Class A, 100% Occupied MOB Portfolio Leased for
an Average (by rents) of 9.5 Years
72% of Rents from Investment Grade Rated
Tenants
Acquisition Significantly Improves Portfolio
Quality and Diversification
Senior Housing Properties Trust (NYSE:SNH) today announced that
it has agreed to acquire 23 Class A medical office buildings, or
MOBs, for a purchase price of approximately $539 million. The 23
properties contain approximately 2.2 million square feet and are
located in 12 states. The properties are currently 100% occupied
for a weighted average term (by rents) of 9.5 years, with no
scheduled lease expiration before December 31, 2018. Seventy-two
percent (72%) of the rents are payable by tenants with investment
grade credit ratings and certain other tenants that are believed to
have strong credit qualities but are unrated. Following is a link
to representative properties: http://reports.snhreit.com/2014/CCIT
Property Photos.pdf.
David Hegarty, President and Chief Operating Officer of SNH,
made the following statement about this acquisition:
“The acquisition of this Class A MOB
portfolio fits squarely within SNH’s stated strategy to
continuously diversify and strengthen its healthcare assets. The
large majority of these MOBs are recently built, Class A
properties, and the average age of the portfolio is just 10
years.”
Below are schedules showing additional details of the 23
properties to be acquired and pro forma presentations of SNH’s
portfolio diversification of properties and rent sources after this
acquisition.
SNH currently expects to assume approximately $30 million of
mortgage debt on two of the MOBs to be acquired and to fund the
balance of the purchase price using cash on hand and drawings under
its unsecured revolving bank credit facility. On a longer term
basis, SNH expects to finance this acquisition with an appropriate
mix of debt and equity capital, depending on the cost of such
financings and future market conditions. The acquisition GAAP
capitalization rate is expected to be approximately 6.4%.
The 23 properties will be purchased in connection with the
purchase by Select Income REIT (NYSE: SIR) of Cole Corporate Income
Trust (“CCIT”), a publicly owned unlisted REIT, which was announced
earlier today. SNH’s acquisition of the 23 properties is contingent
upon the completion of SIR’s acquisition of CCIT. The acquisition
by SIR of CCIT is subject to various conditions, including approval
by both SIR and CCIT shareholders. SNH currently expects that it
will close during the first calendar quarter of 2015. Both SIR and
SNH are managed by Reit Management & Research LLC. Because of
the relationships between SIR and SNH, the Board engaged an
unaffiliated third-party to provide ranges of capitalization rates
for similar real estate portfolios which were considered by the
Board, among other things, in determining the price to be paid for
the properties to be acquired, the terms of SNH’s purchase were
approved by trustees of each of SNH and SIR who are not also
trustees of the other party, and each of SNH and SIR were
represented by separate counsel.
Senior Housing Properties Trust is a real estate investment
trust, or REIT, which owns independent and assisted living
communities, medical office buildings, nursing homes and wellness
centers throughout the United States. SNH is headquartered in
Newton, MA.
SCHEDULE #1: ADDITIONAL
INFORMATION ABOUT THE 23 PROPERTIES SNH HAS AGREED TO
ACQUIRE
Location byState
No. ofProperties
Leased Sq.Ft.
Principal Tenants
Arizona 2 181,991 CVS Caremark; C.R. Bard California 2
288,097 SkinMedica; Advanced Bionics Georgia 1 93,963 Lonza America
Illinois 1 48,911 GN Store Nord Louisiana 6 40,575 Fresenius
Medical Care Massachusetts 1 49,250 Harvard Vanguard Healthcare
Missouri 2 452,165 Magellan Health; Express Scripts North Carolina
1 126,225 Duke University Health Systems New Jersey 1 205,439
Sanofi-Aventis Pennsylvania 1 30,408 Holy Spirit Hospital Texas 4
262,616 HCA; TX Health Presbyterian; Medtronic; DaVita Dialysis
Virginia 1 450,163 McKesson
12 states 23 2,169,803
SCHEDULE #2: SNH PRO FORMA PORTFOLIO
DIVERSIFICATION(1)
Type of Property
No. ofProperties
/Locations
Square Feet /Living Units /
Beds
Tenants / LeaseTerms
AnnualizedRentalIncome(2)
Percent
ofAnnualizedRentalIncome(2)
Healthcare related offices, clinics, biotech research, etc.
