Provides Immediate and Permanent Rent Relief
and Short-Term Liquidity to Address Five Star’s Current Financial
Challenges
Restructured Relationship Materially Improves
Five Star’s Long-Term Financial Outlook
All of Five Star’s Leased Communities Leased
from Senior Housing Properties Trust Will Convert to Management
Contracts
Five Star Common Shares will be Issued to
Senior Housing Properties Trust and its Shareholders to Increase
Their Combined Ownership to 85% of Five Star
Five Star Senior Living Inc. (Nasdaq: FVE), or Five Star, today
announced that it has entered into a definitive agreement to modify
its existing business arrangements with Senior Housing Properties
Trust (Nasdaq: SNH).
Five Star expects its current financial position and near-term
liquidity challenges will be immediately improved because of the
transaction. Key features of the transaction include the
following:
- Commencing February 1, 2019, Five
Star’s aggregate monthly rent payments for the senior living
communities that Five Star leases from SNH have been reduced from
approximately $17.4 million to $11.0 million.
- Five Star has sold approximately $50
million of property, plant and equipment to SNH relating to the
senior living communities that Five Star leases from SNH.
- Five Star has entered a $25 million
short term revolving credit facility provided by SNH that is
secured by six senior living communities owned by Five Star. The
interest rate under this credit facility is 6.0% per year on any
drawn amounts and matures on January 1, 2020. This credit facility
currently has no amount outstanding.
Effective January 1, 2020, the existing five master leases of
184 senior living communities (19,979 living units) that are leased
from SNH as well as the existing management agreements and pooling
agreements with SNH affecting 77 communities (10,135 living units)
will be terminated and replaced with new management agreements for
all 261 senior living communities owned by SNH and operated by Five
Star. Features of the new management agreements include:
- A 15-year term commencing January 1,
2020, with two, five-year extensions at Five Star’s option, subject
to maintaining portfolio financial performance.
- A base management fee of 5% of gross
revenues at the community level.
- An incentive fee of 15% of property
level EBITDA on a combined basis for the total portfolio in excess
of performance targets, subject to a limit of up to 1.5% of
portfolio gross annual revenue.
Simultaneous with the conversion of the existing lease and
management agreements with SNH into new management agreements with
SNH, Five Star will issue Five Star common shares to SNH and SNH
shareholders such that their ownership of Five Star will be equal
to approximately 34% and 51%, respectively, post issuance. At the
same time, SNH will reduce Five Star’s indebtedness under the SNH
credit facility, assume certain liabilities of Five Star or make a
cash payment to Five Star in an amount equivalent to $75 million in
aggregate.
Barbara Gilmore and Donna Fraiche, co-chairs of the special
committee of Five Star’s Board of Directors that is comprised
solely of Independent Directors, which led the negotiations
regarding this transaction, made the following statement regarding
today’s announcement:
“The transaction announced today was the
result of numerous meetings of the special committee and its
advisors over the past four months. We evaluated multiple options
to find a solution that would remedy Five Star’s deteriorating
financial position and near-term liquidity challenges ranging from
the restructuring agreement we have announced today to seeking
bankruptcy protection to reorganize Five Star. In the end, we are
pleased that we were able to reach agreement with SNH. While Five
Star is issuing a substantial ownership stake to SNH and SNH
shareholders as part of this restructured business arrangement with
SNH, we think it is in the best interest of Five Star because this
transaction provides both an immediate solution to Five Star’s
liquidity challenges and provides a materially improved long-term
financial outlook for Five Star. We believe for a variety of
reasons that this transaction was the best option for Five Star and
its stockholders given the difficult circumstances we faced.”
Katie Potter, Five Star’s President and Chief Executive Officer,
made the following statement about today’s announcement:
“I am pleased that Five Star and SNH have
come to an arrangement which materially improves our long-term
financial outlook as well as addresses our short-term
liquidity challenges and enables us to repay $52 million that is
drawn under our revolving credit facility that matures on June
28, 2019. I am also pleased that today’s announcement removes the
cloud of uncertainty that has hung over Five Star recently and
allows Five Star to continue delivering on its mission of providing
an excellent resident and client experience across the enterprise.
I look forward to leading a financially strong Five Star, working
to evolve our business to meet the rapidly changing preferences of
older adults and repositioning Five Star as an industry
leader.”
This transaction was unanimously approved by both the special
committee of Five Star’s Board of Directors and the entire Five
Star Board of Directors. This transaction is expected to close on
January 1, 2020. The share issuances to SNH and SNH shareholders
are subject to the approval of a majority of Five Star’s
stockholders. SNH and ABP Trust, which currently collectively own
approximately 44% of Five Star’s outstanding common shares, have
both agreed to vote in favor of the issuances of Five Star common
shares.
Citigroup Global Markets Inc. is acting as exclusive financial
advisor to the special committee of Five Star’s Board of Directors
and Ropes & Gray is acting as legal counsel to the special
committee of Five Star’s Board of Directors in this
transaction.
A copy of the definitive agreement between Five Star and SNH
will be filed with the Securities and Exchange Commission, or SEC,
on a Current Report on Form 8-K and can be accessed on the SEC
website at www.sec.gov or Five Star’s website at
www.fivestarseniorliving.com. Five Star’s website is not
incorporated as part of this news release.
This press release shall not constitute an offer to sell or the
solicitation of an offer to buy any of the securities described
herein, nor shall there be any sale of these securities in any
state or jurisdiction in which such offer, solicitation or sale
would be unlawful prior to registration or qualification under the
securities laws of any such state or jurisdiction.
