News Archive
03/01/2019 | Senior Housing Properties (SNH) in lease discussions with largest tenant. |
During Senior Housing Properties' 4Q'18 earnings call today, the company announced that it has entered into discussions with tenant Five Star Senior Living regarding a possible lease restructuring. Five Star currently represents approximately 28% of SNH's annualized rental income. The lease discussions follow Five Star's own admission in November that there is substantial doubt about its ability to continue as a going concern. Five Star's ability to cover rent has declined steadily during 2018, reaching 1.0X on a trailing 12-month basis as of September 30, 2018.
As noted on the call, any reset of the Five Star rental rates (presumably to market coverage levels) would have a corresponding negative impact on SNH cash flows "and possibly our distributions to shareholders." As SNH's dividend payout ratio for 2018 is already in excess of 100% of AFFO according to REIT/BASE, there is essentially zero earnings cushion to absorb any fallout with Five Star.
SNH is currently rated Baa3/Negative by Moody's and BBB-/Negative by S&P.