Grubb & Ellis Healthcare REIT II, Inc, the healthcare arm of Grubb & Ellis Company (GBE), recently acquired a five-building portfolio of skilled nursing facilities from New Courtland Elder Services, Inc., an unaffiliated third party, for $75 million.
The portfolio is spread across different locations in Philadelphia and spans approximately 392,000 square feet and provides for 1200 patient beds.
The acquisition was funded through borrowings under the company’s line of credit. Since 2001, the portfolio has witnessed capital improvements of approximately $33 million
The entire portfolio of five buildings is currently leased to Mid-Atlantic Health Care, LLC. As per the terms of the lease, Mid-Atlantic is in charge of all operational and maintenance expenses of the portfolio. The existing lease expires in 2026 but carries three five-year renewals and one 59-month renewal options.
Skilled nursing facilities hold a significant portion of the Grubb & Ellis Healthcare portfolio owing to its huge demand. However, constrained supply is a growing concern for the company. This acquisition makes the company one of the largest owners of skilled nursing facilities in Philadelphia and puts it in an excellent position to tap the growing demand for skilled nursing facilities.
Grubb & Ellis Healthcare intends to qualify as a real estate investment trust (REIT) that seeks to protect its shareholders’ value. The company plans to raise approximately $3 billion in equity to acquire a diversified portfolio of real estate assets, focusing primarily on medical office buildings and other healthcare facilities.
Grubb & Ellis currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock.
One of its competitors, CB Richard Ellis Group, Inc (CBG) currently retains a Zacks #3 Rank.
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