Good day and welcome to the Senior Housing Properties Trust Third 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 the Vice President of Investor Relations, Mr. Tim Bonang. Please go ahead, sir.

Thank you and good morning, 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 transcription, 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, October 29, 2013. 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 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 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 on our filings with the SEC. Investors are cautioned not to place undue reliance upon any forward-looking statements. And now, I would like to turn the call over to Dave.

Thank you, Tim, and good morning everyone, and thank you for joining us on today's call. Earlier this morning we reported normalized funds from operations or normalized FFO of $0.42 per share for the third quarter of 2013. Our results this quarter were met with many positives to note. Our triple net leased assets, representing more than half of our NOI, helped steady and generated modest growth. Our medical office building portfolio representing 30% of our NOI showed modest overall growth and managed senior living portfolio represented 15% of our NOI demonstrated particularly outstanding results. I'll analyze these segments in detail in a few minutes. Consistent with our business strategy of owning and acquiring private pay assets and minimizing our exposure to government funded programs such as Medicare and Medicaid, we completed $101 million of private pay acquisitions since July 1st and have $27 million of additional properties under agreement to acquire. In September, we announced the sale of our two Greater Boston inpatient rehabilitation hospitals. The only rehab hospitals we own to a third-party joint venture for $90 million. Additionally during the quarter, we sold one skilled nursing facility and are making progress in some of the other 10 senior living communities and 7 medical office buildings held-for-sale. These actions are part of our portfolio of repositioning we announced last quarter. We continue to be well positioned today to pursue a previous private pay acquisitions while maintaining our disciplined underwriting standards and do not have a need to access to capital markets for the foreseeable future. With all these moving parts, our board determined earlier this month to leave the dividend unchanged at $0.39 per share, which represents an attractive and secure 6.25% dividend yield as of yesterday's close. I'll now spend some time discussing the trends you'll see…

Thank you, Dave, and good morning everyone. I will now review our third quarter year-over-year financial results. For the third quarter of 2013 we generated normalized FFO of $78.8 million, up 5.4% from the third quarter of last year. On a per share basis normalized FFO for the quarter was $0.42 per share compared to $0.43 per share for the same period last year. Normalized FFO per share continued to be impacted by the timing differences of our capital rates earlier this year until we were able to fully invest the proceeds in August. Normalized FFO per share was also impacted by lower than expected NOI from our same store medical office portfolio primarily related to the decrease in occupancy and lower rates on renewals, as well as decline of certain reimbursable expenses. However we expect our medical office segment to improve in the fourth quarter. Looking first at the income statement. Rental income for the quarter was $112 million down 1.3% from last year. This decline was due to the transfer of 10 previously triple net leased communities to our managed single living segment during the third and fourth quarters of 2012. The decline was partially offset by the acquisition of five triple net leased senior living communities and 30 medical office buildings since July 1st, 2012. Approximately $57 million of rental income was derived from our leased senior living communities and approximately $51 million was derived from our medical office buildings. Percentage rent from our leased senior living communities was $2.3 million for the quarter down from $2.4 million for the same period last year due to the transfer of the 10 previously leased communities to our TRS. Residence fees and services grew to $75 million during the quarter due to the acquisition of six managed senior living…

Thank you. (Operator Instructions) First question is from the line of Juan Sanabria, Bank of America. Please go ahead.

I was just hoping, you could comment on the acquisition environment, I believe you've previously spoken about three to $400 million of transactions for the year, I think you got about $200 million to-date and how you feel about that and just asset pricing?

Yes, okay. On the acquisition environment, I'd say we're continuing to consider these single opportunities, smaller transactions. So I'd say by year-end, yeah, there's always a possibility of a significant transactions -- but bread and butter transactions. I think we're probably more in the neighborhood of $250 million to $300 million expectation at this time. So I think it's a challenge to win some of the larger transactions and this environment because I think pricing is getting a little bit frothy but -- while we're still trying to hold the line on our investment parameters.

What kind of cap ratio should we expect for the $27 million, that's under agreement those four properties?

Yeah that should be north of 8% cap rate.

Okay. And can you give any color on the same store MOB portfolio had a rough period year-over-year kind of what your expectations are going forward and it seems like margins came back a bit. I think you said that reimbursements were part of the problem, but any color on how we should think about going forward?

Well, yes. We do have a stellar of third quarter on MOB same store. We do expect --

I know we had a tough time.

Tough time, yeah, and we do expect the fourth quarter to improve. Occupancies did go down year-over-year. And we will be working on that to get some leases signed up there and push the rates where we can. You also mentioned that we had higher utility expenses, real estate expenses during the quarter unusually high. So we don't expect that moving forward and we do intend to -- we do believe that this will improve in the fourth quarter going forward.

