Senior Housing Finance Activity: HealthLease, Newcastle, Skilled Healthcare Group

HealthLease Commits to Co-Investment Relationship with Mainstreet

HealthLease Properties Trust has invested $20 million in Mainstreet Development Fund II, L.P., which will be used to develop between 12 to 16 seniors housing and care facilities in the United States over the next year.

HealthLease’s investment will consist of $15 million of mezzanine financing, which is targeted to produce an annual return of 14% on funds invested by the REIT and $5 million of equity financing, which is targeted to produce an annual return of 25% on funds invested by the REIT.  Mainstreet Property Group, LLC, the General Partner and Manager of the Fund, committed the initial US$5 million of equity financing to the fund.  The fund is expected to have additional closings from other third party investors in the first quarter of 2014.


“Our relationship with Mainstreet has enabled us to significantly grow the REIT in a relatively short period of time with high-quality assets that attract leading seniors’ housing and care operators,” said Zeke Turner, Chairman and CEO of Mainstreet. “This fund will help us grow the pipeline of acquisitions, allow us to achieve scale and deliver long-term value to our unit holders.”  

Lancaster Pollard Assists Providence Life Services Refinancing

Lancaster Pollard recently arranged a $34.3 million refinancing for Providence Life Services, a nonprofit Illinois corporation offering a full range of senior care and services with 13 facilities in Michigan and Illinois. 


Providence had approximately $43 million in outstanding debt in its Obligated Group in the form of variable-rate, tax-exempt bonds held by multiple banks. Lancaster Pollard recommended refinancing with the FHA Section 232/223(f) program to allowing Providence to lower its debt service and extend the permanency of its debt by eliminating bank-related financing risks.

More than $31.5 million of Providence’s outstanding debt was able to be allocated to facilities eligible for FHA refinancing, and by doing so based on the appraised value of those facilities, Lancaster Pollard was able to ensure that both HUD and the existing banks were comfortable with the pro forma debt allocation. 

Due to the necessity of utilizing accounts receivable financing with the transaction, the firm also worked with one of the banks so it could remain as the accounts receivable lender for all the facilities. 

Ultimately, Lancaster Pollard closed four FHA-insured loans under a master lease structure without obligating the rest of the Providence Life Services organization, resulting in a total of $34.3 million of long-term, low fixed interest rate loans. The transaction replaces most of Providence’s variable-rate debt with long-term, fixed rate debt. 

AHFC Announces $33 Million of Funding for Affordable Alaskan Housing

Alaska Housing Finance Corporation (AHFC) has announced its 2014 Greater Opportunities for Affordable Living (GOAL) grants and tax credits, totaling $33.2 million and benefiting five communities across the state. The projects will develop or upgrade a total of 179 rental units for low-income and senior Alaskans; five of the projects will leverage the AHFC funding with $1.5 million provided by Rasmuson Foundation. 

Alaska’s GOAL program includes a combination of federal and state grants and federal tax credits to project sponsors who build or renovate affordable rental and supportive housing for low-income, senior families and those with disabilities. 

The seven projects awarded funding are located in five communities: Anchorage, Delta Junction, Haines, Juneau, and Ninlichik. Grant recipients for low-income senior projects are: Eklutna Estates II in Anchorage, which will add 34 new rental units for low-income seniors (Cook Inlet Housing Authority) and Ptarmigan Heights in Delta Junction, which will add six new rental units featuring solar energy for low-income seniors (Deltana Community Services Partnership).

GS Commercial Real Estate Finances Newcastle’s Holiday Acquisition

Newcastle Investment Corp. subsidiaries have entered into loan agreements with GS Commercial Real Estate LP to fund the acquisition of the 51-property Holiday portfolio for about $1.04 billion. 

The lender is providing a term loan in the original principal amount of nearly $316.9 million scheduled to mature in 2021 and secured by 25 facilities fee-owned or ground leased by Newcastle, along with a term loan for $362.5 million, scheduled to mature in 2024 and secured by 26 facilities owned by Newcastle. 

Certain other Newcastle subsidiaries have also entered into a $40 million mezzanine loan with the lender, scheduled to mature in 2021 and secured by a pledge of 100% of the equity interests in the Newcastle subsidiaries under the first mortgage loan; and a mezzanine loan for $1,000 (according to a Newcastle filing) scheduled to mature in 2024 and secured similarly to the first mezzanine loan. 

Newcastle guarantees the borrowers’ obligations under each of the loan documents. 

Skilled Healthcare Group Announces $67 Million MidCap Financing

Skilled Healthcare Group, Inc. (NYSE: SKH) has announced the closing of a financing with MidCap Financial consisting of a $62 million non-recourse (subject to customary carve outs) mortgage-backed term loan and a $5 million asset based revolving credit facility with an initial balance of $5 million.

The loans are secured by 10 skilled nursing facilities and have a term of three years and an interest rate based on LIBOR which is currently approximately 6.7%. The net loan proceeds of approximately $65 million have been used to pay down outstanding term debt in Skilled Healthcare Group’s senior secured credit facility, which has a maturity date of April 2016 and an interest rate based on LIBOR which is currently approximately 6.8%.

“These loans, along with the disposition of two skilled nursing facilities earlier this month, further strengthen our balance sheet and provide additional cushion under our leverage ratio, which is a metric under our senior secured credit facility comparing earnings to debt that we must maintain below an agreed level,” said Bob Fish, Chief Executive Officer of Skilled Healthcare Group, in a statement. “We closed $87 million in HUD-insured loans earlier this year, and we continue to believe that the HUD program offers attractive opportunities for longer-term financing at favorable interest rates. We anticipate that these new loans, and the ten skilled nursing facilities securing them, will transition well into HUD-insured loans in the future.” 

Omega Healthcare Investors Enters $200 Million Loan Facility

Omega Healthcare Investors (NYSE:OHI) has announced a new $200 million senior unsecured, deferred draw, term loan facility hat matures on Feb. 29, 2016. 

The term loan facility is being provided through a credit agreement with Bank of America, N.A., as the initial lender and administrative agent. 

So far, Omega hasn’t made any borrowings against the new term loan facility, and proceeds of any future borrowings can only be used to finance general corporate working capital, including repayment of existing indebtedness, asset acquisitions, acquiring or improving income producing healthcare facilities, and investments incidental or related to such purposes, and capital expenditures or other corporate purposes. 

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