Investor Presentation May 2018

Transcription

1 Investor Presentation May

2 Warning Concerning Forward Looking Statements THIS PRESENTATION CONTAINS STATEMENTS THAT CONSTITUTE FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND OTHER SECURITIES LAWS. ALSO, WHENEVER WE USE WORDS SUCH AS BELIEVE, EXPECT, ANTICIPATE, INTEND, PLAN, ESTIMATE, WILL, MAY AND NEGATIVES OR DERIVATIVES OF THESE OR SIMILAR EXPRESSIONS, WE ARE MAKING FORWARD LOOKING STATEMENTS. THESE FORWARD LOOKING STATEMENTS ARE BASED UPON OUR PRESENT INTENT, BELIEFS OR EXPECTATIONS, BUT FORWARD LOOKING STATEMENTS ARE NOT GUARANTEED TO OCCUR AND MAY NOT OCCUR. FORWARD LOOKING STATEMENTS IN THIS PRESENTATION RELATE TO VARIOUS ASPECTS OF OUR BUSINESS, INCLUDING OUR POLICIES AND PLANS REGARDING INVESTMENTS, FINANCINGS AND DISPOSITIONS, OUR ABILITY TO RETAIN OUR EXISTING TENANTS, ATTRACT NEW TENANTS AND MAINTAIN OR INCREASE CURRENT RENTAL RATES, THE CREDIT QUALITIES OF OUR TENANTS, OUR ABILITY TO COMPETE FOR ACQUISITIONS AND TENANCIES EFFECTIVELY, OUR ACQUISITIONS AND SALES OF PROPERTIES, THE ABILITY OF THE MANAGER OF OUR MANAGED SENIOR LIVING COMMUNITIES TO MAINTAIN AND INCREASE OCCUPANCY, REVENUES AND OPERATING INCOME AT THOSE COMMUNITIES, OUR ABILITY TO PAY DISTRIBUTIONS TO OUR SHAREHOLDERS AND THE AMOUNT OF SUCH DISTRIBUTIONS, OUR ABILITY TO RAISE DEBT OR EQUITY CAPITAL, THE FUTURE AVAILABILITY OF BORROWINGS UNDER OUR REVOLVING CREDIT FACILITY, OUR ABILITY TO PAY INTEREST ON AND PRINCIPAL OF OUR DEBT, OUR ABILITY TO APPROPRIATELY BALANCE OUR USE OF DEBT AND EQUITY CAPITAL, OUR CREDIT RATINGS, OUR BELIEF THAT THE AGING U.S. POPULATION AND INCREASING LIFE SPANS OF SENIORS WILL INCREASE THE DEMAND FOR SENIOR LIVING SERVICES AND OUR BELIEF THAT FIVE STAR SENIOR LIVING INC. (FIVE STAR), OUR FORMER SUBSIDIARY AND LARGEST TENANT AND THE MANAGER OF OUR MANAGED SENIOR LIVING COMMUNITIES, HAS ADEQUATE FINANCIAL RESOURCES AND LIQUIDITY AND THE ABILITY TO MEET ITS OBLIGATIONS TO US AND TO MANAGE OUR SENIOR LIVING COMMUNITIES SUCCESSFULLY. OUR ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE CONTAINED IN OR IMPLIED BY OUR FORWARD LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS, SUCH AS THE IMPACT OF CONDITIONS AND CHANGES IN THE ECONOMY AND THE CAPITAL MARKETS ON US AND OUR TENANTS AND MANAGERS, THE IMPACT OF THE PATIENT PROTECTION AND AFFORDABLE CARE ACT (ACA), INCLUDING CURRENT PROPOSALS TO REPEAL OR TO REPEAL AND REPLACE THE ACA, AND OTHER EXISTING OR PROPOSED LEGISLATION OR REGULATIONS ON US, ON OUR TENANTS AND MANAGERS AND ON THEIR ABILITY TO PAY OUR RENTS AND RETURNS, ACTUAL AND POTENTIAL CONFLICTS OF INTEREST WITH OUR RELATED PARTIES, COMPLIANCE WITH, AND CHANGES TO APPLICABLE LAWS, REGULATIONS AND RULES, OUR ABILITY TO SATISFY COMPLEX RULES IN ORDER FOR US TO QUALIFY FOR TAXATION AS A REIT FOR U.S. FEDERAL INCOME TAX PURPOSES, COMPETITION WITHIN THE HEALTHCARE AND REAL ESTATE INDUSTRIES AND ACTS OF TERRORISM, OUTBREAKS OF SO CALLED PANDEMICS OR OTHER MANMADE OR NATURAL DISASTERS BEYOND OUR CONTROL. FOR EXAMPLE: (A) FIVE STAR MAY EXPERIENCE FINANCIAL DIFFICULTIES AS A RESULT OF A NUMBER OF FACTORS, INCLUDING CHANGES IN MEDICARE OR MEDICAID POLICIES, SUCH AS THOSE THAT MAY RESULT FROM THE ACA, WHICH COULD RESULT IN REDUCED MEDICARE OR MEDICAID RATES OR A FAILURE OF SUCH RATES TO COVER FIVE STAR S COSTS OR LIMIT THE SCOPE OR FUNDING OF EITHER OR BOTH PROGRAMS, THE IMPACT OF CHANGES IN THE ECONOMY AND THE CAPITAL MARKETS ON FIVE STAR AND ITS RESIDENTS AND OTHER CUSTOMERS, COMPETITION WITHIN THE SENIOR LIVING SERVICES BUSINESS, INCREASES IN INSURANCE AND TORT LIABILITY COSTS, INCREASES IN COMPLIANCE COSTS AND INCREASES IN FIVE STAR'S LABOR COSTS OR IN COSTS FIVE STAR PAYS FOR GOODS AND SERVICES; (B) IF FIVE STAR S OPERATIONS CONTINUE TO BE UNPROFITABLE, IT MAY DEFAULT ON ITS RENT OBLIGATIONS TO US; (C) IF FIVE STAR FAILS TO PROVIDE QUALITY SERVICES AT SENIOR LIVING COMMUNITIES THAT WE OWN, OUR INCOME FROM THESE COMMUNITIES MAY BE ADVERSELY AFFECTED; (D) OUR COMMUNITIES MAY FAIL TO BE COMPETITIVE AND THEY MAY FAIL TO ATTRACT RESIDENTS, DESPITE OUR CAPITAL INVESTMENTS; (E) OUR OTHER TENANTS MAY EXPERIENCE LOSSES AND DEFAULT ON THEIR RENT OBLIGATIONS