A month after announcing a $900 million disposition plan with a specific focus on standalone skilled nursing assets, the president of Senior Housing Properties Trust (Nasdaq: SNH) confirmed that the company intends to sell all remaining single-site SNFs in its portfolio.
“We’re marketing and selling all of our standalone skilled nursing, and are very far along in the process of that,” president and COO Jennifer Francis said Thursday on SNH’s first-quarter earnings call with investors. “Some of these are really underperforming and struggling assets.”
The real estate investment trust (REIT) already had firm agreements to sell 20 of the 38 SNFs not associated with a senior living campus by the end of the quarter, with three of those facilities sold after the close of the quarter, according to SNH.
Francis predicted an active market for the buildings left on the chopping block.
“There’s a lot of capital in the market for both skilled nursing and senior living,” Francis said. “So I think we’re going to be very successful in the disposition of the assets. We feel pretty comfortable that we’ll complete the disposition pretty quickly.”
Thursday’s earnings call came amid a larger sea change for SNH, which in April announced a wide-ranging plan to restructure its relationship with top tenant Five Star Senior Living (Nasdaq: FVE). Under the terms of that deal, SNH is set to expand its ownership of Five Star from 8% to 34%, while also embarking on a $900 million disposition spree. In addition to standalone SNFs, SNH identified certain senior living campuses and other non-core assets such as medical office buildings and wellness centers.
The company’s 38 standalone SNFs only represented about 3% of SNH’s total annual revenue, according to chief financial officer Rick Siedel.
“Historically, the occupancy in those units have trailed the rest of the portfolio,” he said back in April. “So I don’t think it’s a disproportionate amount of revenue, but it’s something that the team is actively working on.”
The move away from skilled nursing assets wasn’t particularly surprising even at the time of the announcement last month, with covering analyst Michael Carroll telling SNN that the decision was more a commentary on SNH’s overall strategy than the state of the skilled nursing market.
“SNH has been more focused on the private pay side, so they’ve been trying to exit their skilled nursing facilities for the longest time,” Carroll, director at RBC Capital Markets, said.
SNH’s overall divestment plan remains in the early stages, though Francis and Siedel both touted strong interest in the properties.
“We are conducting broker interviews over the next few days, and then we’ll hit the market with them,” Francis said. “We’re not in discussions with any buyers right now, though we have a lot of excited brokers because they know that the market is good for these assets.”
SNH’s shares finished Thursday’s trading up $0.31 or about 4%, closing at $8.28.
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