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Senior Housing Properties Trust Announces Restructuring of Business Arrangements with Five Star Senior Living

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Senior Living Communities Leased to Five Star will Convert to
Management Agreements

SNH and SNH Shareholders to Have Combined 85% Ownership of Five Star

Conference Call Scheduled for 10:00 a.m. Eastern Time on April 2, 2019

Senior Housing Properties Trust (NASDAQ:SNH) today announced that it
has entered into a definitive agreement to modify its existing business
arrangements with Five Star Senior Living Inc. (NASDAQ:FVE), or Five
Star. Effective January 1, 2020, the existing five master leases for 184
of SNH's senior living communities (19,979 living units) that are leased
to Five Star as well as the existing management agreements and pooling
agreements with Five Star for 77 of SNH's senior living communities
(10,135 living units) will be terminated and replaced with new
management agreements for all 261 Five Star operated senior living
communities.

Simultaneous with the conversion of SNH's existing agreements with Five
Star into new management agreements with Five Star, SNH and SNH
shareholders will receive Five Star common shares equal to approximately
85% ownership of Five Star in aggregate after taking into account SNH's
current ownership. As part of the transaction announced today, SNH
shareholders will receive, by way of a distribution of the right to
receive Five Star common shares from SNH and subject to certain
conditions, Five Star common shares equal to approximately 51% ownership
of Five Star post issuance, effective as of January 1, 2020. SNH will
also increase its current 8.3% ownership of Five Star to approximately
34% post issuance. SNH currently plans to retain this ownership of Five
Star for the foreseeable future.

John Harrington, chair of the special committee of SNH's Board of
Trustees comprised solely of Independent Trustees, which led the
negotiations of 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
began this process by evaluating multiple options to address the impact
that Five Star's rapidly deteriorating financial position could have on
our 261 Five Star operated senior living communities, which represent a
significant amount of our revenues and net operating income. Some of the
options we considered included evaluating whether we should engage new
operators rather than Five Star to run some or all the communities as
well as whether we should try to sell the entire portfolio. We
ultimately concluded for a variety of reasons that the transaction
announced today was the best option for SNH and our shareholders in
light of the difficult circumstances we faced."

In addition to SNH's and SNH shareholders' increased ownership of Five
Star, details of the transaction include the following:

  • Commencing February 1, 2019, Five Star's aggregate monthly rent
    payable to SNH under the five master leases with Five Star was reduced
    from approximately $17.4 million to $11.0 million, and Five Star has
    paid its February rent payment, which was previously deferred to March
    31, 2019, at this reduced amount.
  • SNH has purchased from Five Star approximately $50.0 million of fixed
    assets and improvements related to the leased senior living
    communities.
  • SNH has provided a $25 million short term revolving credit facility to
    Five Star that is secured by six of Five Star's wholly-owned senior
    living communities. The interest rate under this credit facility is
    6.0% per year on any drawn amounts and matures on January 1, 2020.
    There is currently no amount outstanding under this credit facility.
  • Simultaneous with SNH and SNH shareholders receiving Five Star common
    shares, Five Star will reduce Five Star's indebtedness under the SNH
    credit facility and SNH will assume certain of Five Star's liabilities
    and/or make a cash payment to Five Star equal to $75 million in
    aggregate.

Due to the lower cash flow SNH will receive from its senior living
communities operated by Five Star, SNH anticipates that it will need to
lower its common share distribution rate in the future. SNH currently
expects to pay an annual distribution of $0.55 to $0.65 per common share
going forward, which is based on a target distribution payout ratio of
approximately 80% of projected cash available for distribution in the
future. This new distribution rate is expected to begin with SNH's next
regularly scheduled quarterly distribution announcement later this month.

To reduce leverage, SNH expects to sell properties valued at up to $900
million to achieve a target debt to adjusted EBITDA ratio of
approximately 6.0x by the end of 2019. As part of these property sales,
SNH plans to focus its efforts primarily on selling underperforming
senior living communities and non-healthcare related assets, including
standalone skilled nursing facilities and wellness centers.

Jennifer Francis, President and Chief Operating Officer of SNH, made the
following statement regarding today's announcement:

"The transaction announced today provides an immediate and long-term
solution to stabilize our largest operator and protect the value of our
senior living communities. In fact, we believe Five Star will be a
healthy company at the end of this transaction, with projected annual
EBITDA of $20 to $30 million, minimal capital expenditure requirements,
low leverage and continued direct ownership in 20 senior living
communities. We also believe it makes sense that SNH and its
shareholders receive the bulk of this benefit in the form of Five Star
ownership. In addition, we believe receiving Five Star common shares may
help compensate SNH shareholders for our lower distribution rate going
forward."

"The transaction announced today also provides SNH with greater asset
management oversight of its senior living portfolio going forward as
well as positions SNH and SNH shareholders to realize possible financial
upside in the future. Our long-term strategy remains unchanged, with a
focus on growing our medical office and life science buildings
portfolio, and we expect that our medical office and life science
building portfolio will increase as a percentage of our total property
portfolio at the end of our announced disposition program. While our
portfolio of senior living communities is expected to decrease as a
percentage of our total property portfolio in the future, today's
announcement underscores our commitment to ensuring all of our
properties are positioned for long-term success."