TO US; (F) SOME OF OUR TENANTS MAY NOT RENEW EXPIRING LEASES, AND WE MAY BE UNABLE TO OBTAIN NEW TENANTS TO MAINTAIN OR INCREASE THE HISTORICAL OCCUPANCY RATES OF, OR RENTS FROM, OUR PROPERTIES; (G) WE MAY BE UNABLE TO PAY OUR DEBT OBLIGATIONS WHEN THEY BECOME DUE OR TO MAINTAIN OUR CURRENT RATE OF DISTRIBUTIONS ON OUR COMMON SHARES AND FUTURE DISTRIBUTIONS MAY BE REDUCED OR ELIMINATED; (H) WE MAY BE UNABLE TO IDENTIFY PROPERTIES THAT WE WANT TO ACQUIRE OR TO NEGOTIATE ACCEPTABLE PURCHASE PRICES, ACQUISITION FINANCING, MANAGEMENT AGREEMENTS OR LEASE TERMS FOR NEW PROPERTIES; (I) RENTS THAT WE CAN CHARGE AT OUR PROPERTIES MAY DECLINE BECAUSE OF CHANGING MARKET CONDITIONS OR OTHERWISE; (J) CONTINGENCIES IN OUR ACQUISITION AND SALE AGREEMENTS MAY NOT BE SATISFIED AND OUR PENDING ACQUISITIONS AND SALES AND ANY RELATED LEASES OR MANAGEMENT ARRANGEMENTS WE MAY EXPECT TO ENTER INTO MAY NOT OCCUR, MAY BE DELAYED OR THE TERMS OF SUCH TRANSACTIONS OR ARRANGEMENTS MAY CHANGE; (K) OUR ACQUISITIONS ARE SUBJECT TO CONDITIONS THAT MAY NOT BE MET AND OUR ACQUISITIONS AND RELATED MANAGEMENT AND POOLING ARRANGEMENTS MAY NOT OCCUR, MAY BE DELAYED OR THEIR TERMS MAY CHANGE; (L) WE CANNOT BE SURE THAT WE WILL ENTER INTO ANY ADDITIONAL LEASES, MANAGEMENT ARRANGEMENTS OR OTHER TRANSACTIONS WITH FIVE STAR; (M) CONTINUED AVAILABILITY OF BORROWINGS UNDER OUR REVOLVING CREDIT FACILITY IS SUBJECT TO OUR SATISFYING CERTAIN FINANCIAL COVENANTS AND OTHER CREDIT FACILITY CONDITIONS THAT WE MAY BE UNABLE TO SATISFY; (N) ACTUAL COSTS UNDER OUR REVOLVING CREDIT FACILITY OR OTHER FLOATING RATE CREDIT FACILITIES WILL BE HIGHER THAN LIBOR PLUS A PREMIUM BECAUSE OF FEES AND EXPENSES ASSOCIATED WITH SUCH FACILITIES; (O) OUR OPTION TO EXTEND THE MATURITY DATE OF OUR REVOLVING CREDIT FACILITY IS SUBJECT TO OUR PAYMENT OF A FEE AND MEETING OTHER CONDITIONS THAT MAY NOT BE MET; (P) OUR RESIDENTS AND PATIENTS MAY BECOME UNABLE TO FUND OUR CHARGES WITH PRIVATE RESOURCES AND WE MAY BE REQUIRED OR MAY ELECT FOR BUSINESS REASONS TO ACCEPT OR PURSUE REVENUES FROM GOVERNMENT SOURCES, WHICH COULD RESULT IN AN INCREASED PART OF OUR NET OPERATING INCOME (NOI) AND REVENUE BEING GENERATED FROM GOVERNMENT PAYMENTS AND OUR BECOMING MORE DEPENDENT ON GOVERNMENT PAYMENTS; (Q) CIRCUMSTANCES THAT ADVERSELY AFFECT THE ABILITY OF SENIORS OR THEIR FAMILIES TO PAY FOR OUR TENANTS AND MANAGER S SERVICES, SUCH AS ECONOMIC DOWNTURNS, WEAK HOUSING MARKET CONDITIONS, HIGHER LEVELS OF UNEMPLOYMENT AMONG OUR RESIDENTS FAMILY MEMBERS, LOWER LEVELS OF CONSUMER CONFIDENCE, STOCK MARKET VOLATILITY AND/OR CHANGES IN DEMOGRAPHICS GENERALLY COULD AFFECT THE PROFITABILITY OF OUR SENIOR LIVING COMMUNITIES; (R) OUR UNSPENT LEASING RELATED OBLIGATIONS MAY COST MORE OR LESS AND MAY TAKE LONGER TO COMPLETE THAN WE CURRENTLY EXPECT, AND WE MAY INCUR INCREASING AMOUNTS FOR THESE AND SIMILAR PURPOSES IN THE FUTURE; (S) WE MAY NOT BE ABLE TO SELL PROPERTIES THAT WE DETERMINE TO OFFER FOR SALE ON TERMS ACCEPTABLE TO US OR OTHERWISE AND (T) OPERATING DEFICIENCIES OR A LICENSE REVOCATION AT ONE OR MORE OF OUR SENIOR LIVING COMMUNITIES MAY ADVERSELY IMPACT OUR ABILITY TO OBTAIN LICENSES FOR, OR ATTRACT RESIDENTS TO, OUR OTHER COMMUNITIES. OUR ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2017, OUR QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2018 AND OUR OTHER FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION (SEC) IDENTIFY OTHER IMPORTANT FACTORS THAT COULD CAUSE DIFFERENCES FROM OUR FORWARD LOOKING STATEMENTS. OUR FILINGS WITH THE SEC ARE AVAILABLE ON THE SEC S WEBSITE AT YOU SHOULD NOT PLACE UNDUE RELIANCE UPON OUR FORWARD LOOKING STATEMENTS. EXCEPT AS REQUIRED BY LAW, WE DO NOT INTEND TO UPDATE OR CHANGE ANY FORWARD LOOKING STATEMENTS AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE. NON-GAAP FINANCIAL MEASURES THIS PRESENTATION CONTAINS NON-GAAP FINANCIAL MEASURES INCLUDING NORMALIZED FUNDS FROM OPERATIONS (FFO), ADJUSTED EBITDA, NOI AND CASH BASIS NOI. RECONCILIATIONS FOR THESE METRICS TO THE CLOSEST U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) METRICS ARE INCLUDED IN AN APPENDIX HERETO. Note: Unless otherwise stated, data in this presentation is as of March 31,

