Senior Housing Properties Trust, a real estate investment trust, said Friday that it has inked an agreement to sell New England Rehabilitation Hospital and Braintree Rehabilitation Hospital to The Sanders Trust and Harrison Street Real Estate Capital for $90 mln. SNH expects the transaction to be completed mid-year 2014.
NEWTON, Mass.–(BUSINESS WIRE)–Senior Housing Properties Trust (NYSE: SNH) today announced that it has entered an agreement to sell two rehabilitation hospitals it owns to a joint venture comprised of affiliates of The Sanders Trust, LLC of Birmingham, AL and Harrison Street Real Estate Capital, LLC of Chicago, IL for $90 million. SNH currently expects to realize a gain upon completion of this sale of over $30 million.
The two hospitals to be sold are New England Rehabilitation Hospital (198 licensed beds) located in Woburn, MA and Braintree Rehabilitation Hospital (166 licensed beds) located in Braintree, MA. These hospitals were acquired by SNH in 2002; and the hospitals real estate assets are currently leased to Five Star Quality Care, Inc. (NYSE: FVE). In connection with the transactions, FVE has agreed to terminate its lease of the hospitals and transfer its operating rights and obligations, subject to regulatory approvals, to entities affiliated with Reliant Hospital Partners, LLC (Reliant), a private company located in Richardson, TX, which will operate the hospitals when the sale is completed.
A large majority of the revenues at the hospitals are paid by Medicare. After completion of this sale, only 2% of SNH’s total revenues (based upon revenues for the three months ended June 30, 2013) will be from the ownership of healthcare facilities where Medicare and Medicaid represent a majority of revenues. The two hospitals are leased by SNH to FVE under a combination lease which also includes 51 senior living properties. The rent reduction which SNH will experience as a result of this sale will be $9.5 million per year. After this rent reduction, the total of all rent received by SNH from FVE under the four combination leases with FVE will represent only 26% of SNH’s total revenues (based upon revenues for the three months ended June 30, 2013).
David Hegarty, President and Chief Operating Officer of SNH, made the following statement concerning the transaction:
“For more than a decade, SNH has been focused on reducing its exposure to government funded programs like Medicare and Medicaid. Upon completion of the sale of these hospitals, this plan to reduce SNH’s exposure to possible future reductions in government funded Medicare and Medicaid programs will be nearly complete. SNH believes the rent reduction may be substantially offset by reinvesting the sale proceeds into additional healthcare related real estate, and any temporary reduction in earnings is more than offset by the reduced risk exposure to the politics and vagaries of government funding.”
The sale of these hospitals is not subject to any financing condition, but the transaction is subject to various health regulatory approvals and other closing conditions typical of these types of transactions. The health regulatory approvals are often time consuming, and SNH currently expects this sale may be completed about mid-year 2014.
Senior Housing Properties Trust is a real estate investment trust, or REIT, that owns independent and assisted living communities, medical office buildings, nursing homes and wellness centers located throughout the United States.