Senior Housing Investments & Acquisitions: Care Trust REIT, LTC

CareTrust REIT Acquires Minn. Memory Care Facility for $7.2 Million 

CareTrust REIT, Inc. (Nasdaq:CTRE) acquired Prelude at Woodbury, an upscale memory care facility in Woodbury, Minn., a Minneapolis suburb, for $7.2 million. The transaction was a sale-leaseback with Prelude Homes & Services, LLC, which developed the 30-bed facility in 2011 and has operated it since it opened.

As a smaller but growing entity, Prelude hasn’t historically had the “attention, operational insight and expediency” from other prospective funders that it received from CareTrust’s senior executives, said Phil Dommer, founder and president of Prelude, in a statement.

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“That’s a unique combination worth building on,” he said.

In connection with the sale, Prelude entered into a long-term triple-net master lease with CareTrust. The lease has an initial term of 15 years with two five-year renewal options and CPI-based rent escalators.

The Woodbury investment carries an initial cash yield of 8.25% on EBITDAR lease coverage of 1.30x, producing initial annual lease revenue of $.6 million.

CareTrust also secured an option to purchase and lease back Prelude’s next senior housing project, which is currently under development in nearby White Bear Lake, Minn.

LTC Acquires Colo. Memory Care Facility for $9.8 Million 

LTC Properties, Inc. (NYSE:LTC), a real estate investment trust that primarily invests in seniors housing and health care properties, acquired a 48-unit, private-pay memory care community in Castle Rock, Colo. for $9.8 million.

The property, constructed in 2012 and serving the greater Denver area is leased to an affiliate of Senior Lifestyle Corporation (SLC) under an existing 15-year master lease. The initial cash yield is 6.5%, with rent increases of 3% on the first and second anniversary of the acquisition closing, and 2.75% annually thereafter.

Effective Jan. 1, LTC will further expanded its relationship with SLC by adding 13 assisted living communities, comprising 500 units, to the SLC master lease. These communities were co-leased to Enlivant and affiliates of Extendicare under leases that expired at the end of December 2014.

“This acquisition underscores LTC’s interest in the growing memory care market, as well as our continued focus on increasing private pay revenue, and reducing the average age of our portfolio,” said Wendy Simpson, LTC’s chairman and CEO, in a statement. “Senior Lifestyle has been a great partner, so we are excited to expand our relationship with them to include the Castle Rock community, which will greatly benefit from SLC’s long-standing tradition of providing comprehensive and innovative memory care services.”

Each SLC community has a unique identity, said Jon DeLuca, CEO and President, of SLC.

“We are especially proud of our award-winning ‘Walk with Me’ program, which takes a personal and well-rounded approach to easing the transition for families and residents with memory loss, by creating strong connections among residents, caregivers and families,” he said.

Greystone Provides $43.5 Million HUD Loan for N.Y. Skilled Nursing Acquisition 

Greystone, a national provider of multifamily and healthcare mortgage loans, provided a $43,545,000 HUD loan for the acquisition of a 360-bed skilled nursing facility in Brooklyn, NY. The transaction was originated by Fred Levine, a senior mortgage originator at the firm.

The FHA financing was provided for Shorefront Center for Rehabilitation and Nursing Care, a nursing home and rehabilitation center located on the storied Coney Island boardwalk of Brooklyn’s ocean waterfront. The terms of the non-recourse loan include a fixed low interest rate for 35 years. The facility now becomes part of the growing SentosaCare Network in New York.

“By going straight to HUD for the acquisition, I was able to avoid the additional step and associated costs of securing a bridge loan first,” said Ben Philipson, president of SentosaCare, in a statement.

While a skilled nursing facility acquisition with HUD can often be challenging due to extended timelines, Greystone worked closely with SentosaCare and the seller “to close in a timely fashion and realize the benefits of long-term, low rate FHA financing,” said Betsy Vartanian, head of Greystone’s FHA healthcare lending team at Greystone.

Kindred Transitions Operations of 9 Nursing Centers to Ventas 

Kindred Healthcare, Inc. (NYSE:KND) entered into an agreement with Ventas, Inc. (NYSE:VTR) to transition the operations under the leases for nine non-strategic nursing centers. Each lease will terminate when the operation of the nursing center is transferred to a new operator.

The current lease term for eight of these nursing centers is scheduled to expire at the end of April 2018. The current lease term for the ninth of these nursing centers is scheduled to expire at the end of April 2020.

Kindred and Ventas have also reached agreements to modify provisions in the 2007 master leases to make them more consistent with Master Lease Agreement No. 5, the most recent master lease entered into between the parties, and to reimburse Ventas for certain deferred capital expenditures at healthcare facilities previously transferred to new operators. The company will pay an aggregate of $40 million in connection with the agreements in January 2015, which payments are expected to be tax deductible.

The nine nursing centers where operations will be transferred contain 903 licensed nursing center beds and generated revenues of about $65 million for the year ended Dec. 31, 2013. The current annual rent for these facilities approximates $10 million. Kindred will continue to operate these facilities until operations are transferred, but their operating results will be reflected in discontinued operations through the expiration of the lease term. 

“We are pleased to have negotiated a mutually beneficial transaction with Ventas that allows us to dispose of additional non-strategic nursing center operations,” said Paul J. Diaz, CEO of Kindred, in a statement. “As we have in the past, we will work cooperatively with Ventas as it finds suitable tenants for these facilities and effectuate an orderly transition of our patients, employees and operations to the new tenants.” 

Ensign Group Acquires Texas Skilled Nursing Operation 

The Ensign Group, Inc. (Nasdaq:ENSG) acquired the Mildred and Shirley L. Garrison Geriatric Education and Care Center, a 103-bed skilled nursing operation located in Lubbock, Texas. The purchase was made in connection with the Chapter 11 bankruptcy filed by Sears Methodist Retirement System in June of last year and was effective Jan. 1, 2015.

The Ensign Group is the parent company of the Ensign group of skilled nursing, rehabilitative care services, home health, home care, hospice care, assisted living and urgent care companies,

“This acquisition presents a unique opportunity to expand our presence in West Texas,” said Christopher Christensen, Ensign’s president and CEO, in a statement. “This operation has a strong heritage of providing quality care and in developing innovative healthcare services.”

The Garrison Geriatric Education and Care Center is located on the campus of Texas Tech University pursuant to a long-term ground lease. Under Ensign’s ownership the center will continue an affiliation with the Texas Tech University Health Sciences Center that includes an integrated approach with the University on several healthcare initiatives.  

Kevin Reese, president of Keystone Care, LLC, Ensign’s subsidiary for Texas operations, expects the operation, which had an occupancy rate of approximately 79% at acquisition, to be mildly accretive to earnings in 2015.

This purchase, along with Ensign’s other acquisitions announced today, brings Ensign’s growing portfolio to 140 facilities, eleven hospice agencies, thirteen home health agencies, two home care businesses and fifteen urgent care clinics across 12 states.

Ensign is actively seeking additional opportunities to acquire real estate or to lease both well-performing and struggling skilled nursing, assisted living and other healthcare related businesses across the United States, Christensen said.

Written by Cassandra Dowell

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