National Health Investors (NYSE: NHI) announced Monday it has entered into a definitive agreement to acquire a portfolio of eight senior living communities in the South Atlantic region for $476 million.
Following the transaction, which is expected to close by December 31, 2014, NHI will lease the eight communities to Charlotte, North Carolina-based operator Senior Living Communities, LLC, pursuant to a 15-year master lease. The lease equates to an initial cash yield of 6.51% of the purchase price and has annual escalators of 4% in years two through four, and annual escalators thereafter of 3%.
In a separate transaction announced the same day, Toledo, Ohio-based Health Care REIT (NYSE: HCN) announced the sale of seven entrance-fee continuing care retirement communities (CCRCs) and one rental community for $435 million to an undisclosed buyer.
The two announcements represent the same properties, a Health Care REIT spokesman confirmed, noting that HCN is selling the portfolio to Senior Living Communities, which is selling the portfolio to NHI.
The communities will continue to be managed by an affiliate of Senior Living Communities. In total, the eight properties tally 1,671 units, have an average of 12 years and average occupancy rate of 85.4% for the three months ended October 31, 2014.
Geographically, four of the communities are located in South Carolina, while two are located in North Carolina, one in Florida and one in Georgia.
In connection with the acquisition, NHI also expects to provide a $15 million working capital line of credit to SLC, borrowings under which will be used to finance construction projects within the SLC portfolio, including building additional units at several of the acquired communities.
“NHI’s agreement to acquire a portfolio that includes high-end communities strengthens our portfolio by further diversifying our sources of rental income by operator, geography, property type and payor source while significantly reducing our exposure to government reimbursement,” said NHI CEO Justin Hutchens in a statement.
Communities within the purchased portfolio include the South Carolina properties of Brightwater (Myrtle Beach); Lakes at Litchfield (Pawley’s Island); Cascades Verdae (Greenville); and Summit Hills (Spartanburg).
Others include Homestead Hills (Winston-Salem, N.C.); Ridgecrest (Mt. Airy, N.C.); Marsh’s Edge (Saint Simons Island, GA); and Osprey Village (Amelia Island, FL).
The acquisition is also consistent with NHI’s strategy to not only partner with experienced senior housing operators, but to also diversify its portfolio, Hutchens added.
Earlier last month, NHI made its foray into the entry-fee CCRC sector with an agreement to lend up to $154.5 million to assist Des Moines, Iowa-based operator Life Care Services recapitalize and finance the expansion of its CCRC in Washington, Timber Ridge at Talus.
With Monday’s announcement, NHI increases its total 2014 investment volume to $724 million.
Written by Jason Oliva