Five Star Defers February Rent to SNH as Struggles Continue

Five Star Senior Living’s (Nasdaq: FVE) financial woes continue to pile up.

The Newton, Massachusetts-based senior living operator and Senior Housing Properties Trust (NYSE: SNH) agreed to defer the minimum aggregate February rent Five Star owes SNH for properties it operates under a master lease between the two companies. The deal was unveiled in a Securities and Exchange Commission filing.

SNH owns 184 Five Star communities, the largest percentage of Five Star’s portfolio.

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The agreement’s terms, signed by Five Star President and CEO Katherine Potter, and SNH President and CEO Jennifer Francis, defers the rent through March 31, at which point the rent is expected to be paid. The amount of rent was not disclosed.

Five Star has been beset by financial and operational struggles for more than a year. The company has struggled with occupancy rates while facing competition from memory care communities, and reevaluated its skilled nursing exposure amidst declining revenue. Five Star stock has plummeted to a level where it risks being delisted by Nasdaq; on Monday, it closed trading at $.90 per share, down 5.26%

Five Star and SNH have been in talks since the end of Q3 2018 about a possible restructuring. During its Q4 2018 earnings call last week, Potter would not comment on negotiations.

“We cannot be sure that there will be any changes to our agreement with SNH or whether Five Star will be able to continue as a going concern,” she said.

In recent months, the company has taken several steps to address its financial and operational challenges. A revenue management program aimed at adjusting pricing to match demands for specific products in specific markets was installed in 160 of Five Star’s 283 communities at the end of 2018, and will be standard across the entire portfolio by the end of the year.

Still, not all news has been bad for the company. Three Five Star communities, meanwhile, became the first senior living communities in the U.S. to earn J.D. Power’s senior living certification. Five Star intends for the entire portfolio to earn the certification by 2020.

Senior Housing News has reached out to Five Star for comment and will update this story if the company responds.

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