3 Company Overview SNH is a healthcare REIT with the following attributes: Substantial size: $8.6 billion investment portfolio. Focused growth: Medical office and life science buildings, and private pay senior living communities. Property Mix (3) Wellness Centers, 3% Limited government funding exposure: Approximately 97% of NOI comes from private pay properties. (1) Geographic diversity: Properties in 42 states and Washington, D.C. Tenant diversity: Approximately 700 tenants. Carefully structured investments: No ground leased medical office buildings, and only 26 of 444 properties (19% of total rents (2) ) are encumbered by mortgages and capital leases. Medical Office, 20% Life Science, 22% SNFs, 3% Independent Living, 28% Assisted Living, 24% (1) Defined as properties categorized as MOBs, wellness centers and senior living communities in which the majority of the resident revenues are derived from private pay sources. (2) Based on Q rental income and managed property NOI. (3) Based on Q NOI. See exhibits herein for the calculation of NOI and a reconciliation of net income determined in accordance with GAAP to that amount. 3

4 Why Invest in SNH? High quality portfolio. Predominantly private pay assets with limited exposure to government reimbursement. Diversification across geography, tenant and asset mix. Actively maintain a high quality portfolio through regular investment and active asset management. Healthcare supply and demand fundamentals are positive and growing. Long term demand for senior housing exceeds supply. 10,000 Baby Boomers turning 65 every day. (1) Secure dividend payment. Current annualized dividend of $1.56 per share. Secure normalized FFO payout ratio of 86% for the trailing twelve months. (2) Conservative financial approach. Financial flexibility with a strong balance sheet. Investment grade ratings by Moody s (Baa3) and S&P (BBB-). (1) Source: U.S. Census Bureau. (2) Excludes the business management incentive fee expense in 4Q17. 4

