Senior Housing Properties Partners on Boston Assets

By Gail Kalinoski

Boston—Less than a year after refinancing its two Fan Pier properties, Senior Housing Properties Trust has formed a joint venture with an unidentified sovereign institutional investor who bought a minority stake in 11 Fan Pier and 50 Northern Ave. for $261 million.

11 Fan Pier and 50 Northern Ave. in Boston

The investor owns 45 percent equity interest in the joint venture with SNH owning the remaining 55 percent. The Newtown, Mass.-based REIT said the investment amount is based on a property valuation of $1.2 billion, with less than $620 million of existing secured debt on the property.

In July, taking advantage of the low interest rate environment, SNH closed on a new $620 million mortgage provided by Morgan Stanley and Citi. The 10-year loan has a fixed interest rate of 3.53 percent and matures in August 2026.

The property in Boston’s hot Seaport District was acquired in May 2014 by SNH for $1.1 billion and consists of two 15-story, Class A, LEED Gold certified life science buildings with structured parking. The buildings are connected by a walkway on the sixth floor. Vertex Pharmaceuticals leases 95 percent of the buildings through 2028. Ground-floor retail comprises the remainder of the 1.1 million rentable square feet of space that included labs and corporate offices for Vertex.

SNH, which owns senior living communities, medical office buildings and wellness centers, acquired the buildings in one of the biggest commercial real estate deals in Boston that year. SNH bought the buildings from The Fallon Co. and an institutional investor. Fallon, one of Boston’s leading real estate investment and development companies, had completed the development in December 2013. Vertex began moving in about 1,300 employees a few months later in early 2014 just before the sale to SNH.

SNH said it will continue to control the property, calling the JV partner a “passive financial investor.” The REIT expects to use the cash proceeds from the transaction to repay debt owed under its revolving credit facility.

David Hegarty, SNH president & COO, noted that this is the REIT’s first joint venture transaction to own property.

“This transaction highlights the increased value of these two well-located, well-leased buildings since we acquired them less than three years ago,” Hegarty said in a prepared statement. “This transaction also reduces our investment portfolio’s concentration in this property and reduces our overall leverage.”

Eastdil Secured acted as SNH’s advisor and Sullivan & Worcester LLP provided legal counsel to SNH.

SNH is managed by the operating subsidiary of The RMR Group, an alternative asset management company headquartered in Newton.