About Five Star Senior Living
Five Star Senior Living Inc. is a senior living and healthcare
services company that owns, leases and manages over 280 senior
living communities, including Independent Living, Assisted Living,
Alzheimer's/Memory Care, and Healthcare Centers with Skilled
Nursing & Rehabilitation and Continuing Care Retirement
Communities throughout the U.S. Five Star is headquartered in
Newton, MA.
WARNING CONCERNING FORWARD LOOKING
STATEMENTS
THIS PRESS RELEASE CONTAINS STATEMENTS THAT CONSTITUTE FORWARD
LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995 AND OTHER SECURITIES LAWS. ALSO,
WHENEVER FIVE STAR USES WORDS SUCH AS “BELIEVE”, “EXPECT”,
“ANTICIPATE”, “INTEND”, “PLAN”, “ESTIMATE”, "WILL", “MAY” AND
NEGATIVES OR DERIVATIVES OF THESE OR SIMILAR EXPRESSIONS, FIVE STAR
IS MAKING FORWARD LOOKING STATEMENTS. THESE FORWARD LOOKING
STATEMENTS ARE BASED UPON FIVE STAR’S PRESENT INTENT, BELIEFS OR
EXPECTATIONS, BUT FORWARD LOOKING STATEMENTS ARE NOT GUARANTEED TO
OCCUR AND MAY NOT OCCUR. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM
THOSE CONTAINED IN OR IMPLIED BY FIVE STAR’S FORWARD LOOKING
STATEMENTS AS A RESULT OF VARIOUS FACTORS, INCLUDING:
- THIS PRESS RELEASE STATES THAT FIVE
STAR ENTERED INTO A DEFINITIVE AGREEMENT TO MODIFY ITS EXISTING
BUSINESS ARRANGEMENTS WITH SNH. AS DESCRIBED HEREIN, CERTAIN OF
THESE ARRANGEMENTS ARE EXPECTED TO BE EFFECTIVE JANUARY 1, 2020.
THESE ARRANGEMENTS ARE SUBJECT TO CONDITIONS, INCLUDING, AMONG
OTHERS, THE RECEIPT OF REQUISITE APPROVAL BY FIVE STAR’S
STOCKHOLDERS AND CERTAIN LICENSING APPROVALS. FIVE STAR CANNOT BE
SURE THAT ANY OR ALL OF SUCH CONDITIONS WILL BE SATISFIED.
ACCORDINGLY, THESE TRANSACTIONS MAY NOT BECOME EFFECTIVE AS OF
JANUARY 1, 2020 OR AT ALL, OR THE TERMS OF SUCH TRANSACTIONS AND
THE OTHER TRANSACTIONS MAY CHANGE.
- MS. GILMORE AND MS. FRAICHE’S STATEMENT
IN THIS PRESS RELEASE THAT THE TRANSACTION ANNOUNCED TODAY PROVIDES
AN IMMEDIATE SOLUTION TO FIVE STAR’S LIQUIDITY AND MATERIALLY
IMPROVES THE LONG-TERM FINANCIAL OUTLOOK FOR FIVE STAR MAY IMPLY
THAT THIS OPTION WILL ACHIEVE BETTER RESULTS FOR FIVE STAR AND FIVE
STAR STOCKHOLDERS IN THE FUTURE THAN OTHER OPTIONS. HOWEVER, FIVE
STAR CANNOT BE SURE THAT THIS OPTION WILL ACHIEVE BETTER RESULTS
FOR FIVE STAR AND FIVE STAR SHAREHOLDERS IN THE FUTURE.
- MS. POTTER’S STATEMENT IN THIS PRESS
RELEASE ABOUT LEADING A FINANCIALLY STRONG FIVE STAR IS CONTINGENT
UPON THE CONSUMMATION OF THE TRANSACTION CONTEMPLATED BY THE
DEFINITIVE AGREEMENT BETWEEN SNH AND FIVE STAR. THE TRANSACTION
CONTEMPLATED BY THE DEFINITIVE AGREEMENT BETWEEN SNH AND FIVE STAR
MAY NOT OCCUR AND THE BENEFITS OF THE TRANSACTION MAY NOT
MATERIALIZE. IN ADDITION, FIVE STAR MAY NOT BE A FINANCIALLY STRONG
COMPANY AT THE CONCLUSION OF THE TRANSACTION. ALSO, FIVE STAR MAY
NOT BE ABLE TO SUCCESSFULLY IMPLEMENT ITS LONG-TERM STRATEGY.
THE INFORMATION CONTAINED IN FIVE STAR’S FILINGS WITH THE
SECURITIES AND EXCHANGE COMMISSION, OR SEC, INCLUDING UNDER “RISK
FACTORS” IN FIVE STAR’S PERIODIC REPORTS, OR INCORPORATED THEREIN,
IDENTIFIES OTHER IMPORTANT FACTORS THAT COULD CAUSE FIVE STAR’S
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE STATED IN OR IMPLIED
BY FIVE STAR’S FORWARD LOOKING STATEMENTS. FIVE STAR’S FILINGS WITH
THE SEC ARE AVAILABLE ON THE SEC’S WEBSITE AT WWW.SEC.GOV.
YOU SHOULD NOT PLACE UNDUE RELIANCE UPON FORWARD LOOKING
STATEMENTS.
EXCEPT AS REQUIRED BY LAW, FIVE STAR DOES NOT INTEND TO UPDATE
OR CHANGE ANY FORWARD LOOKING STATEMENTS AS A RESULT OF NEW
INFORMATION, FUTURE EVENTS OR OTHERWISE.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190402005404/en/
Brad Shepherd, Senior Director, Investor Relations(617)
796-8234
Senior Housing Properties (NASDAQ:SNH)
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