Senior Housing Restructures Business Arrangements With Five Star

(RTTNews) - Senior Housing Properties Trust (SNH) announced Tuesday that it has entered into a definitive agreement to modify its existing business arrangements with Five Star Senior Living Inc. (FVE).

Effective January 1, 2020, the existing five master leases for 184 of SNH's senior living communities (19,979 living units) that are leased to Five Star as well as the existing management agreements and pooling agreements with Five Star for 77 of SNH's senior living communities (10,135 living units) will be terminated and replaced with new management agreements for all 261 Five Star operated senior living communities.

Simultaneous with the conversion of SNH's existing agreements with Five Star into new management agreements with Five Star, SNH and SNH shareholders will receive Five Star common shares equal to approximately 85% ownership of Five Star in aggregate after taking into account SNH's current ownership.

As part of the transaction, SNH shareholders will receive, by way of a distribution of the right to receive Five Star common shares from SNH and subject to certain conditions, Five Star common shares equal to approximately 51% ownership of Five Star post issuance, effective as of January 1, 2020.

SNH will also increase its current 8.3% ownership of Five Star to approximately 34% post issuance. SNH currently plans to retain this ownership of Five Star for the foreseeable future.

SNH began this process by evaluating multiple options to address the impact that Five Star's rapidly deteriorating financial position could have on its 261 Five Star operated senior living communities, which represent a significant amount of its revenues and net operating income.

SNH currently expects to pay an annual distribution of $0.55 to $0.65 per common share going forward. This new distribution rate is expected to begin with SNH's next regularly scheduled quarterly distribution announcement later this month.

This transaction was unanimously approved by both the special committee of SNH's Board of Trustees and the entire SNH Board of Trustees. This transaction does not require approval by SNH's shareholders.

The issuances of Five Star common shares to SNH and SNH shareholders in connection with this transaction are subject to the approval of Five Star's stockholders.

The transaction is expected to close on January 1, 2020 after the requisite regulatory approval process is completed.