Sabra Health Care REIT, Inc. (NASDAQ:SBRA) recently acquired five senior care properties in Texas and Minnesota in two transactions for a total of $40.2 million.
The Texas portfolio consists of three skilled nursing facilities and one assisted living community. The other acquisition was for a skilled nursing facility in Minnesota. Sabra funded the transactions with available cash and proceeds from its secured revolving credit facility.
The REIT exercised a purchase option on the Texas portfolio to complete the acquisition from Meridian Senior Properties Fund I, L.P. The facilities, with a total of 394 beds, are located in the Dallas-Fort Worth metro area. The skilled nursing properties were built in 2001 or later, and the assisted living community was constructed in 1996.
In March of this year, Sabra had provided the Meridian fund with a $10 million mezzanine loan secured by partnership interests under which the REIT had the option to purchase the facilities for $43 million. By the time Sabra closed on the portfolio, the outstanding mortgage debt and Sabra’s mezzanine loan had been repaid, resulting in Sabra funding a net $33 million for the acquisition.
Sabra entered a triple-net master lease agreement with affiliates of the seller. The agreement has an initial 15-year term and two five-year renewal options with annual rent escalators equal to 3.0% for the first two years and the greater of the change in the Consumer Price Index (CPI) or 2.5% thereafter. The initial yield on cash rent is 9.0% with $4.7 million in annual lease revenues determined in accordance with GAAP.
For the fifth property, Camden Care Center, Sabra paid $7.2 million for an 87-bed skilled nursing facility in Minneapolis, Minn., built in 1990. The REIT entered a triple-net lease with Trinity Health Systems, LLC, with an initial 15-year term and two five-year renewal options. The lease agreement provides for annual rent escalators equal to the greater of the change in the CPI o 3.0%, resulting in annual lease revenues determined in accordance with GAAP of $0.9 million and an initial yield on cash rent of 10%.
“Both of these acquisitions were expected to occur next year, but were accelerated to accommodate year end closing preferences,” said Rick Matros, CEO and chairman of Sabra. “The Camden facility is the second deal that we have done with Trinity following the Ridgecrest deal completed earlier in the year. The four facility deal with Meridian is an early exercise of the purchase option related to the mezzanine loan announced earlier this year. These are very attractive assets and primarily recent vintage.”
Written by Alyssa Gerace