Transactions & Financings: Moody’s Boosts Welltower’s Ratings Outlook; Friendship Village of Tempe’s $104M Bond Issuance

Welltower’s (NYSE: WELL) credit rating received a slight boost, in another sign that its senior housing operating portfolio’s (SHO) performance is on the rebound.

The Toledo, Ohio-based real estate investment trust’s (REIT) rating outlook was revised from negative to stable, and its issuer credit rating was revised to “Baa1” status by Moody’s Investors Service.

The financial services firm emphasized that the stable outlook reflects steady improvement in SHO and a continued recovery in cash flows. 

Welltower reported spot occupancy across its senior housing segment of 76.1% as of Sept. 3, 2021. Total SHO portfolio spot occupancy increased nearly 380 basis points from the pandemic low point of March 12, 2021, led by a 520 basis point improvement in Welltower’s U.S. portfolio, and a 480 basis point jump in its U.K. segment.

Sales and operator transitions

NHI sells Indiana community to Welltower

National Health Investors (NYSE: NHI) completed the sale of an independent living community in Fort Wayne, Indiana, managed by Holiday Retirement to an affiliate of Welltower (NYSE: WELL), according to an SEC filing.

Capital Square 1031 acquires Florida manufactured housing community

Capital Square 1031 expanded its portfolio of age-restricted manufactured housing communities with the acquisition of The Coach House, a manufactured housing community in Palmetto, Florida consisting of 420 homesites. Amenities include a clubhouse, heated pool, shuffleboard courts, a laundry room, fitness center, three community lakes and storage lots available for residents.

Capital Square intends to make strategic capital improvements to the community, including an extensive clubhouse renovation, exterior amenity enhancements and additions, community-wide enhancements, improvements to roads, driveways and curbs as well as upgrades to utility systems.

Avanath Capital Management acquires California affordable senior housing community

Avanath Capital Management acquired River Run Senior, a 360-unit affordable senior housing community in Corona, California.

Avanath now owns 11 senior housing properties totaling 2,187 units in southern California. River Run is the firm’s second acquisition in Riverside County, and its third acquisition in the region in the past nine months. It will manage the property, and embark on a capital improvement program that will upgrade mechanical systems; replace roofs, HVAC systems, and boilers; add a maintenance shop; and install security cameras near access gates.

Financings

LTC Properties closes $46 million in investments

Westlake Village, California-based LTC Properties (NYSE: LTC) has originated $46 million in new investments so far in Q3 2021, the real estate investment trust (REIT) announced on Oct. 11.

The four investments are expected to generate annual interest income of about $3.5 million. The transactions include:

• A $27 million unitranche loan for the purchase of a skilled nursing center in Louisiana by a regional operator new to LTC
• A $12.5 million senior loan for the purchase of a Florida assisted living/memory care community by a regional operator new to LTC
• A $4.4 million mezzanine loan for the refinance of an Oregon independent living community with a regional operator new to LTC
• A $1.8 million land loan secured by a parcel of land for the development of a post-acute skilled nursing center to be operated by an existing LTC partner

Ziegler closes 2 transactions totaling $275M

Ziegler completed the following financing packages:

— A $104.1 million Series 2021A, Series 2021B, and Series 2021C bond issuance on behalf of Friendship Village of Tempe, a continuing care retirement community in Tempe, Arizona. The bonds were issued through the Industrial Development Authority of the City of Tempe, are exempt from federal and state income tax, and are not rated. Proceeds will be used to refinance previously issued Series 2012 bonds, fund a second phase of a campus repositioning, fund debt service reserve funds on the bonds and capitalized interest for approximately 23 months, and fund costs of issuance. The campus repositioning includes a new five-story building with 64 entrance fee apartments and a new dining facility, replacing an existing 60-unit apartment building.

— A $170.6 million bond issuance on behalf of Canterbury Court, a retirement community in Atlanta’s Buckhead neighborhood. The issuance consists of a $124.81 million Series 2021A/B fixed rate bond package, and a $45.8 million Series 2021C direct bank bond package. Proceeds will be used, together with other available funds, to funds the costs of of a campus enrichment project consisting of repurposing older health care facilities and skilled nursing units into a mix of independent living, assisted living, memory care, and private nursing apartments; fund separate debt service reserve fund accounts for the Series 2021A/B Bonds; fund a portion of interest on the Series 2021 bonds; and pay certain expenses incurred in connect with the sale and issuance of the bonds.

HJ Sims closes $78M bond issuance for Landis Communities

HJ Sims closed a bond issuance and financing package on behalf of Landis Communities, consisting of $25 million in financing for Landis Place on King in Lancaster, Pennsylvania; and a $53.4 million Series 2021 bond issuance for Landis Homes, a 55-plus retirement community in Lititz, Pennsylvania. Both financings are secured by a gross revenue pledge, first mortgage positions on the campuses, and are secured by a debt service reserve fund.

The bonds were oversubscribed, allowing for lower interest rates.

MidCap Financial closes $14M loan for Georgia community

MidCap Financial closed a $14.25 million acquisition loan for a joint venture between Winterpast Capital Partners, Broadview Real Estate and Vitality Living. Proceeds facilitated the acquisition and repositioning of Vitality at Frederica, a 92-unit senior housing community on St. Simon’s Island, Georgia.

Ratings Outlooks

Fitch revises Morningstar’s outlook to Negative, affirms Covenant Health’s ‘BBB’ rating

Fitch Ratings announced the following ratings updates:

— Fitch affirmed the “BBB” issuer default rating on Covenant Health. The Lexington, Massachusetts-based nonprofit health system offers an array of health care services including assisted living, skilled nursing, and rehabilitation services. The affirmation reflects a financial profile that is consistent with the middle of the “BBB” rating category and supported by a strong balance sheet that offsets a thinner but improving operating performance. The affirmation acknowledges the progress that Covenant Health has made on its turnaround plan.

— Fitch assigned a “BB+” issuer default rating and affirmed the “BB+” rating on $61.8 million in Series 2012 and Series 2019 bonds issued by the Northampton County Industrial Development Authority on behalf of Morningstar Senior Living. The rating outlook was revised from stable to negative, reflecting Fitch’s expectation that the provider will maintain a stable but thin financial profile. The bonds are secured by a pledge of the obligated group’s (OG) gross revenues, a first mortgage lien, and a debt service reserve fund. Key rating drivers include weak profitability and robust capital expenditures.

— Fitch assigned an “A+” issuer default rating to Kendal at Oberlin, a life plan community affiliate of Kendal Corporation located in Oberlin, Ohio. The rating outlook is stable, reflecting expected resilience of the community’s financial profile, strong revenue defensibility, strong national interest and limited competition, solid operating metrics and steady capital spending, and midrange operating risk.