121 properties in 28 states and D.C. Approx. 11,313,000 sq. ft.
Approx. 630 tenants for a weighted average (by rents) of 8.6 years
$340,720 51% Independent and assisted living and skilled
nursing beds leased to Five Star Quality Care, Inc. 184 properties
in 28 states 20,250 living units / beds Four combination leases to
Five Star Quality Care, Inc., leased to 2024, 2026, 2028 and 2032
$196,505 30% Independent and assisted living communities and
skilled nursing beds leased to SNH taxable REIT subsidiaries. 44
properties in 17 states 7,051 living units / beds N/A $73,660
11%(3) Independent living and assisted living communities
and skilled nursing beds leased to Sunrise Senior Living, Inc. 4
properties in 3 states 1,619 living units / beds Four leases to
Sunrise Senior Living, Inc. guaranteed by Marriott International,
Inc. Leased to 2018 $14,602 2% Independent and assisted
living units and skilled nursing beds. 12 properties in 7 states
1,620 living units / beds Eight leases to six private companies.
Lease terms expiring between 2015 and 2030 $10,712 2%
Assisted living communities leased to Brookdale Senior Living, Inc.
18 properties in 10 states 894 living units One lease to Brookdale
Senior Living, Inc. Leased to 2017 $9,230 1% Wellness
Centers 10 properties in 8 states
Approx. 812,000 sq. ft. plus 86.4 acres for outdoor tennis courts,
pools, etc. 4 leases to Life Time Fitness, Inc. and
Starmark Holdings/Wellbridge expiring between 2023 and 2028
$17,536 3% Totals 393 properties in 39
states and D.C. Approx. 11,313,000 sq. ft. of MOBS; 10,865 IL
Units, 13,842 AL Units, 6,727 SNF beds; approx. 812,000 sq. ft. and
86.4 acres of wellness facilities Approx. 650 tenants with a
weighted average (by rents) lease term of 10.6 years $662,965 100%
(1) Portfolio composition as of June 30, 2014,
pro forma adjusted for the pending acquisition of the CCIT MOBs.
Excludes properties classified in discontinued operations. (2)
Annualized rental income is rents pursuant to existing leases as of
June 30, 2014, includes estimated percentage rents, straight line
rent adjustments, estimated recurring expense reimbursements for
certain net and modified gross leases and excludes lease value
amortization at certain of the MOBs and wellness centers; and
includes net operating income (three months ended June 30, 2014,
annualized) from our managed senior living communities. (3) For
purposes of calculating the percentage of annualized rental income,
the net operating income (three months ended June 30, 2014
annualized) from managed properties leased by SNH to its taxable
REIT subsidiaries is treated as rental income.
