Brookdale Senior Living Inc. (NYSE:BKD) announced Tuesday it has recently completed the acquisition of 12 senior living communities for $162.1 million plus customary transaction expenses.
The communities, which have a total of 871 units, had previously been operated by Brookdale under long-term leases.
Eleven of the communities were acquired under purchase options that had become exercisable by the end of 2012. The options had been negotiated at the inception of the leases and helped align the interests of the tenant and landlord, said Bill Sheriff, Brookdale’s CEO, in a statement.
“The economics of these communities built nicely over time and the purchase options gave us the opportunity to purchase these communities at a cap rate exceeding 9%, thus harvesting a portion of the improved value,” Sheriff said. “By replacing escalating lease rates with mortgage financing at today’s interest rates, the transaction is modestly accretive. Ownership of these communities also allows us to capture the communities’ value creation potential going forward.”
In a related transaction, Brookdale also obtained a $171.3 million first mortgage loan secured by nine of the company’s communities, including eight of the recently-acquired properties. The loan has a 10-year term with a variable interest rate of 30-day LIBOR plus 259 basis points.
In connection with the transaction, Brookdale repaid $37.4 million of mortgage loans scheduled to mature in 2013 and used the remaining loan proceeds to provide long-term financing for the acquisitions.
Written by Alyssa Gerace