National Health Investors (NYSE: NHI) will lend up to $154.5 million to recapitalize and finance the expansion of a Washington-based continuing care retirement community (CCRC), the company announced Monday.
The financing for an entry-fee CCRC is the first of its kind for NHI, which has a long history of investing in the senior housing space. The anticipated financing will close by Nov. 30.
Serving the greater Seattle area, Timber Ridge at Talus is currently 95% occupied and the new expansion is 75% pre-sold. The Class A community is managed by Life Care Services, a Life Care Companies subsidiary.
“Historically, we’ve been focused on primarily private pay senior housing assets that have included independent living and assisted living,” NHI CEO and President Justin Hutchens tells SHN, noting that the company is shifting away from pursuing skilled nursing assets, which provide about 40% of NHI’s current revenue. “Skilled nursing has been less of a focus as we made new investments over the last several years. So, our skilled nursing concentration has gone down and our private pay concentration has gone up to 50%. This CCRC investment with Life Care Services contributes to our overall goal to diversify the portfolio with primarily private-pay backed assets and best in class operators.”
The existing campus was built in 2008 and has 184 independent living apartments and 36 transitional care beds. Expansion construction is expected to begin upon closing and to add 145 independent living apartments, 26 assisted living/memory care apartments and 9 transitional care beds in addition to a swimming pool, dining room, fitness center and other amenities.
“We like the Seattle housing market,” Hutchens says, adding that its strong housing market is linked to CCRC demand.
The financing is expected to include a $60 million senior loan and a $94.5 million construction loan with proceeds from the entrance fees of the new expansion to be applied to the construction loan balance. The average entrance fee per unit is projected to be $700,000.
The borrower will be a joint venture between Westminster Capital and LCS. The loan will be divided up into two notes under one master credit agreement. The senior loan, Note A, is expected to have a 10-year maturity and 6.75% interest rate that escalates 10 basis points per year after the third year of the loan.
The construction loan, Note B, is expected to have a 5-year maturity and an 8% interest rate. NHI would have the option to purchase the community upon the achievement of specific hurdles.
NHI will fund an initial amount on Note A of $30 million at closing. This amount will be funded from borrowings on NHI’s revolving credit facility.
“We’re excited about our new relationship with Life Care Services,” he says.
Written by Cassandra Dowell