SCHEDULE #3: SNH PRO FORMA
DIVERSIFICATION: RENTAL INCOME FROM TENANTS PROVIDING 1%
ORMORE OF MOB RENTS(1)
Tenant Name
Approx. AnnualRental
Income
Percent ofAnnualized
MOBRental Income(4)
Percent of TotalAnnualized
SNHRental Income(5)
Vertex Pharmaceuticals $ 84,787,000 25 % 12.8 % Aurora Health Care
16,896,000 5 % 2.6 % Cedars-Sinai Medical Center 11,638,000 3 % 1.8
% The Scripps Research Institute 10,164,000 3 % 1.5 % Reliant
Medical Group 7,661,000 3 % 1.1 % HCA Holdings(2) 7,563,000 3 % 1.1
% Sanofi-Aventis(3) 5,208,000 2 % 0.8 % Tokio Marine Holdings
4,765,000 2 % 0.7 % Covidien 4,666,000 1 % 0.7 % AbbVie 4,471,000 1
% 0.7 % Children’s Hospital of Boston 4,298,000 1 % 0.7 % Magellan
Health(3) 4,205,000 1 % 0.6 % Advanced Bionics(3) 4,160,000 1 % 0.6
% Emory University Healthcare 4,108,000 1 % 0.6 % Seattle Genetics
3,958,000 1 % 0.6 % Health Insurance Plan of GNY 3,916,000 1 % 0.6
% Express Scripts(3) 3,912,000 1 % 0.6 % PerkinElmer 3,681,000 1 %
0.6 % Duke University Health System(3) 3,478,000 1 % 0.5 % Boston
Scientific Corp. 3,468,000 1 % 0.5 % Medtronic(3) 3,466,000 1 % 0.5
% All other MOB tenants $ 140,251,000
41 % 21 % MOB Subtotal $ 340,720,000 100 % 51
% Senior Living & Wellness Centers $ 322,245,000
N/A 49 % Total SNH Rental
Income $ 662,965,000 N/A 100 % (1) Portfolio
composition as of June 30, 2014, pro forma adjusted for the pending
acquisition of the CCIT MOBs. (2) Denotes both a tenant of SNH and
CCIT. (3) Denotes a tenant of the CCIT MOBs. (4) Annualized MOB
rental income is rents pursuant to existing leases of SNH’s MOBs as
of June 30, 2014, includes estimated percentage rents, straight
line rent adjustments, estimated recurring expense reimbursements
for certain net and modified gross leases and excludes lease value
amortization at certain of the MOBs. (5) Annualized rental income
is rents pursuant to all of SNH’s existing leases as of June 30,
2014, includes estimated percentage rents, straight line rent
adjustments, estimated recurring expense reimbursements for certain
net and modified gross leases and excludes lease value amortization
at certain of the MOBs and wellness centers. For purposes of
calculating the percentage of SNH total annualized rents, the net
operating income (three months ended June 30, 2014, annualized)
realized from managed properties leased by SNH to its taxable REIT
subsidiaries is treated as rental income.
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 BEYOND SNH’S CONTROL. FOR EXAMPLE:
- THIS PRESS RELEASE STATES THAT SNH HAS
AGREED TO ACQUIRE 23 MOB PROPERTIES FOR APPROXIMATELY $539 MILLION
AND THAT THIS ACQUISITION IS EXPECTED TO CLOSE DURING THE FIRST
CALENDAR QUARTER OF 2015. THE IMPLICATION OF THESE STATEMENTS IS
THAT SNH WILL ACQUIRE THESE PROPERTIES. HOWEVER, AS NOTED ABOVE,
SNH’S PURCHASE IS CONTINGENT UPON THE PURCHASE BY SIR OF CCIT, AND
SIR’S PURCHASE OF CCIT IS ITSELF CONTINGENT UPON APPROVALS FROM THE
SHAREHOLDERS OF SIR AND CCIT AND OTHER CONDITIONS AND
CONTINGENCIES. ACCORDINGLY, WE CAN PROVIDE NO ASSURANCE THAT OUR
ACQUISITION OF THE 23 PROPERTIES FROM SIR WILL BE CONSUMMATED, THAT
IT WILL NOT BE DELAYED OR THAT ITS TERMS WILL NOT CHANGE.
