2.8 MSF MOB Portfolio to Trade for a Half-Billion Dollars

Senior Housing Properties Trust -- the owner of seniors housing communities, rehabilitation hospitals, wellness centers and medical office buildings -- has signed on to acquire 27 medical office buildings from CommonWealth REIT for $470 million.

November 15, 2010
By Barbra Murray, Contributing Editor

Senior Housing Properties Trust–owner of seniors housing communities, rehabilitation hospitals, wellness centers and medical office buildings–has signed on to acquire 27 medical office buildings from CommonWealth REIT for $470 million. The 2.8 million square-foot unencumbered portfolio spans 12 states.

New Mexico, with six properties totaling 616,000 square feet, is the location of the largest concentration of square-footage in the behemoth portfolio. Home to four MOBs each, Pennsylvania and Massachusetts account for a respective 448,000 and 414,000 square feet. The largest properties in the portfolio, two office towers offering an aggregate 331,000 square feet and parking structures for 1,705 vehicles, sit near the celebrity-friendly Cedars Sinai Hospital in Los Angeles. The remaining assets are located in Arizona, Connecticut, Georgia, Minnesota, New Hampshire, Ohio, South Carolina and Texas.

All told, the portfolio boasts a 95 percent occupancy level, with medical services providers in medical related businesses taking up the majority of the tenant rosters.

For CommonWealth, the agreement dovetails with the REIT’s two-year-old strategy of selling older healthcare facilities in order to build up its portfolio of Class A assets. CommonWealth expects to use proceeds from the transaction for acquisitions, as well as general business purposes and the repaying of debt.

Senior Housing Properties plans to rely on cash on hand and drawings under its unsecured revolving bank credit facility to finance the acquisition. In August, the company secured a new $750 million unsecured revolving credit facility with Wells Fargo Bank and a group of other lenders to replace a credit facility that had been scheduled to mature later that month. The REIT did not have to compete with eager investors to get its hands on the group of CommonWealth properties; Senior Housing Properties had been a 100 percent owned subsidiary of CommonWealth until it became a separate company in a 1999 transaction that also gave it rights of first refusal to acquire certain CommonWealth assets. Terms of the deal struck 11 years ago may very well lead to Senior Housing Properties making additional purchases, as the company has rights of first refusal to buy 19 other properties totaling 1.8 million square feet should CommonWealth decide to sell them.

If all goes as planned, Senior Housing Properties will complete the acquisition of the portfolio in separate closings before the end of the second quarter of 2011.

Healthcare property and seniors housing investors have been quite active this year, closing a bevy of big-ticket deals. In May, a joint venture between Emeritus Corporation, Blackstone Real Estate Advisors VI L.P. and Columbia Pacific Advisors, L.L.C., completed the acquisition of 144 assets belonging to bankrupt Sunwest Management for $1.2 billion. And just last month, Ventas Inc. revealed that it had entered into an agreement to purchase all of Atria Senior Living Group’s real estate assets in a $3.1 billion transaction that will make Ventas the largest owner of seniors housing properties in the country.