Prestige Healthcare on Thursday closed the acquisition of 15 senior care properties in Michigan from a local owner and operator, funding the purchase with a loan from LTC Properties Inc. (NYSE:LTC) in a transaction handled by Evans Senior Investments.
In August, LTC Properties agreed to a $141 million mortgage with Louisville, Ky.-based Prestige for the portfolio, which includes 2,092 licensed skilled nursing beds and 24 independent living units.
The agreement called for funding around $126 million of the loan in the fourth quarter of 2013 upon the closing of the acquisition, according to LTC’s previous announcement. The REIT also stated plans to fund an additional $12 million for capital improvements and up to $3 million for short-term working capital.
The transaction, while structured as a mortgage, essentially functions as a sale-leaseback between LTC Properties and Prestige, according to sources with knowledge of the transaction, as the Medicaid reimbursement system in Michigan is tied to the size of skilled nursing facilities’ mortgages.
The loan has a 30-year term with an initial 9.41% interest rate for five years, after which it will escalate annually by 2.25%. Payments will be interest-only for three years, after which Prestige will make interest payments along with annual principal payments of $1 million.
LTC’s loan agreement with Prestige also provides, under certain circumstances, for additional loan proceeds of up to $40 million, limited to $10 million a year.
Written by Alyssa Gerace