Seventeen former Holiday Retirement communities have new operators now that Murfreesboro, TN-based National Health Investors’ lawsuit against Toledo, OH-based Welltower was finalized Friday as expected, NHI announced Monday.
As McKnight’s Senior Living previously reported, NHI sued Welltower and some of its subsidiaries in December, asserting that the latter real estate investment trust “failed repeatedly to honor their legal obligations to NHI” and owed more than $14.1 million in back rent related to Holiday Retirement properties.
At the time, NHI said Welltower owed more than $14.1 million in back rent related to the properties, over which NHI previously had sent a default notice. As of late January, NHI said, total unpaid rent exceeded $16 million as it sought to “expeditiously” move the legacy Holiday properties to new owners.
NHI on Monday released additional details of the previously announced settlement agreement, saying that six Holiday independent living communities have been moved to a joint venture with Merrill Gardens — a new relationship for NHI — and that nine Holiday independent living communities have been moved to a joint venture with Discovery Senior Living.
“We are excited to start a new relationship with Merrill Gardens and expand our relationship with Discovery through these new joint ventures,” NHI President and CEO Eric Mendelsohn said in the announcement. “Our decision to pivot from the traditional triple-net lease model to an operating partnership is a milestone moment for the company and one we would only contemplate with trusted and experienced partners like Merrill Gardens and Discovery.”
The joint ventures, NHI said, “are structured to qualify under real estate investment trust regulations as operating partnerships, allowing for NHI to participate directly in the net operating income generated by community operations as opposed to revenues limited to rents received under a triple net lease arrangement.”
The settlement agreement includes a $6.9 million payment from Welltower to NHI, which is expected to be recognized in the second quarter, the REIT said. Also, an $8.8 million security deposit that NHI held has been applied to outstanding rent and was recognized in rental income in the first quarter.
In addition to the independent living community transitions, NHI moved a Holiday assisted living community in Florida to an existing master lease with Discovery and sold one Holiday property for approximately $3.2 million in gross proceeds.
Bickford leases restructured
Also effective Friday, NHI and Bickford Senior Living restructured master leases on the Bickford portfolio and Bickford agreed to pay annual cash rent of $28 million. NHI said that contractual rent will be reset to a fair market value after two years. Additionally, the REIT is in the process of selling five Bickford properties that it says are underperforming; NHI estimates gross proceeds of approximately $38 million and said that the sales largely will be completed in the second quarter.
In addition, in what is a new relationship for NHI, the REIT moved an assisted living community in Pennsylvania from Bickford to Pittsburgh-based IntegraCare under a triple net lease.
Other activity
NHI also reported Monday that last month it completed the sale of one assisted living community in Tennessee for approximately $8.6 million in gross proceeds. The REIT said it is in negotiations to sell eight underperforming senior living communities for estimated gross proceeds of approximately $65.3 million; those sales are expected to be completed in the second quarter.
NHI also said it deferred approximately $1.9 million in March rent for five operators and agreed to abate approximately $1.7 million in March rent, including approximately $1.5 million for Bickford. The additional Bickford abetment was primarily due to delays in closing dispositions, according to NHI.
The REIT said it collected 78.4% of contractual cash due for March. The remaining balance for the month consists of 5.8% in rent abated for Bickford, 7.3% in deferrals related to five other tenants, and 8.5% in unpaid rent related to the aforementioned Holiday properties. The collection rate excludes the $8.8 million security deposit.
