Senior Housing Properties Trust (NYSE: SNH) today announced that
it has agreed to purchase 27 medical office properties for $470
million. The properties to be purchased include approximately 2.8
million sq.ft. and are located in 12 states.
The properties being purchased have a current average occupancy
(weighted by leasable area) of approximately 95% and are leased,
primarily to medical services providers and other tenants in
medical related businesses. The largest properties are two office
towers totaling 331,000 sq.ft., plus garages for 1,705 cars, which
are attached by an enclosed walkway to Cedars Sinai Hospital in Los
Angeles and are primarily leased to medical practice groups
affiliated with that hospital.
The combined purchase prices for all the properties to be
purchased represents a weighted (by purchase prices) average
capitalization of annual property level net operating income during
the remaining lease terms of approximately 9.0% p.a.. However, the
purchase price capitalization rate for certain properties, such as
the office building attached to Cedars Sinai Hospital, are lower.
Because of the blended capitalization rate which SNH was able to
achieve by agreeing to purchase all 27 properties, SNH believes
this transaction may be accretive to earnings on a combined
basis.
SNH believes that an important benefit it may realize as a
result of these purchases is the diversification of its investments
and revenues. After these purchases are completed, SNH will have
approx. $3.9 billion invested in 326 properties located in 37
states and Washington, DC, including 88 office properties primarily
leased to approximately 450 medical services businesses which will
be responsible for approximately 37% of SNH’s total rents. For
details concerning the diversification impacts of this transaction
upon SNH, please see the schedule below.
The 27 properties are being purchased from CommonWealth REIT
(NYSE: CWH). SNH was a 100% owned subsidiary of CWH until it was
spun out to CWH shareholders in 1999. Both SNH and CWH are managed
by Reit Management & Research LLC (“RMR”). As a result of
agreements entered in connection with the spin out and since then,
SNH has a right of first refusal to purchase certain properties
majority leased to tenants in medical related businesses when CWH
determines to sell. All of the properties in the transaction
announced today are properties included in SNH’s rights of first
refusal.
Because SNH and CWH are both managed by RMR and have certain
common trustees, the sale prices for the properties to be purchased
by SNH were established by reference to an appraisal report by a
national recognized real estate appraisal firm and the terms of the
sales were negotiated by special committees of each company’s
Board, composed of Independent Trustees who are not also trustees
of the other company, each represented by separate counsel.
SNH currently expects to purchase these 27 properties free and
clear of any mortgage debts using cash on hand and drawings under
its unsecured revolving bank credit facility. The sales are
expected to be completed in a series of separate closings before
June 30, 2011.
Senior Housing Properties Trust is a real estate investment
trust, or REIT, which owns independent and assisted living
communities, nursing homes, rehabilitation hospitals, wellness
centers and medical office buildings. SNH is headquartered in
Newton, MA.
WARNING REGARDING FORWARD LOOKING
STATEMENTS
THIS PRESS RELEASE 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 SNH’S CURRENT BELIEFS AND EXPECTATIONS; BUT THEY ARE NOT
GUARANTEED TO OCCUR AND MAY NOT OCCUR FOR VARIOUS REASONS,
INCLUDING SOME REASONS WHICH ARE BEYOND SNH’S CONTROL. FOR
EXAMPLE:
- THIS PRESS RELEASE STATES THAT SNH HAS
AGREED TO PURCHASE 27 PROPERTIES FOR $470 MILLION AND THAT THESE
PURCHASES ARE EXPECTED TO BE COMPLETED IN A SERIES OF SEPARATE
CLOSINGS BEFORE JUNE 30, 2011. SNH’S OBLIGATIONS TO COMPLETE THESE
PURCHASES ARE SUBJECT TO VARIOUS CONDITIONS TYPICAL OF LARGE,
COMMERCIAL REAL ESTATE TRANSACTIONS. IN THE EVENT THESE CONDITIONS
ARE NOT SATISFIED, SOME OF THESE PURCHASES MAY BE DELAYED OR MAY
NOT OCCUR;
- THIS PRESS RELEASE STATES THAT THE
PURCHASE PRICES FOR ALL OF THE PROPERTIES COMBINED REPRESENTS A
WEIGHTED (BY PURCHASE PRICE) AVERAGE CAPITALIZATION OF ANNUAL
PROPERTY LEVEL NET OPERATING INCOME DURING REMAINING LEASE TERMS OF
APPROXIMATELY 9.0%. THE ANNUAL PROPERTY LEVEL NET OPERATING INCOME
PURCHASE PRICE CAPITALIZATION RATE FOR EACH OF THE PROPERTIES IS
DIFFERENT; SOME ARE HIGHER AND SOME ARE LOWER THAN THIS STATED