. :

Just one last question on the dispositions of the 17 assets, the senior living and senior. Can you just remind us on the NOI attributable to those properties that you're looking to dispose of?

Yes. Well some of these -- the 10 senior living facilities for sale and they're underperforming. There's really not that true. These -- although we're collecting rents on those 10 senior living communities, our tenants experiencing negative margins on them. So selling these will not only help them on the performance of their other properties in the leases we can actually take the proceeds and put them into other private pay senior living facilities first.

Right. And the impact on SNH would be that to the extent, we received proceeds -- we take those proceeds and reinvest them in other assets. If the original rent on the property whatever differential shortfall the risk gets put back onto the master leases. So if we had a property for $10 million and the rent was a $1 million, if we sell it for $5 million, we give the tenant a rent concession of 10% on $5 million or $500,000 -- $50,000 -- $500,000. That differential of $500,000 from the original rent just gets put back on the master lease and distribute it over the remaining properties in that master lease. So we're really talking about how much we can reinvest the net proceeds and what cap rate we can do. So, for today it's going to be about 1.5%, 2% dilutive effect from the net proceeds, which is effectively couple of $100,000 per annum. Yeah, on the medical office buildings, some of the buildings are vacant today and are already in our numbers and so with the net proceeds, I think we will probably come out neutral to little bit dilutive on that.

Okay. So for the senior living, because of the master lease, it's going to be a wash it's just a question of the cap rate you can reinvest the proceeds at, is that correct? Sorry.

That's right.

(Operator Instructions) And we will go to the line of Omotayo Okusanya with Jefferies. Please go ahead.

Dave, I just want to dig a little bit more into the Sunrise aspect. I think you mentioned on the call that the margins around that is now about 14%. Could you talk about what occupancy levels are with that portfolio and then ultimately your efforts to kind of get operating margins kind of closer towards the rest of the retail portfolio, how that's going and how do you expect that to manifest over the next 12 to 18 months?

Correct. You're correct that in the presentation we said that 14% would be margin for the quarter for those assets. The occupancies of those properties are about 80% -- high 70s to 80% and we expect that we are putting capital into the properties right now to make them more competitive for the most part; most of that capital will still continue to be put into the properties over this coming next couple of quarters. So we would expect to see increasing occupancy at those properties. One of the things that makes it not comparable to our existing RIDEA assets the same store assets is that these assets are roughly 40% skilled nursing and 60% assisted living. So the margins are going to be not as good as the existing RIDEA assets because the same store RIDEA is about 75% independent living and 25% assisted living. So the higher, the best margins are independent living. So I would expect, this portfolio to probably in the neighborhood of 20%, 25% margins as opposed to the 30% to 40% margins we can achieve on our existing RIDEA assets if not better actually.

And how much in CapEx are you still putting into the assets, are you still kind of running around the $2,000 to $2,500 per unit that you were talking about or that you've guided to?

Yeah, overall, yeah, I would say the normal --

Recurring.

Recurring is more like $1,500.

Yes.

But with an extra $1,000 or so of structural costs and so on.

The $100.5 million of acquisitions that you made could you give us what the split is between the MOB piece and the senior housing piece in result to cap rates you paid on each of those pieces?

Its 50:50 dollar wise and the cap rates for the senior housing is in the low 8s versus the MOB which is about 7, 7.25, 7.5 or 7.5.

Okay, MOB, senior housing. And then last one from me, I mean just with everything going on with commonwealth that at this point whatever ultimate decision kind of guesstimate on that and do you expect that to have further implications for changes to corporate governance on SNH and what potentially could those additional changes be?

I mean I don't know what will happen at CWH. I think we would have to take into consideration what they're doing. But our board is really going to make a sound decision on, what it's going to do as far as corporate governance matters, I mean, like the management fee structure, we have five different REITs with the same manager and so it would be -- you couldn't justify really one REIT paying a different fee structure than another REIT paying a different fee structure. So as far as that type of analysis that that probably would be do it from change their we'd have to seriously consider making such a change at SNH. As far as like each of our bylaws and declaration of trust and so on, have some differences between them and so what might be appropriate for one might REIT not be appropriate for another. So I think down the road I -- we have been looking at surely the board composition and things of that nature.

And our next question comes from line of Daniel Bernstein with Stifel. Please go ahead. Daniel Bernstein – Stifel Nicolaus: On the MOBs, I just want to go little bit into -- further into what you are expecting to improve. And so are you expecting occupancies to improve as you leased up some of the vacated properties or space, what are you thinking in terms of rent growth? Are you -- what should we be expecting occupancy to go up but rents to continue to roll down and margins as well? Just want to get a little bit more clarity on what you are expecting to, how are you expecting NOI in MOBs to improve?

