on it, but we would not get any negative impact from the sale of that.

Who's the tenant?

It's one of Five Star properties.

Next we’ll go to the line of Daniel Bernstein from Stifel. Please go ahead.

I just want to go into the acquisition pipeline first. On the Seniors Housing side, again both you and Five Star alluded to cap rate compression. Are you seeing more Class B assets or lower quality assets come to market trying to take advantage of the cap rates? So are you not seeing as attractive acquisitions out there? Just trying to understand the mix of quality that's come into the market.

Well, we are seeing Class A and Class B prop coming to the market fairly steadily, but the Class A is drawing all the attention, particularly if it's of size and therefore driving the cap rates down on those particular assets. The other ones are attracting attention because as I mentioned there is a lot of private equity, private REITs, and just other smaller REITs that are public all chasing this product. So I think even the Class B product type is getting the benefit of pricing. I don't think -- I'm not seeing any of those really trade below 7 let's say or even below 7.5. But we are seeing a decent amount of product to consider and our pricing clearly would be between 7.5 and 8 I guess right now.

So would you characterize that some of the pricing is getting out of your comfort zone and that's why you're looking at MOB's a little bit harder?

Yeah. In some cases -- again either an individual Class A or a portfolio of Class A product is getting pretty frothy and we're just -- it's going to trade in the fives and sixes which is not going to chase that product at that pricing.

When you say fives you're thinking more independent living, not assisted? Or is it both?

Yeah and it's high fives.

Then also given that, are you looking at any other alternative investments like mortgages or development funding where you can get a higher yield? You really don't have much of that in your portfolio or not at all. And so are some of those other real estate related investments on the -- are you looking at those at all?

As you mentioned, we don't do developments generally and we're not providing development financing. I think that there's quite a bit of demand for that out there, but fortunately the banks are still not lending that easily for development. So right now there's nothing in those categories that I envision us investing in. I wouldn't rule it out entirely, but at the moment there's nothing.

And then one other question I have here on the managed asset same-store NOI was up 3%. That portfolio's really starting to push 92% occupancy. So what are your definitive expectations for the same-store stabilized assets that are being managed by Five Star in terms of rate growth, margin expansion NOI? I would think the NOI growth should be over 5% given that occupancy, but I want to hear it from you.

Yeah. There are a couple of thoughts on that. One is we still have a relatively small portfolio and if you noticed if you were to take the 3% growth that we had -- 3.2%, it's only a couple hundred thousand dollars that brings up to 5% growth. So it won't take much to hit 5% or do better than 5%. I think that our occupancy has moved up considerably without rate increases. So I expect that we should be able to push rates. Typically 3% to 5% would be the range. I know that at these properties we're currently seeing 4% and 5% rates being requested of new residents. So again it's a portfolio of 22. I'd say some of the properties maybe still have to offer some incentives for people to come in while others are pushing to 100% occupancy and they can push that 4% or 5% rate growth. I don't know if any of our properties are charging in excess of 5%, but 45 and 5% typically is good I would say.

And you expect significant margin increase as well. So that 5% to 7% NOI growth seems pretty reasonable

For that?

For that particular part of…

Correct. Yeah.

Next we’ll go to the line of Todd Stender from Wells Fargo. Please go ahead.

Was the IL investment in Redmond a sale lease-back with Stellar?

Yeah, triple net lease and that property is literally at the entrance of Microsoft and they -- and I think it was featured in one of the recent magazines on senior living business. It's a property that we see significant potential in of which almost all of that would be to the benefit of the operator, but we would see increasing rents as performance improves.

What was the occupancy and what are the in-place rates look like versus the market?

Let’s see. Occupancies we’re in the about 83% or so at that property and historically have been operating in the low to mid-90s. So rate wise I believe we're in the low $3,000 per month. And it's about 75% independent living and the rest of it is some memory care and a little bit of assisted living. So I think it has a good amount of potential.

Does that mean you get -- did you get above average rent escalators in relation to the occupancy upside?

Right. We get modified minimal bumps in the rents that are fixed and we get percentage of the revenue growth at the property on top of that. So as they fill up and raise revenues we get 4% of growth in revenues there.

And Stellar is an existing tenant, isn't that right?

Right. We currently have four properties with Stellar and we've added to the master lease.

There is assumed debt on this. When does that come due?

2015.

Just lastly with the Cherry Hill, New Jersey MOB, any other specifics on that deal, if it was single tenant or hospital affiliated, any other details you can share?

Obviously we'll talk about it more on our next call or as soon as the deal closes, but it's an A rated healthcare system and it's triple net leased. They manage it themselves and there’s bumps in the lease and it's a long-term lease.

We have no further questions at this time. So now I'd like to turn the conference back over to Dave Hegarty for closing remarks.

Thank you all for joining us today. We intend to take part in several upcoming conferences this spring; the Bank of America Merrill Lynch Conference in Las Vegas in May; the Jefferies Global Healthcare Conference in New York City; and the Annual NAREIT Conference in Chicago, both occurring in June and we hope to see many of you at those conferences and we're more than happy to meet with you and talk to you in further detail at those conferences. Have a good day. Thank you.

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation and for using AT&T Executive Teleconference. You may now disconnect.