5 Geographic Diversification $8.6 billion invested in 444 properties located in 42 states and Washington, D.C. Geographic Diversification (1) MD 4% NC 3% VA 3% IN 3% WI 4% GA 5% 32 Other States + D.C. 37% Property Type No. of Properties % of NOI (2) Independent living % Assisted living % Skilled nursing facilities % Life science % Medical office % Wellness centers % Total % TX 7% FL 9% CA 11% MA 14% Note: Blue colored states represent states where SNH owns properties. (1) Based on cost of real estate properties as of March 31, Cost of real estate properties is before depreciation and less impairment write downs, if any. (2) Based on Q NOI. See exhibits herein for the calculation of NOI and a reconciliation of net income determined in accordance with GAAP to that amount. 5

6 65+ Age group population (millions) Medical Office Industry Dynamics Approximately 10,000 people are turning 65 each day. (1) ($ in billions) National Health Expenditures $5,000 $4,000 $3,000 $2,000 $1,000 $ % 13.0% Population Growth 19.7% 18.2% 16.3% 14.5% % of population 25% 20% 15% 10% 5% 0% 65+ Age group % of total population (U.S.) National Healthcare Expenditures are expected to grow rapidly over the next decade. (2) In 2010, the number of seniors in the U.S. totaled 40 million, representing 13% of the population. By 2030, the number is expected to reach 71 million, or 19.7% of the population. (3) (1) Source: U.S. Census Bureau. (2) Source: (3) American Seniors Housing Association. 6

7 High Quality MOB Portfolio 12.6 million square feet in 129 properties located in 28 states and Washington, D.C. Over 650 tenants. Occupancy of 95.1% at March 31, Concord, MA. Tenant: Harvard Vanguard. Square feet: 49,250. Los Angeles, CA. Tenant: Cedars-Sinai Medical Center. Square feet: 330,892. Durham, NC. Tenant: Duke University Health System. Square feet: 126,225. Sheboygan, WI. Tenant: Aurora Healthcare, Inc. Square feet: 154,423. San Diego, CA. Tenant: The Scripps Research Institute. Square feet: 164,091. Irving, TX. Tenant: Hospital Corporation of America. Square feet: 94,137. 7

8 Medical Office Building Portfolio Largest MOB Tenants ($ in 000s) Square Feet Annualized Rental Income (1) % (1) Lease Expiration Vertex Pharmaceuticals, Inc. (2) 1,082,000 $91, % 2028 Advocate Aurora Health 643,000 $16, % 2024 Cedars-Sinai Medical Center 141,000 $14, % The Scripps Research Institute 164,000 $10, % 2019 HCA Healthcare Inc. 248,000 $7, % Reliant Medical Group, Inc. 362,000 $7, % % MOB Annualized Rental Income Expiring 40% 36% 30% 20% 10% 4% 11% 9% 6% 8% 5% 11% 4% 5% The MOB weighted average remaining lease term (by annualized rental income) is 6.7 years. 0% (1) Annualized rental income is rents pursuant to existing leases as of March 31, Annualized rental income includes straight line rent adjustments and estimated recurring expense reimbursements for certain net and modified gross leases; excludes lease value amortization at certain of the MOBs. 8 (2) The property leased by this tenant is owned by a joint venture, of which we own a 55% equity interest. Rental income presented includes 100% of rental income as reported under GAAP.

9 MOB Segment Life Science Laboratory and research space. 52% Medical Office Buildings (1) 38% Patient Care Clinics, outpatient centers, and doctor s offices. 10% Other Medical Related Medical equipment manufacturing. Other medical related tenants. (1) Based on Q NOI. See exhibits herein for the calculation of NOI and a reconciliation of net income determined in accordance with GAAP to that amount. 9

10 Millions Units Occupancy Senior Living Industry Dynamics 20 Age 85 + Population (1) 9% 12,000 Senior Housing Supply-Demand Trends (2) 92% % 7% 10,000 91% % 5% 4% 3% 8,000 6,000 4,000 2,000 90% 89% 88% 4 2% 0 87% % 0% -2,000 86% 85+ Population Growth Rate (%) Inventory Growth Absorption Occupancy The age 85 plus population is growing at a much faster rate than the rest of the population. (1) New supply mitigated by record absorption due to aging population and overall penetration rates. (1) Source: U.S. Census Bureau, 2014 National Population Projections. (2) Source: National Investment Center for the Seniors Housing and Care Industry (NIC), as of March 31,