Right. Well, we do have some expected occupancy increase at certain locations, so that should be a pick up. As far as rental rates, I think for the traditional MOB that that is going to be more or less flat and may be a little positive. But I think some of the concerns we have or issues we've had is with some of the may be non-core MOB buildings and a number of leases were executed pre-recession that when we -- that are rolling over now it is been a challenge to achieve the same rental rates today. So I would say net, net I would say the flat is -- probably will come out, may be plus or minus percent, but I think we are pretty much at status quo today and we would expect to somewhat improve. Daniel Bernstein – Stifel Nicolaus: Okay. And now on -- or is there any pressure for you to put additional CapEx or TI to get those leases? So in another words, your NOI might go up I think on an after CapEx basis, am I going to see the NOI go down? Just trying to think about what kind of pressures you are seeing in terms of CapEx and TI?

Right. I mean we are spending regular CapEx on some of the buildings, particularly some of the older buildings, we have 2141 K Street and the other on is on 19th Street in Washington, D.C. And even at Cedars-Sinai we are doing fair amount of renovations to the lobbies and elevators and things of that nature. So -- but as far as the tenant space itself, I know I'm not expecting significant increase in TI required to release the space. Daniel Bernstein – Stifel Nicolaus: On the managed assets, if you took out the Sunrise assets, do you have any data that can provide on a quarter-over-quarter performance again for the non-Sunrise assets? Just when I look at the supplement, I don't have an apples-to-apples basis to how you did sequentially on occupancy rate margin, etc.

Yes, if we took out the 10 Sunrise and we had just the 30 managed senior living communities, I think we said on the call that the margins would be above 28%. And that's little higher than it was year-over-year. It's consistent with second quarter to this quarter. It's somewhat flat this quarter. Daniel Bernstein – Stifel Nicolaus: And then, I assume that occupancy improves sequentially looked like 20 basis points in the supplemental but it is -- again it is not apples-to-apples, is that about right, 20 basis points or so?

That's probably in line. Daniel Bernstein – Stifel Nicolaus: And then, the other question I had is, most of you acquisitions in the senior housing side has been put into TRS to manage the assets. Could you go over maybe again the criteria of using triple net versus TRS? And is it you preference now to basically do seniors housing acquisitions, placed them into the managed portfolio and thus the construction data that you see at NIC MAP alter that thinking at all?

Well, currently our expectation is to continue to put them in to TRS assets. It definitely is a transaction by transaction analysis that we do. But our -- we do not feel threatened for the say the next year or two on the fact that new construction will impact occupancies at properties. I think we feel that the demographics and the local analysis we do at each acquisition suggest that they're is still decent amount of upside potential. So we're still staying with the TRS model for now, I'd say for the next several quarters at least. And if a significant transaction comes along I think we probably evaluate that even further whether or not we should, which way we should do it. But I think we still have quite a bit of running room.

Our next question today comes from the line of Michael Carroll representing RBC Capital Markets, please go ahead.

Can you guys give an update on the two portfolios you're currently marketing for sale? What type of interest have you received already and when can we expect these sales to be completed?

Can you guys give an update on the two portfolios you're currently marketing for sale? What type of interest have you received already and when can we expect these sales to be completed?

Well we have a good amount of interest. The -- I'd say although the skilled nursing and senior housing assets, both are actively getting good solid offers on each of those properties. So as you can see where we could sell some them before year-end, close on them, otherwise I think it would slip into the first quarter on the senior housing side of things. Medical office buildings, a little bit later marketing effort, but there is a good amount of interest in the properties. So I think it's a little longer time to through the sales effort. But then again they don't need healthcare regulatory approvals to close on, so the closing again is most likely to occur mostly in the first quarter next year.

And these are the senior housing assets, at least are mostly leased to Five Star, right. So can we expect a pretty good pick up in Five Star's coverage ratios?

And these are the senior housing assets, at least are mostly leased to Five Star, right. So can we expect a pretty good pick up in Five Star's coverage ratios?

Yes, yes, it's -- and again in the presentation -- in the script I had mentioned that there would be a 40 basis points pick up in occupancy and about a five basis point pick up in coverage ratio.

And are all the assets leased to Five Star or only some of them?

And are all the assets leased to Five Star or only some of them?

Well all 10 are leased to Five Star.

Yeah.

Well now I'd turn the conference back over to the speakers for closing remarks. Thank you.

Well thank you all for joining us and we will be at Marriott in just a couple of weeks from now. So we look forward to seeing many of you at that conference personally. Thank you. Have a good day.

Gentlemen, that does conclude our conference for today. We thank you for your participation and using the AT&T executive teleconference. You may now disconnect.