Sabra Health Care REIT, Inc. (SBRA) announced the acquisition of 21 independent living facilities, which are100% private pay, in a sale/leaseback deal from affiliates of Holiday Acquisition Holdings Corp. for $550.0 million in cash.
The move is in sync with the company’s strategy of diversifying into the private pay senior housing assets and lowering exposure to its largest tenant. These 21 independent living facilities, comprising 2,850 units, are positioned across 15 states.
Simultaneous with this acquisition, Sabra inked a triple-net master lease agreement with some wholly-owned subsidiaries of Holiday AL Holdings LP. With an initial term of 15 years, this master lease has annual rent escalators of 4% in the second and third years and the greater of CPI and 3.5% for the remaining lease term.
For Sabra, this acquisition is a strategic fit and adds notable value. With this deal, the company’s geographic footprint increased to 34 states from the earlier count of 28 states. On pro forma basis, as of Jun 30, 2014, this portfolio acquisition also enhances its total annualized revenues by 23%.
Moreover, considering the diversification aspect, we note that the company’s exposure to skilled nursing/transitional care facilities has declined to 55.8% from 68.6% while revenue from private payors increased to around 52.4% from around 41.6%. Finally, Genesis concentration has now decreased to 38.1% from 46.8%. Encouragingly, over the next 60 days, Sabra plans to close around $100 million in sale/leaseback deals.
However, Sabra is not the only company in the heathcare real estate investment trust (REIT) sector sketching such deals. As a matter of fact, demand for healthcare facilities and senior housing have been on the rise, with an increase in the elderly population and consequently proliferating healthcare expenses. Amid this, strong players in the market have announced acquisitions to capitalize on this trend.
Among them is Ventas Inc. (VTR) that has already completed the acquisition of 29 Canadian senior living communities from Holiday Retirement and is also set to buy its competitor, American Realty Capital Healthcare Trust Inc., in a stock and cash deal worth $2.9 billion.
Health Care REIT, Inc. (HCN) acquired Gracewell assets in August and also unveiled a plan to acquire HealthLease Properties REIT at a transaction valued at around $950 million in cash, including debt. Also, HCP Inc. (HCP) has extended its relationship with Brookdale Senior Living by creating a $1.2 billion continuing care retirement communities (CCRC) joint venture (JV) and amending previous Emeritus leases.
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