Senior Housing Properties Trust Announces Termination of Ten Sunrise Leases
December 30 2011 - 4:01PM
Business Wire
Senior Housing Properties Trust (NYSE: SNH) today announced that
it late yesterday received notice from Sunrise Senior Living, Inc.
(NYSE: SRZ) that Sunrise’s leases for 10 senior living communities
(2,472 living units) will be terminated effective December 31,
2013.
Sunrise currently leases 14 senior living communities from SNH.
Sunrise’s obligations to SNH under the 14 leases are guaranteed by
Marriott International, Inc. (NYSE: MAR). The terms of these leases
provide that they are automatically renewed on December 31, 2013
for a five year renewal term unless Sunrise gives notice to SNH at
least two years before the expiration date, and lease extensions
automatically extend Marriott International’s guarantee to SNH. SNH
believes that Marriott declined to permit Sunrise to extend
Marriott International’s guarantee obligations for 10 of the 14
communities and, accordingly, that Sunrise was required to give
notices of termination for the 10 leases.
The 10 communities were 87.4% occupied during the 12 months
ended September 30, 2011 and produced cash flow coverage of SNH’s
minimum rents for the same period of approximately 1.6 times on a
weighted average basis. Minimum rents received by SNH for the 10
affected communities for the 12 months ended September 30, 2011
were approximately $14.2 million (before percentage rent and
straight line adjustments).
Sunrise has offered to extend its leases for all 14 communities
on their existing terms without a guarantee from Marriott
International; but SNH has declined this offer. SNH and Sunrise may
continue to discuss leasing the 10 communities before the scheduled
lease expirations at year end 2013. However, SNH can provide no
assurance that it will reach agreement to continue to lease these
affected 10 communities to Sunrise on their current terms, or on
any terms, after December 31, 2013.
A spokesman for SNH explained that SNH believes the financial
and other terms of the 10 leases which are the subject of Sunrise’s
notice are favorable to the tenants based upon current market
conditions. SNH also believes that Sunrise’s current credit
characteristics require changes in those terms to offset any loss
of credit support provided by Marriott International’s guarantees
to SNH.
Senior Housing Properties Trust is a real estate investment
trust headquartered in Newton, Massachusetts which owns senior
living communities, nursing homes, hospitals, fitness centers,
medical office buildings and other real estate used by medical
related tenancies.
WARNING REGARDING
FORWARD LOOKING STATEMENTS
THIS PRESS RELEASE CONTAINS STATEMENTS WHICH CONSTITUTE FORWARD
LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995 AND OTHER SECURITIES LAWS. WHENEVER
SNH USES WORDS SUCH AS “BELIEVE”, “EXPECT”, “ANTICIPATE”, “INTEND”,
“PLAN”, “ESTIMATE”, OR SIMILAR EXPRESSIONS, IT IS MAKING FORWARD
LOOKING STATEMENTS. THESE FORWARD LOOKING STATEMENTS AND THEIR
IMPLICATIONS ARE BASED UPON SNH’S CURRENT INTENT, BELIEFS OR
EXPECTATIONS, BUT THEY ARE NOT GUARANTEED TO OCCUR AND MAY NOT
OCCUR FOR VARIOUS REASONS, INCLUDING SOME REASONS BEYOND SNH’S
CONTROL. FOR EXAMPLE:
- THIS PRESS RELEASE STATES THAT SNH
BELIEVES THAT THE FINANCIAL AND OTHER TERMS OF THE LEASES WHICH ARE
THE SUBJECT OF SUNRISE’S TERMINATION NOTICES TO SNH ARE FAVORABLE
TO THE TENANTS BASED UPON CURRENT MARKET CONDITIONS AND THAT
SUNRISE’S CREDIT CHARACTERISTICS REQUIRE CHANGES IN THOSE TERMS TO
OFFSET THE LOSS OF THE CREDIT SUPPORT PROVIDED BY MARRIOTT
INTERNATIONAL’S GUARANTEES TO SNH. AN IMPLICATION OF THESE
STATEMENTS MAY BE THAT SNH WILL RENEW THESE LEASES WITH SUNRISE OR
A DIFFERENT TENANT AT HIGHER RENTS. HOWEVER (I) SNH HAS NO CONTROL
OF MARKET CONDITIONS WHICH COULD CHANGE UNFAVORABLY TO SNH; (II)
SNH MAY BE UNABLE TO REACH ANY AGREEMENTS WITH SUNRISE TO EXTEND
THE LEASES ON MORE FAVORABLE TERMS OR ON ANY TERMS; (III) SNH MAY
BE UNABLE TO REACH AGREEMENTS WITH ANOTHER OPERATOR OF SENIOR
LIVING COMMUNITIES TO ASSUME RESPONSIBILITY FOR OPERATING THE
AFFECTED 10 COMMUNITIES WHEN SUNRISE’S LEASES TERMINATE; AND (IV)
ANY NEW LEASES OR OTHER FINANCIAL ARRANGEMENTS AFFECTING THESE 10
COMMUNITIES MAY RESULT IN LESS INCOME AND LESS CASH FLOW TO SNH
THAN SNH NOW RECEIVES UNDER THE SUNRISE LEASES GUARANTEED BY
MARRIOTT INTERNATIONAL.
FOR THESE REASONS, AMONG OTHERS, INVESTORS SHOULD NOT PLACE
UNDUE RELIANCE UPON FORWARD LOOKING STATEMENTS IN THIS PRESS
RELEASE. EXCEPT AS REQUIRED BY LAW, SNH DOES NOT INTEND TO UPDATE
OR CHANGE ANY FORWARD LOOKING STATEMENTS AS A RESULT OF NEW
INFORMATION, FUTURE EVENTS OR OTHERWISE.
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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