11 Senior Living Portfolio 305 properties with 34,205 units located in 39 states. Premier operators: Five Star Senior Living, Brookdale Senior Living, and 11 private senior living operators. The Stratford. Carmel, IN. 213 Units. Weighted average rent coverage of 1.20x. Weighted average occupancy of 83.6%. Calusa Harbour. Ft Myers, FL. 440 Units. Court at Palm Aire. Pompano Beach, FL. 295 Units. Remington Club. San Diego, CA. 405 Units. The Gables. Winchester, MA. 125 Units. Park Summit. Coral Springs, FL. 281 Units. Note: Coverage ratio and occupancy are for the twelve months ended December 31,

12 Senior Living Portfolio Operator Unit Mix Number of Communities (1) Units (1) Occupancy (2) Rental Coverage (2) Five Star Senior Living IL, AL, ALZ, SNF , % 1.15x Sunrise Senior Living (3) IL N/A N/A Brookdale Senior Living AL % 2.30x 11 Private Operators IL, AL, SNF 29 3, % 1.21x Managed Senior Living IL, AL, ALZ, SNF 72 9, % N/A Total Senior Living , % 1.20x (1) Number of communities and units are as of March 31, (2) Operator occupancy and rental coverage are presented for the twelve month period ended December 31, Rental coverage is calculated as operating cash flow from our tenants operations of properties, before subordinated charges, divided by rents payable to us. (3) In March 2018, we sold two senior living communities leased to a subsidiary of Sunrise Senior Living, LLC, or Sunrise. We currently have one senior living community leased to Sunrise under agreement to sell. We expect the closing of the sale of this community to occur by the end of the second quarter of

13 Investment Grade Rated Balance Sheet (1) Unsecured senior notes: $2.25 billion of senior notes due in 2019, 2020, 2021, 2024, 2028, 2042 and Mortgage debt & capital leases: $828 million secured by 26 properties (94% of properties are unencumbered). Unsecured term loans: $350 million non-revolving term loan. Total Market Capitalization Unsecured Senior Notes 30% Matures in January $200 million non-revolving term loan. Matures in September Unsecured credit facility: $1 billion revolving credit facility. $55 million outstanding. LIBOR plus 120 basis points. Matures in January 2022, with option to extend to Market Value of Common Shares 51% Mortgage Debt 11% Unsecured Revolving Credit Facility 1% Unsecured Term Loans 7% (1) As of March 31,

14 Conservative Financial Profile 45% 40% 35% 30% 25% 20% 15% 10% Total Debt as a % of Gross Assets 41.0% ($ in millions) $1,200 $1,000 $800 $600 $400 $200 $- Debt Maturity Schedule (2) SNH SNL US REIT Healthcare Index (1) Unsecured Floating Unsecured Fixed Secured Fixed No derivatives, no off balance sheet liabilities and no material adverse change clauses or ratings triggers. (1) Source for the Healthcare Index is SNL Financial; data is actual as of the most recent quarter reported. (2) As of March 31,

15 $1.23 $1.24 $1.25 $1.28 $1.30 $1.38 $1.40 $1.42 $1.45 $1.49 $1.53 $1.56 $1.56 $1.56 $1.56 $1.56 $1.56 History of Providing Returns to Investors $1.60 Dividends Paid Per Share (1) 94% 600% Total Return (2) $1.55 $ % 90% 500% $1.45 $1.40 $1.35 $ % 86% 84% 400% 300% 200% $1.25 $ % 80% 100% $ % 0% Annual Dividends Paid Normalized FFO Payout Ratio SNH SNL U.S. REIT Equity Normalized FFO payout ratio of 86% for the trailing 12 months Q % total return over 15 years. (1) Excludes 13.2 /share of RMR stock distributed in 4Q15 and the business management incentive fee expense in 4Q17. (2) Source: SNL Financial, based on period from 12/31/2002 to 12/31/

16 Preferred Portfolio Composition 100% 90% 80% Portfolio Comparison of Largest Healthcare REITs 3% 4% 3% 7% 22% 25% 20% 17% 70% 60% 50% 20% 15% 83% 26% 14% 45% 40% 3% 7% 34% 30% 20% 10% 0% 14% 11% 1% 38% 25% 24% 27% 13% SNH OHI HCP VTR WELL Senior Housing - NNN Skilled Nursing Senior Housing - Managed Hospitals MOBs Life Science Other Source: Company filings and presentations. SNH, HCP, VTR and WELL shown as a percentage of NOI. OHI shown as a percentage of revenue. 16

17 Billions Healthcare REIT Peer Comparison $40 $30 Total Enterprise Value 10.0% 8.0% Dividend Yield $20 $10 $0 6.0% 4.0% 2.0% 0.0% 20.0x FFO Multiple (Consensus Est FFO) 10.0% Implied Cap Rate 15.0x 8.0% 10.0x 6.0% 5.0x 4.0% 0.0x 2.0% Source: SNL Financial; data is actual as of the most recent quarter reported. 17