This transaction was unanimously approved by both the special committee
of SNH's Board of Trustees and the entire SNH Board of Trustees. This
transaction does not require approval by SNH's shareholders. The
issuances of Five Star common shares to SNH and SNH shareholders in
connection with this transaction are subject to the approval of Five
Star's stockholders. SNH and ABP Trust, which collectively own
approximately 44% of outstanding Five Star common shares, have both
agreed to vote their shares in favor of the issuance of Five Star shares.

The transaction is expected to close on January 1, 2020 after the
requisite regulatory approval process is completed, and to maintain
compliance with complex tax rules affecting real estate investment
trusts, or REITs, including limitations on the amount of ownership a
REIT may own in a tenant during any calendar year.

Morgan Stanley is acting as exclusive financial advisor to the special
committee of SNH's Board of Trustees and Sullivan & Worcester LLP is
acting as legal counsel to the special committee of SNH's Board of
Trustees in this transaction.

Conference Call:

At 10:00 a.m. Eastern Time this morning, President and Chief Operating
Officer, Jennifer Francis, and Chief Financial Officer and Treasurer,
Rick Siedel, will host a conference call to discuss the transaction.
Following management's remarks, there will be a question and answer
period for analysts. A copy of the definitive agreement regarding the
transaction between SNH and Five Star will be filed with the Securities
and Exchange Commission, or SEC, on a Current Report on Form 8-K. SNH
will also provide a presentation regarding the transaction that will be
available on its website at www.snhreit.com
and furnished with the SEC as an exhibit to a Current Report on Form
8-K. SNH's website is not incorporated as part of this news release.

The conference call telephone number is (877) 270-2148. Participants
calling from outside the United States and Canada should dial (412)
902-6510. No pass code is necessary to access the call from either
number. Participants should dial in about 15 minutes prior to the
scheduled start of the call. A replay of the conference call will be
available through 11:59 p.m. on April 9, 2019. To access the replay,
dial (412) 317-0088. The replay pass code is 10130144.

A live audio webcast of the conference call will also be available in a
listen only mode on SNH's website. Participants wanting to access the
webcast should visit SNH's website about five minutes before the call.
The archived webcast will be available for replay on both websites
following the call for about one week. The transcription, recording
and retransmission in any way of SNH's conference call are strictly
prohibited without the prior written consent of SNH.

About Senior Housing Properties Trust

Senior Housing Properties Trust is a REIT which owns senior living
communities, medical office buildings and wellness centers throughout
the United States. SNH is managed by the operating subsidiary of The RMR
Group Inc. (NASDAQ:RMR), an alternative asset management company that
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 SNH USES
WORDS SUCH AS "BELIEVE", "EXPECT", "ANTICIPATE", "INTEND", "PLAN",
"ESTIMATE", "WILL", "MAY" AND NEGATIVES OR DERIVATIVES OF THESE OR
SIMILAR EXPRESSIONS, SNH IS MAKING FORWARD LOOKING STATEMENTS. THESE
FORWARD LOOKING STATEMENTS ARE BASED UPON SNH'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 SNH'S FORWARD LOOKING STATEMENTS AS A
RESULT OF VARIOUS FACTORS. FOR EXAMPLE:

