SNH Senior Housing Properties Trust

Senior Housing Properties Trust (SNH), a real estate investment trust (REIT) which primarily owns private pay senior living communities and medical office buildings across the U.S., has recently acquired a portfolio of 9 large senior living rental communities across 6 states for $478 million.

The purchase price included $164 million of assumed mortgage debt on certain communities. The transaction was funded by cash on hand and its unsecured credit facility.

The portfolio comprises 2,226 living units – 1,708 independent living apartments, 471 assisted living suites, and 47 suites for specialized Alzheimer services. About 4 of the acquired properties are located in Florida, while Maryland, Nevada, New Jersey, New York, and Texas have a property each.

The healthcare properties are presently 87% occupied. Senior Housing Properties expects to complete the bulk of the acquisition by the fourth quarter of 2011. The company anticipates a combined cash flow to the tune of 7%-7.5% of the purchase price in its first year of ownership.

Subsequent to the closing of the transaction, the portfolio will be managed by Five Star Quality Care Inc. (FVE) under long-term contracts, while about 8 of the healthcare communities will be leased out to a taxable REIT subsidiary of Senior Housing Properties.  

Senior Housing Properties has one of the most diversified portfolios in the healthcare sector with exposure to nearly all types of facilities. The company leases some of its owned healthcare related and senior housing facilities to third-party operators under "triple net" leases, under which the tenant pays all taxes, insurance, and maintenance for the properties, in addition to rent.

Healthcare is relatively immune to the economic problems faced by office, retail and apartment companies. Consumers will continue to spend on healthcare while cutting out discretionary purchases.

The healthcare industry is also the single largest industry in the U.S., based on Gross Domestic Product (GDP). Consequently, healthcare REITs like Senior Housing Properties are poised to continue their bull run in the long term.

We presently have a Neutral rating on Senior Housing Properties, which currently has a Zacks #3 Rank that translates into a short-term Hold recommendation indicating that the stock is expected to perform in line with the overall U.S. equity market for the next 1–3 months.

 
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SENIOR HOUSING (SNH): Free Stock Analysis Report
 
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