Toledo, OH-based Welltower has agreed to pay $368 million to Newton, MA-based Senior Housing Properties Trust for four rental continuing care retirement communities managed by Sunrise Senior Living, the real estate investment trusts announced Tuesday.
The sale of one of the communities, in Arlington, VA, was completed in late December. Sales of the other three communities — in Boca Raton, FL; Silver Springs, MD; and Charlottesville, VA — are expected to be completed before March 31, the REITs said.
“These assets, located in top markets, represent both an enhancement to our Sunrise portfolio and a significant above-market return for our shareholders,” Welltower CEO Tom DeRosa said. The REIT said it has more than $6 billion of investments with McLean, VA-based Sunrise.
The communities — with a total of 1,179 living units/beds, excluding units owned by Sunrise as well as separately owned independent living condos — currently are managed under triple-net leases, but Welltower said it will be transitioning them to a RIDEA structure. Total rent for the 12 months ending Sept. 30 was about $14.8 million, SNH said.
SNH said it bought the communities in 1994 for about $124.3 million. At that time, they were leased to Marriott Senior Living Services, which at the time was a wholly owned subsidiary of Marriott International. In 2003, Marriott International sold its senior living business to Sunrise, but Marriott International has remained a guarantor of the lease obligations, the REIT said.
“SNH believes these communities now require updating and renovation capital, and the current tenant arranged for SNH to sell these communities to a buyer interested to make the necessary investments on terms acceptable to the tenant,” Senior Housing Properties Trust President David J. Hegarty said in a statement. “In these circumstances, now is the right time for SNH to harvest its significant capital gains on this investment and to use the proceeds to reduce SNH’s debt leverage and/or to re-deploy the capital received from these sales into new investments.”
The REIT said it expects to report a gain of approximately $308 million on the sale.