The Dealmakers Forum E-Newsletter, October 1, 2014 - Sabra acquires 21 independent living communities from affiliates of Holiday Retirement

 

Bringing You Senior Care M&A Deals and News
 

October 1, 2014 Issue:

Seniors Housing Weekly Update: 60 Seconds with Steve Monroe
The Buzz At NIC Conference: With perhaps record attendance,and maybe even record buzz, the NIC conference will see a lot of M&A and finance action this year............ Read More   

 

Recent Senior Care M&A Deals
Home Health Care & Hospice    
Acquirer Target Price
Interim HealthCare Inc. Just Better Care N/A
Long-Term Care    
Midwest operator 19 skilled nursing facilities $63 million
Summit Healthcare REIT, Inc. 2 skilled nursing facilities $7.9 million
Global Healthcare REIT, Inc. 4 skilled nursing facilities $10.2 million
Gryphon Senior Livings Group 3 senior living properties $18.3 million

 

 

Deal of the Week 

Sabra Health Care REIT’s acquisition of 21 independent living communities from affiliates of Holiday Retirement is significant for the California-based REIT in a variety of ways. The deal marks a departure from Sabra’s traditional skilled nursing home focus, adding 2,850 units of independent living to Sabra’s portfolio and bringing down the company’s exposure to skilled nursing/transitional care facilities from 68.6% to 55.8%. Also, being 100% private pay, the acquired units reduce Sabra’s exposure to Medicare and Medicaid payers, with revenue attributable to private payers increasing from approximately 41.6% to 52.4%. At a price of $550 million, the deal represents the largest in Sabra’s history, and increases the company’s total annualized revenues by 23.0% (pro forma as of June 30, 2014). Sabra also significantly reduced exposure to its biggest tenant, Genesis HealthCare, from 46.8% to 38.1% of its whole portfolio, which is associated with the company’s strategy to branch out from skilled nursing. Concurrently with the acquisition, Sabra entered into a triple-net master lease agreement with certain wholly-owned subsidiaries of Holiday AP Holdings LP, an affiliate of Holiday Retirement. The master lease has an initial term of 15 years, with two five-year renewal options. In addition, the lease provides the base rent for the first year (approximately $30.3 million), as well as annual rent increases of 4.0% in years two and three, and the greater of 3.5% or CPI during the remainder of the lease term. The low initial 5.5% cash yield will be compensated for with the higher than usual rent escalators, which brings the GAAP yield over the lease term to 7.14%. Sabra also expects to close on approximately $100 million in sale/leaseback transactions over the next 60 days.................. Want to read more news? Click here for a free trial to The SeniorCare Investor and download the current issue today

 

 

Financing of the Week

Laurel Parc at Bethany Village has quite a history with HUD, despite being built just five years ago. The IL/AL community located just outside of Portland, Oregon was originally constructed in 2009 and used a separate loan type for each acuity: an FHA Sec. 221(d)(4) loan financed the construction of the IL units, while an FHA Sec. 232 loan financed the AL units. The community opened during the depths of the Great Recession, and as a result, experienced a longer lease-up timeframe than anticipated. So, the owners went to HUD and structured two operating loss loans to keep the community afloat until stabilization. It took a couple of years, but by 2013, Laurel Parc was thriving, and had waiting lists for both its independent living and assisted living units. Wanting to expand to meet the demand, the owners wished to pursue a new construction project that would add a total of 69 units in IL and AL, as well as new memory care units. Lancaster Pollard used HUD LEAN to underwrite a $50 million blended rate loan through the FHA Sec. 232 program, which consisted of a $36 million refinance that consolidated four outstanding loans and a $14 million loan to simultaneously finance the construction project. Also, Lancaster Pollard worked with HUD to allow Laurel Parc to start construction during the application process to stay ahead of the notoriously wet Oregon fall weather. Overall, the permanent financing lowered Laurel Parc’s interest rate, and relieved the community of the burden of managing multiple loans. Matt Lindsay, representing the Northwest for Lancaster Pollard, led the transaction.................Want to read more news? Click here for a free trial to The SeniorCare Investor and download the current issue today

 

 

Stat of the Week

Starting with the third quarter of 2013, we have now had five straight quarters with at least 60 publicly announced seniors housing and care acquisitions per quarter. This is significant because we had not had a quarter with 60 transactions before 2013. And it appears that no one took the summer off, as our preliminary numbers are indicating that the transaction volume for the third quarter 2014 may top 80 deals, representing a 33% increase from the third quarter 2013. With three months to go, we are already closing in on the record transaction pace of 2013. This bull market, now 17 quarters strong, certainly has legs.................Want to read more news? Click here for a free trial to The SeniorCare Investor and download the current issue today

 

 

Around the Web in Senior Care M&A...Click here to see more

Webcast Calendar... Click here to see more

Upcoming Investor Conferences - Seniors Housing and Health Care... Click here to see more

Previous Issues of The Dealmakers Forum... Click here to see more