Sabra Health Care REIT (NASDAQ:SBRA) announced on Tuesday the acquisition of two skilled nursing facilities for $18 million.
The first is Manokin Manor & Rehabilitation Center, a 135 bed skilled nursing facility built in 1987 and located in Princess Anne, Maryland. The second property is Honey Hill Care Cetner, a 150 skilled nursing facility that was built in 1993 and is located in Norwalk, Connecticut.
Both facilities will be operated under a single 15-year triple-net master lease agreement with two five-year renewal options which will provide an initial yield on cash rent of 10.6% said Sabra in a statement. Both deals were acquired through a sale leaseback with affiliates of Aurora Health Management. Sabra will fund $1.8 million of the deal on or before Oct. 1, 2012.
“The two SNF acquisitions are very good assets in good markets that have been under managed,” said Rick Matros, CEO of Sabra in a statement. “This transaction aligns us with an operator skilled in turnarounds. The upside in these centers is primarily in cost management and the recently announced CMS cuts are not a material factor.”
On top of the SNF acquisitions, Sabra announced it has entered into an agreement to acquire Creekside Senior Living for $4.2 million through a sale leaseback transaction with an affiliate of Pathway Senior Living. The deal also includes an allowance of up to $1.6 million primarily for facility improvements. Based in Green Bay, Wisconsin, Creekside is an assisted living facility is a 59 unit assisted living facility built in 2004.
“Creekside Senior Living is a relatively new assisted living facility that has also been undermanaged with significant potential upside under Pathway’s management,” said Matros. “While this is a small deal, it demonstrates our intent to expand our portfolio in the AL/Memory Care space. Given our deep operational experience, we are positioned to assess opportunities such as these in an uncertain environment and get transactions completed at appropriate cap rates.”
The property is in the process of being acquired through a court approved receiver. Once the deal is done, it will close the sale leaseback transaction with Sabra.
Once Sabra has acquired the facility from Pathway, the facility will be operated under a 10 year triple-net lease agreement with two five-year renewal options which will provide an initial yield on cash rent of 9.25%. In addition, as the $1.6 million allowance is funded over a period of up to two years, rents will increase to maintain the yield on cash rent.
Sabra said it expects to close the transaction in the fourth quarter of 2011 and can terminate the transaction if court approval and the closing do not occur by December 22, 2011.
Written by John Yedinak