A federal bankruptcy court this week approved a settlement agreement between Sabra Health Care REIT (Nasdaq: SBRA) and embattled tenant Senior Care Centers, the real estate investment trust (REIT) announced Friday.
Under the terms of the deal, the Irvine, Calif.-based Sabra will receive $9.5 million from the bankrupt operator. Of that amount, Senior Care Centers will pay $5 million on April 1 — the same day that Sabra plans to complete previously announced sale of 28 SCC-operated buildings for $282.5 million — with the remaining $4.5 million due by July 1.
Sabra will also recognize $6.2 million in rent accrued after Senior Care Centers filed for Chapter 11 bankruptcy protection back in December.
The court approval brings a relatively brief legal fight between Sabra and Senior Care Centers to a close. The REIT sued the provider in late December after announcing a plan to sell off 38 SCC-run properties in its portfolio, asking the court for control of its buildings during the bankruptcy and sale process. Sabra eventually reduced that sale number to 28 and announced the settlement in late February, with Sabra CEO Rick Matros indicating to SNN that the legal action had all but wrapped up by that point.
At the time of its bankruptcy filing, the Dallas-based Senior Care Centers operated more than 100 skilled nursing facilities across Texas and Louisiana, with about 11,000 employees caring for 10,000 residents. The operator blamed burdensome lease terms in announcing its bankruptcy action.
“As the entire industry has seen, the leases associated with the communities have become cost-prohibitive,” chief operating officer Michael Beal said in a December statement. “This kind of action is absolutely necessary to address those costly leases while continuing to care for our patients and residents.”
Sabra isn’t the only landlord that has taken steps to break up with the operator: LTC Properties (NYSE: LTC) CEO Wendy Simpson said earlier this month that SCC isn’t likely to emerge from bankruptcy as a going concern, with the planned transfer of 11 properties still ongoing as of March 1.
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