SNH Buys Seven Five Star Communities for $112.4M in Sale-Leaseback Transaction

by Jeff Shaw

NEWTON, Mass. — Senior Housing Properties Trust (NYSE: SNH) has acquired seven seniors housing communities from Five Star Quality Care (NYSE: FVE) for $112.4 million. Five Star will continue to operate the communities as as part of the sale-leaseback deal.

The portfolio totals 545 units in North Carolina, South Carolina, Tennessee and Virginia. The lease with Five Star expires at the end of 2028 and includes renewal options.

Five Star intends to use the proceeds it receives from the sale and leaseback transaction to repay in full amounts outstanding under its secured revolving credit facility which had $60 million outstanding on June 28, 2016, and for general business purposes.

The initial annual rent payable to SNH under the lease will be $8.4 million per year, resulting in an approximate capitalization rate of 7.5 percent. Starting after 2017, the rent may increase based upon a percentage of gross revenue increases realized by operations at the leased communities.

SNH funded the purchase of the seven communities with cash on hand and drawings under its $1 billion unsecured revolving credit facility.

Five Star was formerly SNH’s wholly owned subsidiary and both companies are based in Newton. 

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