Real estate investment trust (REIT) National Health Investors (NYSE: NHI) has completed its previously announced conversion of a senior housing portfolio from a RIDEA structure to a triple net lease with its joint venture partner, an affiliate of Bickford Senior Living. The conversion comes at a time when senior housing REITs have reached all-time highs in terms of their RIDEA portfolio shares.
The portfolio consists of 32 assisted living and memory care assets. In addition, NHI and Bickford have another five properties under development. In the conversion, NHI purchased Bickford’s 15% share of the real estate for $25.1 million; Bickford purchased NHI’s 85% operational interest in the portfolio for $8.1 million.
At the time the conversion was announced, NHI executives said the transaction would improve cash flow for the REIT and offer a simplified relationship with Bickford going forward with future properties. The deal also allowed Olathe, Kansas-based Bickford to pay off debt, NHI President and CEO Eric Mendelsohn stated Tuesday.
“Bickford emerges as a stronger company with better credit by paying off certain of its legacy debt to third parties and has the strong incentive to continue to drive operating cash flow at each of the facilities in our lease,” he said in a press release.
The entire portfolio with Bickford includes five additional facilities under development. One property opened in July, while two other are expected to open by the end of 2016. The remaining two developments will open in 2017. Future developments between the two parties will be funded through a construction loan at 9% annual interest, and NHI will receive a favorable purchase option at stabilization, according to NHI. Furthermore, Bickford will be entitled to incentive payments for reaching operational benchmarks on current and future projects.
Written by Amy Baxter