Healthcare real estate investment trust National Health Investors, Inc. (NYSE:NHI) has entered an agreement with operator Bickford Senior Living to combine their ownership in the real estate and operating assets of 10 stabilized assisted living and memory care communities.
The deal is expected to close by the end of 2012’s third quarter. NHI will contribute eight properties and own an 85% interest in the assets, while Bickford will contribute two and have a 15% interest. The eight facilities the REIT is contributing to the partnership were purchased in 2009 and 2010 from Bickford for $36.7 million. The Olathe, Kans.-based operator will continue to manage all 10 facilities.
“This investment is substantially accretive from day one,” said Justin Hutchens, NHI’s President and CEO, in a statement. “There is inherent appeal in the solid initial cap-rate of 9% and in this portfolio’s potential to outpace the growth of our typical triple-net lease structure. Bickford Senior Living is a premier operator with twenty years of operating experience.”
The partnership has a RIDEA structure, permitting NHI to receive rent payments through a triple-net lease between the property company and operating company. The REIT has the exclusive right to finance and include all future acquisitions and development projects by Bickford into the new business structure, including the up to eight previously disclosed development projects the two entities are planning, three of which are underway.
Included in the transaction are 10 facilities with a total 488 units and an 88% average occupancy rate, plus current development of three 60-unit facilities. They are located in Illinois, Indiana, Iowa, Kansas, and Michigan.
NHI will invest $22.5 million of cash at the transaction closing, drawn from its revolving credit facility. There is $19.3 million of secured debt being assumed bearing a 4.5% fixed interest rate, with a maturation date of November 2013. The portfolio’s 10 stabilized properties have a 2012 NOI of $8 million after a 5% management fee to the operator and $500 per unit of capital expenditures.
In the first year of the partnership, NHI expects to receive $6.8 million, of which $5.9 million is a guaranteed minimum lease payment. The lease is for an initial period of five years, plus renewal options, with an annual lease escalator of 3%.
Wells Fargo Securities, LLC served as financial advisor to NHI on the transaction.
Written by Alyssa Gerace
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