Five Star Quality Care, Inc. (NYSE: FVE) (“FVE” or “Five Star”) today
announced that effective December 31, 2013, it has transferred the
operations of two rehabilitation hospitals to entities affiliated with
Reliant Hospital Partners, LLC (Reliant) of Richardson, TX.
The two hospitals are New England Rehabilitation Hospital located in
Woburn, MA and Braintree Rehabilitation Hospital located in Braintree,
MA, plus several leased in-patient and out-patient locations in eastern
Massachusetts which are affiliated with these hospitals. The hospitals
were formerly leased by FVE from Senior Housing Properties Trust (NYSE:
SNH). SNH sold the hospitals’ real estate assets to HSRE-TST III, LLC, a
joint venture comprised of affiliates of The Sanders Trust, LLC of
Birmingham, AL and Harrison Street Real Estate Capital, LLC of Chicago,
IL (HSRE).
With the hospitals’ sale and operations transfers complete, FVE expects
to realize cash proceeds of approximately $8.0 million from the
retention of its working capital investment in these hospitals. FVE will
be relieved of rent obligations totaling approximately $11.5 million per
year, including rents to SNH and rents to third parties.
In connection with the transfer of operations of the hospitals, FVE’s
$35 million secured revolving credit facility was reduced to $25 million
because the accounts receivable generated at the two rehabilitation
hospitals will no longer be available as collateral. FVE also has an
additional $150 million revolving credit facility secured by certain FVE
owned real estate that is unaffected by the transfer of the hospitals’
operations.
Bruce Mackey, President and Chief Executive Officer of FVE, made the
following statement concerning this transaction:
“By exiting these hospital operations, Five Star increases its focus on
its core business of private pay senior living communities. I believe
the fact that the large majority (approximately 77%) of Five Star’s
total revenues are from residents and patients who pay for services with
private resources is an indication of the high quality of FVE’s
services.”
Jefferies LLC acted as a financial advisor in connection with this
transaction.
Five Star Quality Care, Inc. is a senior living and healthcare services
company that owns, leases and manages senior living communities,
including primarily private pay independent and assisted living
communities located throughout the U.S. FVE is headquartered in Newton,
Massachusetts.
WARNING CONCERNING FORWARD LOOKING STATEMENTS
THIS PRESS RELEASE CONTAINS STATEMENTS THAT CONSTITUTE FORWARD LOOKING
STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995 AND OTHER SECURITIES LAWS. WHENEVER FVE OR MR. MACKEY
USE WORDS SUCH AS “BELIEVE”, “EXPECT”, “ANTICIPATE”, “INTEND”, “PLAN”,
“ESTIMATE” OR SIMILAR EXPRESSIONS, WE ARE MAKING FORWARD LOOKING
STATEMENTS. THESE FORWARD LOOKING STATEMENTS ARE BASED UPON THEIR
PRESENT INTENT, BELIEFS OR EXPECTATIONS, BUT FORWARD LOOKING STATEMENTS
ARE NOT GUARANTEED TO OCCUR AND MAY NOT OCCUR. ACTUAL RESULTS MAY DIFFER
MATERIALLY FROM THOSE CONTAINED IN OR IMPLIED BY THESE FORWARD LOOKING
STATEMENTS AS A RESULT OF VARIOUS FACTORS. FOR EXAMPLE:
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THIS PRESS RELEASE STATES THAT FVE EXPECTS TO REALIZE CASH PROCEEDS OF
APPROXIMATELY $8.0 MILLION BY RETAINING ITS WORKING CAPITAL INVESTMENT
IN THE REHABILITATION HOSPITALS. THIS EXPECTED AMOUNT IS BASED ON
AMOUNTS OF FVE WORKING CAPITAL INVESTMENTS IN THE HOSPITALS AS OF
NOVEMBER 30, 2013. THE AMOUNT OF NET WORKING CAPITAL FVE RETAINS WILL
DEPEND ON MANY FACTORS, INCLUDING THE FINANCIAL RESULTS OF THE
OPERATIONS OF THE REHABILITATION HOSPITALS PRIOR TO TRANSFER.
ACCORDINGLY, THE AMOUNT OF NET WORKING CAPITAL THAT MAY BE RETAINED BY
FVE IS NOT ASSURED AND MAY BE LESS THAN $8.0 MILLION.
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THIS PRESS RELEASE STATES THAT A LARGE MAJORITY OF FVE’S TOTAL
REVENUES (APPROXIMATELY 77%) ARE NOW FROM RESIDENTS AND PATIENTS WHO
PAY FOR SERVICES WITH PRIVATE RESOURCES. THIS MAY IMPLY THAT A LARGE
MAJORITY OF FVE’S REVENUES WILL CONTINUE TO COME FROM RESIDENTS’ AND
PATIENTS’ PRIVATE RESOURCES. HOWEVER, RESIDENTS AND PATIENTS WHO PAY
FOR FVE’S SERVICES WITH THEIR PRIVATE RESOURCES MAY BECOME UNABLE TO
AFFORD FVE’S SERVICES WHICH COULD RESULT IN DECREASED OCCUPANCY,
DECREASED REVENUES AT FVE’S SENIOR LIVING COMMUNITIES OR INCREASED
RELIANCE ON LOWER RATES FROM GOVERNMENT PAYERS. FURTHER, FVE MAY
ACQUIRE OR OPERATE ADDITIONAL HEALTHCARE FACILITIES THAT HAVE A HIGHER
PERCENTAGE OF THEIR REVENUES RECEIVED FROM THE MEDICARE AND MEDICAID
PROGRAMS. IN ADDITION, THE MEDICAID AND MEDICARE PROGRAMS MAY BE
CHANGED TO PROVIDE FOR PAYMENTS FOR ADDITIONAL RESIDENTS OR PATIENTS
OF FVE OPERATED HEALTHCARE FACILITIES.
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THIS PRESS RELEASE STATES THAT FVE IS NOW 100% FOCUSED ON OPERATING
SENIOR LIVING COMMUNITIES. THIS MAY IMPLY THAT FVE’S OPERATING RESULTS
WILL IMPROVE. HOWEVER, THE HOSPITALS’ OPERATIONS WERE A SMALL PART OF
FVE’S BUSINESS AND FVE MAY NOT REALIZE IMPROVED OPERATING RESULTS.
ALSO, FVE MAY CONSIDER OTHER INVESTMENTS AND BUSINESS OPPORTUNITIES IN
THE FUTURE WHICH MAY RESULT IN FVE NOT HAVING ITS CONTINUING
OPERATIONS 100% FOCUSED UPON SENIOR LIVING COMMUNITIES.
YOU SHOULD NOT PLACE UNDUE RELIANCE UPON OUR FORWARD LOOKING STATEMENTS.
EXCEPT AS REQUIRED BY LAW, WE DO NOT INTEND TO UPDATE OR CHANGE ANY
FORWARD LOOKING STATEMENTS AS A RESULT OF NEW INFORMATION, FUTURE EVENTS
OR OTHERWISE.
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