18 Management Structure SNH obtains high quality and cost-effective management services from The RMR Group for its real estate operating platform. RMR is an alternative asset management company with $30.0 billion of assets under management, including more than 1,700 real estate properties. The RMR managed companies combined have approximately $11 billion of annual revenues and approximately 52,000 employees. RMR s Operations Include: Healthcare REIT G&A Expense Comparison Financial Services: Real Estate Services: Business Services: (1)(2) Accounting Acquisitions / Dispositions Administration Capital Markets Asset Management Human Resources Compliance / Audit Construction Information Technology (IT) Finance Engineering Investor Relations Financial Planning Leasing Legal Tax Property Management Risk Management (1) Source: SNL Financial (2) Excludes the business management incentive fee expense in 4Q17. 18

19 Management Fees and Aligned Interests In June 2015 SNH, along with three other managed public REITs, acquired approximately half of The RMR Group. Further Aligned Interests The historical owners of RMR have become owners of a significant number of restricted shares of SNH and those shares are subject to 10 year lock up agreements. SNH and its shareholders own RMR shares and share in future profits from new businesses of the external manager. There is greater transparency for SNHs shareholders into RMR management, including compensation practices as well as financial and operating results. Revised Fee Structure Business Management Fee: Incentive Fee: Property Management Fee: Principally consists of an annual fee based on 50 bps multiplied by the lower of: (1) SNH s historical cost of real estate, or (2) SNH s total market capitalization. Equal to 12% of value generated by SNH in excess of benchmark index total returns per share over a three year period, subject to a cap (1.5% of equity market cap). Principally consists of an annual fee based on 3.0% of gross rents collected at SNH s MOB properties. 19

20 Business Plan Remain focused on investing internally and active asset management to maintain high quality properties leased to strong credit tenants. Expand private pay senior living communities that contain a mix of independent living, assisted living and memory care. Continue to reinvest at our medical office buildings to attract high quality tenants. Maintain a strong, investment grade rated financial profile. Continue to grow Normalized FFO. Continue to monitor debt market and repayment opportunities. Continue to evaluate alternatives to optimize our weighted average cost of capital. 20

21 Exhibits 21

22 Financial Summary For the three months ended March 31, Rental income $ 173,728 $ 166,443 Residents fees and services (managed properties) 102,087 98,118 Total revenues $ 275,815 $ 264,561 ($ in 000s, except per share data) Property net operating income (NOI) (1) $ 167,672 $ 163,504 NOI margin % 60.8% 61.8% Adjusted EBITDA (1) $ 157,844 $ 152,984 Normalized funds from operations (FFO) (1) $ 107,163 $ 108,432 Per share data: Common dividend $ 0.39 $ 0.39 Normalized FFO $ 0.45 $ 0.46 Normalized FFO payout ratio 86.7% 84.8% (1) See following pages for reconciliation to nearest GAAP measures. 22

23 Calculation and Reconciliation of Net Operating Income (NOI) and Cash Basis NOI (1) ($ in 000's) For the Three Months Ended 3/31/ /31/2017 9/30/2017 6/30/2017 3/31/2017 Calculation of NOI and Cash Basis NOI: Revenues: Rental income 173, , , , ,443 Residents fees and services 102,087 98,981 98,331 98,366 98,118 Total revenues 275, , , , ,561 Property operating expenses (108,143) (104,865) (104,714) (102,795) (101,057) Property net operating income (NOI): 167, , , , ,504 Non-cash straight line rent adjustments (2,993) (3,473) (3,621) (3,435) (3,429) Lease value amortization (1,381) (1,386) (1,352) (1,320) (1,291) Non-cash amortization included in property operating expenses (2) (199) (200) (199) (199) (199) Cash Basis NOI 163, , , , ,585 Reconciliation of Net Income to NOI and Cash Basis NOI: Net income 237,405 66,328 35,793 17,402 32,281 Gain on sale of properties (181,154) (46,055) Income before gain on sale of properties 56,251 20,273 35,793 17,402 32,281 Equity in earnings of an investee (44) (75) (31) (374) (128) Income tax expense Loss on early extinguishment of debt ,353 Interest expense 43,552 40,625 40,105 40,800 43,488 Interest and other income (54) (83) (128) (76) (120) Unrealized gains and losses on equity investments, net (27,241) Dividend income (659) (659) (659) (659) (659) Operating income 72,195 60,235 75,463 64,545 74,954 Impairment of assets 5,082 Acquisition and certain other transaction related costs General and administrative expense 25,118 45,813 19,883 22,922 15,083 Depreciation and amortization expense 70,339 67,398 66,619 69,669 73,175 Property NOI 167, , , , ,504 Non-cash amortization included in property operating expenses (2) (199) (200) (199) (199) (199) Lease value amortization (1,381) (1,386) (1,352) (1,320) (1,291) Non-cash straight line rent adjustments (2,993) (3,473) (3,621) (3,435) (3,429) Cash Basis NOI 163, , , , ,585 (1) See page 26 for a definition of NOI and Cash Basis NOI, a description of why we believe they are appropriate supplemental measures and a description of how we use these measures. (2) We recorded a liability for the amount by which the estimated fair value for accounting purposes exceeded the price we paid for our investment in RMR Inc. common stock in June A portion of this liability is being amortized on a straight line basis through December 31, 2035 as a reduction to property management fees expense, which is included in property operating expenses. 23

