December 6, 2018, Alex Spanko, Skilled Nursing News - Sabra Health Care REIT (Nasdaq: SBRA) on Thursday announced a $385 million deal to sell all 38 buildings in its portfolio operated by troubled skilled nursing provider Senior Care Centers. The deal — which the Irvine, Calif. based real estate investment trust (REIT) had previously announced earlier this year — is expected to close early next year, according to a release from Sabra.
The portfolio consists of 36 skilled nursing facilities and two senior housing facilities operated by Senior Care Centers, which on Tuesday filed for Chapter 11 bankruptcy protection. The buyer is New York City-based alternative asset management company BlueMountain, a person with knowledge of the deal told SNN; an affiliate of BlueMountain last year purchased Kindred Healthcare’s entire portfolio of skilled nursing facilities for $700 million. A third-party spokesperson for BlueMountain could not confirm the company’s involvement as of press time.
The Irvine, Calif.-based Sabra first raised the specter of issues at Senior Care Centers last month, when CEO Rick Matros announced that the Dallas-based operator had not paid rent since May — a move that he classified as a gambit for leverage amid an ongoing sale process that Sabra had initiated earlier this year. In response, the REIT declared SCC in default and terminated its leases during the third quarter of the year.
The announcement this week of a formal purchase-and-sale agreement marks the latest step in an ongoing process that also saw a change of buyers and Matros criticizing “instability” in Senior Care Centers’ management team.
“We determined it was in our best interest to forego a potential earn-out opportunity that may or may not be realized at some future date and instead receive more cash up front,” Matros said in a statement announcing the agreement, noting that the final price was higher than a previously reported figure of $377.5 million. “We do not expect Senior Care Centers’ bankruptcy filing to have a substantive impact on our disposition of the Senior Care Centers facilities.”
SCC owes Sabra about $31.8 million, according to the provider’s bankruptcy petition filed in the U.S. Bankruptcy Court for the Northern District of Texas. That makes the REIT far and away SCC’s largest unsecured creditor, with second-place Healthcare Services Group out just under $8 million.
With 38 buildings out of a total 111, Sabra currently ranks as SCC’s largest landlord; LTC Properties (NYSE: LTC), which on Wednesday announced plans to transfer operations of its 11 SCC-operated SNFs, comes in second place among unaffiliated entities. Unlike Sabra, LTC had not terminated SCC’s leases before the firm filed for bankruptcy, giving SCC the option to either affirm or reject its current agreements with LTC as part of the court proceedings.
Management at the Westlake Village, Calif.-based LTC would strongly prefer that SCC take the latter path.
“We are doing everything we can to come to an agreement with them to return the leases to us, because we are working now with another operator to take these properties,” Wendy Simpson, the REIT’s CEO, told SNN.
SCC is still evaluating its options under bankruptcy protection, according to spokesman Tom Becker.
Granite Investment Group, the Irvine, Calif.-based majority owner of Senior Care Centers, also owns the real estate associated with 34 SCC properties, according to a schedule of leases and landlords provided to SNN by Becker. Granite owns those buildings separately from its interest in SCC, leasing the buildings to the operator through multiple individual portfolios.
A phone message left at Granite’s offices seeking comment was not returned as of press time.