Following the recent mega merger with Omega Healthcare Investors (NYSE: OHI), Aviv REIT, Inc. (NYSE: AVIV) announced its largest acquisition in 30 years, at $305 million for 29 properties, the Chicago-based real estate investment trust announced Wednesday.
Aviv entered into a definitive agreement with Diamond Senior Living, LLC, a subsidiary of General Electric (GE) Credit Corporation of Tennessee, to acquire the 29 properties; 23 of which are skilled nursing facilities with the remainder comprising assisted living, independent living and offices. GE Credit Corporation of Tennessee is a subsidiary of GE Capital Corporation.
All of the properties are currently triple-net leased to new Aviv operator Laurel Health Care at an initial cash yield of 8.5%, for a remaining term of 15 years. Laurel is headquartered in Westerville, Ohio and has been in the business of operating skilled nursing facilities (SNFs) and other healthcare facilities for over 20 years. Laurel operates 42 facilities in 5 states, 28 of which Laurel will now lease from Aviv.
The company expects to fund about 40% of the purchase price, or $125 million, with cash and its available line of credit and approximately 60% of the purchase price, or $180 million, with a secured loan anticipated to be made by GE, acting through its business unit known as GE Capital, Healthcare Financial Services. Aviv expects to have about $350 million drawn under its $600 million line of credit after the closing of this acquisition.
In the recent $10 billion deal between Omega and Aviv the companies agreed to merge in a stock for stock transaction, creating a SNF REIT powerhouse. In connection with the company’s merger with Omega, the cash portion of the purchase price will be refinanced by various debt and equity offerings executed by Omega in connection with the combined company’s capital plan.
“This is a strategic investment for us at a seminal moment having just announced our merger with Omega,” said Aviv Chairman and Chief Executive Officer Craig M. Bernfield in a written statement. “This is an exciting transaction for us in many ways. It is the single biggest acquisition we have made in more than 30 years as investors in the SNF industry. We have renewed our long standing relationship with GE as a strategic seller and lender in this transaction, as GE is one of the most important players in our industry as an owner and lender to the sector. The transaction demonstrates our ability to execute larger deals accretively in addition to the smaller and medium sized deals that are key to consolidation in our sector.”
Aviv’s new acquisition includes 23 SNFs, four assisted living facilities, one independent living facility and one office building, located in five states. The portfolio consists of 11 facilities in Michigan, eight facilities in Ohio, seven facilities in North Carolina, one facility in Virginia and in Indiana, as well as Laurel’s corporate office building in Ohio. Two of the properties are leasehold interests, which have terms expiring in 2025 and 2020, respectively, and both of those properties will be subleased to Laurel until the end of their respective terms.
The company expects to close the acquisition on or about Dec. 5, 2014, but no later than Dec. 31, 2014.
“We have forged a new, growth-oriented relationship with Laurel, a high quality company that we have been getting to know over the past few years,” said Aviv President and Chief Operating Officer, Mr. Steven J. Insoft. “This deal meaningfully enhances our operator and geographic diversification, which remains critical to our overall strategy. With this acquisition, we will have completed approximately $750 million of investments this year, not including numerous other identified acquisitions we will continue to work on in 2014.”
Written by Cassandra Dowell