24 Calculation and Reconciliation of EBITDA and Adjusted EBITDA (1) ($ in 000's) For the Three Months Ended 3/31/ /31/2017 9/30/2017 6/30/2017 3/31/2017 Net income $237,405 $66,328 $35,793 $17,402 $32,281 Interest expense 43,552 40,625 40,105 40,800 43,488 Income tax expense Depreciation and amortization expense 70,339 67,398 66,619 69,669 73,175 EBITDA 351, , , , ,036 General and administrative expense paid in common shares (2) Estimated business management incentive fees (3) 14,347-22,048 8,022 10,760 3,266 Acquisition and certain other transaction related costs Impairment of assets 5,082 Loss on early extinguishment of debt ,353 Gain on sale of properties -181,154-46,055 Unrealized gains and losses on equity securities, net (4) -27,241 Adjusted EBITDA $157,844 $107,187 $151,515 $151,808 $152,984 (1) See page 26 for a definition of EBITDA and Adjusted EBITDA and a description of why we believe they are appropriate supplemental measures. (2) Amounts represent equity compensation awarded to our trustees, officers and certain other employees of RMR LLC. (3) Incentive fees under our business management agreement with RMR LLC are payable after the end of each calendar year, are calculated based on common share total return, as defined, and are included in general and administrative expense in our condensed consolidated statements of income. In calculating net income in accordance with GAAP, we recognize estimated business management incentive fee expense, if any, in the first, second and third quarters. Although we recognize this expense, if any, in the first, second and third quarters for purposes of calculating net income, we do not include these amounts in the calculation of Adjusted EBITDA until the fourth quarter, when the amount of the business management incentive fee expense for the calendar year, if any, is determined. Adjusted EBITDA includes business management incentive fee expense of $55,740 for the three months ended December 31, Excluding business management incentive fee expense, Adjusted EBITDA would have been $162,927 for the three months ended December 31, (4) Represents the unrealized gains and losses on equity securities, net, to adjust the carrying value of our investments to fair value in accordance with a change in GAAP standards effective January 1,

25 Calculation and Reconciliation of Funds From Operations (FFO) and Normalized FFO (1) ($ in 000's, except per share data) For the Three Months Ended 3/31/ /31/2017 9/30/2017 6/30/2017 3/31/2017 Net income attributable to common shareholders 236,022 65,000 34,414 16,042 32,155 Depreciation and amortization expense 70,339 67,398 66,619 69,669 73,175 Noncontrolling interest's share of net FFO adjustments (5,300) (5,304) (5,305) (5,305) (456) Gain on sale of properties (181,154) (46,055) Impairment of assets 5,082 FFO 119,907 81,039 95,728 85, ,874 Estimated business management incentive fees (2) 14,347 (22,048) 8,022 10,760 3,266 Acquisition and certain other transaction related costs Loss on distribution to common shareholders of RMR common stock Loss on early extinguishment of debt ,353 Unrealized gains and losses on equity securities, net (3) (27,241) Normalized FFO 107,163 59, , , ,432 Weighted average common shares outstanding (basic) 237, , , , ,391 Weighted average common shares outstanding (diluted) 237, , , , ,416 Per Common Share Data (basic and diluted): Net income attributable to common shareholders $0.99 $0.27 $0.14 $0.07 $0.14 FFO $0.50 $0.34 $0.40 $0.36 $0.44 Normalized FFO $0.45 $0.25 $0.44 $0.44 $0.46 (1) See page 26 for a definition of FFO and Normalized FFO, a description of why we believe they are appropriate supplemental measures and a description of how we use these measures. (2) Incentive fees under our business management agreement with RMR LLC are payable after the end of each calendar year, are calculated based on common share total return, as defined, and are included in general and administrative expense in our consolidated statements of income. In calculating net income attributable to common shareholders in accordance with GAAP, we recognize estimated business management incentive fee expense, if any, in the first, second and third quarters. Although we recognize this expense, if any, in the first, second and third quarters for purposes of calculating net income attributable to common shareholders, we do not include these amounts in the calculation of Normalized FFO until the fourth quarter, when the amount of business management incentive fee expense for the calendar year, if any, is determined. Normalized FFO includes business management incentive fee expense of $55,740 for the three months ended December 31, Excluding business management incentive fee expense, Normalized FFO per share would have been $0.48 for the three months ended December 31, (3) Represents the unrealized gains and losses on equity securities, net, to adjust the carrying value of our investments to fair value in accordance with a change in GAAP standards effective January 1,

