SNH Closes on Sale of 2 Boston Hospitals

NEWTON, MA-Senior Housing Properties Trust on Thursday said it had closed its sale of two Boston-area rehabilitation hospitals for $90 million to a joint venture comprising affiliates of the Sanders Trust LLC of Birmingham, AL and Harrison Street Real Estate Capital LLC of Chicago. The REIT expects to recognize a gain on sale of over $30 million.

A large majority of the revenues at the sold hospitals—New England Rehabilitation Hospital in Woburn, MA; and Braintree Rehabilitation Hospital located in Braintree, MA—are paid by Medicare. With the completion of this sale, only 2% of SNH's total revenues are derived from the ownership of healthcare facilities where Medicare and Medicaid represent a majority of revenues.

“With this sale, our decade-plus plan to reduce SNH's exposure to possible future reductions in government funded Medicare and Medicaid programs is nearly complete,” says David Hegarty, president and COO of SNH. “Now, 98% of SNH's revenues have limited exposure to government funding. We are pleased that we were able to complete the sale of these two hospitals ahead of our expected timeframe of mid-year 2014.”  

SNH acquired both properties in 2002, and the hospitals' real estate assets were leased to Five Star Quality Care Inc. under SNH's FVE Lease No. 2. With the sale, FVE transferred its operating rights and obligations to entities affiliated with Reliant Hospital Partners LLC, a private company located in Richardson, TX, which will operate the hospitals.

The two hospitals were leased by SNH to FVE under a combination lease which also includes 51 senior living properties. The rent reduction which SNH will experience as a result of this sale will be $9.5 million per year. With this rent reduction, the total of all rent received by SNH from FVE under the four combination leases with FVE represents only 26% of SNH's total revenues, based on revenues for the three months that ended Sept. 30, 2013.