Five Star Senior Living is deferring its February rent payment to Senior Housing Properties Trust until March 31, the organizations announced Monday in filings with the Securities and Exchange Commission.
The parties’ rent deferral agreement comes days after Five Star reported a net loss of $23.7 million for the fourth quarter of 2018 and a $74.1 million net loss for the year and after a November announcement that the company’s financial situation raised “substantial doubt on our ability to continue as a going concern.”
Five Star is the real estate investment trust’s largest tenant and manager of the senior living communities in its portfolio. As of Dec. 31, the company leased 184 senior living communities and managed 76 senior living communities for Senior Housing Properties Trust, accounting for 26.7% and 20.4% of the REIT’s communities, respectively, according to information filed with the SEC.
March 1, Senior Housing Properties Trust Chief Operating Officer Jennifer Francis told shareholders and analysts that discussions between the REIT and Five Star were “actively happening” and that the organizations expected to have an announcement within 60 days about operating and liquidity issues at Five Star.
“The boards of both Senior Housing Properties Trust and Five Star have formed special committees comprised solely of independent trustees and directors, and they have engaged separate advisers to help facilitate these discussions,” she said during the REIT’s fourth-quarter and full-year 2018 earnings call.
Senior Housing Properties Trust Chief Financial Officer and Treasurer Richard Siedel said March 1 that “a fairly small percentage” of Five Star assets are being marketed, and Francis indicated that some leases may be restructured, but “we cannot be sure that there will be any changes to our agreements with Five Star or whether Five Star will be able to continue as a going concern.”
Five Star was a subsidiary of the REIT until 2001. Senior Housing Properties Trust is one of the company’s largest stockholders, owning more than 4.2 million shares, or approximately 8.3% of Five Star’s outstanding common shares, as of Dec. 31, according to Monday’s SEC filing.
The largest stockholder, according to the filing, is a subsidiary of ABP Trust, whose sole trustee is Adam Portnoy, a managing trustee of Senior Housing Properties Trust and a managing director of Five Star. Portnoy also controls The RMR Group, which provides management services to both the REIT and Five Star. The ABP Trust subsidiary owned almost 18 million, or approximately 35.4%, of Five Star’s common shares as of Dec. 31.