Newton real estate investment trust Senior Housing Properties Trust has agreed to acquire 13 properties that are majority leased to medical office users and other tenants in medical related businesses for $167 million.
All of the 13 properties will be purchased from CommonWealth REIT (CWH). Senior Housing Properties (SNH) was a 100 percent owned subsidiary of CWH until it was spun out to CWH’s shareholders in 1999. As a result of agreements entered at the time of this spin out and since then, SNH has a right of first refusal to purchase certain properties from CWH.
At the conclusion of this transaction, substantially all of the properties subject to this right of first refusal will have been purchased by SNH, and the existing right of first refusal between SNH and CWH will terminate. Both SNH and CWH are managed by Reit Management & Research LLC, or RMR, and have certain common trustees. Because of the historical and existing relationships between SNH and CWH, the purchase prices for the 13 properties which SNH has agreed to acquire were established by reference to an appraisal by a nationally recognized real estate appraisal firm, and the terms of these purchases were negotiated by special committees of each company’s board composed of independent trustees who are not trustees of the other company, represented by separate counsel.
These properties contain 1.3 million square feet and are located in eight states (three in California; two in Illinois; two in New York; two in Pennsylvania and one in each of Arizona, Minnesota, Ohio and South Carolina). These purchases are expected to be completed in 2011.
These 13 properties are currently 95 percent occupied on a combined basis and they have a weighted (by rents) average remaining lease term of approximately five years. The combined purchase prices for all 13 properties represents a weighted (by purchase prices) estimated average capitalization rate based on annual property level net operating income during the remaining lease terms of approximately 9.2 percent per year.
SNH currently expects to purchase these 13 properties free and clear of any mortgage debts using cash on hand and drawings under SNH’s $750 million unsecured revolving bank credit facility.
