Senior Housing Properties Trust
) recently disclosed the sale of two rehabilitation hospitals to
a joint venture (JV) for $90 million. The company expects to reap
a gain of over $30 million from selling these hospitals.
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The two properties -- New England Rehabilitation Hospital in
Woburn, MA and Braintree Rehabilitation Hospital in Braintree, MA
would be sold to a JV comprising affiliates of The Sanders Trust,
LLC of Birmingham, AL and Harrison Street Real Estate Capital,
LLC of Chicago, IL. Notably, New England Rehabilitation Hospital
has 198 licensed beds while Braintree Rehabilitation Hospital
comprised 166 licensed beds.
The hospitals, which were acquired in 2002, are currently leased
Five Star Quality Care, Inc.
). As part of the deal, Five Star's lease of the hospitals would
be terminated and the operating rights and obligations would be
shifted to entities affiliated with Reliant Hospital Partners,
LLC, a private company in Richardson, Texas. The disposition is
expected to be completed by about mid-year 2014.
The move comes as Senior Housing Properties continues to lower
its exposure to properties that generate a large chunk of their
revenues from government funded programs like Medicare and
Medicaid. Following the sale, a minimum percentage (only 2%) of
Senior Housing Properties' total revenues would come from the
ownership of healthcare facilities where Medicare and Medicaid
represent the bulk of revenues.
As a matter of fact, a greater exposure to properties that
generate revenue from government reimbursement makes the
company's earnings more susceptible to the politics and whims
surrounding such government funding. A cut in the reimbursement
rate has an adverse impact on tenants rent coverage that has the
capability to negatively impact the REIT's revenue.
Moreover, though the company would bear the impact of rent
reduction from these dispositions, the sale proceeds can be
efficiently channelized into other healthcare related real
estate. Hence, it is in line with the company's strategic
portfolio repositioning moves.
Senior Housing currently has a Zacks Rank #4 (Sell). However, a
number of promising stocks include
Sotherly Hotels Inc.
) carrying a Zacks Rank #1 (Strong Buy) and
Highwoods Properties Inc.
) having a Zacks Rank #2 (Buy).