  • THIS PRESS RELEASE STATES THAT SNH ENTERED INTO A DEFINITIVE AGREEMENT
    TO MODIFY ITS EXISTING BUSINESS ARRANGEMENTS WITH FIVE STAR AND THAT
    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 AND OTHER APPROVALS. SNH 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.
  • MR. HARRINGTON'S STATEMENT IN THIS PRESS RELEASE THAT THE TRANSACTION
    ANNOUNCED TODAY WAS THE BEST OPTION FOR SNH AND SNH SHAREHOLDERS MAY
    IMPLY THAT THIS OPTION WILL ACHIEVE BETTER RESULTS FOR SNH AND SNH
    SHAREHOLDERS IN THE FUTURE THAN OTHER OPTIONS. HOWEVER, SNH CANNOT BE
    SURE THAT THIS OPTION WILL ACHIEVE BETTER RESULTS FOR SNH AND SNH
    SHAREHOLDERS IN THE FUTURE.
  • SNH EXPECTS TO RETAIN APPROXIMATELY 34% OF OWNERSHIP OF FIVE STAR FOR
    THE FORESEEABLE FUTURE. HOWEVER, SNH MAY SELL SOME OR ALL OF ITS FIVE
    STAR COMMON SHARES. SNH'S OWNERSHIP OF FIVE STAR MAY ALSO BE DILUTED
    IN THE FUTURE.
  • SNH PLANS TO PAY AN ANNUAL DISTRIBUTION OF $0.55 TO $0.65 PER COMMON
    SHARE GOING FORWARD, BASED ON A TARGET DISTRIBUTION PAYOUT RATIO OF
    APPROXIMATELY 80% OF PROJECTED CASH AVAILABLE FOR DISTRIBUTION IN THE
    FUTURE. SNH'S DISTRIBUTION WILL BE SET AND RESET FROM TIME TO TIME BY
    SNH'S BOARD OF TRUSTEES. THE SNH BOARD WILL CONSIDER MANY FACTORS WHEN
    SETTING THE DISTRIBUTION, INCLUDING SNH'S HISTORICAL AND PROJECTED NET
    INCOME, NORMALIZED FUNDS FROM OPERATIONS, THE THEN CURRENT AND
    EXPECTED NEEDS AND AVAILABILITY OF CASH TO PAY SNH'S OBLIGATIONS,
    DISTRIBUTIONS WHICH SNH MAY BE REQUIRED TO BE PAID TO MAINTAIN ITS TAX
    STATUS AS A REIT AND OTHER FACTORS DEEMED RELEVANT BY SNH'S BOARD OF
    TRUSTEES IN ITS DISCRETION. ACCORDINGLY, FUTURE SNH DISTRIBUTIONS MAY
    BE INCREASED OR DECREASED AND SNH CANNOT BE SURE AS TO THE RATE AT
    WHICH FUTURE DISTRIBUTIONS WILL BE PAID.
  • SNH EXPECTS TO SELL UP TO $900 MILLION OF PROPERTIES TO REDUCE ITS
    LEVERAGE TO STATED TARGETS. HOWEVER, SNH MAY NOT BE ABLE TO
    SUCCESSFULLY SELL PROPERTIES IN THE FUTURE. ALSO, SNH MAY SELL
    PROPERTIES AT PRICES THAT ARE LESS THAN THEIR CARRYING VALUES AND SNH
    MAY INCUR FUTURE LOSSES.
  • MS. FRANCIS'S STATEMENTS IN THIS PRESS RELEASE REGARDING THE IMMEDIATE
    AND LONG-TERM SOLUTION PROVIDED BY THE TRANSACTION ANNOUNCED TODAY,
    SNH'S BELIEF IN FIVE STAR BEING A HEALTHY COMPANY AT THE CONCLUSION OF
    THE TRANSACTION AND SNH'S LONG-TERM STRATEGY ARE CONTINGENT UPON THE
    CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED BY THE DEFINITIVE
    AGREEMENT BETWEEN SNH AND FIVE STAR. THESE TRANSACTIONS MAY NOT OCCUR
    AND THE BENEFITS OF THESE TRANSACTIONS MAY NOT MATERIALIZE AND/OR FIVE
    STAR'S FINANCIAL CONDITION MAY FURTHER DETERIORATE DESPITE THESE
    AGREEMENTS. IN ADDITION, FIVE STAR MAY NOT BE A HEALTHY COMPANY AT THE
    CONCLUSION OF THE TRANSACTION. SNH MAY ALSO NOT BE ABLE TO
    SUCCESSFULLY IMPLEMENT ITS LONG-TERM STRATEGY.
  • MS. FRANCIS'S STATEMENT THAT FIVE STAR IS PROJECTED TO HAVE ANNUAL
    EBITDA OF $20 TO $30 MILLION FOLLOWING THE CLOSING OF THE TRANSACTION
    HAS BEEN PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND IS NOT
    NECESSARILY INDICATIVE OF FIVE STAR'S EXPECTED FINANCIAL POSITION OR
    RESULTS OF OPERATIONS FOR ANY FUTURE PERIOD. IN FACT, FIVE STAR'S
    ACTUAL ANNUAL EBITDA FOLLOWING THE CLOSING OF THE TRANSACTION WILL BE
    SUBJECT TO MARKET CONDITIONS AND OTHER FACTORS, SOME OF WHICH ARE
    BEYOND FIVE STAR'S CONTROL, AND FIVE STAR'S ANNUAL EBITDA FOR FUTURE
    PERIODS FOLLOWING THE CLOSING OF THE TRANSACTION MAY BE SIGNIFICANTLY
    LOWER THAN IS STATED IN THIS PRESS RELEASE.

THE INFORMATION CONTAINED IN SNH'S FILINGS WITH THE SEC INCLUDING UNDER
"RISK FACTORS" IN SNH'S PERIODIC REPORTS, OR INCORPORATED THEREIN,
IDENTIFIES OTHER IMPORTANT FACTORS THAT COULD CAUSE SNH'S ACTUAL RESULTS
TO DIFFER MATERIALLY FROM THOSE STATED IN OR IMPLIED BY SNH'S FORWARD
LOOKING STATEMENTS. SNH'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, SNH DOES NOT INTEND TO UPDATE OR CHANGE ANY
FORWARD LOOKING STATEMENTS AS A RESULT OF NEW INFORMATION, FUTURE EVENTS
OR OTHERWISE.

A Maryland Real Estate Investment Trust with transferable shares of
beneficial interest listed on the Nasdaq.

No shareholder, Trustee or officer is personally liable for any act or
obligation of the Trust.

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