NEWTON, MASS. — Newton-based Senior Housing Properties Trust (NYSE: SNH) has entered into an agreement to purchase nine large senior living rental communities for $478 million, including $164 million of assumed mortgage debt on certain communities. These communities are currently operated by Vi® as Classic Residence, and were formerly known as Classic Residence by Hyatt. Goldman Sachs & Co. represented Vi in the transaction.
The nine properties are located in six states: four in Florida, and one each in Maryland, Nevada, New Jersey, New York and Texas. The communities include 2,226 living units: 1,708 independent living apartments, 471 assisted living suites and 47 suites where specialized Alzheimer services are provided; they are currently 87 percent occupied.
“It’s not common in this industry to be able to do a significant transaction for multiple properties of this caliber and size,” says David J. Hegarty, president of SNH. “In addition, there’s been no meaningful new supply, virtually no financing for development, and the demographics are increasing demand in this sector. It will be a few more years before senior housing takes off, but it’s modestly improving now, and we want to capture that.”
The 200-unit Vi Boca Raton, Fla., one of the nine properties Senior Housing Properties Trust recently purchased for a total of $478 million.
In addition, the revenues at these particular communities are 100 percent paid by residents from their private resources, which is SNH’s target for investment.
“For the last 10 years, we’ve based our strategy on private-paid properties, as we feel that government programs will eventually come under pressure,” adds Hegarty. “We have not bought anything government dependent, and we’re actively selling down other properties that do have government funding, in addition to aggressively acquiring private-paid senior living communities.”
The 330-unit Vi Chevy Chase (Md.).
Following the closing, eight of these communities will be leased to a taxable REIT subsidiary of SNH, and all nine communities will be managed by Five Star Quality Care, Inc. (NYSE: FVE), or Five Star, under long term contracts on terms similar to the terms of the existing senior living communities management contracts between SNH and Five Star. The combined cash flows SNH currently expects it may realize from these nine communities in its first year of ownership will equal approximately 7 to 7.5 percent of SNH’s combined purchase prices.
SNH currently expects to fund these purchases using cash on hand, drawings available under its unsecured credit facility and by assuming approximately $164 million of mortgage debts, planning to close on the majority of the communities in the fourth quarter of 2011. The purchase of certain communities may be delayed into 2012 because of required regulatory and other third party approvals, especially the licensing process in New York. The closings are also subject to other customary conditions.
— Dan Marcec