Sabra Health Care REIT (Nasdaq: SBRA) this week filed a lawsuit seeking control over 38 properties operated by Senior Care Centers, which entered Chapter 11 bankruptcy protection earlier this month.
In a filing submitted to the U.S. Bankruptcy Court for the Northern District of Texas, lawyers for the real estate investment trust (REIT) accused Senior Care Centers of trying to hang on to the 36 SNFs and two assisted living facilities in the Sabra portfolio throughout the bankruptcy process.
Reuters first reported the news Friday afternoon.
The troubled SCC defaulted on its leases over the summer after failing to pay rent for months, with Sabra moving to terminate those agreements and finalizing a deal to sell off the properties for $385 million shortly after the operator filed for Chapter 11. According to the REIT, SCC never responded to the termination notices and then falsely claimed that Sabra had withdrawn them — potentially throwing a monkey wrench into the REIT’s attempt to exit the facilities entirely.
“The position the SCC tenants have asserted in this bankruptcy proceeding is interfering with Sabra Landlord’s ability to close the proposed sale transaction and ensure the orderly transition of the operations of the leased premises to the new operators,” Sabra asserted in the filing.
The REIT’s legal team asked the court to affirm that the leases had been severed well before SCC filed for bankruptcy, and thus the operator has no right to remain in the properties — 30 of which are located in Texas, with the remaining eight in Louisiana.
As of December 4, SCC owes Sabra nearly $35 million in unpaid rent and other fees.
“To ensure the health and safety of the residents of the SNF facilities, the prospective buyer and designated SNF operators will assume and continue the operations of the facilities upon the closing of the sale and delivery of possession of the SNF facilities,” Sabra’s lawyers asserted. “The buyer will only close the sale of the facilities, and continue the operations, subject to the condition and assurance that the properties are free and clear of all lease interests.”
Fellow SCC landlord LTC Properties (NYSE: LTC), for comparison, must wait for the Dallas-based operator to either accept or reject its leases because they were not terminated prior to the start of the bankruptcy proceedings; LTC CEO Wendy Simpson told SNN that her company strongly prefers that SCC walk away from the properties so that the REIT can install new management.
“We dispute the allegations and look forward to presenting our case to the court,” a spokesperson for SCC told Skilled Nursing News via e-mail.
Sabra CEO Rick Matros had no additional comment on the lawsuit when reached by SNN.
Written by Alex Spanko