- THIS PRESS RELEASE STATES THAT SNH
CURRENTLY EXPECTS TO ASSUME APPROXIMATELY $30 MILLION OF MORTGAGE
DEBT ON TWO OF THE MOBS TO BE ACQUIRED AND TO FUND THE BALANCE OF
THE PURCHASE PRICE USING CASH ON HAND AND DRAWINGS UNDER ITS
UNSECURED REVOLVING BANK CREDIT FACILITY. SNH’S ASSUMPTION OF THE
$30 MILLION OF MORTGAGES WILL REQUIRE THE APPROVAL OF THE
MORTGAGEES WHICH MAY NOT BE OBTAINED. ALSO, ALTHOUGH SNH CURRENTLY
HAS CASH ON HAND AND THE FULL $750 MILLION AVAILABLE FOR DRAWINGS
UNDER ITS UNSECURED REVOLVING BANK CREDIT FACILITIES, THE AMOUNTS
OF CASH AND AVAILABLE DRAWINGS MAY BE LESS THAN REQUIRED TO CLOSE
WHEN SNH’S PURCHASE OF THE 23 MOBS OCCURS. FOR THIS REASON OR IN
SNH’S DISCRETION, SNH MAY FUND THIS ACQUISITION BY OTHER
MEANS.
- THIS PRESS RELEASE STATES THAT SNH
EXPECTS TO LONG TERM FINANCE THE ACQUISITION WITH AN APPROPRIATE
MIX OF DEBT AND EQUITY CAPITAL. THE ACTUAL MIX OF DEBT AND EQUITY
FINANCING WILL DEPEND ON THE AVAILABILITY AND COST OF SUCH
FINANCING, AND THE FINAL MIX OF FINANCING MAY BE DIFFERENT FROM
CURRENT EXPECTATIONS.
- THIS PRESS RELEASE INCLUDES SNH’S
EXPECTED ACQUISITION GAAP CAPITALIZATION RATE FOR THE 23 CCIT
PROPERTIES TO BE ACQUIRED BY SNH. THIS RATE IS CALCULATED AS THE
AVERAGE CONTRACTUAL RENTS EXPECTED TO BE RECEIVED FROM EXISTING
TENANTS AT THESE PROPERTIES STARTING JANUARY 1, 2015, FOR THE
REMAINING LEASE TERMS AS DETERMINED AND REPORTABLE IN ACCORDANCE
WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPALS, OR GAAP, LESS
ESTIMATED PROPERTY LEVEL EXPENSES EXPECTED TO BE INCURRED BY SNH
PLUS ESTIMATED TENANT EXPENSE REIMBURSEMENTS EXPECTED TO BE PAID TO
SNH BY THESE TENANTS. BECAUSE THIS CALCULATION IS BASED IN PART
UPON ESTIMATES, IT MAY BE MISTAKEN AND THE GAAP CAPITALIZATION RATE
WHICH SNH REALIZES MAY DIFFER FROM THE AMOUNT STATED AND THIS
DIFFERENCE MAY BE MATERIAL.
THE INFORMATION CONTAINED IN SNH’S FILINGS WITH THE SECURITIES
AND EXCHANGE COMMISSION, OR SEC, INCLUDING UNDER THE CAPTION “RISK
FACTORS” IN SNH’S PERIODIC REPORTS, OR INCORPORATED THEREIN,
IDENTIFIES OTHER IMPORTANT FACTORS THAT COULD CAUSE DIFFERENCES
FROM SNH’S FORWARD LOOKING STATEMENTS. SNH’S FILINGS WITH THE SEC
ARE AVAILABLE ON THE SEC’S WEBSITE AT WWW.SEC.GOV.
FOR THESE AND OTHER REASONS, INVESTORS ARE CAUTIONED NOT TO
PLACE UNDUE RELIANCE UPON FORWARD LOOKING STATEMENTS IN THIS PRESS
RELEASE.
EXCEPT AS REQUIRED BY APPLICABLE LAW, SNH DOES NOT INTEND TO
UNDERTAKE ANY OBLIGATION TO UPDATE THE FORWARD LOOKING STATEMENTS
IN THIS RELEASE AS A RESULT OF NEW INFORMATION WHICH MAY COME TO
SNH’S ATTENTION, 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.
Senior Housing Properties TrustKimberly M. Brown,
617-796-8234Director, Investor Relationswww.snhreit.com
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