Senior Housing Properties Trust is to acquire 23 Class A medical office buildings (MOBs) for a purchase price of approximately USD539 million.
The 23 properties contain approximately 2.2 million square feet and are located in 12 states.
The properties are currently 100 per cent occupied for a weighted average term (by rents) of 9.5 years, with no scheduled lease expiration before 31 December 2018
Some 72 per cent of the rents are payable by tenants with investment grade credit ratings and certain other tenants that are believed to have strong credit qualities but are unrated.
David Hegarty, president and chief operating officer of SNH, says: “The acquisition of this Class A MOB portfolio fits squarely within SNH’s stated strategy to continuously diversify and strengthen its healthcare assets. The large majority of these MOBs are recently built, Class A properties, and the average age of the portfolio is just 10 years.”
SNH currently expects to assume approximately USD30 million of mortgage debt on two of the MOBs to be acquired and to fund the balance of the purchase price using cash on hand and drawings under its unsecured revolving bank credit facility. On a longer term basis, SNH expects to finance this acquisition with an appropriate mix of debt and equity capital, depending on the cost of such financings and future market conditions. The acquisition GAAP capitalisation rate is expected to be approximately 6.4 per cent.
The 23 properties will be purchased in connection with the purchase by Select Income REIT of Cole Corporate Income Trust (CCIT), a publicly owned unlisted REIT. SNH’s acquisition of the 23 properties is contingent upon the completion of SIR’s acquisition of CCIT. The acquisition by SIR of CCIT is subject to various conditions, including approval by both SIR and CCIT shareholders. SNH currently expects that it will close during the first calendar quarter of 2015.