PERCENTAGE. ACCORDINGLY, IF LESS THAN ALL OF THE 27 PROPERTIES ARE
PURCHASED, THE CAPITALIZATION RATE FOR THE COMPLETED TRANSACTION
MAY BE DIFFERENT;
- THIS PRESS RELEASE STATES THAT SNH
BELIEVES THAT THE TRANSACTION DESCRIBED MAY BE ACCRETIVE TO ITS
EARNINGS. THE ACCRETION TO EARNINGS, IF ANY, WHICH MAY RESULT FROM
THIS TRANSACTION DEPENDS IN LARGE PART UPON SNH’S COSTS OF CAPITAL
TO LONG TERM FINANCE THESE PURCHASES. SNH’S COSTS OF CAPITAL WILL
DEPEND UPON THE TYPES OF CAPITAL (E.G., EQUITY VS. DEBT CAPITAL)
AND MARKET CONDITIONS AT THE TIME SNH RAISES THIS CAPITAL. THE
ACCRETION TO EARNINGS WHICH SNH MAY REALIZE WILL ALSO DEPEND UPON
SNH’S ABILITY TO MAINTAIN OR INCREASE RENTS AND CONTROL EXPENSES AT
THE PROPERTIES BEING ACQUIRED, WHICH ALSO DEPEND UPON FUTURE MARKET
CONDITIONS. SNH HAS NO CONTROL OVER MARKET CONDITIONS. ACCORDINGLY,
THIS TRANSACTION MAY NOT BE ACCRETIVE TO SNH’S FUTURE
EARNINGS;
- THIS PRESS RELEASE STATES, AND THE
SCHEDULE ATTACHED TO THIS PRESS RELEASE INCLUDES A PRO FORMA TABLE
WHICH IMPLIES, THAT SNH’S TENANT DIVERSIFICATION WILL INCREASE WHEN
THE PURCHASES OF THE 27 PROPERTIES ARE COMPLETED. IF LESS THAN ALL
OF THESE PROPERTIES ARE PURCHASED, THE DIVERSIFICATION NUMBERS AND
PERCENTAGES PRESENTED IN THIS PRESS RELEASE AND IN THE SCHEDULE
WILL BE DIFFERENT; AND
- THIS PRESS RELEASE STATES THAT THE
PURCHASE PRICES TO BE PAID BY SNH WERE ESTABLISHED BY REFERENCE TO
AN APPRAISAL REPORT AND THAT THE SALES TERMS WERE NEGOTIATED BY
SPECIAL COMMITTEES OF INDEPENDENT TRUSTEES OF EACH OF SNH AND CWH
REPRESENTED BY SEPARATE COUNSEL. AN IMPLICATION OF THESE STATEMENTS
MAY BE THAT THE PURCHASE PRICES ARE THE AMOUNTS WHICH SNH WOULD
HAVE PAID IN AN ARMS LENGTH TRANSACTION. SNH AND CWH ARE BOTH
MANAGED BY RMR AND HAVE COMMON TRUSTEES. ACCORDINGLY, SNH AND CWH
MAY BE CONSIDERED RELATED PARTIES AND THERE CAN BE NO ASSURANCE
THAT THE PURCHASE PRICES WHICH SNH PAYS ARE THE SAME OR AS LOW AS
SNH WOULD HAVE PAID IN AN ARMS LENGTH TRANSACTION BETWEEN UNRELATED
PARTIES.
FOR THESE FOREGOING REASONS, AMONG OTHERS, INVESTORS ARE
CAUTIONED NOT TO PLACE UNDUE RELIANCE UPON FORWARD LOOKING
STATEMENTS IN THIS PRESS RELEASE. OTHER FACTORS WHICH MAY CAUSE THE
FORWARD LOOKING STATEMENTS IN THIS PRESS RELEASE TO NOT OCCUR ARE
DESCRIBED UNDER “ITEM 1A RISK FACTORS” IN SNH’S ANNUAL REPORT ON
SEC FORM 10K FOR THE YEAR ENDED DECEMBER 31, 2009, AS THE SAME MAY
HAVE BEEN OR BE REVISED OR UPDATED IN SUBSEQUENT FILINGS WITH THE
SEC, EACH OF WHICH IS AVAILABLE AT THE SEC WEBSITE:
www.sec.gov.
EXCEPT AS MAY BE REQUIRED BY LAW, SNH DOES NOT INTEND TO IMPLY
ANY OBLIGATION TO MAKE UPDATES TO THE FORWARD LOOKING STATEMENTS IN
THIS PRESS RELEASE.
Location of Properties to be Acquired
and Impact Upon SNH
Diversification
Properties to be
acquired:
AZ (1 property, approx. 126,000 sq.ft.)
NH (1 property, approx. 211,000
sq.ft.)
CA (2 properties, approx. 331,000 sq.ft.)
NM (6 properties, approx. 616,000
sq.ft)
CT (2 properties, approx. 97,000 sq.ft.)
OH (1 property, approx. 125,000
sq.ft.)
GA (1 property, approx. 95,000 sq.ft.) PA (4 properties, approx.
448,000 sq.ft.) MA (4 properties, approx. 414,000 sq.ft.) SC (2
properties, approx. 104,000 sq.ft.) MN (1 property, approx. 141,000
sq.ft.) TX (2 properties, approx. 96,000 sq.ft.)
Diversification:
As of September 30,
2010
Actual
Pro
Forma1
Size and geography: $3.4 billion $3.9 billion invested in
invested in 298 properties 326 properties in 35 States in 37 States
and Wash. D.C. and Wash. D.C. No. of tenants, approximately:
230 460 Average remaining lease term (weighted by rents): 12
years 11 years Property type based upon rents: Assisted
living: 28% 24% Independent living: 33% 28% Skilled nursing: 6% 5%
Rehabilitation hospitals: 3 % 2% Wellness centers: 5% 4% Medical
offices, clinics, biotech labs, etc. leased to medical service
providers and other medical related businesses (“MOBs”) 25% 37%
Totals: 100% 100% Tenant concentration based upon
rents: Five Star Quality Care, Inc. 56% 47% Other
operators of assisted and independent living communities (8
tenants) 14% 12% Lifetime Fitness and Starmark/Wellbridge
(wellness centers) 5% 4% MOBs 25% 37% Totals: 100%
100%
1 Pro Forma for the acquisition of all 27 MOB properties for
$470 million and one MOB acquired in October 2010 for $15
million.
A Maryland Real Estate Investment Trust with
transferable shares of beneficial interest listed on the New York
Stock Exchange.
No shareholder, Trustee or officer is
personally liable for any act or obligation of the Trust.
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