Senior Housing Properties Trust Settles Litigation with HealthSouth
November 08 2006 - 5:01PM
Business Wire
Senior Housing Properties Trust (NYSE: SNH) today announced that it
has agreed to settle its long running litigation with HealthSouth
Corporation (NYSE: HLS). In January 2002, SNH leased two hospitals
in Massachusetts to HealthSouth. In March 2003, a massive financial
fraud by prior management at HealthSouth was disclosed. Shortly
thereafter SNH commenced a lawsuit alleging that its lease had been
induced by HealthSouth�s fraud. SNH also subsequently issued a
notice of lease termination based upon HealthSouth�s failure to
provide timely and accurate financial reports, and HealthSouth sued
SNH seeking to prevent the lease termination. During this
litigation, the trial court has ruled that HealthSouth�s lease was
properly terminated and a new hospital tenant, Five Star Quality
Care, Inc. (AMEX: FVE), has begun to operate the hospitals
effective October 1, 2006. Until the settlement announced today,
HealthSouth was appealing the trial court�s decision terminating
HealthSouth�s lease. The issue of how much rent HealthSouth owed
for the period it operated the hospitals also was still being
litigated, until today�s settlement. Under the terms of the
settlement announced today, HealthSouth has agreed to pay an
increased rent for the period it operated the SNH owned hospitals
and all appeals and pending litigation between SNH and HealthSouth
and their various affiliates will be dismissed. Also, HealthSouth
will reimburse certain transition costs in connection with the
transfer of the hospital lease from HealthSouth to Five Star. As a
result of this settlement, SNH expects to report non-recurring
rental income in the fourth quarter of approximately $5.7 million,
or $0.08 per share. SNH�s fourth quarter will also include rent
from Five Star for the hospitals as well as final legal costs to
conclude this dispute. David J. Hegarty, President of SNH, made the
following statement when this settlement was announced: �Everyone
at SNH is pleased to bring our litigation with HealthSouth to a
conclusion. During the three month period ended September 30, 2006,
SNH incurred approximately $700,000, or $0.01/share in litigation
costs. Obviously, we are pleased to stop the distraction and
expense of this matter, and we are very pleased with our continuing
lease arrangements for these hospitals with Five Star.� Senior
Housing Properties Trust is a real estate investment trust which
owns hospitals, nursing homes, independent and assisted living
facilities and senior housing properties throughout the United
States. SNH is headquartered in Newton, MA. Senior Housing
Properties Trust (NYSE: SNH) today announced that it has agreed to
settle its long running litigation with HealthSouth Corporation
(NYSE: HLS). In January 2002, SNH leased two hospitals in
Massachusetts to HealthSouth. In March 2003, a massive financial
fraud by prior management at HealthSouth was disclosed. Shortly
thereafter SNH commenced a lawsuit alleging that its lease had been
induced by HealthSouth's fraud. SNH also subsequently issued a
notice of lease termination based upon HealthSouth's failure to
provide timely and accurate financial reports, and HealthSouth sued
SNH seeking to prevent the lease termination. During this
litigation, the trial court has ruled that HealthSouth's lease was
properly terminated and a new hospital tenant, Five Star Quality
Care, Inc. (AMEX: FVE), has begun to operate the hospitals
effective October 1, 2006. Until the settlement announced today,
HealthSouth was appealing the trial court's decision terminating
HealthSouth's lease. The issue of how much rent HealthSouth owed
for the period it operated the hospitals also was still being
litigated, until today's settlement. Under the terms of the
settlement announced today, HealthSouth has agreed to pay an
increased rent for the period it operated the SNH owned hospitals
and all appeals and pending litigation between SNH and HealthSouth
and their various affiliates will be dismissed. Also, HealthSouth
will reimburse certain transition costs in connection with the
transfer of the hospital lease from HealthSouth to Five Star. As a
result of this settlement, SNH expects to report non-recurring
rental income in the fourth quarter of approximately $5.7 million,
or $0.08 per share. SNH's fourth quarter will also include rent
from Five Star for the hospitals as well as final legal costs to
conclude this dispute. David J. Hegarty, President of SNH, made the
following statement when this settlement was announced: "Everyone
at SNH is pleased to bring our litigation with HealthSouth to a
conclusion. During the three month period ended September 30, 2006,
SNH incurred approximately $700,000, or $0.01/share in litigation
costs. Obviously, we are pleased to stop the distraction and
expense of this matter, and we are very pleased with our continuing
lease arrangements for these hospitals with Five Star." Senior
Housing Properties Trust is a real estate investment trust which
owns hospitals, nursing homes, independent and assisted living
facilities and senior housing properties throughout the United
States. SNH is headquartered in Newton, MA.
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