26 Definitions of Certain Non-GAAP Financial Measures NOI and Cash Basis NOI The calculations of NOI and Cash Basis NOI exclude certain components of net income in order to provide results that are more closely related to our property level results of operations. We calculate NOI and Cash Basis NOI as shown on page 23. We define NOI as income from our real estate less our property operating expenses. NOI excludes amortization of capitalized tenant improvement costs and leasing commissions that we record as depreciation and amortization. We define Cash Basis NOI as NOI excluding non-cash straight line rent adjustments, lease value amortization, lease termination fee amortization, if any, and non-cash amortization included in property operating expenses. We consider NOI and Cash Basis NOI to be appropriate supplemental measures to net income because they may help both investors and management to understand the operations of our properties. We use NOI and Cash Basis NOI to evaluate individual and company wide property level performance, and we believe that NOI and Cash Basis NOI provide useful information to investors regarding our results of operations because these measures reflect only those income and expense items that are generated and incurred at the property level and may facilitate comparisons of our operating performance between periods and with other REITs. NOI and Cash Basis NOI do not represent cash generated by operating activities in accordance with GAAP and should not be considered alternatives to net income, net income attributable to common shareholders or operating income as indicators of our operating performance or as measures of our liquidity. These measures should be considered in conjunction with net income, net income attributable to common shareholders and operating income as presented in our condensed consolidated statements of income. Other real estate companies and REITs may calculate NOI and Cash Basis NOI differently than we do. EBITDA and Adjusted EBITDA We calculate EBITDA and Adjusted EBITDA as shown on page 24. We consider EBITDA and Adjusted EBITDA to be appropriate supplemental measures of our operating performance, along with net income, net income attributable to common shareholders and operating income. We believe that EBITDA and Adjusted EBITDA provide useful information to investors because by excluding the effects of certain historical amounts, such as interest, depreciation and amortization expense, EBITDA and Adjusted EBITDA may facilitate a comparison of current operating performance with our past operating performance. EBITDA and Adjusted EBITDA do not represent cash generated by operating activities in accordance with GAAP and should not be considered alternatives to net income, net income attributable to common shareholders or operating income as indicators of operating performance or as measures of our liquidity. These measures should be considered in conjunction with net income, net income attributable to common shareholders and operating income as presented in our condensed consolidated statements of income. Other real estate companies and REITs may calculate EBITDA and Adjusted EBITDA differently than we do. FFO and Normalized FFO We calculate FFO and Normalized FFO as shown on page 25. FFO is calculated on the basis defined by the National Association of Real Estate Investment Trusts, or Nareit, which is net income attributable to common shareholders, calculated in accordance with GAAP, excluding any gain or loss on sale of real estate and loss on impairment of real estate assets, if any, plus real estate depreciation and amortization and the difference between net income attributable to common shareholders and FFO attributable to noncontrolling interest, as well as certain other adjustments currently not applicable to us. Our calculation of Normalized FFO differs from Nareit's definition of FFO because we include business management incentive fees, if any, only in the fourth quarter versus the quarter when they are recognized as expense in accordance with GAAP due to their quarterly volatility not necessarily being indicative of our core operating performance and the uncertainty as to whether any such business management incentive fees will be payable when all contingencies for determining such fees are known at the end of the calendar year, and we exclude acquisition and certain other transaction related costs expensed under GAAP such as legal and professional fees associated with our acquisition and disposition activities, gains and losses on early extinguishment of debt, if any, unrealized gains and losses on equity securities, net, if any, and Normalized FFO from noncontrolling interest, net of FFO, if any. We consider FFO and Normalized FFO to be appropriate supplemental measures of operating performance for a REIT, along with net income, net income attributable to common shareholders and operating income. We believe that FFO and Normalized FFO provide useful information to investors, because by excluding the effects of certain historical amounts, such as depreciation and amortization expense, FFO and Normalized FFO may facilitate a comparison of our operating performance between periods and with other REITs. FFO and Normalized FFO are among the factors considered by our Board of Trustees when determining the amount of distributions to our shareholders. Other factors include, but are not limited to, requirements to maintain our qualification for taxation as a REIT, limitations in our revolving credit facility and term loan agreements and our public debt covenants, the availability to us of debt and equity capital, our expectation of our future capital requirements and operating performance and our expected needs for and availability of cash to pay our obligations. FFO and Normalized FFO do not represent cash generated by operating activities in accordance with GAAP and should not be considered alternatives to net income, net income attributable to common shareholders or operating income as indicators of our operating performance or as measures of our liquidity. These measures should be considered in conjunction with net income, net income attributable to common shareholders and operating income as presented in our condensed consolidated statements of income. Other real estate companies and REITs may calculate FFO and Normalized FFO differently than we do. 26

27 Investor Presentation May