Senior Housing Properties (SNH) slashes dividend on lease restructuring.

Senior Housing Properties Trust (SNH) announced today that it will cut its dividend by approximately 60% to an annual rate of $0.55 - $0.65/share versus the $1.56/share paid in 2018.  The revised dividend rate reflects the conclusion of restructuring talks with key tenant Five Star Senior Living (261 facilities, previously 28% of rental income), which will reduce annualized lease payments to SNH by approximately $77 million.

As part of the restructuring agreement, the current net lease agreements with Five Star will be converted to a RIDEA management structure upon receipt of regulatory approvals.  SNH and SNH shareholders will also receive stock in Five Star, increasing pro forma ownership to approximately 85%.  Due to REIT tax restrictions, certain aspects of the SNH/Five Star agreement are expected to close on January 1, 2020.

SNH also said it intends to sell approximately $900 million of properties - "primarily underperforming senior living communities" in order to achieve a targeted Debt/EBITDA ratio of 6.0x.  Management cited a "challenging current operating environment" for senior living properties, characterized by excess new supply, declining occupancy rates, and increased labor costs.