New Senior to Sell Holiday, LCS Properties for $296 Million

New Senior Investment Group (NYSE: SNR) is trimming its portfolio by undertaking $296 million in asset sales, the New York City-based real estate investment trust announced Thursday.

The transactions involve a $186 million sale of six properties triple-net leased to Life Care Services (LCS) and a $109.5 million sale of nine properties managed by Holiday Retirement.

Des Moines, Iowa-based LCS is the third-largest senior living operator nationally, according to recent rankings from the American Seniors Housing Association. Holiday Retirement, which is transitioning its headquarters from Oregon to Florida, is the nation’s largest independent living operator and second-largest provider overall.

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“The sales announced today significantly advance our stated objective of pursuing selective asset sales in order to enhance the overall quality of our portfolio. In addition, these sales are expected to generate significant dry powder for new investments and other initiatives,” New Senior CEO Susan Givens stated in a press release.

LCS itself is buying back the properties and will no longer be an operator in the SNR portfolio, New Senior spokesman David Smith confirmed to Senior Housing News. That transaction is structured with a $170 million purchase price and $16 million lease termination payment.

A Florida-based owner and operator identified in an SEC filing as GAHC4 Central Florida Senior Housing Portfolio, LLC, is the buyer of the managed portfolio.

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New Senior detailed several ways that it believes the transactions will improve its portfolio:

– Trimming exposure to the challenged skilled nursing market by disposing of four continuing care retirement communities (CCRC) that are part of the LCS transaction

– Reducing the concentration of communities in Dallas, Texas, which is a market facing competitive pressures related to new supply

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– Increasing its overall independent living exposure

The LCS portfolio consists of the four CCRCs as well as one assisted living/memory care property and one independent living property. All the Holiday properties are assisted living/memory care.

In addition, New Senior expects to improve the coverage ratio on its overall triple-net lease portfolio. In the second quarter of 2017, the leased properties that are being sold had EBITDARM coverage of 1.05x. Excluding these properties, coverage for the overall SNR triple-net lease portfolio would improve from 1.17x to 1.19x, the company stated in announcing the transactions.

The deals are anticipated to close before the end of the year.

Like other REITs and senior housing operators, New Senior has been hit by occupancy pressures and rising labor costs. After missing analyst expectations for revenue and funds from operations (FFO) in the second quarter of 2017, Givens said the company would make moves to sell underperforming assets, specifically assisted living and memory care.

“I often refer to this as a tale of two cities,” she said at the time. “Our independent living facilities have generally fared better than our assisted living and memory care properties, which have seen weakness in performance, generally consistent with what the rest of the industry has experienced.”

SNR shares were flat in after-hours trading on Thursday, immediately after the announcement of the dispositions.

Written by Tim Mullaney

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