Senior Housing Properties Trust (Nasdaq: SNH) on Monday completed the first wave of a planned $900 million property sell-off that will see the real estate investment trust (REIT) eliminate all standalone skilled nursing assets from its portfolio.
The Newton, Mass.-based firm announced the sale of a 15-building skilled nursing portfolio in Nebraska, Iowa, and Kansas for a total price of just $8 million — along with the $18 million offloading of 13 medical office buildings across Massachusetts.
The latter portfolio of facilities had been operated by Reliant Medical Group.
The transaction marked the initial domino to fall in SNH’s plan to shed $900 million of assets as it restructures its relationship with major senior housing operator Five Star Senior Living (Nasdaq: FVE).
“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 during SNH’s first-quarter earnings call with investors back in May. “Some of these are really underperforming and struggling assets.”
Along with single-site SNFs, the REIT placed medical office buildings, wellness centers, and certain senior living campuses on the chopping block. SNH’s 38 standalone SNFs only generated about 3% of the REIT’s total annual income, chief financial officer Rick Siedel said at the time of the announcement, with occupancy that lagged behind other asset classes in its portfolio.
Earlier this spring, SNH indicated that it already had firm deals on 20 of the 38 SNFs it had owned, and Francis pointed to strong demand in the skilled nursing marketplace in predicting a swift disposition.
“There’s a lot of capital in the market for both skilled nursing and senior living,” Francis said in May. “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.”
The company plans to use its eventual $900 million cash infusion to pay down debts and for other “general business purposes,” according to a statement announcing the first round of sales.
Five Star Senior Living, which had endured a $74.1 million loss in 2018 and serious doubts about its corporate future, has seen its fortunes turn around somewhat in recent months: The senior housing operator logged its first quarterly profit in six years during the second quarter of 2019.
“There is no longer doubt that Five Star Senior Living will continue as a going concern,” CEO Katherine Potter said on the company’s most earnings recent call with investors and analysts back in August.